Google filed a motion to strike the revised damages expert report submitted by Oracle in their continuing battle over Android. In the second expert report, Oracle’s expert “estimated damages, from 2007 through 2011, to be $201.8 million for patent infringement, $823.9 million in unjust enrichment for copyright infringement (not deducting for expenses or apportionment), and $136.2 million in lost profits or $102.6 million in lost licensing fees for copyright infringement.” For the patent infringement matter, Oracle’s expert calculated damages using a hypothetical negotiation method beginning with a $100 million starting value that was based on real-world negotiations between the parties in 2006, then adjusted downward for patent apportionment, then adjusted upward for lost revenue that was expected from the licensing agreement.
Google moved to exclude the patent damages, among others, arguing that the damages cannot be based on a hypothetical lost license fee because Sun (Oracle’s predecessor) would never have licensed an incompatible version of Java to Google. The district court disagreed. The district court found that Oracle’s expert had “a non-speculative factual basis to value a license for an incompatible version of Java.” The district court found this appropriate because the analysis started with the real-world negotiations between Sun and Google for a compatible Java, and then adjusting that amount up to compensate for the incompatibility. “The amount of the upward adjustment was based on Sun’s own revenue projections for the value of compatibility. Dr. Cockburn’s calculation was based on real-world facts and not incurably speculative. Google fights the hypothetical by ignoring the legal requirement for a hypothetical negotiation that the licensing agreement must be reached as the result of a hypothetical meeting between the parties.”
Google also argued that Oracle’s expert erred by using $100 million as the starting point for the hypothetical negotiation instead of $28 million, which was the amount in a draft agreement. The district court disagreed with that as well, finding that the starting point was within the bound of reason, although a jury could eventually reject the premise. The district court found significant that the expert relied upon e-mails where Sun had not yet agreed to the terms of the draft agreement. In addition, the $100 million was appropriate as a starting point based on the expert’s review of the entire licensing history between the parties.
Google also challenged the upward adjustment of the starting point to account for lost convoyed sales that would be expected from real-world negotiations. Google argued that the upward adjustment was speculative because it was based on a single internal presentation from Sun. The district court disagreed and found that an upward adjustment was not improper based on the parties’ discussions in 2006 that plainly contemplated Sun expected convoyed sales after licensing a compatible version of Java to Google.
Finally, Google asserted that Oracle’s expert should have conducted a claim-by-claim analysis of damages instead of a patent-by-patent analysis. Based on this argument, Google requested that Oracle’s expert be precluded from apportioining an asserted patent’s value among its claims at trial. The district court agreed with this argument, noting that the court’s prior order made clear that a claim-by-claim analysis of damages were preferable. “There are a number of reasons for requesting a claim-by-claim analysis. First, this is necessary to get the correct timeline to calculate past damages. Second, some of the asserted claims might be less valuable, or easier to design around, than other claims contained within that same patent. Third, this is necessary to calculate future damages if Google designs around some claims but not others in the same patent. Fourth, the jury may find liability on some claims but not others in the same patent. And fifth, some claims may be rejected by the USPTO on re-examination.”
Accordingly, the district court tentatively precluded the expert from apportioning the asserted patent’s value among its claims at trial. “Furthermore, this tentative order holds that the jury will be instructed that if they find any asserted claim not infringed, they may assume that the non-infringed claim represented the full value of that patent.”
The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. We represent inventors, patent owners and technology companies in patent licensing and litigation. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.