Patent Lawyer Blog
In response to Oracle’s third expert on damages (which was submitted after the district court had struck parts of the first two reports), Google’s damage experts were permitted to submit supplemental damage reports. With respect to the patent damages, the district court summarized the supplemental report as follows: “In his supplemental report on patent damages, Dr. Leonard conducts a so-called ‘forward citation’ analysis to arrive at his own ranking of the 22 patents from Dr. Cockburn’s report. This was done to critique Dr. Cockburn’s ‘upper bound’ opinion that three patents in suit were the most valuable of the 22. Now that Dr. Cockburn’s ‘upper bound’ opinion has been stricken and the number of the asserted patents reduced, the only remaining issues is whether Dr. Leonard can opine that the ‘104 patent ranks in the ‘middle or worse'” of the top 22 patents. Specifically, whether Dr. Leonard can opine that the ‘104 patent ranks 17th among the top 22 patents under the forward-citation analysis (Rpt. At 7).”
The district court then concluded that part of Google’s expert report was flawed because it failed to take into consideration that one of the patents was re-issued twice: “As a critique of the ‘upper bound’ opinion in Dr. Cockburn’s group-and-value approach, Dr. Leonard conducts a forward-citation ranking of the patents within the top 22. Specifically, Dr. Leonard uses the citation count of each of the top 22 patents as a proxy for the value of that patent. First, Dr. Leonard counts the number of times each patent has been cited by any another U.S. patent. Next, he ‘control[s] for patent age by comparing each patent’s forward citation count to the number of forward citations for other patents in the same technology class and of approximately the same age. Specifically, [he] considered patents that were issue within three years before or after the subject patent’s issue date’ (Leonard Dec1.114). Finally, he ranks the top 22 patents by their age-adjusted citation counts to get the following result (Rpt at 7):
“[T]he ‘104/’205/’720 patents in suit rank 10th (‘720), 11th (‘205), and 17th (‘104) among the 22 patents — again, in the middle of the pack or worse …. This, in turn, suggests that only the lower bound on Dr. Cockburn’s range has any support.
“With respect to the ‘104 patent, Dr. Leonard’s ranking is fatally flawed. Dr. Leonard fails to account for the fact the ‘104 patent was re-issued twice, and thus fails to include citation counts to its predecessor patents. The predecessor to the ‘104 patent was US Patent RE36204, which was applied for in November 1996 and issued in April 1999, and has one citation. The predecessor to USRE36204 was US Patent 5367685, which was applied for in December 1992 and issued in November 1994, and has 73 citations (Cockburn Dec1.115). Dr. Leonard fails count the 74 predecessor citations and instead counts only three citations for the ‘104 patent (Richardson Decl. Exh. C). Had those predecessor citations been counted, the rank of the ‘104 patent would have jumped from 17th to the top (see Cockburn Decl. ΒΆ 6).”
Accordingly, that part of Google’s expert report was stricken.
The district court next turned to the expert report’s alternative basis for a reasonable royalty calculation, which was based on an accounting document prepared by Oracle in connection with its January 2010 acquisition of Sun. As explained by the district court, “[i]n April 2010, a few months after Sun’s acquisition, Oracle’s accounting department prepared an ‘Estimation of the Fair Value of Certain Assets and Liabilities of Sun Microsystems, Inc. as of January 26, 2010’ report. The report was prepared to assist ‘Oracle Corporation management in allocating the Sun purchase price for financial report purposes.’ One section of this document calculated the fair value of the Sun Core Technology, which included all of Sun’s 14,000 patents in 2010 (including the patents in suit), at $505 million (Zimmer Decl. Exh. F). Dr. Leonard opines that this amount should serve as the base for apportionment of the patents in suit in the 2006 hypothetical negotiation.”
Ultimately, the district court found that this alternative basis could proceed to the jury. “Oracle argues that the report should be excluded because the profit allocation method does not measure the full value of Sun’s intellectual property in 2006, including profits earned through licensing to third parties such as Google. This may he true. Nevertheless, the profit allocation method is relevant because it estimates the value of a license to Sun’s patent portfolio. Since the 2006 negotiation between Google and Sun was for a license to the patents in suit, not a complete sale of the patents in suit, the $505 million calculation is relevant and will not be excluded.”
Google’s expert also opined that the reasonable royalty should be limited to the value that Google was expecting to receive. The district court agreed with Oracle that this opinion should be stricken. “The infringer’s revenue from the infringement does not cap the amount of a reasonable royalty. Both patentee’s and infringer’s expected revenues and losses should be considered in calculating a reasonable royalty. The court of appeals has held that “although an infringer’s anticipated profit from use of the patented invention is among the factors to be considered in determining a reasonable royalty, the law does not require that an infringer be permitted to make a profit,” Monsanto Co. v. Ralph, 382 F.3d 1374, 1384 (Fed. Cir. 2004) (emphasis added). Permitting Dr. Leonard to offer testimony that is contrary to law would intrude on the Court’s role in instructing the jury as to the relevant considerations for calculating a reasonable royalty. Therefore, Dr. Leonard’s opinion that “[i]t is the value that Google was expecting to receive that matters for the reasonable royalty analysis” is STRICKEN.”
Oracle America, Inc. v. Google Inc., Case No. C 10-03561 WHA (N.D. Cal. March 15, 2012)
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.