Page 96 - Intellectual Property Disputes

these requirements are additive, not alternative ways to demonstrate eligibility for application of
the entire market value rule. See Id. at 1549-50. fn 133

Finally, Judge Rader coined the "smallest salable unit" doctrine, which was subsequently ratified by the
Federal Circuit, which held that, "We reaffirm that in any case involving multi-component products,
patentees may not calculate damages based on sales of the entire product, as opposed to the smallest
salable patent-practicing unit, without showing that the demand for the entire product is attributable to
the patented feature. (See LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51 (Fed. Cir. 2012)).

The Federal Circuit clarified the smallest salable unit doctrine and its relationship to the entire market
value rule in VirnetX v. Cisco. There, in reversing the lower court’s ruling, the Federal Circuit clarified
that the smallest salable unit should not be used as the royalty base if non-patented features are included
unless the entire market value rule applies: "Where the smallest salable unit is, in fact, a multi-
component product containing several non-infringing features with no relation to the patented feature (as
VirnetX claims it was here), the patentee must do more to estimate what portion of the value of that
product is attributable to the patented technology." fn 134

In Imonex Services v. W. H. Munzprufer Dietmar Trenner, the Federal Circuit affirmed a district court’s
order granting a new trial when a first trial resulted in a damages verdict based on insufficient evidence.
fn 135 The district court excluded Imonex’s expert testimony on the entire market value rule. Imonex’s
expert testified that the entire washing machine was appropriate royalty base for coin acceptors as
follows:

Imonex first argued that a laundromat customer would have perceived that the coin selectors
enhanced the performance of the washing machines as a whole. Imonex later argued that the
Georgia-Pacific factors, specifically factors 8 (commercial success of a product as relevant to
royalties) and 13 (distinguishing between patented and non-patented features of an infringing
device or process in calculating damages) supported its theory. In addition, Imonex noted that the
OEMs could supply profitability data only on the entire machines. fn 136

The Federal Circuit found insufficient evidence for the entire market value rule when the patented
feature, which differentiated the coins that were put into the machine, was not shown to be the basis for
the customer demand of the entire laundry machine. The Federal Circuit also affirmed the exclusion of
testimony relating to the entire market value rule.

The Federal Circuit also found that "Imonex’s proposed expert testimony on the entire market value
rule, however, bore no relation to [the entire market value] rule." The Federal Circuit affirmed that

fn 133 Id.

fn 134 VirnetX, Inc. v. Cisco Sys., Inc., No. 13-1489 (Fed. Cir. 2014).

fn 135 Imonex Servs. v. W.H. Munzprufer Dietmar Trenner Gmbh, 408 F.3d 1374 (Fed. Cir. 2005), A jury awarded Imonex $10.4
million based on its finding that its ’280 and ’349 patents (directed to coin selectors used on laundry machines) were valid,
enforceable, and willfully infringed. Because the verdict was based on insufficient evidence, a second trial was ordered and resulted in
a lower damages award of $1.4 million to Imonex and an attorneys’ fees award to Imonex. Imonex appealed the order granting a
second trial, and Munzprufer appealed the denial of its judgment as a matter of law motion for noninfringement as well as the
enhanced damages award.

fn 136 Id. (citing Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970)).

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