A Reasonable Royalty Rate Must Be Tied to Facts

improved air and grass flow for reduced blowout, increased grass cut quality, minimized grass clumping, and more uniform discharge, all of which improve the mower's function and allows a mower to go faster in heavy grass areas.

Id. at 25.

Summary Judgment: District Courts Must Independently Assess Validity

The grant of summary judgment of no invalidity was reversed. The Federal Circuit explained that a district court cannot abdicate its responsibility for assessing validity, regardless of the proceedings at the patent office, whether they are examination, re-examination, reissue or appeal. See, id. at 9-10. The Federal Circuit found that the district court's decision was based solely on the grounds the '863 Patent had survived three separate reexaminations. Although the district court indicated that it had not afforded the results of the reexaminations “determinative” “weight,” id. at 8, the Federal Circuit concluded that the district court provided “[n]o other explanation.” Id. at 9.

The Federal Circuit held that “a reexamination confirming patentability of a patent claim alone is not determinative of whether a genuine issue of fact precludes summary judgment of no invalidity.” Id. Consequently, the court vacated and remanded with instructions to consider the entire record and reach an independent conclusion regarding invalidity.

Indefiniteness: Functional Claim Language Supports Definiteness

Claim language describing an “elongated and substantially straight” baffle was held to be sufficiently definite, even without numerical indications of how long or straight it had to be. Id. at 20. Briggs unsuccessfully argued for summary judgment that claim 1 was indefinite because the '863 Patent does not explain how to measure whether a baffle portion is straight or long enough to be considered “elongated and substantially straight.” Id. at 18. The Federal Circuit affirmed. First, it explained that definiteness is a question of law, which it reviews de novo. Id. at 16. It then determined that a claim is definite if the specification and prosecution history inform those skilled in the art about the scope of a claim with “reasonable certainty.” Id.

The Federal Circuit ruled that there is not always a requirement to impose strict numerical precision on the claim terms. Id. at 18. It explained that the claim language was definite, in part, because the claims included functional language. It reasoned that functional language improves the definiteness of a claim, by specifying the operations performed by the invention. “Thus, one skilled in the art would understand that the elongated and straight portions of the baffle must be extended, straightened, and positioned in such a way that the grass cuttings from each blade deflect the clippings into the direction of the next blade.” Id. at 19. The claim limitation of elongation and straightness could therefore be understood with reasonable certainty. Id.

Damages Must Be Tied to the Evidence

Briggs presented three damages arguments on appeal: 1) it was error to use the price of the entire mower rather than the price of the flow control baffles as a royalty base; 2) Exmark's damages expert failed to explain her basis for selecting a 5% royalty rate; and 3) Briggs should have been permitted to explain that the '863 patent was similar to the prior art. Id. at 20.

1. A Properly Apportioned Royalty Rate Can Be Based on Sales of the Entire Accused Product

The parties agreed that the improvement of the '863 Patent over the prior art related to the configuration of the baffle system. Briggs argued that because a reasonable royalty must be based on the incremental value the invention adds to the accused product, it was improper for the royalty base to comprise total sales. It argued that the base should have comprised only the value attributable to the baffle system. The Federal Circuit disagreed. Id. at 22.

First, the Federal Circuit clarified that although a reasonable royalty must apportion damages, apportionment can be addressed by adjusting either the royalty base, the royalty rate, or a combination of both. Id. The court recognized that using total sales conforms more closely to a real-world negotiation. Id. at 23. Therefore, as “long as Exmark adequately and reliably apportions between the improved and conventional features of the accused mower, using the accused mower as a royalty base and apportioning through a royalty rate is an acceptable methodology.” Id. at 22.

The Federal Circuit also noted that in this case, the asserted claim was directed to the entire lawnmower. It confirmed that “[i]t is not the baffle that infringes the claim, but rather the entire accused mower.” Id. at 23. Nevertheless, it clarified that even when a patent claim covers the entire product, the relative value of the patentee's invention must be apportioned “in comparison to the value of the conventional elements recited in the claim.” Id. The court explained that one acceptable method of effecting this apportionment “is through a proper analysis of the Georgia-Pacific factors.” Id. However, as discussed below, it is not sufficient to merely recite the factors, without explaining how they determine the selection of a rate.

2. A Reasonable Royalty Rate Must Be Tied to the Facts of the Case

The Federal Circuit ruled that Briggs was entitled to a new trial on damages, on the grounds Exmark's damages expert had not tied her proposed royalty rate to the facts of the case. Id. at 24. It explained that while she had thoroughly evaluated the Georgia-Pacific factors, “she did not explain how … her analysis of the Georgia-Pacific factors, led to her proposed 5% royalty rate.” Id. at 25. The Federal Circuit characterized this as a “superficial” Georgia-Pacific analysis which did no more than inform a jury regarding the factors that could be taken into consideration, but not how those factors lead to the proposed rate. Id. at 25. It explained that while mathematical precision is not required, the expert must explain how particular factors resulted in the proposed royalty: “It is not enough for an expert to simply assert that a particular royalty rate is reasonable in light of the evidence without tying the proposed rate to that evidence.” Id. at 28. Accordingly, the court ruled that the district court had abused its discretion by denying Briggs a new trial on damages.

3. Defendants May Present Prior Art to Counter an Argument That a Patent Represents a Substantial Advancement

The Federal Circuit ruled that Briggs should have been permitted to present evidence of uncommercialized prior art to the jury to counter Exmark's evidence of the significance of the invention. Although Briggs was permitted to compare the patented invention to commercialized mowers, it was not permitted to discuss how close prior art patents were to the '863 patent. First, the Federal Circuit explained that neither the district court nor Exmark had identified a case that limited evidence to commercialized products. Id. at 29. It also found that uncommercialized patents were relevant to Exmark's argument that the '863 Patent provided utility and advantages over the prior art.

Willfulness

The Federal Circuit ruled that willfulness is entirely for the jury and vacated the jury's finding of willfulness and the district court's enhancement of damages on the grounds Briggs should have been permitted to introduce evidence of its belief of patent invalidity. Prior to the trial, the district court had found that Briggs' litigation defenses were unreasonable. It therefore precluded Briggs from presenting evidence regarding patent validity. Briggs had argued that such evidence mitigated an assertion that it had acted with an objectively high risk of infringement. It also argued that under the Supreme Court's ruling in Halo Electronics, Inc. v. Pulse Electronics, Inc. 136 S. Ct. 1923, 579 US __ (2016), the jury, not the judge, assesses the infringement risk issue. The Federal Circuit agreed. Id. at 31.

The Federal Circuit noted that Halo overruled prior precedent that required a threshold of objective unreasonableness, before a finding of willful infringement could be made. Id. at 31. It concluded that the entire willfulness determination was for the jury. Therefore, evidence relevant to Briggs' state of mind was relevant to the jury's finding of willfulness. Consequently, it was improper for the district court to have excluded that evidence, based on its finding of unreasonableness. Id. “The district court must reconsider its decision to exclude evidence of prior art during a jury trial on willfulness to determine whether Briggs had developed any views about the prior art at the time of accused infringement or whether the evidence only relates to Briggs' litigation-inspired defenses.” Id. at 32.

Conclusion

As can be seen, this decision contains something for everyone. Patentees can celebrate the reinforcement of the “reasonable certainty” standard on indefiniteness and the appropriateness of basing a royalty base on total sales. Defendants will cheer permitting them to show how close even uncommercialized prior art is to the claim as a way of beating down the royalty rate and avoiding willfulness findings. Damages experts may be left scratching their heads as to how they should go about selecting royalty rates, after the rule of thumb was discredited and this case eschews a general review of the Georgia-Pacific factors, followed by plucking a rate from thin air. Certainly, litigants will ignore this case at their peril.

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Matthew Siegal is Of Counsel to the intellectual property firm of Dilworth & Barrese in Woodbury, NY and a member of this newsletter's Board of Editors. He can be reached at [email protected]. Any opinions or positions expressed are not necessarily of the firm or any of its clients.