Source: http://adequatetocompensate.com/tag/cafc/
Timestamp: 2019-04-26 01:46:00+00:00

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The Federal Circuit issued an opinion reversing the District Court regarding disgorgement of profits. The Federal Circuit found that the monetary award for trade secret damages should be vacated, in part, because only one of three asserted trade secrets was found to have been misappropriated; whereas the plaintiff expert had advanced a single damages value concerning all three of those trade secrets… and the resulting monetary award had not been allocated on a trade-secret-by-trade-secret basis.
The court also decided that TAOS was not entitled to a jury decision on disgorgement, and that the District Court should make that determination.
The Federal Circuit rejected “double recovery” of damages/monetary remedy awards on sales of the same accused product. In this instance, it was unacceptable that a reasonable royalty should be paid on the same accused sales for which disgorgement was afforded.
Ultimately, the CAFC and the Commission determined that the behavior of Changzhou Trina Solar Energy Co. Ltd. caused at least some injury. The courts stated that not all injury was due to the dumping, but there was enough evidence to demonstrate a causal nexus of at lease some harm.
The CAFC issued a precedential opinion today which seems to offer a different interpretation of the entire market value rule. In this matter, Briggs appealed the damages award of $24,280,330, claiming that Exmark’s damages expert both violated the entire market value rule and failed to relate her 5% royalty rate to the facts of the case. The Nebraska District Court denied a new trial on damages.
The CAFC found that the expert did not violate the entire market value rule when employing as a royalty base the entire mower, as opposed to the flow control baffles in the mower.
The court also notes that in a real-world negotiation, the parties would base a royalty rate on the lawn mower sales, not the baffle component.
The CAFC did find that the expert failed to tie the royalty rate to the facts of the case. The expert failed to guide the trier of fact to the rate, and instead just offered a “superficial recitation of the Georgia Pacific factors, followed by conclusory remarks,” as was done in the Whitserve case.
Damages experts in recent years have been understandably wary of running afoul of the court’s guidance on the entire market value rule when quantifying a royalty base. This decision, among others, appears to afford experts some leeway to make such recourse… when the facts of the case permit.
Judge Freeman declared a mistrial on the second Finjan v. Blue Coat matter (“Blue Coat II”).
In her order, Judge Freeman bifurcates the case and sets the infringement trial for February, and sets the damages trial for December.
It is unclear whether she will allow new reports on damages. The CAFC opinion appears to disagree with the use of the $8 figure (which is used as a “reasonableness” check in Blue Coat II). And the CAFC opinion also appears to disagree with the use of prior verdict royalty rates (which is relied on in Blue Coat II, as well).
Today, the CAFC offered an opinion on Finjan v. Blue Coat Systems. In August 2015, a jury determined that Blue Coat owed approximately $39.5 million for its infringement of several of Finjan’s patents. For one patent, the CAFC found that Finjan’s expert failed to apportion, and failed to demonstrate the technological and economic comparability of the license on which she relied.
The CAFC explains that her quantification was supported by: 1) a document which suggested that there were 24 functions of the accused product, and 2) conversations with experts and witnesses who told her that the 24 functions were of equal value. Despite evidence that Blue Coat provided contradicting this equal division by 24, the CAFC concludes that the jury heard conflicting testimony and was entitled to make up its own mind.
For damages experts, however, it remains unclear precisely where the evidentiary threshold supporting “function analysis” lies; and thus, when one might pursue equal-apportionment to derive a royalty base.
We note that Finjan and Blue Coat are currently back in court. Attached is Judge Freeman’s most recent order on motions in limine.
The CAFC listened to oral argument in the TAOS v. Intersil matter in January 2018. At the forefront of the discussion was the question of whether disgorgement should be considered an equitable remedy or a legal remedy, and whether net or gross profits should have been used.
In the oral argument, Intersil argued that the disgorgement award should not have been determined by the jury. Citing to two Fifth Circuit cases, ERI Consulting Engineers, Inc. v. Swinnea and MGE UPS Sys., Inc. v. GE Consumer & Industrial, Intersil said this was an equitable issue. It was not appropriately categorized as a “damage” because TAOS never asked for lost profits, nor ever suggested that TAOS lost sales as a result of the misappropriation.
TAOS argued that the Supreme Court ruling in Dairy Queen should be followed and that the jury’s award should be preserved.
Intersil also argued that the award should not have relied on gross profits, but instead on net profits. A recent 5th Circuit case, Motion Medical Technologies v. Thermotek Inc., affirmed a judgment which vacated a lost profits jury award (for fraud) calculated using defendant’s gross profits instead of net profits.
The appropriate measure of any party’s economic benefit is a cornerstone for sensible damages. Reliance in this case on “gross profit” (which is formally defined as Net Sales – Cost of Goods Sold) inexplicably may ignore the other expenses (e.g., selling, general & administrative… a.k.a., “SG&A”… a.k.a., “operating expenses”) that the party required to place its product successfully in the marketplace.
This case was originally filed in 2012 in Massachusetts. The case went to trial and BU won on infringement and validity, with the jury awarding damages in the form of a fully paid-up lump sum. On the jury verdict form, the jury chose a one-time payment for the life of the patent, as opposed to a running royalty rate based on sales.
The interesting question for damages came in post-judgment motions, when BU asked for prejudgment interest. BU argued such interest should accrue from the date of the hypothetical negotiation (i.e., January 2000), rather than from the point in time six to twelve years (for the three defendants) later, when notice occurred and damages began to accrue.
On December 8, 2017, the CAFC heard oral arguments on the issue (N.b., the relevant argument begins at 29 minutes & 30 seconds into the recording available below). The prejudgment interest case discussed was Gen. Motors Corp. v. Devex Corp., 461 U.S. 648, 655 (1983). Counsel for BU argued that the case supports the notion that lump-sum damages awarded by a jury should accrue interest from the hypothetical negotiation. It will be interesting to read the Court’s eventual opinion on this specific issue.

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