The requirement that damages experts in patent cases must properly apportion their proposed damages figures to reflect the incremental value provided by the patents-in-suit, and nothing more, is a legal enigma.
Although the U.S. Court of Appeals for the Federal Circuit repeatedly has stressed that ascertaining patent damages necessarily involves speculation and imprecision, it also has indicated that determining a patented invention's footprint in the marketplace requires at least some level of quantitative or mathematic underpinning.
Depending on the facts and circumstances of a given case, how to reconcile these two seemingly conflicting principles may be unclear. This is especially so where specific quantitative evidence that directly bears on the patented invention's economic or commercial value is not readily available.
Where quantitative evidence is lacking, one common approach that damages experts have taken is to marshal available qualitative evidence regarding the patented invention's perceived value — primarily including opinions from technical experts about the invention's benefits over the prior art and any available noninfringing alternatives — and then translate it into a quantitative apportionment figure.
The goal is to derive a number, often expressed as a set percentage, which reflects the portion of the accused product's overall value that is specifically attributable to the patents-in-suit.
A review of several recent — and potentially overlooked — district court cases, however, suggests that district court judges may be giving this percentage-of-the-product's-value approach heightened scrutiny and increasingly rejecting it as unreliable under the U.S. Supreme Court's Daubert v. Merrell Dow Pharmaceuticals Inc. decision.1 This article surveys three cases that illustrate this trend and then explores potential alternative approaches that may address courts' concerns.
The apportionment requirement is a bedrock principle of patent damages law. It embodies the fundamental principle that unless an allegedly infringing product's entire market value "is properly and legally attributable to the patented feature," the patent owner "must in every case give evidence tending to separate or apportion the defendant's profits and the patentee's damages between the patented ... and the unpatented features."2
In other words, to be properly recoverable, a patent damages award must be carefully tied to "the claimed invention's footprint in the market place," such that it "reflect[s] the value attributable to the infringing features of the product, and no more."3 This "essential requirement" means that the ultimate royalty award "must be based on the incremental value that the patented invention adds to the end product."4
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Footnotes
1 509 U.S. 579 (1993).
2 Garretson v. Clark , 111 U.S. 120, 121 (1884).
3 VirnetX, Inc. v. Cisco Sys., Inc. , 767 F.3d 1308, 1327 (Fed. Cir. 2014); Commonwealth Sci. & Indus. Research Org. v. Cisco Sys., Inc. , 809 F.3d 1295, 1301 (Fed. Cir. 2015).
4 Ericsson, Inc. v. D-Link Sys., Inc. , 773 F.3d 1201, 1226 (Fed. Cir. 2014).
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