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Vadis v. Amazon: Reasonable Royalty Opinion Excluded Where Entire Market Value Implicated

Via Vadis, LLC and AC Technologies, S.A. (“Plaintiffs”) are the owner and exclusive licensee, respectively, of U.S. Patent No. RE40,521 (the “’521 Patent”) for a data access and management system. Plaintiffs accused Defendant, Inc. (“Amazon”) of direct and indirect infringement of the ’521 Patent through Amazon’s software-as-a-service and related services “by supporting the BitTorrent protocol, or other infringing peer to peer file distribution protocol, to transfer files and other data between electronic devices, such as computers.”

Amazon filed a motion to exclude the opinion of Plaintiffs’ damages expert, Paul Benoit, asserting that Benoit improperly based his damages theory on revenue for Amazon’s entire cloud storage service (Simple Storage Service or “S3”). Amazon contended that the non-accused features of that service account for more than 99.999 percent of its revenue and that Benoit violated the entire market value rule by basing his damages analysis on Amazon’s S3 revenue, “rather than looking to the revenue Amazon received or projected to receive from the usage of the BitTorrent interface.”

In opposing the motion, Plaintiffs asserted that Benoit had “articulated evidence reflecting the importance of price as a driver of sales of S3 services, and thus the economic footprint of the invention would not only reflect revenue generated from data transmitted via BitTorrent, but also the ability to attract customers to Amazon’s S3 by reducing the effective price of the service.”

As the district court explained, “[t]he heart of the parties’ disagreement thus is whether the entire market rule is implicated by starting the royalty calculation with total S3 revenues – notwithstanding subsequent apportionment – rather than the market value for the BitTorrent service.”

Relying on LaserDynamics, Inc. v. Quanta Comput., Inc., 694 F.3d 51, 67 (Fed. Cir. 2012), the district court concluded that entire market value was implicated:

Here, Benoit’s reasonable royalty calculation discloses Amazon’s estimated revenues associated with its entire S3 cloud storage services rather than the BitTorrent interface only. LaserDynamics, 694 F.3d at 68. A hypothetical ex ante negotiation “necessarily involves an element of approximation and uncertainty,” Interactive Pictures Corp. v. Infinite Pictures, Inc., 274 F.3d 1371, 1385 (Fed. Cir. 2001) (citation omitted), and the parties did not know in 2006 what the extent of BitTorrent’s use by Amazon’s S3 customers would prove to be. Nonetheless, where the accused feature generated less than $250,000 in revenue over 13 years, the court “must insist on a more realistic starting point for the royalty calculations” than $22 billion. Ericsson, 773 F.3d at 1227; see also Power Integrations, 904 F.3d at 977 (“We have cautioned against reliance on use of the entire market value of a multi-component product that includes a patented component because it ‘cannot help but skew the damages horizon for the jury, regardless of the contribution of the patented component to this revenue.’”) (quoting Uniloc, 632 F.3d at 1320).

Accordingly, the district court granted the motion to exclude the reasonable royalty analysis.

Via Vadis, LLC v., Inc., Case No. CV-00813-LY (W.D. Tex. Jan. 3, 2022)

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