Apportionment of damages, one of the most controversial provisions of the proposed patent reform, may already be upon us (some damages experts believe it has been all along).
Recently, Cornell University sued Hewlett-Packard for infringement of a patent directed to a component of a computer processor. The processor, in turn, is inserted into a server. The trial judge repeatedly warned Cornell that he expected “well-documented economic evidence closely tied to the scope of the claimed invention.” Apparently, Cornell could not take a hint. It sought damages based upon the sales of all Hewlett-Packard server and workstation systems in which the patented components were incorporated. The jury obliged, awarding damages of $184 million, based upon $23 billion in sales (for the mathematically challenged, that is a royalty rate of 0.8%).
The trial judge, who gets the last word in such matters, then entered a JMOL (judgment as a matter of law), reducing the damages to a measly $53.5 million because Cornell had attempted “to show economic entitlement to damages based on technology beyond the scope of the claimed invention.” While the “entire market value rule” permits damages on technology beyond the scope of the claimed invention, application of the rule requires proof that damages on the unpatented portion of the product are necessary to fully compensate for the infringement. The court found that Cornell failed to provide such proof. Indeed, Cornell failed to offer any evidence of a connection between the patented invention and consumer demand for the servers and workstations (where were all the Cornell marketing majors).
THE LESSONS TO BE LEARNED: (1) Damages for patent infringement are – generally – based on sales of the patented invention, and (2) when the judge speaks, LISTEN.