Page 97 - Intellectual Property Disputes

"[w]ithout any evident record that the patented features were the basis for customer demand for the
laundry machines as a whole, the trial court properly foreclosed further evidence on this unsupported
theory." The Federal Circuit added that "[a]ny reliance on the so-called Georgia-Pacific factors, actually
a Georgia-Pacific listing, had little or no relation to Imonex’s entire-value calculation in different
clothing." fn 137

In Lucent Technologies, the judge reversed a $1.5 billion verdict against Microsoft because he
concluded that the jury misapplied the entire market value rule. The jury based damages on the average
sales price of personal computers despite the fact that the patents covered particular features of MP3
technology. Microsoft had built the technology into its Windows Media Player, a software product
included in Microsoft’s Windows operating system. The judge found a "lack of evidence showing that
the patented features set forth in the claims ... were the basis for customer demand." Although Lucent
cited evidence suggesting "that MP3 capabilities overall were a commercially important feature," it cited
no evidence that the claimed features "were critical to MP3," "established the basis for the customer
demand or value of MP3," or "were critical or provided value to the whole computer." fn 138

In IP Innovation, Judge Rader affirmed that the patented feature must be the basis for demand in order
to invoke the entire market value rule, stating that "[u]nder the entire market value rule, damages are
recoverable only ‘if the patented apparatus was of such paramount importance that it substantially
created the value of the component parts.’" fn 139

Judge Rader also opined that the plaintiff’s expert relied upon "irrelevant or unreliable evidence" and
failed to "account for the economic realities of this claimed component as part of a larger system." "The
evidence shows that the workspace-switching feature represents only one of over a thousand
components included in the accused products." According to Judge Rader, the plaintiff’s expert "made
no effort to factor out of his proffered royalty base those operating systems in which the user never
affirmatively enables the claimed switching feature. In fact, he made no effort to even discern the
percentage of users who would never enable or use the claimed feature." Judge Rader concluded that
"the record cannot support the unfounded conclusion that the often-unused feature drives demand for a
royalty base of 100% of the operating systems as a whole. In sum, this stunning methodological
oversight makes it very difficult for this court to give any credibility to [plaintiff’s expert’s] assertion
that the claimed feature is the ‘basis for customer demand.’" fn 140

In Golden Blount, fn 141 the owner of a patent relating to fireplace assemblies sued its direct competitor
for selling a burner component of a patented assembly. Specifically, the competitor sold ember burner
components that provide the flame pattern along with instructions on how end users could assemble
components to produce the patented burner assembly. The ember burner component produced a pleasing
flame pattern and was the basis for customer demand of the entire burner assembly (even though the
burner assembly is the actual patented invention).

fn 137 Id.

fn 138 Lucent Techs., Inc. v. Gateway, Inc., 2007 U.S. Dist. LEXIS 57135 (S.D.Cal.).

fn 139 IP Innovation LLC v. Red Hat, Inc., 2010 U.S. Dist. LEXIS 32528 (E.D. Tex.) (citing Rite-Hite, 56 F.3d at 1538, 1549).

fn 140 Id.

fn 141 Golden Blount, Inc. v. Robert H. Peterson Co., 438 F.3d 1354 (Fed. Cir. 2006).

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