Damages Expert Cannot Exclude Claimed Elements From Royalty Base

The court granted plaintiff's motion to exclude the testimony of defendant's damages expert because of his royalty base analysis. "[The expert] notes that during prosecution, all elements of [plaintiff's] asserted invention except for three image-processing steps were found obvious in view of the prior art. Thus, [the expert] deems the three image-processing steps to be the 'inventive aspect' of the asserted patents. The Wii Remote’s direct pointing device ('DPD') is accused of practicing the three image-processing steps in combination with a Bluetooth microcontroller. However, [since] the Bluetooth microcontroller existed in the prior art [at the time of invention], [the expert] concludes, the proper royalty base is the DPD alone, and does not include the accused Bluetooth microcontroller or any other portion of an accused device. . . . [Defendant] argues the royalty base should only include products accused of infringing the 'inventive' aspects of the asserted patents. Thus, it maintains that [its expert's] report properly excludes revenue associated with components alleged to infringe claimed elements that the patentee did not invent. [Defendant's] position is unsupported. While it is sometimes necessary to apportion the smallest salable patent practicing unit to remove the value of unclaimed elements, [defendant] has not cited any precedent permitting the complete removal of the value of claimed elements. . . . [Defendant's expert's] royalty base must include the value of all claimed elements."

ThinkOptics, Inc. v. Nintendo of America, Inc., et al, 6-11-cv-00455 (TXED June 21, 2014, Order) (Davis, J.)