Oracle’s damage expert was directed to submit a substitute expert report after his original report was excluded on a motion by Google because it failed to apportion the value of the asserted claims and instead used a total value of Java and Android in calculating damages. The substitute damages report calculated damages to be approximately $2.5 billion. Of this number, $200 million was for past patent infringement and an additional $205 million for future patent damages through the end of 2012. Google moved again to strike the damages expert report.
In terms of the patent damages, Google challenged the starting point of $100 million for the hypothetical negotiation instead of $28 million, which was the number in a draft agreement proposed by Sun (Oracle’s predecessor) for a broad technology partnership between Sun and Google. The district court disagreed with Google, finding that Oracle’s expert had reviewed the entire licensing history between the parties and noted that the $100 million offer was on the table during real-world negotiations.
Google also attacked the upward adjustment of the starting point used by the expert which the expert had used to account for lost convoyed sales that were expected from real-world negotiations. The expert’s upward adjustment was based on “harm to Sun, in the form of foregone licensing revenues,” fragmentation on non-mobile Java revenues, and a litigation premium that assumes the patents are valid and infringed. The district court was not willing to strike the upward adjustment, concluding that a hypothetical negotiation should take this type of lost revenue into account and therefore there was a sufficient factual basis for the calculation to go before the jury.
The district court also analyzed the apportionment of the starting value and upward adjustment. The district court found that the expert failed to apportion the $100 million offer properly between the 26 claims in suit versus all other items in the 2006 offer. “If the $100 million offer in 2006 is used as the starting point, as the July order suggested (but did not require), then a fair apportionment of the $100 million as between the technology in suit and the remainder of the technology then offered must be made. One way this might be done would be to divide the thousands of items into coherent groups and to evaluate the relative importance of the groups and to apportion the $100 million across the groups in proportion to their relative importance. The group or groups including the 26 claims in suit would further need to be apportioned as between these claims versus the rest of the group members.” The district court also noted that other methods might be viable as well but that Oracle’s expert’s method did not account for any of these factors and therefore would be stricken.
The district court next turned to whether an analysis of claim-by-claim instead of patent-by-patent analysis should have been conduct as Google contended The district court agreed with Google for several reasons. “First, a single patent can include many distinct variations of an invention, each represented by its own claim. Some may be apparatus claims. Some may be method claims. . . . Therefore, the hypothetical negotiation must be focused only on negotiating a compulsory license for each claim infringed, not for the entire patent. Second, some of the asserted claims might be less valuable, or easier to design around, than other claims contained within that same patent. Third, the jury may find liability on some claims but not others in the same patent, or some claims may be rejected by the USPTO on re-examination. Fourth, if liability is found on a claim, it may be possible to extend the royalty rate found by the jury on that claim into the future as a condition of not granting an injunction.”
Accordingly, the district court struck part of Oracle’s damage report, but also directed the parties to submit further briefing as to whether Oracle’s expert may get a third try.
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.