This document summarizes a presentation on the entire market value rule (EMVR) in patent damages. It discusses recent court cases that have applied gatekeeping to prevent unsupported damage statistics. While ambiguities still exist around measuring consumer demand, courts now generally require evidence that the patented feature drove consumer demand for the infringing product. The presentation also notes the debate around whether the EMVR overcompensates patent owners and interferes with technology development, but argues abolishing the rule is not the answer. It concludes that Congress should codify guidelines for applying the EMVR more narrowly.

1. Analysis of The EMVR Ravi Mohan | Stanford Law School: Patent Remedies Conference Overcompensation and Apportionment 02.18.11 http://twitter.com/fivetofour

2. Presentation Overview The rule permits recovery of damages based on the value of a patentee’s entire apparatus containing several features when the patent-related feature is the basis for customer demand.1 1.Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1549 (Fed. Cir. 1995), cert. denied, 516 U.S. 867 (1995).

4. Classic hypothetical Is the royalty base the wiper, or the entire car?

5. Could the rule apply to complex technology?

6. The Smartphone Patent Thicket

7. Apportionment is difficult. “Properly, the question [of apportionment] is in its nature unanswerable...It is generally impossible to allocate quantitatively the shares of the old and the new, and the party on whom that duty falls, will usually lose.”2 Judge Learned Hand 2Cincinnati Car Co. v. New York Rapid Transit Corp., 66 F.2d 592, 593 (2d Cir. 1933).

8. Recent EMVR Decisions

9. Recent EMVR Decisions

10. Cornell v. Hewlett Packard *Opinion by Judge Randall Rader (sitting by designation in the NDNY) *Patent-in-suit directed to technology that issues multiple processor instructions at once, thereby increasing processor performance *Patent reads on component of the instruction reorder buffer *HP JMOL on royalty base/damages

11. Cornell v. Hewlett-Packard Invention Instruction Record Buffer Processor CPU Module Brick Server

12. Cornell v. Hewlett-Packard $23,005,506,034 *.8 Server $184,044,408 CPU Brick $53,494,282 Processor Chief Judge Rader explained “[i]n the anatomy of a Hewlett-Packard server, the processor is the smallest salable patent-practicing unit…”

13. Lucent v. Microsoft *Lucent accused 3 MS Office Products *Jury awards $358M *Court admonishes damage expert’s calculations *Lucent did not prove that date picker drove consumer demand “Indeed, Lucent’s damages expert conceded that there was no “evidence that anybody anywhere at any time ever bought Outlook, be it an equipment manufacturer or an individual consumer … because it had a date picker.”

14. Lucent Expert Opinion re: damages Original Opinion Second Opinion 1% 8% Royalty Rate Royalty Base COMPUTER MSFT Outlook “This cannot be an acceptable way to conduct an analysis of what the parties would have agreed to in the hypothetical licensing context.” Lucent Technologies v. Gateway, 530 F. 3d 1301.

15. Current EMVR Takeaways *Judge Rader is gate-keeping unsupported damage stats *Evidence needs to be grounded in sound economic principles *Sufficient evidence (Judge Rader at one point required demand curves) *Nonetheless…..

16. Ambiguities & Unpredictability Exist.

17. Linguistic Variations re: Consumer Demand Some courts require substantial basis. [Rite-Hite, Lucent, etc.] such paramount importance that it substantially created the value of the component parts [IP Innovation] literally, without the patented feature, [the defendant] would not have a product to sell. [Cordis] Reform language (2009): the predominant basis for the market demand for an infringing product or process

18. Dangerous language: Bose v. JBL “the invention of the ’721 patent inextricably worked with other components of loudspeakers as a single functioning unit to provide the desired audible performance.” No mention of consumer demand.

19. Iphone Case study

21. http://www.patentlyo.com/patent/2008/03/patent-litigati.html

22. The # of Named Defendants is increasing

23. Hypotheticals Could an integrated circuit manufacturer recover EMVR damages ? Probably not… What about a Touch-Screen Manufacturer? Maybe.

24. Measuring Consumer Demand *Conjoint Analysis *Benchmarks [i4i v. Msft] *Consumer Surveys *Reasonableness Checks *Many others…

25. Policy discussion

26. Policy *Critics argue the EMVR rewards infringement & interferes with development and financing of new technology *Overcompensation is a real issue *Abolishing the rule is not the answer *EMVR application should be rare

27. Conclusion *Judge Learned Hand was partially right *Juries are persuaded too easily, but *Gatekeeping works *Congress should codify the EMVR

28. Thank you