The Federal Circuit affirmed a $391 million damage award in Versata Software, Inc. v. SAPAmerica, Inc., No. 2012-1029, -1049 (Fed. Cir. May 1, 2013). In reviewing the damage portion of the ruling, one cannot help but question the strategy that the defendant employed, which offered only criticisms to the plaintiff’s damages calculation without suggesting an alternative calculation.
The Federal Circuit summarized the parties and the infringement as follows:
“In 1995 and 1996, Versata both commercialized its hierarchical pricing engine and filed a patent application covering the invention. The commercial embodiment was a software called “Pricer,” and it received praise as a “breakthrough” that was “very innovative”. … The praise for Pricer was borne out in its sales. Between 1995 and 1998, Pricer customers included many large companies—called “Tier 1” companies at trial—such as IBM, Lucent, Motorola, and Hewlett-Packard. Pricer Tier 1 customers generated an average of $5 million in revenue and $3 million in profit for Versata. Versata sold Pricer either as a package with other Versata software or as a bolt-on addition to enterprise systems offered by companies like SAP. …
Before SAP launched its new software, it stated the planned software would be like Versata’s Pricer. When SAP ultimately released its software in October 1998, it bundled the hierarchical pricing capability into its full enterprise software to discourage the use of bolt-on products like Pricer.
Following the announcement and launch of SAP’s new hierarchical pricing engine, Pricer sales faltered. Versata’s win-rate on sales offerings of Pricer dropped from 35 percent to 2 percent. While Versata retained many of its previously-won Pricer customers, Versata decided to discontinue heavy investment in marketing because SAP had destroyed its market. Versata maintained Pricer as a product offering, but made no new sales as SAP’s bundled software took hold.”
For background, the Federal Circuit nicely summarized relevant damage principles as follows:
“Lost-profits damages are appropriate whenever there is a “reasonable probability that, ‘but for’ the infringement