Page 90 - Intellectual Property Disputes

owned by Applied Medical Resources and was enjoined from selling Versaport I. fn 114 U.S. Surgical had
attempted to design around the patents by offering Versaport II, which Applied Medical Resources
alleged infringed a distinct set of patented claims.

U.S. Surgical argued that both products would have the same hypothetical negotiation date, which
would have contemplated a license for both products. The court disagreed, concluding that "[w]e are
required to identify the infringement requiring compensation, and evaluate damages based on a
hypothetical negotiation at the time that infringement began, not an earlier one." The court noted the
differences in the Versaport products and particulars of the infringement claims, including the date on
which infringement commenced. In response to U.S. Surgical’s claim that sales of the products
overlapped, the court found that infringement that "appear[s] to be continuous in time" is not necessarily
a "continuous infringement in law." The court acknowledged that the issues in the case were specific to
the parties in suit, stating "[w]e recognize that there may be instances, which we do not address here, in
which two products, even if not identical, may present the same damages analysis. That is not the case
here." fn 115

Also, the court confirmed that each lawsuit initiated for infringement of the same patent, by the same
infringer but for different products, requires independent hypothetical negotiations because each
infringement began on a unique date and used separate evidence. "Because the determination of
reasonable royalty damages is tied to the infringement being redressed, a separate infringement
beginning at a different time requires a separate evaluation of reasonable royalty damages." In the first
matter between the parties, Applied I, U.S. Surgical was found to have infringed the same patent as well
as two others, and a jury found that the infringement was willful and awarded damages in the form of a
7% reasonable royalty. In Applied II, U.S. Surgical sought to establish, as a matter of law under
collateral estoppel, that the jury’s royalty rate conclusion of 7% from Applied I was binding. The district
court denied this finding and determined that the jury would make "its own ‘independent’ determination
of the reasonable royalty rate" (citing the district court case Applied Medical Research Corp. v. U.S.
Surgical Corp., 353 F. Supp. 2d 1075 [C.D. Cal. 2004] [emphasis in original]). U.S. Surgical appealed
the final jury verdict. The Federal Circuit found that the "issue of reasonable royalty damages in Applied
II is not identical to the issue of reasonable royalty damages in Applied I because the infringements
requiring compensation began at separate and distinct times." Infringement occurred in Applied I in
1994 and occurred in Applied II in 1997. Accordingly, the hypothetical negotiation date for the
infringing sales in Applied II relates to sales beginning in 1997, not the past infringement caused by the
1994 sales in Applied I. "The infringement in Applied II was caused by sales of Versaport II, which
began in 1997, whereas the infringement in Applied I was caused by sales of Versaport I, which began in
1994." "We conclude that the damages issues in Applied I and Applied II are not identical, and therefore
the jury’s award of reasonable royalty damages for infringing sales of Versaport I in Applied I does not

fn 114 Applied Medical Resources first sued U.S. Surgical in the U.S. District Court for the Eastern District of Virginia in 1996 (Applied
I) alleging infringement. Applied Med. Res. Corp. v. U.S. Surgical Corp., 967 F. Supp. 861 (E.D. Va. 1997). Affirmed by the U.S.
Court of Appeals for the Federal Circuit on June 30, 1998. Applied Med. Res. Corp. v. U.S. Surgical Corp., 147 F.3d 1373 (Fed. Cir.
1998).

fn 115 Applied Med. Res., 435 F.3d 1356 (Fed. Cir. 2006). The patent in this matter related to surgical devices called trocars, which are
used as access ports into the abdomen during laparoscopic surgery. The trocars must maintain a seal with the instrument during the
surgery in order to limit the leakage of gas used in the procedure.

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