The misapplication of the entire market value rule has another high profile victim. Following this week’s Federal Circuit ruling regarding the Uniloc v. Microsoft case, a patent infringement case in the Eastern District of Texas has been directly impacted as a result of a timely motion by local (San Diego, CA) attorneys John Gartman and Justin Barnes from the Fish & Richardson firm and representing defendant SAP against Versata (Case No. 2:07-CV-153-CE).
The order clearly states that “In light of the Federal Circuit’s recent decisions on damages, including ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860 (Fed. Cir. 2010); Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301 (Fed. Cir. 2009), and Uniloc USA, Inc. v. Microsoft Corp., No. 03-CV-0440 (Fed. Cir. January 4, 2011), the court is persuaded that it erred when it admitted Mr. [Christopher] Bakewell’s testimony and his damages model.” Consequently, the judge has ordered a new trial on the question of damages.
As mentioned in yesterday’s post, the “entire market value” rule in patent damages appraisals allows for the recovery of patent infringement damages based on the value of the entire product that contains an infringing component when, and this is what has been typically overlooked, the patent-related feature is the basis for consumer demand. Once again, the temptation of arriving at giant damages numbers on the infringement of non-essential elements seems to have overcome the solid reasoning required to assess the actual damages suffered or, from an alternative perspective, to calculate a reasonable royalty that would have been negotiated on the eve of the infringement.
These rulings, furthermore, have consequences for trademark and copyright infringement damages assessments as well, because much of professional practice on these issues has traditionally relied upon the more explicit bases for patent infringement damages. See, e.g. our case study regarding damages apportionment and our comments on the ongoing Mattel v. MGA case.