Calculating Reasonable Royalty Damages for Indirect Infringement

Conflicting Pronouncements

In two recent cases decided only three weeks apart, the Federal Circuit gave conflicting pronouncements on the issue of whether trial courts can limit damages as a matter of law to proven instances of direct infringement. In Lucent Technologies v. Gateway, Inc., 580 F.3d 1301, 1308 (Fed. Cir. 2009), cert. denied, 130 S. Ct. 3324 (2010), the court affirmed the jury's finding of infringement of Lucent's claims on a “method of entering information into fields on a computer screen without using a keyboard.” Customers directly infringed the claims by using Microsoft Outlook's appointment-scheduling feature, and the defendant was found indirectly liable on both inducement and contributory infringement theories. The court vacated the jury award of reasonable royalty damages (a lump sum of $357,693,056.18) as unsupported by evidence, but opined that “we have never laid down any rigid requirement that damages in all circumstances be limited to specific instances of infringement proven with direct evidence.” Id. at 1334. The court stated that such a damage-limiting rule would be inconsistent with the hypothetical negotiation approach to calculating reasonable royalty damages by assuming a scenario that would be “far removed from what parties regularly do during real world licensing negotiations. ' [For example], companies in the high-tech computer industry often strike licensing deals in which the amount paid for a particular technology is not necessarily limited to the number of times a patented feature is used by a consumer. A company licensing a patented method often has strong reasons not to tie the royalty amount strictly to usage.” Id. In the context of this case, if the defendant actually took a licensee for Lucent's patent, it would likely owe a royalty on each sale of a Microsoft Outlook software package ' whether or not the particular customer who bought the software actually used the patented appointment-scheduling feature.