Collateral Damages: How the Smartphone Patent Wars Are Changing the Landscape of Patent Infringement Damages Calculations

By West, Martin | Fordham Urban Law Journal, November 2013 | Go to article overview

Collateral Damages: How the Smartphone Patent Wars Are Changing the Landscape of Patent Infringement Damages Calculations


West, Martin, Fordham Urban Law Journal


ABSTRACT

This Note addresses the diverging approaches to patent infringement damages calculations. Judge Alsup of the Ninth Circuit recently took a rare approach and selected Dr. James Kearl to testify as an independent damages expert in Oracle v. Google under Rule 706 of the Federal Rules of Evidence. In contrast, Judge Posner of the Seventh Circuit recently dismissed the Apple v. Motorola lawsuit, finding that each party failed to present adequate evidence of their respective damages claims. Judge Koh of the Ninth Circuit took yet another approach using a more relaxed level of admissibility for expert testimony relating to infringement damage calculations. This Note analyzes all three approaches in the context of the suits at issue and proposes that Judge Alsup's approach is the best, for numerous reasons.

TABLE OF CONTENTS

Introduction
I.   Patent Damage Calculations: A Legal Background
     A. Damage Approaches
     B. Two Roads Diverged: Analytical Approach and
        Hypothetical Negotiation Scenario
     C. Witness Standards
        1. Rule 702
        2. Rule 706
        3. Expert Calculations in Light of Unilocand Lucent
II.  Three Case Studies
     A. Procedural History
        1. Oracle v. Google
        2. Apple v. Motorola
        3. Apple v. Samsung
     B. Who Can Rely on What?
        1. Defining the Alleged Infringement
        2. Information Generated After the Date of the
           Hypothetical Reasonable Royalty Negotiation
        3. Reliance on Potentially Biased Sources
        4. Surveys
        5. Royalties Based on Similar Products and Software
     C. The Results Are In
III. Everybody Comes Out Ahead
     A. Fallout
     B. Congress
     C. Judges
     D. Fears Resolved
        1. Advocacy
        2. Infallibility
        3. Counter-Productivity
        4. Cost
     E. Benefits Realized
     F. So Happy Together
Conclusion

"Then you do make a profit for yourself," Yossarian declared

"Of course I do. But it all goes to the syndicate. And everybody has a share, Don't you understand? It's exactly what happens with those plum tomatoes I sell to Colonel Cathcart."

"Buy," Yossarian corrected him. "You don't sell plum tomatoes to Colonel Cathcart and Colonel Korn. You buy plum tomatoes from them."

"No, sell," Milo corrected Yossarian. "I distribute my plum tomatoes in markets all over Pianosa under an assumed name so that Colonel Cathcart and Colonel Korn can buy them up from me under their assumed names at four cents apiece and sell them back to me the next day for the syndicate at five cents a piece. They make a profit of one cent a piece, I make a profit of three and a half cents apiece, and everybody comes out ahead." (1)

INTRODUCTION

The goal of the United States Patent system is to "promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries...." (2) The hope is that granting creators of patentable inventions a monopoly on their "discoveries" will promote a paradigm in which people are encouraged to invent and develop without fear of having their ideas stolen. Incentivizing innovation would thus result in the rapid development of technology in such a way that "everybody comes out ahead." (3)

The recent growth of litigation surrounding the smartphone patent wars has called into question the need for and the utility of patents. (4) While the patent system is no stranger to the public spotlight, recent developments have been so widely discussed that the head of the Patent and Trademark Office, David Kappos, came forward to make a public statement telling critics to "[g]ive it a rest already." (5) While this Note cannot possibly discuss all of the alleged problems surrounding software patents, it will attempt to discern an underlying problem stemming from infringement damage calculations in light of three recent cases: Oracle America, Inc. …

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