Opinion ID: 807002
Heading Depth: 2
Heading Rank: 1

Heading: CPi’s Appeal

Text: We first address CPi’s arguments on appeal. As noted, we affirm the trial court’s denial of JMOL on infringement because substantial evidence supports the jury’s verdict. We also affirm the denial of JMOL on anticipation on most claims, but reverse-in-part because we find that substantial evidence does not support the jury’s finding that Claim 10 of the ’007 Patent is not anticipated. We remand for a new trial on damages because the jury’s damages verdict is unsupported by the record and the trial court abused its discretion when it failed to order a new damages trial. This court reviews denial of post-trial motions under regional circuit law, the Second Circuit in this case. See Revolution Eyewear, Inc. v. Aspex Eyewear, Inc., 563 F.3d 1358, 1370 (Fed. Cir. 2009). The Second Circuit reviews a denial of JMOL de novo. AMW Materials Testing, Inc. v. Town of Babylon, 584 F.3d 436, 456 (2d Cir. 2009). Similar to the frequently applied substantial evidence standard, a district court may set aside the [jury’s] verdict pursuant to Rule 50 only where there is “such a complete absence of evidence supporting the ver- dict that the jury’s findings could only have been the result of sheer surmise and conjecture, or there is such an overwhelming amount of evidence in favor of the movant that reasonable and fair minded men could not arrive at a verdict against him.” Id. (quoting Cross v. N.Y.C. Transit Auth., 417 F.3d 241, 248 (2d Cir. 2005)). The Second Circuit considers the evidence in the light most favorable to the non-moving 7 WHITSERVE v. COMPUTER PACKAGES party and gives that party the benefit of all reasonable inferences that the jury might have drawn in the nonmovant’s favor. Caceres v. Port Auth., 631 F.3d 620, 622 (2d Cir. 2011).
Claim 1 of ’468 Patent is representative of the claims in the ’468 Patent Family. It recites: A device for automatically delivering professional services to a client comprising: a computer; a database containing a plurality of client reminders, each of the client reminders comprising a date field having a value attributed thereto; software executing on said computer for automatically querying said database by the values at- tributed to each client reminder date field to retrieve a client reminder; software executing on said computer for automatically generating a client response form based on the retrieved client reminder; a communication link between said computer and the Internet; software executing on said computer for automatically transmitting the client response form to the client through said communication link; and, software executing on said computer for automatically receiving a reply to the response form from the client through said communication link. ’468 Patent col. 6 l. 56 to col. 7 l. 8 (emphases added). WHITSERVE v. COMPUTER PACKAGES 8 The district court interpreted “automatic” in the claims as: a process that, once initiated, is performed by a machine without the need for manually perform- ing that process, that is, without the need for hu- man intervention. A machine may still perform the claimed process automatically, even though a human might manually initiate or interrupt the process. In reaching the conclusion that the term “automatic” as used in claim 1 does not exclude all possible human intervention, the trial court relied on our decision in CollegeNet, Inc. v. ApplyYourself, Inc., 418 F.3d 1225, 1235 (Fed. Cir. 2005), where we explained that dishwashers and autopilots could still be automatic even though they must be started by a human, or their operation may be interrupted by a human. As we did in CollegeNet, the trial court focused on the use of the term “comprising” in the claim to find that unrecited elements of manual, human actions were not excluded from its scope. See id. at 1235 (stating that, “[w]hile claim 1 does not expressly provide for human intervention, the use of ‘comprising’ suggests that additional, unrecited elements are not excluded. Such elements could include human actions to expressly initiate the automatic [querying, generating, transmitting, or receiving], or to interrupt such functions.”). The trial court then explained why it believed this construction of automatic was supported both by the patent’s specification and by its prosecution history. CPi does not challenge the trial court’s claim construction on appeal. 4 Instead, CPi argues that, even 4 While CPi alluded to the possibility that the trial court’s claim construction was contrary to the patent’s specification and prosecution history at times in its 9 WHITSERVE v. COMPUTER PACKAGES allowing for the presence of some manual intervention in the elements of the claims, its products do not infringe because they require a type of manual intervention not contemplated by or consistent with the asserted claims. CPi contends that, while all of the asserted claims of the ’468 Family require “software executing on said computer for automatically querying said database by values attributed to each client reminder date field to retrieve a client reminder,” “the accused products all require, at minimum, the manual entry of a due date range during the execution of the querying process.” Appellant’s Br. 30 (original emphasis deleted). 5 Essentially, CPi argues that, because a person using their products must manually choose a due date range to be queried, and, in its view, choosing the date range occurs during the querying process, there is no infringement because that manual action neither initiates nor interrupts the querying process. WhitServe counters that this argument is illogical opening brief, it did not raise the issue in the “Statement of the Issues,” cited no legal support for its claim construction “arguments,” and did not even recite the standard of review for claim construction. It has, accordingly, waived the ability to argue for an alternative claim construction. See Kao Corp. v. Unilever U.S., Inc., 441 F.3d 963, 973 n.4 (Fed. Cir. 2006) (stating that failure to set forth substantive discussion of claim construction in the statement of the issues presented, summary of the argument, and argument itself, constitutes waiver of any alternative claim construction). This finding renders moot WhitServe’s motion, filed after CPi’s opening brief, asking that we prohibit CPi from later requesting de novo review of the court’s claim constructions. 5 In a footnote, CPi raises another reason why it believes the ’801 Patent is not infringed. Appellant’s Br. 32 n.4. This argument is waived. SmithKline Beecham v. Apotex Corp., 439 F.3d 1312, 1320 (Fed. Cir. 2006) (“[A]rguments raised in footnotes are not preserved.”). WHITSERVE v. COMPUTER PACKAGES 10 because the “querying process does not start until the user enter[s] a date range and starts the process.” CrossAppellant’s Br. 59. We agree with WhitServe. We find that there is substantial evidence to support the jury’s implicit finding that choosing a due date range is separate from CPi’s automated querying process and that all other manual operations required by CPi’s products are outside the automated tasks required by the claims. Dr. Sayward was WhitServe’s expert on the fields of computer science, docketing systems, database management, and Internet and network applications. He testified that in analyzing CPi’s products for infringement, he spent “hundreds of hours” looking at the products’ source code and user manuals, and experimenting with test accounts. Dr. Sayward explained, element by element, how, for example, CPi’s Hosted EARS product worked and infringed claim 1 of the ’468 Patent. Regarding the “automatically querying” element, he explained that, after “enter[ing] a date range,” the user “press[es] the search button.” “After pressing the search button what happens under the scene is that the database of client reminders are searched and then a display is produced which shows the results of that search.” “So after the law firm enters the information and clicks the search button, Hosted EARS automatically queries at that time.” Thus, Dr. Sayward testified that “entering a date range” happens before the querying begins in Hosted EARS and the querying process itself (checking the database entries against a desired date range) happens automatically. Dr. Sayward testified similarly about Desktop EARS/TERMS, and CPi Online. When CPi’s counsel cross-examined Dr. Sayward, he asked whether the querying process could start before due dates were manually entered by the user. Dr. Sayward rejected that proposition and stated that entering the date 11 WHITSERVE v. COMPUTER PACKAGES range can not be part of the querying process because prior to entering the date range “you haven’t formed a proper question.” To be a query, “you need a date range, so that you know what you’re searching for.” The jury was entitled to credit this explanation and reject CPi’s theory that querying involves choosing the date range to be searched. CPi’s argument that their products require “date entry” and other manual steps does not negate the fact that, when the evidence is viewed in the light most favorable to WhitServe, there was substantial evidence to support a finding to the contrary. Thus, we affirm the trial court’s denial of CPi’s motion for JMOL of noninfringement.6
The jury found that two of CPi’s products, Hosted EARS and Hosted PMS, infringed all 15 claims of the ’007 Patent. It also found that CPi’s Desktop Ears product infringed claim 10 of the ’007 Patent. CPi concedes that it infringes the ’007 Patent, if valid, but argues that the ’007 Patent is invalid under 35 U.S.C. § 102 as anticipated by U.S. Patent No. 5,903,881 (“the Schrader Patent”). We conclude that claim 10 of the ’007 Patent is invalid as anticipated, but that substantial evidence supports the jury’s finding of no anticipation as to the other claims. “[A] claim is anticipated if each and every limitation is found either expressly or inherently in a single prior art 6 From this evidence, the jury reasonably also could have concluded that CPi’s products infringed under the doctrine of equivalents. The jury was instructed that they could find infringement under the doctrine, but CPi appealed only on the basis that its products do not literally infringe. There is, accordingly, more than one basis upon which to conclude that substantial evidence supports the jury’s infringement verdict. WHITSERVE v. COMPUTER PACKAGES 12 reference.” Celeritas Techs., Ltd. v. Rockwell Int’l Corp., 150 F.3d 1354, 1361 (Fed. Cir. 1998). The “elements must be arranged or combined in the same way as in the claim,” but “the reference need not satisfy an ipsissimis verbis test.” In re Gleave, 560 F.3d 1331, 1334 (Fed. Cir. 2009) (internal citations and quotation marks omitted). Also, the reference must “enable one of ordinary skill in the art to make the invention without undue experimentation.” Impax Labs., Inc. v. Aventis Pharm. Inc., 545 F.3d 1312, 1314 (Fed. Cir. 2008). Patents are presumed to be valid and invalidity must be proven by clear and convincing evidence. Microsoft Corp. v. i4i Ltd. P’ship, 131 S. Ct. 2238, 2242 (2011). Anticipation is a question of fact reviewed for substantial evidence when tried to a jury. Orion IP, LLC v. Hyundai Motor Am., 605 F.3d 967, 974 (Fed. Cir. 2010). Because the jury found that the patents were not invalid, under the Second Circuit’s JMOL standard, we review the evidence to see if there is such an “overwhelming amount of evidence in favor of [CPi] that reasonable and fair minded men could not arrive at a verdict against [it].” AMW, 584 F.3d at 456. This is a high burden. The ’007 Patent is entitled “Onsite Backup from Internet-Based Data Processing.” It recognizes that many companies have moved their data processing systems from their private networks to the Internet and now allow their customers to access and manipulate their data via a web interface. ’007 Patent col. 1 ll. 21-24. The object of the ’007 Patent is to allow clients to backup to their own computer a copy of their Internet-based data, which, from the specification, appears to be data resulting from outsourced data-processing that is stored on a central computer separated from the client’s network by the Internet. Id. col. 1 ll. 21-24, col. 2 ll. 6-24. This objective is the opposite of traditional backup systems, which allow the 13 WHITSERVE v. COMPUTER PACKAGES client to copy data from their own computer onto an external computer or server. Id. col. 1 ll. 49-56. In addition to saving a copy of the Internet-based data, dependent claims 3, 6, and 9 go on to claim “software executing on said central computer for retrieving said data backup.” Id. col. 3 ll. 48-50, col. 4 ll. 12-15, col. 4 ll. 49-51. Essentially, those claims recite the central computer’s ability to restore any lost data by retrieving it from the client’s personal computer. CPi focused its anticipation case on claim 10. It recites: A system for local storage of data through the Internet comprising: a central computer connected to the Internet; a client computer connected to the Internet; at least one storage having a plurality of client data records, said at least one storage acces- sible by said central computer, each client data record having an identifier that relates the client data record to a client; a client data request, sent from said client com- puter via the Internet to said central com- puter; and client data corresponding to said client data re- quest, sent from said central computer via the Internet to said client computer and saved on said client computer. Id. col. 4 ll. 52-64 (emphases added). The Court construed “client data” to mean “a complete or partial backup or copy of data records corresponding to a particular client.” It interpreted “data request” to mean “a data backup request.” Neither party appeals these WHITSERVE v. COMPUTER PACKAGES 14 claim constructions. Thus, claim 10 requires: a client and central computer, each connected to the Internet; backups or copies of data records corresponding to a particular client that are identifiable by client and accessible by the central computer; a data backup request sent by the client computer to the central computer; and a complete or partial backup or copy of data records corresponding to that client sent from the central computer to the client computer where they are then saved. Basically, it allows clients to access and copy their own files or files associated with them from across the Internet. On its face, claim 10 (as well as claims 11-15, which depend from claim 10) does not recite Internet-based data, which is differentiated from general client data by the fact that it must be accessible and modifiable by the client’s act of processing the data over the Internet. See ’007 Patent col. 1 ll. 21-24, col. 2 ll. 6-24. The Schrader Patent is the only piece of prior art upon which CPi relied for its anticipation defense. It discloses an electronic checkbook system that reconciles pending financial transactions against cleared transactions. 7 Among other things, it claims: a computer-based system that allows the user to send transactions from his computer to a financial institution’s computer system for processing; a display showing an account balance of all cleared transactions; a display showing an account balance of both cleared and uncleared transactions; the ability to receive from the financial institution a list of transactions cleared since the last time they were checked; and then updating the two account balances. Schrader Patent col. 19 l. 48 to col. 20 l. 25. In the section of the specification entitled “Update Statement,” it ex- 7 The Schrader Patent is sold under the trademark Quicken®. 15 WHITSERVE v. COMPUTER PACKAGES plains that, once a user requests an update, the “personal finance application connects to the financial institution computer system” over the Internet. Id. col. 16 l. 63 to col. 17 l. 5. Then the software “creates a request file that includes a request for all cleared transactions since the date of the last update” that is sent to the financial institution. Id. col. 17 ll. 6-9, ll. 15-19. In response, the financial institution’s computer system “creates a response file that contains the set of transactions that have been cleared” since the last update. Id. col. 17 ll. 22-25. The response file is then sent back to the application and processed, which includes “extracting each of the cleared transactions from the response file and storing them.” Id. col. 17 ll. 26-38. CPi’s expert, Dr. Alexander, testified about claim 10 and stated that, in Schrader, the users “retriev[e] from the financial institution these records, just as the ’007 Patent requires downloading to a client.” He also stated that the download is “to your business or personal computer from the bank’s computer.” “[T]he banks maintain the database with your checkbook record” and “these are records that are specific to you.” “So there’s a request. In the case of the Quicken Schrader prior art, you’re at a personal computer, at your business or at home, and you request the downloading of records that essentially are unposted records that the bank has processed.” Then, according to Dr. Alexander, the “the bank giv[es] you the response file, which is the records that are specific to you, based on your client ID, your account number.” “And these records are saved on your computer in the case of Quicken, the Schrader patent, they are saved on your computer, and/or business computer.” His testimony tracks all of claim 10’s elements. CPi argues that, therefore, the Schrader Patent, which describes a computer downloading files specific to the user from a central WHITSERVE v. COMPUTER PACKAGES 16 computer, contains all of the limitations claimed in the ’007 Patent. WhitServe argues that Schrader is missing certain elements claimed in the ’007 Patent. WhitServe states that “Dr. Sayward testified at trial that Schrader was missing additional key claim elements: (1) a central computer for transmitting client data to a client computer (required by all claims 1-15); (2) Internet-based data (required by claims 1-9); and (3) data conversion (required by claims 7-9 and 12-15).” We conclude that claim 10 of the ’007 Patent is anticipated by the Schrader Patent despite these asserted differences. First, Schrader clearly discloses a central computer in the form of the financial institution’s computer. Additionally, claim 10 recites neither Internet-based data nor data conversion. In fact, the only rebutting testimony offered by WhitServe specifically regarding claim 10 was its expert’s conclusory testimony that claim 10’s limitations “aren’t taught by Schrader.” In its brief, WhitServe argues that Schrader does not anticipate claim 10: “Schrader does not relate to a system for backing up client data” because “the Schrader request file is not a request for a data backup of existing data, but rather is a request for new data relating to cleared transactions since the client was last online.” Cross- Appellant’s Br. 70 (emphases added). Such “arguments of counsel cannot take the place of evidence lacking in the record.” Estee Lauder Inc. v. L’Oreal, S.A., 129 F.3d 588, 595 (Fed. Cir. 1997) (internal citations and quotation marks omitted). Moreover, claim 10 does not distinguish between data that is “existing” or “new,” and instead recites only “client data,” which was defined as “a complete or partial backup or copy of data records corresponding to a particular client.” Data corresponding to a user’s cleared financial transactions clearly satisfies the defini17 WHITSERVE v. COMPUTER PACKAGES tion of a “copy of data records corresponding to a particular client.” WhitServe points to no other elements that distinguish claim 10 from the Schrader Patent and does not argue that the Schrader Patent is not enabling. See Amgen Inc. v. Hoechst Marion Roussel, Inc., 314 F.3d 1313, 1355 (Fed. Cir. 2003) (explaining that there is “a [rebuttable] presumption . . . that both the claimed and unclaimed disclosures in a prior art patent are enabled.”). Thus, in this case, even viewing the evidence in a light most favorable to WhitServe, no reasonable juror could have found that claim 10 was not anticipated by the Schrader Patent. Therefore, the trial court’s denial of CPi’s motion for JMOL regarding claim 10 is reversed because claim 10 is anticipated by the Schrader Patent. Contrary to CPi’s arguments, however, the fact that claim 10 is invalid does not cause all of the other claims of the ’007 Patent to fail. We do not invalidate the rest of the claims because they contain additional elements that CPi has not established were either anticipated or obvious. The law states: Each claim of a patent (whether in independent, dependent, or multiple dependent form) shall be presumed valid independently of the validity of other claims; dependent or multiple dependent claims shall be presumed valid even though de- pendent upon an invalid claim . . . . The burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting invalidity. 35 U.S.C. § 282. “Typically, testimony concerning anticipation must be testimony from one skilled in the art and must identify each claim element, state the witnesses’ interpretation of the claim element, and explain in detail WHITSERVE v. COMPUTER PACKAGES 18 how each claim element is disclosed in the prior art reference.” Schumer v. Lab. Computer Sys., Inc., 308 F.3d 1304, 1315 (Fed. Cir. 2002) (emphasis added). In Koito Manufacturing Co. v. Turn-Key-Tech, LLC, 381 F.3d 1142, 1151 (Fed. Cir. 2004), the defendant entered another patent into evidence as anticipatory prior art, “but otherwise failed to provide any testimony or other evidence that would demonstrate to the jury how that reference met the limitations of the claims . . . .” Instead, the defendant’s expert testified about four prior art patents simultaneously and stated: All these prior art patents provide for products and ways of making products with thick and thin sections. The gate locations are shown, and they all have inherently crossing flows in sections of the product, sometimes substantial sections of these products, such that they all would have a cross-laminated section as Turn Key is applying that term to the accused lenses. Id. at 1152. We held that such “[g]eneral and conclusory testimony . . . does not suffice as substantial evidence of invalidity.” Id. Because general and conclusory testimony is not enough to be even substantial evidence in support of a verdict, it is certainly not enough to require us to overturn a jury’s finding of no invalidity. In this case, CPi’s expert, Dr. Alexander, explained what part of the Schrader Patent anticipated each element in claim 10. When asked if encryption and data format conversion were well known at the time the ’007 Patent was filed, he answered affirmatively. CPi’s attorney then asked, “Do you have an opinion on the validity of Claims 1, 2, 3, 7, 8, 9, 10, 11, 12, 13, 14 and 15 of the ’007 19 WHITSERVE v. COMPUTER PACKAGES Patent?” 8 Dr. Alexander replied, “Yes, they’re all invalid because of prior art.” Finally, CPi’s attorney asked, “And are all the elements of those claims disclosed in the Schrader patent?” Dr. Alexander stated, “Yes, they are.” We find this generalized exchange, which failed to articulate how the Schrader Patent anticipated the other claims’ specific elements, to be a far cry from the “overwhelming amount of evidence” needed to require us to overturn the jury’s verdict. See Id. There are several additional elements contained in the other claims, moreover, which a reasonable jury could find absent from the Schrader Patent. For example, dependent claims 3, 6, and 9 require that there be “software executing on said central computer for retrieving said data backup.” The Schrader Patent has not been shown to allow the financial institution to retrieve the data previously sent to the user. Also, claims 1-9 require Internet-based data, 9 which is not clearly disclosed by the 8 It is unclear why Dr. Alexander did not mention claims 4 through 6, but it would not change the result if he had. 9 For example, claim 1 of the ’007 Patent recites: A system for onsite backup of internet-based data comprising: a central computer; a client computer; a communications link between said central com- puter and the Internet; a communications link between said client com- puter and the Internet; at least one database containing a plurality of data records accessible by said central com- puter, each data record containing a client identification number; software executing on said central computer for receiving a data backup request from said cli- ent computer; WHITSERVE v. COMPUTER PACKAGES 20 Schrader Patent. While CPi argues that WhitServe’s expert conceded that Schrader disclosed Internet-based data, what he actually said was that the “client computer get[s] the data from the financial institution computer system ‘over a network.’” A jury reasonably could have concluded that the fact that data is transferred over the Internet does not automatically make it “Internet-based data” because, as disclosed in the ’007 Patent, that element requires the ability to modify centrally stored data from across the Internet, rather than simply sending it across the Internet. 10 CPi also states that the ’007 patent is rendered obvious by the Schrader patent. However, “an obviousness determination . . . is based on underlying factual inquiries including: (1) the scope and content of the prior art; (2) the level of ordinary skill in the art; (3) the differences between the claimed invention and the prior art; and (4) objective evidence of nonobviousness.” Eli Lilly & Co. v. software executing on said central computer for transmitting said data backup to said client computer for onsite backup of internet-based data on said client computer. ’007 Patent col. 3 ll. 30-44 (emphases added). 10 The ’007 Patent describes an Internet-based data processing system in which a “client computer executes software 20, residing on the data processing system 15, for displaying, updating, and deleting data 12 stored on the central data processing system 15.” ’007 Patent col. 2 ll. 50-53 (emphases added). WhitServe’s expert accurately described Internet-based data as “[i]f you have data that you constructed and you send it to a central computer for further processing, Internet based data is that data that you created yourself, plus the data that gets created as a consequence of doing that processing on a server computer.” He also agreed that a good definition is: “information that could be created on an application on the other side of the Internet from a client computer[.]” 21 WHITSERVE v. COMPUTER PACKAGES Teva Pharm. USA, Inc., 619 F.3d 1329, 1336 (Fed. Cir. 2010). Other than the cursory statement that data conversion and encryption were “well known” at the time of patenting by CPi’s expert, CPi has not pointed to facts necessary for us to conclude that no reasonable jury could have found the rest of the ’007 Patent’s claims to be nonobvious. Therefore, while we conclude that claim 10 of the ’007 Patent is invalid as anticipated, we find that substantial evidence supports the jury’s verdict of no invalidity as to the remaining ’007 Patent’s claims.
CPi appeals the trial court’s denial of its post-trial motions for JMOL or a new trial on damages on the grounds that the jury’s $8,378,145 damages award is not supported by substantial evidence and is, in fact, against the clear weight of the evidence. “When reviewing damages in patent cases, we apply regional circuit law to procedural issues and Federal Circuit law to substantive and procedural issues pertaining to patent law.” WordTech Sys., Inc. v. Integrated Network Solutions, Inc., 609 F.3d 1308, 1318 (Fed. Cir. 2010) (internal citations and quotation marks omitted). In the Second Circuit, “a district court may grant a new trial pursuant to [Federal Rules of Civil Procedure] Rule 59 even when there is evidence to support the jury’s verdict, so long as the court ‘determines that, in its independent judgment, the jury has reached a seriously erroneous result or its verdict is a miscarriage of justice.’” AMW, 584 F.3d at 456 (quoting Nimely v. City of New York, 414 F.3d 381, 392 (2d Cir. 2005)). Denial of a motion for a new trial is reviewed for abuse of discretion. Id. “The standard for ordering a new trial is therefore somewhat less stern than that for entering judgment as a matter of law, but our review of a district court’s disposition of a Rule motion is more deferential.” Id. “A district court abuses its discretion when WHITSERVE v. COMPUTER PACKAGES 22 its decision is based on clearly erroneous findings of fact, is based on erroneous interpretations of the law, or is clearly unreasonable, arbitrary or fanciful.” Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1460 (Fed. Cir. 1998) (en banc). After CPi made its initial post-trial motions in this case, the trial court issued an order upholding the verdict. The only analysis it provided was that ‘“[t]he court concludes that the $8,378,145.00 jury verdict entered on May 25, 2010, is fair, just, and reasonable and adequately addresses all legal and equitable considerations.” It then dismissed as moot all post trial motions, including CPi’s motion regarding damages. We have said that “[m]ost jury damages awards re- viewed on appeal have been held to be supported by substantial evidence.” Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1336 (Fed. Cir. 2009). “Nonetheless, on post-trial JMOL motions, district court judges must scrutinize the evidence carefully to ensure that the ‘substantial evidence’ standard is satisfied, while keeping in mind that a reasonable royalty analysis ‘necessarily involves an element of approximation and uncertainty.’” Id. (quoting Unisplay, S.A. v. Am. Elec. Sign Co., 69 F.3d 512, 517 (Fed. Cir. 1995)). The same rule requiring the trial court to scrutinize the evidence applies to motions for new trials. In this case, we believe that, had the trial court scrutinized the damages evidence properly, it would have concluded that the evidence did not support the award. Because the jury’s verdict lacked evidentiary support, we conclude that the trial court abused its discretion when it denied the motion for a new trial. When a patent is infringed, the patentee is entitled to “damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use 23 WHITSERVE v. COMPUTER PACKAGES made of the invention by the infringer.” 35 U.S.C. § 284. The patentee bears the burden of proving damages. Lucent, 580 F.3d at 1324. “Two alternative categories of infringement compensation are the patentee’s lost profits and the reasonable royalty he would have received through arms-length bargaining.” Id. If lost profits are not at issue, the reasonable royalty is the floor for damages. Id. The jury’s verdict form does not indicate how the award was calculated, whether it is a lump sum or running royalty, or whether it includes damages in addition to a reasonable royalty. At trial, both parties based their damage theories primarily on the 15 Georgia-Pacific factors, see Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970), 11 which are 11 We have stated that the factors include: (1) royalties the patentee has received for licensing the patent to others; (2) rates paid by the li- censee for the use of comparable patents; (3) the nature and scope of the license (exclusive or non- exclusive, restricted or nonrestricted by territory or product type); (4) any established policies or marketing programs by the licensor to maintain its patent monopoly by not licensing others to use the invention or granting licenses under special conditions to maintain the monopoly; (5) the commercial relationship between the licensor and licensee, such as whether they are competitors; (6) the effect of selling the patented specialty in promoting sales of other products of the licensee; (7) the duration of the patent and license term; (8) the established profitability of the product made under the patent, including its commercial success and current popularity; (9) the utility and advantages of the patent property over old modes or de- vices; (10) the nature of the patented invention and the benefits to those who have used the in- vention; (11) the extent to which the infringer has used the invention and the value of that use; (12) WHITSERVE v. COMPUTER PACKAGES 24 meant to provide a reasoned economic framework for a “hypothetical negotiation, . . . [which] attempts to ascertain the royalty upon which the parties would have agreed had they successfully negotiated an agreement just before infringement began.” Lucent, 580 F.3d at 1324. CPi’s main arguments against the verdict concern the testimony by WhitServe’s damages expert, Dr. Shapiro, and the closing argument made by WhitServe’s counsel. It argues that WhitServe improperly relied on a “business-wide” damages theory that included non-infringing revenue and caused the royalty base relied upon by the jury to be inflated by several times. It also argues that WhitServe’s damages expert’s testimony can not support the verdict because the royalty rate upon which he based his reasonable royalty calculation is merely speculative, as is WhitServe’s “other damages” theory based on the cost to develop CPi’s systems. Finally, it argues that WhitServe’s closing arguments were prejudicial and require a new trial because the trial court’s correcting statements were insufficient to prevent the jury from being tainted by WhitServe’s misstatements of law and fact. the portion of profit or of the selling price that may be customary in that particular business to allow for use of the invention or analogous inven- tions; (13) the portion of the realizable profit that should be credited to the invention as opposed to its non-patented elements; (14) the opinion testimony of qualified experts; and (15) the results of a hypothetical negotiation between the licensor and licensee. i4i Ltd. P’ship v. Microsoft Corp., 598 F.3d 831, 853 n.3 (Fed. Cir. 2010), aff’d, 131 S. Ct. 2238 (2011). 25 WHITSERVE v. COMPUTER PACKAGES In response, WhitServe proffers two main theories in support of the verdict. First, it argues that the lump sum licenses it presented at trial along with the GeorgiaPacific factors support Dr. Shapiro’s royalty rate of 16-19%, which, when applied to $42-43 million in infringing revenue yields a royalty of about $8 million. Second, it argues that the jury may have awarded a reasonable royalty of about $3 million and then increased the damages award based on “other damages” it felt WhitServe suffered. We find that neither theory supports the jury’s verdict.
When a hypothetical negotiation would have yielded a running royalty, the classic way to determine the reasonable royalty amount is to multiply the royalty base, which represents the revenue generated by the infringement, by the royalty rate, which represents the percentage of revenue owed to the patentee. See, e.g., Finjan, Inc. v. Secure Computing Corp., 626 F.3d 1197, 1208 (Fed. Cir. 2010). In this case, CPi’s expert stated that there were 1,036,877 accused infringing transactions. WhitServe adopted that number at trial and on appeal. Thus, the royalty base is equivalent to the revenue generated by those transactions, which equals 1,036,877 times the average transaction fee charged by CPi for transactions that infringe WhitServe’s patents. There was a factual dispute over whether the average infringing service fee charged by CPi was $15.69 or $41. WhitServe’s expert, Dr. Shapiro, had based his original calculations on the $15.69 figure provided by CPi. Dr. Shapiro changed his opinion to incorporate the $41 figure on the eve of trial, however. By multiplying $41 by a little more than 1 million infringing transactions, WhitServe argues the infringing revenue base was $42-43 million. WHITSERVE v. COMPUTER PACKAGES 26 CPi argues that number is far too high because Dr. Shapiro came up with the number by dividing CPi’s gross revenues by the total number of all transactions— including non-infringing transactions. It argues that including non-infringing transactions in the average fee calculation makes the revenue base unsupported by the evidence because it sweeps in non-infringing use, for which CPi says it charges higher fees. CPi’s expert testified that the correct revenue base was about $18 million. WhitServe argues that CPi stipulated to evidence supporting the jury’s verdict in the form of its past financial data and that Dr. Shapiro properly used that information to determine that CPi’s average infringing service fee was about $41. We find that the jury was entitled to find that $41 accurately represented the average service fee charged for infringing products. In Finjan, the patentee’s expert calculated the infringer’s profit margin on accused products by using “company-wide, instead of product-specific, gross profits.” 626 F.3d at 1209. The expert “explained to the jury that he found that the gross profit margin for the [accused] products was similar to the company-wide margin (both roughly 70%), so that ‘the [accused] products . . . have a gross profit margin . . . that’s close.’” Id. at 1209-10. We concluded that substantial evidence supported the award based on that profit margin because the expert “provided more than just a conclusory opinion, on which the jury was entitled to rely.” Id. at 1210. As in Finjan, we do not find reversible error in Dr. Shapiro’s calculation of the average service fee because he explained that, as CPi automated more and more transactions, the average service fee remained the same over time. See J.A. 15667-68 (explaining that “one would expect a lower average service fee when the proportion of electronic transactions increased”). Non-infringing use, 27 WHITSERVE v. COMPUTER PACKAGES which commands a higher fee according to CPi, accounted for 97% of all transactions in 2003 but dropped to 60% in 2009 as CPi moved away from manual transactions and started conducting more automated transactions, using computers and the Internet. Dr. Shapiro explained that the average fee remained the same during that whole period, however. J.A. 15667. Thus, the jury was free to reason that the average fee would have decreased as the allegedly cheaper infringing transactions progressively made up a larger proportion of total transactions. Because that did not happen, it was reasonable to conclude that the infringing transactions were not, in fact, cheaper and that the average transaction fee is a fair approximation of the fee charged in the infringing transactions. See Bluebonnet Sav. Bank, F.S.B. v. United States, 266 F.3d 1348, 1355 (Fed. Cir. 2001) (explaining that damage calculations are not an exact science and “it is enough if the evidence adduced is sufficient to enable a court or jury to make a fair and reasonable approximation” (internal quotation marks and citations omitted)). Although it would have been preferable to have broken the data down by specific transaction type, we do not find that Dr. Shapiro’s reasoning on this point was impermissible speculation. Instead, “vigorous crossexamination, presentation of contrary evidence, and careful instruction on the burden of proof are the traditional and appropriate means of attacking shaky but admissible evidence.” i4i Ltd. P’ship v. Microsoft Corp., 598 F.3d 831, 856 (Fed. Cir. 2010) (citing Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 596 (1993)), aff’d, 131 S. Ct. 2238 (2011). Here, CPi cross-examined Dr. Shapiro on the issue and presented contrary evidence. 12 12 CPi complains that Dr. Shapiro came up with his higher average transaction fee the night before he testified and presented the trial court with a conclusory expert WHITSERVE v. COMPUTER PACKAGES 28 The jury was entitled to believe that the average fee for the infringing transactions was about $41. Thus, if there was evidence to support the corresponding royalty rate that would have yielded an $8.3 million verdict, we could affirm. We agree with CPi, however, that multiple errors in Dr. Shapiro’s royalty rate calculation cause his ultimate opinion regarding a reasonable royalty rate to be speculative. Dr. Shapiro concluded that the royalty rate that would have resulted from a hypothetical negotiation report with no analysis and no citations to data. The trial court excluded the report after CPi objected but allowed Dr. Shapiro to testify as to his conclusion and permitted WhitServe to publish a chart including the information to the jury during closing. CPi states this information was inadmissible, prejudicial, and requires a new trial. Upon reviewing the trial transcript, it is unclear whether the trial court’s ruling should have prohibited Dr. Shapiro from testifying as to the higher amount. At one point, the