Stay on Top of Hot Topics in Patent Damages Litigation

In patent litigation, damages issues are sometimes treated as an afterthought when compared to the issues of infringement and invalidity. However, achieving a client’s goals requires an attorney to place damages at the center of the litigation strategy from the very beginning. Damages, quite simply, can make or break a case. And it is a quickly evolving field, rife with inconsistent judicial decisions, vague standards, and new techniques for measuring damages. Below are some of the current hot topics in patent litigation—and tips for practitioners on both sides of the “v” on how to handle them.

Extraterritorial Patent Damages May Be Up for Grabs

Claims of patent infringement of U.S. patents are, of course, limited to infringing activities in the United States, so for a long time it was conventional wisdom that damages could only be recovered for sales that occurred within the territorial United States. But several recent appellate court decisions clarify that there are circumstances in which a successful plaintiff may obtain damages based on foreign lost profits.

In 2018, the Supreme Court decided WesternGeco LLC v. ION Geophysical Corp., 585 U.S. 407 (2018), which held that damages could be awarded for infringement under Section 271(f), based on supplying component parts of a patented invention that were combined outside the United States. However, there remained an open question of whether this same rationale could be applied to obtain damages for foreign sales for cases of infringement under Section 271(a) (e.g., making, using, selling, or offering to sell the patented invention). Recently, in Harris Brumfield v. IBG LLC, the U.S. Court of Appeals for the Federal Circuit considered this question and held that it did. As a result, the law is now clear that a successful patent holder may recover damages based on entirely foreign sales if a domestic act of infringement under Section 271(a) is the “proximate cause” of the lost foreign profits.

The Brumfield decision is unlikely to be the end of this line of jurisprudence, as it raises several questions, including, most notably, what “causal relationships” and fact patterns will satisfy the proximate causation requirement.

In view of Brumfield and WesternGeco, practitioners should be prepared for more litigation issues arising relating to extraterritorial issues. Parties can expect plaintiffs to seek damages calculations based on foreign revenues, which, at a minimum, will lead to more frequent discovery requests and disputes relating to whether discovery into foreign sales is appropriate and whether the causal connection has been shown. It may also lead to greater disputes up front in cases where plaintiffs chose to plead allegations regarding foreign sales. And there could be issues relating to patent exhaustion and double recovery if patentees are not careful and simultaneous asserting related foreign patents. Practitioners should be familiar with the standards and prepared to identify and address these issues.

Beware of Apportionment Issues

Most practitioners know that a plaintiff has the burden to identify and define the incremental benefit of the patented invention, and generally cannot calculate damages based on the value of the accused product’s non-patented elements. However, in a world where inter partes review occurs in parallel with district court litigation, and dispositive motions may invalidate certain claims before trial, the claims being tried may be very different from those that were originally set forth in a damages expert report months before.

What this means is that practitioners must be very cautious to ensure their damages expert opinions provide appropriate apportionment for each patent and even among independent and dependent claims. Otherwise, if a patentee is left without an opinion tailored to the incremental value of a particular claim, its damages opinion may be excluded.

For example, in Prolitec Inc. v. ScentAir Techs., LLC, No. CV 20-984-WCB, 2023 WL 8697973, at *17 (D. Del. Dec. 13, 2023), the District of Delaware excluded a damages expert opinion where all independent claims had been invalidated, and the expert had not apportioned the value of the features in the remaining dependent claims. The penalties for failure to apportion are real and can be case dispositive. Plaintiffs and defendants should both pay close attention to this issue.

Defendants Have Burdens, Too

It is wise for defendants to be proactive, and—sometimes—it is required. While most of the burdens and first steps in litigation fall to plaintiffs, that is not always the case. If defendants forget certain key areas where they have obligations, they may find themselves missing out on certain defenses at trial.

For instance, while defendants typically find themselves responding to expert reports, they should consider whether to submit an opening expert report on noninfringing alternatives. In some circumstances, the failure to address non-infringing alternatives until a rebuttal report may be grounds to exclude those arguments at trial. For example, in Correct Transmission, LLC v. Nokia of America Corp., 2:22-cv-00343, the Eastern District of Texas recently excluded an expert report on non-infringing alternatives that was not disclosed until rebuttal reports. Similarly, some courts consider the defendant to have the burden of proof of demonstrating the existence of a FRAND obligation that limits their damages if they are found to infringe. See In re Innovatio IP Ventures, LLC Pat. Litig., 956 F. Supp. 2d 925, 936 (N.D. Ill. 2013).

Thus, defendants should not merely respond to plaintiff’s case. They should be proactive and identify areas where they may want or need to present affirmative theories and evidence.

Stay On Top Of Damages Expert Standards

In 2023, the Advisory Committee on the Federal Rules of Evidence made changes to FRE 702 regarding the admissibility of expert testimony. The changes establish a requirement that it is “more likely than not” that the expert’s opinion meets the requirements of the rule. The changes to this rule were intended to curb what the Advisory Committee described as the “incorrect application” of Rule 702 by courts in holding the sufficiency of an expert’s basis for the expert’s opinion, and the expert’s application of the methodology, to be questions of weight, and not admissibility. The Advisory Committee emphasized the essentiality of “judicial gatekeeping” on expert opinions.

After this rule change, courts may be more willing to step into the “gatekeeper” role and exclude opinions that might have previously been permitted to go to the jury. As a result, practitioners should be prepared for increased challenges to their experts’ opinions. In the damages context, this means that experts should rely upon proven damages methodologies—now is not the time to go out on a limb with a unique theory or to use an unproven source. Likewise, practitioners should use this opportunity to closely scrutinize their adversary’s expert opinions and should not hesitate to challenge an opinion that fails to satisfy the standard.

Don’t Forget Your Damages Case

In sum, the landscape continues to evolve for damages in patent litigation cases. Practitioners should stay on top of these trends, whether a plaintiff or defendant, to ensure they are advocating as best as possible for their clients.

. Please join us on May 14, 2024, at the IP Watchdog Patent Litigation Masters program, where the author, along with David Duski of Charles River Associates and Sanjay Murthy of McAndrews, Held, & Malloy, Ltd., will be speaking on these issues.

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