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Lucent Techs., Inc. v. Gateway, Inc. - 580 F.3d 1301 (Fed. Cir. 2009)

Rule:

Litigants routinely adopt several approaches for calculating a reasonable royalty. The first, the analytical method, focuses on the infringer's projections of profit for the infringing product. The second, more common approach, called the hypothetical negotiation or the willing licensor-willing licensee approach, attempts to ascertain the royalty upon which the parties would have agreed had they successfully negotiated an agreement just before infringement began. Among the relevant facts are: what plaintiff's property was, to what extent defendant has taken it, its usefulness and commercial value as shown by its advantages over other things and by the extent of its use, and the commercial situation. The hypothetical negotiation tries, as best as possible, to recreate the ex ante licensing negotiation scenario and to describe the resulting agreement. In other words, if infringement had not occurred, willing parties would have executed a license agreement specifying a certain royalty payment scheme. The hypothetical negotiation also assumes that the asserted patent claims are valid and infringed.

Facts:

Lucent initiated the action against Gateway, and Microsoft subsequently intervened. At trial, Lucent charged infringement by Microsoft of claims 19 and 21, among others, of the Day patent. Lucent alleged indirect infringement of claim 19 based on the sales and use of Microsoft Money, Microsoft Outlook, and Windows Mobile. As to claim 21, Lucent asserted that the use of Windows Mobile infringed. Microsoft challenged Lucent's infringement contentions, contending among other defenses that the Day patent was invalid for being anticipated or obvious and, even if valid, Microsoft's sales of its products did not infringe the Day patent. The jury found Microsoft liable on claim 19 as to all three products and on claim 21 as to Windows Mobile but returned a finding of no infringement by Dell as to those two claims. The verdict, without distinguishing among the three products or between inducement and contributory infringement, awarded a single lump-sum against Microsoft for all products involved. The jury awarded $357,693,056.18 for Microsoft's infringement of the Day patent, excluding prejudgment interest. 

Issue:

(a) Did the trial court err when it denied the motions for judgment as a matter of law (JMOL) regarding the jury's finding of infringement--specifically, the finding that the patent was not invalid due to obviousness, 35 U.S.C.S. § 103(a)? (a) Was there an error in the award of damages? 

Answer:

(a) No (b) Yes

Conclusion:

Sufficient evidence supported the jury's finding of non-obviousness of claims 19 and 21 over a 1984 magazine article describing the potential benefits and drawbacks of using computer touch screens at a time when computer technology was developing, § 103(a). Sufficient circumstantial evidence also supported the district court's denial of the competitor's motion for JMOL that the assignee did not prove direct infringement, 35 U.S.C.S. § 271, or contributory infringement, § 271(c), and that the competitor did not induce infringement of the patent, § 271(b). However, substantial evidence did not support the jury's damages award--a lump-sum royalty payment of approximately $358 million, 35 U.S.C.S. § 284. To the extent the jury relied on an entire market value calculation to arrive at the lump-sum damages amount, that award was not supported by substantial evidence and was against the clear weight of the evidence.

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