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District Court Excludes Damage Opinion That Used Cost Savings Approach and That Resulted in Ignoring The Smallest Salable Component

In this patent infringement action, Microchip accused Aptiv’s Dual Role Hub of infringing several the patents. As the district court explained, the Dual Role Hub is a media module that Aptiv manufactures and sells to automakers for incorporation into a car’s infotainment system through USB peripherals, such as a smart phone. The Dual Role Hub can also perform a more complex function. For example, when an iPhone is connected to the Dual Role Hub to start an Apple CarPlay session, the Hub detects the iPhone and requests that it re-connect as a host device instead of a peripheral device and when that happens, two hosts–the Head Unit and the iPhone—can connect to the same Dual Role Hub, which permits the user to make use of other hub ports while CarPlay is active.

Microchip served an expert report from Stephen Becker, Ph.D., which offered two damages-related opinions. First, he explained that, if Aptiv had not infringed, Microchip would have earned incremental profits of $40.9 million. Second, he determined that Aptiv and Microchip would have agreed to a reasonable royalty of $2 per Dual Role Hub in a hypothetical negotiation.

After permitting the lost profits calculation, the district court turned to an analysis of the reasonable royalty determination. The district court explained that much of Dr. Becker’s analysis focuses on the value of the Dual Role Hub, rather than the Boston chip or the Sandia chip that pertained to the claimed technology. Microchip attempted to defend Dr. Becker’s analysis by claiming that he used a cost savings approach, but the district court disagreed. “While Dr. Becker might have used a cost savings approach to apportion the value of the various components, he was not permitted to use the Dual Role Hub as the base for his cost-savings analysis. Unless the host-to-host capability of the Boston chip created cost savings across the Dual Role Hub as a whole, Dr. Becker had to look at the cost savings at the chip level, not the device level.”

The district court further explained that “[t]he reason is simple. In any royalty analysis, there is a risk of awarding damages for non-patented features. The more non-patented features at play, the higher the risk. Narrowing the focus to the smallest patent-practicing unit mitigates that risk. Dr. Becker’s use of a cost-savings approach did not excuse him from that obligation. In addition, by focusing on the Dual Role Hub, Dr. Becker brings into his analysis Aptiv’s total profit on each Dual Role Hub. By introducing that number, Dr. Becker would raise the jury’s eye level in a way that would create a risk of an unfair damages award.”

Accordingly, the district court precluded the opinion on reasonable royalty.

Microchip Technology Inc. v. APTIV Services US LLC, Case No. 1:17-cv-01194-JDW (D. Del. Sept. 1, 2020)

The authors of are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. For more information about this case, contact Stan Gibson at 310.201.3548 or