Expert’s Royalty Rate Testimony Excluded for Failing to Calculate Starting Point for Georgia Pacific Analysis​

The court granted defendant's motion to exclude the testimony of defendant's damages expert concerning a reasonable royalty rate as unreliable. "[Defendant] contends [the expert's] opinion is inadmissible because it considers the Georgia-Pacific factors without regard to a starting point—that is, a starting royalty rate which varies up or down based on the expert’s application of the Georgia-Pacific factors. . . . Rather than identifying a starting royalty rate, [the expert] contends there are no comparable licenses in the record on which to base his Georgia-Pacific analysis. Instead, he opines that [plaintiff] would not accept less than a 27.6% royalty, which is derived from his lost profits estimate, and [defendant] would not accept a royalty rate higher than 36.5%, the average of its gross profit margins on the [accused] Cooler. . . . He concludes with his 'conservative' estimate of a 29% royalty. The fundamental flaw in this analysis becomes clear when one tries to identify exactly what [the expert] was pushing up or down based on each Georgia-Pacific factor. Without some identifiable and relevant rate to which these factors are applied, the factfinder is unable to evaluate how the expert reaches his final number. This ipse dixit justification is the hallmark of an unreliable methodology."

Baltimore Aircoil Company, Inc. v. SPX Cooling Technologies, Inc., 1-13-cv-02053 (MDD August 22, 2016, Order) (Blake, USDJ)

Antipsychotic Drug Patent Not Invalid Under 35 U.S.C. § 101​

Following a bench trial, the court found that plaintiffs' antipsychotic drug patent was not invalid for unpatentable subject matter because the claims contained an inventive concept. "The patent-at-issue in this case addresses natural relationships to which the claims add conducting CYP2D6 genotyping tests to determine the appropriate dose of iloperidone to reduce QTc-related risks. . . . The court finds it persuasive that the dosage step in the [patent] does not apply to all patients, but only a specific patient population based upon their genetic composition. The dosage step requires applying genetic tests in a highly specified way. Moreover, the process of using this genetic test to inform the dosage adjustment recited in the claims was not routine or conventional and amounted to more than a mere instruction to apply a natural relationship. This combination of elements is sufficient to ensure that the claims amount to significantly more than just a natural law."

Novartis Pharmaceuticals Corporation et al v. Roxane Laboratories, Inc., 1-13-cv-01973 (DED August 25, 2016, Order) (Sleet, USDJ)

Expert’s Analysis of Prior Settlement Agreement Involving Patent-in-Suit Excluded​

The court granted in part defendant's motion to exclude the testimony of plaintiff's damages expert as unreliable for relying on a prior settlement license involving the patent-in-suit. "In reaching his baseline estimate for damages, [the expert] relied on a previous license agreement involving the patent-in-suit. The previous license agreement, however, was made in the context of settling a litigation dispute, and thus did not reflect the royalty the parties would have reached 'just before infringement began.' Therefore, the damages amount arrived at in the settlement agreement had to be translated into a damages number that the same parties would have arrived at just before infringement began had they, instead, assumed that the patent was infringed and valid. This implies that the amount of the previous settlement would need to be increased to arrive at the royalties that would have been agreed to in a hypothetical negotiation. . . . [Plaintiff's expert] attempted to account for this discrepancy by estimating the discount factor the parties used when negotiating the previous license agreement. . . . The estimate did not consider the nature of the patent-in-suit, the accused products, or either party's litigation strategy. Instead, the estimate was based on a study that found that 'patent holders tend to prevail approximately 40% of the time' in the District of Delaware. The Court agrees with [defendant] that [the expert's] estimate approach is not reliable as it is not sufficiently tied to the particular facts of this case."

MAZ Encryption Technologies LLC v. Blackberry Corporation, 1-13-cv-00304 (DED August 25, 2016, Order) (Stark, USDJ)

Patent for Storing and Retrieving Transaction Information Via Nonpredictable Barcode Not Invalid Under 35 U.S.C. § 101 ​

The court denied defendant's motion to dismiss on the ground that the asserted claims of plaintiff’s patent for storing and retrieving transaction information via a nonpredictable barcode encompassed unpatentable subject matter because there was a significant improvement to the computer functionality. "[Defendant] contends that the [patent-in-suit] is directed toward the abstract idea of retrieving transaction records. . . . [Defendant] takes an overly generalized view of the claim language that vitiates meaningful limitations. [Defendant's] recitation of the claims ignores (or at least evades) the elements of 'nonpredictable bar code' and 'transaction information associated with a nonpredictable bar code.' These elements place substantial limitations on the scope of the asserted claims. . . . [Defendant] dismisses the nonpredictable bar code limitation because it was 'known in the prior art.' But a claim does not fail [Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014)] scrutiny merely because it recites elements known in the prior art. . . . Here, the invention lies in the combined use of nonpredictable bar codes with transaction information. Far from conventional, this novel combination resulted in an improvement over the mid-1990s accounting software, which relied on manual entry of transaction information. Furthermore, the specification teaches that using nonpredictable bar codes to transmit transaction information over a network constitutes a 'significant improvement in that transaction data . . . can be accessed by an end user without concern by unauthorized parties.'”

Intellectual Ventures I LLC et al v. J Crew Group, Inc., 6-16-cv-00196 (TXED August 24, 2016, Order) (Gilstrap, USDJ)

Expert’s Unsupported Use of Windows Mobile as Proxy for Valuing Accused Android OS Justifies New Damages Trial​

Following a $3.5 million jury verdict, the court granted defendant's motion for a new damages trial because plaintiff's damages expert used an improper proxy for the operating system in the accused products. "[Plaintiff] based its damages analysis on the value of the Android operating system in [defendant's] accused products . . . [The expert] used an estimated value of the non-accused Windows Mobile operating system as a substitute for determining the approximate value of the accused Android operating system. . . . [T]he Court finds [the expert's] opinion that the Windows Mobile operating system could serve as an acceptable substitute for valuing the Android operating system to be conclusory and wholly unsupported by the evidence. The Windows Mobile operating system is clearly not the smallest salable patent practicing unit, as there is no evidence that it practices the patent and it was not an accused product at trial. At best, its alleged 2008 cost is roughly analogous to a comparable license. However, [plaintiff's expert] did not testify as to whether Windows Mobile is technologically or economically comparable to Android, and he failed to account for any differences between the two products. Absent such testimony, the Court concludes that [plaintiff] failed to offer sufficient evidence for the jury to find that Windows Mobile is an acceptable economic substitute or that it bears any relationship to 'the incremental value that the patented invention adds to the end product.'"

Core Wireless Licensing SARLl v. LG Electronics, Inc. et al, 2-14-cv-00911 (TXED August 23, 2016, Order) (Gilstrap, USDJ)

Defendant’s Knowledge of Notice of Allowance Alone Does Not Support Jury Finding of Willful Infringement

​ The court granted defendant's renewed motion for judgment as a matter of law that it did not willfully infringe plaintiff's patent following a jury finding of willful infringement because of insufficient evidence. "[T]he trial record contains insufficient evidence to support the jury’s willfulness finding, even under a preponderance of the evidence standard. It is undisputed that [plaintiff] never actively informed [defendant] of any of its patents or patent applications before [plaintiff] filed this lawsuit. . . . The only direct evidence that [plaintiff] offered to show that [defendant] was subjectively aware of [the patent-in-suit] before this suit commenced was a Notice of Allowance for [a defendant] patent sent to [defendant's] outside patent prosecution counsel [4 months before plaintiff filed suit], which [defendant's] outside counsel then forwarded . . . to [defendant's] in-house counsel. . . . [T]he Notice of Allowance did not discuss or attach the [patent]. . . . While the notice recited the name of the lead inventor of the [patent] — [plaintiff's CEO] — the notice made no mention of [plaintiff] itself. . . . To the extent that [plaintiff] argues that [defendant] or its outside counsel had a duty to review the [patent] when they saw its number listed in the Notice of Allowance, [plaintiff] is incorrectly suggesting that willfulness can be proven by negligence; the Supreme Court has ruled that 'intentional or knowing' infringement may warrant enhanced damages."

Radware, LTD. et al v. F5 Networks, Inc., 5-13-cv-02024 (CAND August 22, 2016, Order) (Whyte, USDJ)

Where Do TXED Cases Go?

Anyone with a knowledge of the current patent infringement lawsuit landscape in the United States has more than likely noticed one court venue which has seen a huge influx of patent cases. The U.S. District Court for the Eastern District of Texas (E.D. Tex.) has seen an extremely large number of patent infringement cases on its docket, prompting some to go so far as to suggest that legislation limiting venue options should be pursued by Congress.

A plaintiff’s choice of venue in patent infringement cases is defined by Section 1400(b) of U.S. Code Title 28, which states that civil actions for patent infringement may be brought in the judicial district where the defendant resides or where the defendant has committed infringement and has a regular and established place of business. Because patent infringement plaintiffs can bring action in a venue where the defendant is doing business and not where it is headquartered, both the cost and inconvenience of defending a case in a distant venue may be reason enough for file a motion for a transfer of venue.

Legal teams preparing a defense for a party in a patent infringement suit filed in E.D. Tex. might find effective strategies for arguing a transfer of venue by investigating what has worked for others in the past. It’s not that rare to find cases in E.D. Tex. which have seen a motion to transfer venue granted.

As of this writing, in 2016 alone, there have been nearly 50 patent infringement cases which have been transferred out of E.D. Tex., with 19 of those cases ending up in the U.S. District Court for the Northern District of California (N.D. Cal.).

One such case which was successfully transferred is Game and Technology Co. Ltd. vs. Blizzard Entertainment, Inc. et al. Game and Technology Co. brought suit against Blizzard and others, including Valve Corporation and RIOT Games, in E.D. Tex. over a trio of patents related to video gaming and online gameplay. The court granted the motion to transfer venue based on the fact that the relevant evidence and witnesses were more easily found in the districts identified by the defendants. Blizzard does business in the area covered by E.D. Tex. but the primary function of that office was customer support. The cases involving Blizzard and RIOT were directed to the U.S. District Court for the Central District of California (C.D. Cal.), while Valve’s case was transferred to the U.S. District Court for the Western District of Washington (W.D. Wash.).

Another E.D. Tex. case in which the defense’s motion to transfer venue was successful is Intelligent Automation Design, LLC vs. Zimmer Biomet Holdings, Inc. et al. The patent-in-suit protects a method of controlling how screws are seated to prevent them from becoming stripped. Biomet Microfixation, one of the case’s defendants, petitioned for a transfer of venue based upon the fact that a previous case involving a Zimmer company was transferred out of E.D. Tex. for convenience. Biomet Microfixation also noted that it has no offices or facilities in Texas as well as the fact that the accused system was developed in the Kansas City region. The case was transferred to the U.S. District Court for the Middle District of Florida (M.D. Fla.), which is where Biomet Microfixation’s headquarters are located.

There are dozens of recent patent infringement cases which legal teams can analyze to determine successful strategies for motions to transfer venue. Docket Navigator gives attorneys the analytical tools they need to quickly find granted motions regardless of the district court within which the case was originally filed.

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Charts made using Docket Navigator's data.
This guest post was written by Steve Brachmann.