Patent Features Double Count Leads To Daubert Exclusion

|||Patent Features Double Count Leads To Daubert Exclusion

Patent Features Double Count Leads To Daubert Exclusion

September 2016

A recent successful Daubert motion highlights the importance of taking a step back from a damages calculation to assess the critical question of “Does this damages presentation really make sense?”  Finjan, Inc. (‘Finjan”) vs. Sophos, Inc. (“Sophos”) is a patent infringement action involving 14 different claims related to six different patents for computer and network security technology.

Generally, Federal Rule of Evidence 702 allows an expert to offer testimony that is both relevant and reliable, and where the testimony involves specialized skill that the trier of fact would likely find useful.  Courts can exclude offered testimony which does not meet minimum requirements under the established standards.  In this case, Sophos sought to exclude Finjan’s damages expert for multiple reasons:

  • Lack of foundation for the claim that each feature of each product is equally valuable,
  • The apportionment methodology improperly inflates the royalty base,
  • The opinions on future damages are unreliable,
  • Improper reliance on other royalty rates, and
  • Use of revenues from non-infringing products

Many patented products, particularly those involving technology, use more than one patent.  A damage analyst in this situation will often need to allocate or “apportion” the value being measured between these multiple patents.  Sophos claimed that the plaintiff’s apportionment calculation resulted in a functional double or triple counting of revenues, using a royalty base that is over 100 percent of the total value of several of the accused products, and with several of the value-add calculations resulting in a combined value added of the alleged patents that exceeded the total product value.  The Court agreed.  Finjan’s supportive arguments that this overstatement occurs because damages were presented on a per-patent basis, covering overlapping patents, fell flat with the Court, which responded (citations omitted):

Let’s be clear. If Finjan’s patented technologies are truly overlapping then it can in fact only recover damages as if one patent is in suit as “no patent can issue for an invention actually covered by a former patent.”  If Finjan’s patents cover identical technologies, then its later patents cannot be valid as a matter of law. …

I understand that these are complicated, intermingled technologies and that it is difficult to separate them, but it is not necessary for us to do so to resolve this issue. Under

[the Finjan expert’s] methodology, the total value of the threat engine feature does not change.… [W]hat is not possible, as a matter of law and logic, is that the ’844 and ’494 patents’ combined add more value to the threat engine feature than its total value.  This is what [the Finjan expert’s] report assumes by apportioning the value of the threat engine feature to both the ’844 and ’494 patents. This method assumes that both patents add the full value of that feature to the SAV Engine. As discussed, this is not possible under patent law; therefore this apportionment calculation is not a reliable methodology for calculating a reasonable royalty.”

In this matter, while the Court granted Sophos’ motion to exclude based on this and other shortcomings, the Court generously provided a short-term opportunity (less than 10 days) for Finjan’s expert to amend the calculations.  Such second chances are not common.   Had the expert taken a step back to examine the overall reasonableness of the calculation or had the benefit of a peer review prior to being issued, this flaw could have been pre-emptively addressed to prevent double counting.

Fulcrum Inquiry regularly assesses damages in intellectual property litigation as a damages expert witness.

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