In Determining Royalty Base, Accused Infringer Need Not Make or Sell the "Smallest Salable Unit"

The court denied plaintiff's motion to exclude the opinions of defendant's damages expert as to the smallest salable patent-practicing unit. "[Plaintiff] asserts that [the expert's testimony] should be excluded because [the expert] uses the baseband processor chips as the royalty base rather than the entire accused iPhones and iPads. . . . [Plaintiff] can point to no case that requires the smallest salable patent-practicing unit to be made or sold by the accused infringer. [Plaintiff] responds that [defendant], and not a third-party chip maker, participates in the hypothetical negotiation. However, in approaching a reasonable royalty negotiation with [plaintiff], [defendant] may well use the price of the baseband processor chips made by a third party as the starting point from which to apportion the patents’ value. . . . Interpreting the smallest salable patent-practicing unit doctrine to require that the accused infringer make or sell the smallest salable patent-practicing unit would, in circumstances where the accused infringer makes a multicomponent end product and the component manufacturer is not joined, render the smallest salable patent-practicing unit doctrine ineffective. A patentee should not be able to opt in or out of the smallest salable patent-practicing unit doctrine based on its decision of whom to sue."

GPNE Corp. v. Apple Inc., 5-12-cv-02885 (CAND April 16, 2014, Order) (Koh, J.)