Plaintiff’s Apportionment of Royalty Rate Instead of Royalty Base Warrants Summary Judgment Against Damages Theory

The court granted defendant's motion for summary judgment that plaintiff's royalty apportionment theory was invalid under the entire market value rule and rejected plaintiff's argument that it didn't need to apportion the revenue base because it made a downward adjustment to the royalty rate. "[Plaintiff] argues that [revenue base apportionment] is unnecessary because the royalty rate has been adjusted downward to account for the multicomponent nature of the accused products. . . . [Plaintiff's] argument hinges on an incorrect reading of Ericsson, Inc. v. D-Link Systems, 773 F.3d 1201 (Fed. Cir. 2014). There, the Federal Circuit made clear that a royalty-rate-only apportionment approach is typically barred with respect to multi-component products unless the entire value of the accused products is attributable to the patented feature. . . . [T]he opinion carefully explains that this legal rule is limited by 'an important evidentiary principle.'. . . '[W]here the entire value of a machine as a marketable article is properly and legally attributable to the patented feature, the damages owed to the patentee may be calculated by reference to that value. Where it is not, however, courts must insist on a more realistic starting point for the royalty calculations by juries —often, the smallest salable unit and, at times, even less.'"

The California Institute of Technology v. Hughes Communications, Inc. et al, 2-13-cv-07245 (CACD May 5, 2015, Order) (Pfaelzer, J.)