Mega-damages jury awards in patent infringement cases are piling up: Lucent is awarded $358 million in a matter against Microsoft and others; Uniloc is awarded $388 million in a matter against Microsoft; Cornell University is awarded $184 million in a matter against Hewlett-Packard; and LaserDynamics is awarded $57 million against Quanta Computer.
Yet as quickly as the damages awards have piled up, they have been reduced or reversed by the Court of Appeals for the Federal Circuit (CAFC) and other courts for lack of sufficient evidence. The Lucent case was remanded for a new damages trial, a conditional new trial on damages was ordered in the Uniloc case, the Cornell award was slashed to $53 million, and the LaserDynamics award was reduced to $6.2 million.
An important part of the value of a patent is how large a royalty it can command. These recent cases showed that one way, and in reality sometimes the only way, to generate a significant royalty stream is through litigation. These decisions may force patent owners to re-examine what their patent protection is really worth based on the allocation of earnings between the patented and unpatented components of products. Perhaps the central damages issue in these cases is how to apportion value to the patents at issue. The CAFC is sending a message to the district courts that they must apply a stricter evidentiary standard for patent damages, especially as it relates to the so-called Entire Market Value Rule (EMVR). These rulings highlight the need for companies, counsel and damages experts to analyze apportionment issues carefully, both in and out of litigation, in assessing patent value.
March 20, 2012