Patent infringement analysis needs more than plausibility to support lost profits award

The U.S. District Court (Delaware) first found that the defendant infringed four of the plaintiff’s patents related to liquid crystal display (LCD) technology. In determining the appropriate amount of reasonable royalty and lost profits damages, it considered the plaintiff’s expert evidence and his review of the 15 Georgia-Pacific factors (Georgia-Pacific v. U.S. Plywood Corp., 318 F. Supp. 1116 (D.N.Y. 1980).

• The expert accounted for the practice of cross-licensing patent portfolios in the industry (factors 1-4 and 7).
• He also looked to the parties’ past practices in licensing LCD-type patents and examined more than 70 industry licenses, with a particular emphasis on eight cross-licenses between competitors.
• He then used a regression analysis to summarize the data and derive the terms on which the parties would reach a licensing agreement after a hypothetical negotiation, assuming they would cross-license portfolios with an additional balancing payment unique to these parties.
• Finally, the expert used a “count, rank, and divide” method to allocate the portion of the claim attributable to each of the four infringed patents (factors 9-11).

Assuming the four patents comprised the top 5% of the plaintiff’s portfolio, the expert determined that reasonable royalty damages equaled $305,399. He checked this against amounts paid for separate licenses and found they were consistent with his aggregate damages estimate (factor 2). Using a similar “count, rank, and divide” method and assuming once again that the four patents fell into the top 5% of the plaintiff’s portfolio, he calculated $7.8 million in lost profits damages.

Defendant offers no expert opinion. The defendant’s expert sat through the liability phase of trial but did not present an independent opinion during the damages phase. He did offer a rebuttal opinion, critiquing the plaintiff’s expert, but the court was “not persuaded” and summarily dismissed his testimony.

As to the plaintiff’s evidence, the court acknowledged the expert’s “plausible though wide range of damages.” The court found the lower end to be the most credible, because it represented the parties’ past licensing practices and better reflected a hypothetical negotiation between a willing licensor and licensee. The court was not persuaded that the plaintiff’s expert credibly established a commercial value beyond the top 5% and denied lost profits damages, awarding the plaintiff a lump sum of $305,399 as reasonable royalties.