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Dec 15

District Court & PTAB Happenings – December 2017

  • December 15, 2017
  • staff
  • News, Patent

Expert Testimony Stricken for Failure to Adhere to Entire Market Value Rule

By R. Tyler Kendrick, Akin Gump

On November 1, 2017, District of Delaware Judge William Bryson granted defendants D&M Holdings Inc., D&M Holdings U.S. Inc. and Denon Electronics (USA), LLC’s (collectively, “D&M”) motion to strike part of the expert opinion of plaintiff Sonos, Inc.’s damages expert.

This dispute began in October 2014, when Sonos asserted eight patents against D&M and one of its customers, Denon. The asserted patents cover features in D&M’s networked wireless speaker products. D&M challenged the opinion of the plaintiff’s expert in two respects, including that his reasonable royalty opinion was “unreliable because it fail[ed] to apportion damages to the accused features and instead use[d] the full sales price of the accused HEOS devices as the royalty base.”

In his report, the plaintiff’s expert attempted to determine Sonos’s reasonable royalty damages. He analyzed the 15 Georgia Pacific factors and relied on a KPMG report that concluded that royalty rates in the consumer audio industry ranged from 2 percent to 25 percent of revenue, with a medium of 6 percent. The plaintiff’s expert concluded that a 6 percent royalty rate was appropriate for one group of patents, and at least a 2 percent rate was appropriate for another group of patents. The plaintiff’s expert multiplied these royalty rates by the total revenue of all of the accused products included in Sonos’s reasonable royalty damages theory.

D&M argued that the plaintiff’s expert’s opinion was unreliable because he failed to apportion damages to the accused features under the well-established standard that a patentee must provide “‘evidence tending to separate or apportion the defendant’s profits and patentee’s damages between the patented feature and the unpatented features’ or demonstrate that ‘the entire value of the whole machine, as a marketable article, is properly and legally attributable to the patented feature.’” The court noted that it is difficult to assign value to a feature that was never sold separately but that the patentee has a duty to do more than estimate what portion of the value is attributable to the technology at issue. A patentee can base damages on the entire market value of the product only when the patentee can establish that the technology at issue drove demand for the entire product. Judge Bryson held that the plaintiff’s expert’s opinion did not satisfy the patentee’s burden.

The evidence that the plaintiff’s expert relied on was (1) praise that Sonos received for the technology, (2) Sonos’s advertising and marketing of the technology, (3) D&M’s desire to include the patented features, (4) consumers’ demand for the patented features, and (5) D&M’s advertising and marketing of the technology. However, the fact that the patented features are desirable and important is not enough to show that they drive the market for the accused products. The plaintiff’s expert’s opinion was undermined by the fact that at least half of the accused products’ owners could not use one aspect of the patented technology, which he failed to consider. Further, Sonos did not demonstrate that other aspects of the technology were central enough to justify the use of the entire market value rule—the technology was optional, and Sonos did not show that it motivated customers to buy the product. For these reasons, Judge Bryson held that the plaintiff’s expert cannot testify as to his reasonable royalty theory at trial.

Sonos, Inc. v. D&M Holdings Inc. et al., 1-14-cv-01330-WCB, Dkt. 427 (D. Del. Nov. 1, 2017).

 

PTAB Denies Petition to Institute IPR Because Petitioner Failed to Make Threshold Showing That a Reference Was Publicly Accessible Prior to Patent’s Priority Date

By Jason Weil & Rubén H. Muñoz, Akin Gump

The Patent Trial and Appeal Board (PTAB) denied Pfizer, Inc.’s (“Petitioner”) petition to institute an inter partes review (IPR) of the sole claim of Biogen Inc.’s (“Patent Owner”) U.S. Patent 8,329,172 (the “’172 Patent”). That claim covers a method of treating B-cell lymphoma by using a certain chemotherapy followed by maintenance therapy with the drug Rituxan. The petition relied on three potential prior art references, including a document identified as IDEC Pharmaceuticals and Genentech, Inc.’s 1997 product label for Rituxan. Patent Owner argued that the record contained no evidence that the document identified as the product label was publicly available before the patent’s priority date.

Petitioner relied on several supporting documents in an attempt to show that the Rituxan label was publicly accessible before the ’172 Patent’s August 11, 1998, priority date. Petitioner had recently obtained from the Food and Drug Administration’s (FDA’s) website a document purporting to be the original 1997 label, but the fact that the label is available today does not indicate whether it was available before August 11, 1998. Petitioner next relied on a printout of a January 23, 1998, version of a Genentech webpage related to Rituxan. However, that webpage did not show that the specific document relied on in the IPR petition was available in January 1998, or that the webpage itself was publicly accessible as of January 1998. Petitioner also relied on a November 1998 article that referred to an unspecified Rituxan package insert. However, that article was published after the priority date and did not identify a version of the package insert or in any way indicate that the exhibit relied on in the petition was, in fact, publicly accessible. The majority came to a similar conclusion with respect to the 1999 Physician’s Desk Reference. The panel majority concluded that Petitioner had failed to show that the specific document on which it relied as a prior art reference was publicly accessible prior to the ’172 Patent’s priority date. Without that reference, Petitioner’s obviousness arguments failed, and the PTAB declined to institute review.

Judge Snedden dissented. Although he agreed that the record, as it stood at the time of the decision on institution, did not convincingly establish that the Rituxan label was publicly available before the ’172 Patent’s priority date, the record also contained no evidence that the Rituxan label was not publicly accessible. Indeed, the record was devoid of any statement from Patent Owner indicating that the label was not publicly accessible as of August 11, 1998. Judge Snedden explained that the statute governing institution of an IPR requires the Petitioner to show only a “reasonable likelihood” that one or more claims are unpatentable. In his view, the record as a whole showed that, had trial been instituted and Petitioner entitled to discovery, there was a reasonable likelihood that Petitioner would have been able to meet its burden at trial.

Pfizer, Inc. v. Biogen, Inc., IPR2017-01166, Paper No. 9 (PTAB Nov. 13, 2017)

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