Exclusion Of Patentee's Damages Evidence Is Insufficient To Justify SJ Of No Damages

In Info-Hold, Inc. v. Muzak LLC, No. 14-1167 (Fed. Cir. Apr. 24, 2015), the Federal Circuit reversed the grant of SJ of no damages for infringement, vacated the grant of SJ of no induced infringement, and affirmed the district court's construction of the sole claim term in dispute.

Info-Hold, Inc. ("Info-Hold") is the owner of U.S. Patent No. 5,991,374 ("the '374 patent"), which is directed to systems, apparatuses, and methods for playing music and messages through telephones and public speaker systems. During ex parte reexamination of the '374 patent, Info-Hold amended several independent claims by adding the term "when a caller is placed on hold" to overcome prior art. Prior to the suit at the district court, Info-Hold contacted Muzak LLC ("Muzak") on at least two occasions regarding the possibility that Muzak's products infringe the '374 patent.

Following claim construction, the district court granted Muzak's motion for SJ of no induced infringement. The district court also held that Info-Hold was not entitled to either lost profits or reasonable royalty damages due to a lack of damages evidence. Info-Hold appealed (1) the entry of SJ of no reasonable royalty damages, (2) the construction of the claim term "when a caller is placed on hold," and (3) the grant of SJ of no induced infringement.

"[A] patentee's failure to show that its royalty estimate is correct is insufficient grounds for awarding a royalty of zero. By extension, the exclusion of the patentee's damages evidence is not sufficient to justify granting summary judgment." Slip op. at 11 (citing Apple Inc. v. Motorola, Inc., 757 F.3d 1286, 1328 (Fed. Cir. 2014)).

First, the Federal Circuit affirmed the district court's exclusion of Info-Hold's expert report on damages, noting that Info-Hold did not appeal the district court's finding that "Info-Hold's reliance on the entire market value rule, without presenting evidence that the patented features drove customer demand, was 'improper' and itself sufficient to strike [the report]." Slip op. at 10 (citation omitted). The Court further noted that the expert's analysis was deficient due to his reliance on the 25-percent rule, which the Court "discredited as 'fundamentally flawed' in Uniloc." Id. at 10-11 (quoting Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1315 (Fed. Cir. 2011)).

Relying on the analysis in Apple Inc. v. Motorola, Inc., 757 F.3d 1286, 1328 (Fed. Cir. 2014), the Court explained that the district court should...