Page 99 - Intellectual Property Disputes

The court held that "this case provides a good example of the danger of admitting consideration of the
entire market value of the accused where the patented component does not create the basis for customer
demand." "The Supreme Court and this court’s precedents do not allow consideration of the entire
market value of accused products for minor patent improvements simply by asserting a low enough
royalty rate." fn 146

As the district court also aptly noted, "‘[t]he $19 billion cat was never put back into the bag . . . and in
spite of a final instruction that the jury may not award damages based on Microsoft’s entire revenue
from all the accused products in the case’ . . . [t]he disclosure that a company has made $19 billion
dollars in revenue from an infringing product cannot help but skew the damages horizon for the jury,
regardless of the contribution of the patented component to this revenue." fn 147 The Federal Circuit
found that "[e]ven if the jury’s damages calculation was not based wholly on the entire market value
check, the award was supported in part by the faulty foundation of the entire market value." fn 148

These cases highlight how various courts have addressed the entire market value rule issue. Ultimately,
the cases highlight that the practitioner should take care to match an appropriate royalty rate with a
corresponding royalty base that does not overcompensate the patent owner for the value contribution of
the patent.

Other Royalty Base Considerations

In Mitutoyo, fn 149 the district court, using a hypothetical negotiation framework, awarded a royalty rate
of 29.2% on sales of infringing goods sold by the defendant as well as the sales of infringing goods sold
by one of the defendants’ customers, Harbor Freight Tools USA, Inc. (HFTUSA), without an
explanation. The Federal Circuit reversed the district court’s award concluding that although a strong
business relationship existed between the defendant and HFTUSA, they are independent corporate
entities with different owners. Further, no historical dealings or evidence was presented to explain why
the defendant would have been willing, in the hypothetical negotiation, to pay a royalty on HFTUSA’s
sales. The business relationship "does not provide a sufficient justification for including HFTUSA’s
sales in the [royalty] base." fn 150 Rather, the proper infringing sales to include in the royalty base were
the defendant’s infringing sales to HFTUSA.

In Fujifilm, fn 151 the Federal Circuit found a royalty base that included both infringing and non-
infringing product was reasonable considering evidence under the sixth Georgia-Pacific factor. Fuji
sells single-use cameras, or LFFPs, and holds U.S. patents on certain technology embodied in LFFPs.
Once the LFFP is used by the consumer, the film processer processes the film and does not return the

fn 146 Id.

fn 147 Id.

fn 148 Id.

fn 149 Mitutoyo Corp. v. Cent. Purchasing, LLC, 499 F.3d 1284 (Fed. Cir. 2007). The patent at issue recites a "device for electronically
measuring the movement of one object in relation to another, e.g., the movement of a caliper’s slide relative to its scale."
fn 150 Id.

fn 151 Fujifilm Corp. v. Benun, 605 F.3d 1366 (Fed. Cir. 2010). The patents at issue relate to single-use cameras or lens-fitted film
packages (LFFPs).

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