Carnegie Mellon University v. Marvell: $1.5 Billion At Stake At The Federal Circuit

Currently on appeal to the United States Court of Appeals for the Federal Circuit is Carnegie Mellon University's ("CMU") $1.535 billion judgment for patent infringement against Marvell Technology Group Ltd. and Marvell Semiconductor, Inc. (collectively "Marvell"), which is one of the largest damages awards for patent infringement in history. This advisory summarizes the issues and arguments on appeal. This case will be closely watched, and it could serve to demonstrate the Circuit Judges' current attitudes toward high damages awards in patent cases, and in particular, with regard to patents owned by universities and other non-practicing entities ("NPEs") that do not themselves practice the inventions. Moreover, it raises the important question whether products made, used, and sold outside of the United States can be used to determine damages for infringement of a U.S. patent. If the Federal Circuit answers this question in the affirmative by affirming the judgment, companies with foreign operations may need to reevaluate their potential exposure. Marvell appeals from the United States District Court for the Western District of Pennsylvania, Case No. 2:09-CV-00290-NBF. The appeal is captioned Carnegie Mellon University v. Marvell Technology Group, Ltd., et al., Appeal No. 14-1492. The appeal is fully briefed and awaiting oral argument.

Introduction

CMU sued Marvell for alleged infringement of U.S. Patent Nos. 6,201,839 ("the '839 patent") and 6,438,180 ("the '180 patent"). CMU accused Marvell's microchips of infringing claim 4 of the '839 patent and claim 2 of the '180 patent, which relate to methods for improving the accuracy of data read from hard-disk drives. A jury found for CMU on all relevant issues related to liability and damages and awarded $1.17 billion in damages. Post-trial, the District Court found Marvell's infringement willful, and CMU moved for treble damages and an injunction on the sale of infringing products. The District Court denied the injunction but awarded an additional $287 million in enhanced damages, plus post-judgment interest and royalties, raising the total judgment to $1.535 billion.

On appeal, Marvell seeks to have the District Court's $1.535 billion judgment in favor of CMU overturned by challenging the jury and district court's determinations on (1) damages; (2) willfulness; (3) laches; (4) validity; and (5) infringement. This advisory summarizes each of these issues below.

1. Reasonable Royalty Damages Award

   Marvell seeks reversal of the District Court's award of $1.17 billion reasonable royalty damages award because, as Marvell contends, it was based upon (1) erroneously admitted testimony from CMU's damages expert; (2) a royalty base consisting overwhelmingly of chips not made, used, or sold in the United States, thus giving an impermissible extraterritorial effect to U.S. patents; (3) a hypothetical license measured by a per-unit royalty rather than a flat fee when a flat fee should have been deemed the only appropriate measure; and (4) a royalty rate of $.50 per chip that exceeds any comparable real world rate and is not properly apportioned to the technology covered by CMU's patent claims. In the alternative, Marvell seeks to have the damages award vacated and remanded for a new trial or remittitur.

   (1) Alleged erroneously admitted testimony from CMU's damages expert

   Marvell contends that the jury's $1.17 billion damages award rested entirely on the testimony of CMU's damages expert, who lacked the relevant expertise, used unreliable methodologies, and lacked sufficient factual basis to support her testimony. Marvell thus argues that the District Court erred in denying Marvell's motions to exclude her testimony. Citing primarily to Power Integrations, Inc. v. Fairchild Semiconductor Int'l, Inc., 711 F.3d 1348 (Fed. Cir. 2013), LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51 (Fed. Cir. 2012), and Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292 (Fed. Cir. 2011), Marvell contends that the theories advanced by CMU's damages expert lacked the hallmarks of genuinely useful expert testimony because they rested on unreliable methodologies. Marvell points to alleged fatal mistakes made by CMU's damages expert, such as including Marvell's foreign production and sales of accused products in the royalty base, disregarding evidence that CMU's patents were actually valued and licensed on a flat-fee basis (instead of by applying a per-chip royalty), and failing to properly apportion damages to separate between patented and unpatented features of the accused products.

   CMU counters that its damages expert was exceedingly qualified and that her analysis was both thorough and based on reliable methodologies. CMU argues that its expert properly allocated "fair credit" to the respective contributions by Marvell and CMU to the...