United States: Reasonable Royalty Depends On Incremental Price Of A Product Attributable To Its Patented Features Rather Than The Value Of The Patented Features In A Vacuum

Abstract

A court excluded testimony of experts who conducted a consumer survey that established values for each of four patented features relative to each other and then used those results to estimate an $80 million reasonable royalty the infringer would have paid for those features, finding the testimony unreliable for considering the value of the specific features in a vacuum without considering the value of the accused products as a whole.

In Visteon Global Technologies Inc. v. Garmin International, Inc., a Michigan federal court excluded expert opinions on damages for patent infringement as improperly based on the value of specific claimed features in isolation from their incremental value to consumers in the products accused of infringement, rather than the incremental value of the claimed features relative to the value of the accused products as a whole.

Background

Visteon accused Garmin's navigation products of infringing four patents related to four specific features of navigation systems and calculated what it believed Garmin owed in reasonable royalty damages in two steps.

First, Visteon hired an expert who conducted a choice-based conjoint ("CBC") consumer survey to determine the consumer value of the four features allegedly claimed in Visteon's patents. A CBC survey offers respondents hypothetical products that include a combination of different product features. Through the respondents' selections, economists can assign relative values to each of those features. Visteon's expert's CBC survey sought to determine the values of the four claimed features relative to each other.

Second, Visteon enlisted another expert to build on the findings of the first, factoring in product costs and competition with the relative consumer values determined from the results of the CBC survey. Visteon's second expert considered factors such as Garmin's profit margins and the parties' relative positions in the marketplace. Based on the principle that accused patent infringers in every negotiation seek to pay "as little as possible," Visteon's second expert concluded that Garmin would be willing to pay just under $5 per device, which amounted to a royalty of over $80 million over the relevant time period.

The Visteon Decision

A reasonable royalty award for patent infringement must be based on the incremental value that the patented invention adds to the end product as a whole. The value of the invention cannot be divorced from the product in which it is incorporated. In other words, determining a reasonable royalty requires determining the actual price a consumer would be willing to pay for a product with the patented features over an otherwise equivalent product that lacked those features.

In assessing the credibility of Visteon's experts and reliability of their testimony, the Court noted that Visteon's burden was to tie its reasonable royalty to the incremental real-world value of the claimed features. Further, the Court observed, since at least 2009, the Federal Circuit has reiterated the requirement that infringement damages must be apportioned in relation to the patented features alone, separate and apart from any value attributable to any unpatented features.

Visteon's experts, however, did not determine the actual value of either the four claimed features or the myriad unclaimed features. Critically, the CBC survey conducted by Visteon's first expert did not attempt to determine (1) a "real world" price for any of the claimed features or (2) the value of those features relative to the non-patented features in the accused navigation systems. Visteon's second expert never attempted to determine the price that consumers would pay for the individual technology provided by the infringing features. Nor did he attempt to determine the value of all of the features of the accused navigation system (i.e., the combined value of the patented and non-patented features). The Court ruled that considering the relative values of the claimed features alone, without assessing the value those features added to accused device, made it impossible to determine the profit attributable to those features, and therefore what a reasonable royalty would be. Accordingly, the Court excluded the testimony and reports of Visteon's experts.

Strategy and Conclusion

This case confirms that in determining the proper base for reasonable royalty calculations, it is important to show the actual incremental price consumers are willing to pay for a device including the claimed features, compared with the price they would be willing to pay for an otherwise identical device without the claimed features (assuming claims do not cover the device as a whole). Simply assigning a value to the patented technology is typically insufficient to calculate a reasonable royalty. In arriving at a reasonable royalty, parties and experts should show how much (or how little) the patented technology affects the actual price consumers are willing to pay.

Further Information The Visteon decision is available here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
23 Sep 2018, Seminar, Chicago, United States

Finnegan is a sponsor of the Intellectual Property Owners Association Annual Meeting, supporting the Women in IP Networking Brunch.

26 Sep 2018, Webinar, Washington, DC, United States

This latest series of webinars will explore emerging trends in the changing intellectual property (IP) legal environment in Europe and the United States.

26 Sep 2018, Webinar, Washington, DC, United States

This latest series of webinars will explore emerging trends in the changing intellectual property (IP) legal environment in Europe and the United States.

 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions