Page 89 - Intellectual Property Disputes

years after the patent holder notifies the infringer of infringement and the infringement suit is filed.
During this extended period, much information becomes available about the patent and its success that
might not have been anticipated or available at the hypothetical negotiation date when infringement
began. As a result, the analyses and outcomes under the first 14 Georgia-Pacific factors will often be
different if the court limits itself to information available on or before the date of first infringement.

Some courts have cautioned against treating the negotiation as one with full knowledge of future events,
whereby actual information from periods after the date of the hypothetical negotiation would carry
greater weight than the parties’ expectations at the time of the hypothetical negotiation. For example, in
Interactive Pictures Corp. v. Infinite Picture Inc., the Federal Circuit upheld a reasonable royalty award
that relied, in part, on business plan projections of future sales that were not ultimately achieved. fn 107
The defendant argued that the projections were "based on an outdated business plan and [defendant’s]
optimistic assumptions of future revenue growth..." fn 108 The Federal Circuit rejected the argument of
the projections being outdated, as they were prepared two months prior to the hypothetical negotiation.
The court also rejected the argument that the business plan projections should be dismissed as
"optimistic" because Infinite did not achieve the projected results.

The fact that Infinite did not subsequently meet those projections is irrelevant to Infinite’s state
of mind at the time of the hypothetical negotiation. Nor does Infinite’s subsequent failure to meet
its projections imply that they were grossly excessive or based only speculation and guesswork.
Instead, Infinite’s subsequent failure to meet its projections may simply illustrate the "element of
approximation and uncertainty" inherent in future projections. fn 109

In Integra Lifesciences, the Federal Circuit ruled that "[t]he first step in a reasonable royalty calculation
is to ascertain the date on which the hypothetical negotiation in advance of infringement would have
occurred." fn 110 The Federal Circuit went on to reverse and remand the reasonable royalty verdict
because, at least in part, "the record does not clearly indicate whether 1994 or 1995 is the proper date for
the first infringement." fn 111 In its opinion, the court emphasized the importance of determining the first
date of infringement because "[t]he value of a hypothetical license negotiated in 1994 could be
drastically different from one undertaken in 1995 . . . [as] a year can make a great difference in
economic risks and rewards." fn 112

In Applied Medical Resources Corp. v. U.S. Surgical Corp., U.S. Surgical was accused of infringing
through sales of two separate products, Versaport I, which began in 1994, and Versaport II, which began
in 1997. fn 113 In a previous trial between the parties, U.S. Surgical was found to have infringed patents

fn 107 Interactive Pictures, 274 F.3d 1371, 1384–85 (Fed. Cir. 2002).

fn 108 Id.

fn 109 Id.

fn 110 Integra Lifesciences, 331 F.3d at 860, 870.

fn 111 Id.

fn 112 Id.

fn 113 Applied Med. Res. Corp. v. U.S. Surgical Corp., 435 F.3d 1356 (Fed. Cir. 2006).

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