2015 Patent Damages Year In Review

INTRODUCTION

In last year's issue of our Patent Damages Year in Review, we highlighted three important decisions from the Federal Circuit: VirnetX v. Cisco Systems, Inc.,1 Ericsson, Inc. v. D-Link Systems, Inc.2 and Apple, Inc. v. Motorola, Inc.3 In particular, we focused on how these decisions might impact the courts' rapidly changing application of apportionment and the entire market value rule with respect to the determination of a reasonable royalty. While we noted that these decisions provided clarity in some respects, we raised concerns that the Federal Circuit failed to address key issues regarding the proper methodology for an apportionment analysis and primarily left this issue to the district courts to sort out. Not surprisingly, district courts in 2015 were inconsistent in determining whether or not the entire market value rule applied, and if not, how a patent owner could satisfy the apportionment requirement.

In several decisions this year, the Federal Circuit attempted to provide additional guidance on the entire market value rule and apportionment, and in this issue we analyze four decisions from the Federal Circuit that we believe may impact how district courts analyze patent damages for years to come: 1) AstraZeneca LP v. Apotex, Inc.4; 2) Info-Hold, Inc. v. Muzak LLC5; 3) Summit 6, LLC v. Samsung Electronics Co., Ltd.6; and 4) Commonwealth Scientific and Industrial Research Organisation ("CSIRO") v. Cisco Systems, Inc.7

The Federal Circuit in its AstraZeneca decision addressed the entire market value rule and apportionment with respect to AstraZeneca's formulation patents for the drug Prilosec. The court rejected the argument that the entire market value rule ("EMVR") could never apply in the pharmaceutical context, but held that the EMVR was not applicable in this particular case because the patents at issue covered the infringing product as a whole, rather than a single component of a multicomponent product. Nevertheless, the Federal Circuit held, citing Ericsson, that when a patent covers the infringing product as a whole, and the claims recite both conventional elements and unconventional elements, the court must determine how to account for the relative value of the patentee's invention in comparison to the value of the conventional elements recited in the claim, standing alone. Stated another way, the court indicated that "the question is how much new value is created by the novel combination, beyond the value...