Carnegie Mellon University v. Marvell: Marvell Loses Motion To Exclude Damage Expert Testimony That Included Price And Profit Margin On Chips Where Damage Expert Did Not Rely Upon Entire Market Value Rule

With a trial pending in late November in this patent infringement action, Marvell Technology Group, LTD ("Marvell") moved to strike Carnegie Mellon University's ("CMU") expert report on damages. Specifically, Marvell asserted that the expert's reference to overall price, profit or margin of the chips accused of infringement in the litigation was irrelevant and highly prejudicial in light of the Federal Circuit's recent decision in LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51 (Fed. Cir. 2012). CMU opposed the motion asserting that LaserDynamics did not impact the damage expert because the expert's royalty calculation was not based on the entire market value, which was at issue in LaserDynamics.

The patents-in-suit are directed to sequence detection in high density magnetic recording devices, specifically high density magnetic recording sequence detectors. CMU asserted that Marvell infringed the patents-in-suit throughout its "sales cycle," which involves testing of both computer programs and manufactured chips. As explained by the district court, if a sales cycle is successful, it culminates with a "design win" and Marvell makes mass sales of chips that then allegedly perform the patented methods. CMU sought a reasonable royalty for Marvell's alleged infringement throughout the entire process.

CMU's expert asserted that Marvell considered that the technology was a "must have" and went through a detailed Georgia-Pacific analysis. As a result of this analysis, the expert concluded that a running royalty rate of $0.50 per unit should be applied to Marvell's sales of the accused chips.

After reviewing Fed.R.Evid. 702 and the standards for determining a reasonable royalty rate, the district court turned to analyzing recent developments under the entire market value rule. As explained by the district court, "[t]he entire market value rule requires a patentee to 'prove that the patent-related feature is the basis for customer demand.' Lucent Technologies, Inc. v. Gateway, Inc., 580 F.3d 1301, 1336 (Fed. Cir. 2009) (internal quotations omitted). This does not mean that the patent-related feature is the only feature, but simply that it is the one that drives demand. TWM Mfg. Co., Inc. v. Dura Corp., 789 F.2d 895, 901 (Fed. Cir. 1986) (The entire market value rule allows recovery 'based on the value of an entire apparatus containing several features, when the feature patented constitutes the basis for customer demand.'). Put another way...