On January 25, 2013, Judge Ferguson issued an Order (available here) in Axcess International v. Savi Technologies. As background for the Order, Judge Ferguson noted:
After the pretrial hearing on Friday, January 4, 2012, the Court considered the issues relating to the Expert Report of Scott D. Hakala. On January 8, 2013, Axcess submitted a supplemental document (Doc. No. 267) in an attempt to address the Court’s concern that Dr. Hakala failed to adequately apportion to the royalty base only the revenues attributable to the smallest salable patent practicing unit. While the supplement addressed most of the Court’s concern with the royalty base, it came on the eve of trial, which created new difficulties with regard to the setting. In addition, the Court remained concerned with the adequacy of Dr. Hakala’s assessment of the reasonable royalty rate. After considering these issues, the Court determined that the expert report required more detail and analysis before Dr. Hakala could testify. Therefore, the Court continued the trial to permit Axcess an opportunity to address the Court’s concerns with Dr. Hakala’s analysis and to permit Savi an opportunity to respond to any supplemental expert analysis. The purpose of this order is to outline the additional requirements for Dr. Hakala’s Expert Report.
Judge Ferguson’s Order summarized key aspects of the law on patent infringement damages, including the entire market value rule, apportionment, and royalty rate issue. Judge Ferguson held that “Dr. Hakala is obligated to calculate the royalty base using the smallest salable patent practicing unit, unless the requirements of the entire market value rule are satisfied.” Because it was unclear to Judge Ferguson whether the damages expert appropriately calculated allegedly owed damages, the expert was required to provide more analysis and detail so that his analysis could be properly evaluated. For example, the expert
must explain why he used the total revenue for all of the accused tags to calculate the royalty base. If this decision was based on the conclusion that the accused tags are the smallest salable patent practicing unit, then he must provide that reasoning. He should address whether it is proper to use the total revenue for all of the accused tags to calculate the royalty base even though some tags command a greater value due to additional features and functionalities not covered by the ‘953 Patent. If, however, his decision was based on the entire market value rule, then he must show, with sound economic and/or consumer demand analyses, that the patented technology drives the demand for all of the accused tags, with the understanding that “[i]t is not enough to merely show that [Axcess’s invention] is viewed as valuable, important, or even essential to the use of the [accused tags]. LaserDynamics, Inc., 694 F.3d at 68.
Judge Ferguson also held that the expert’s reliance on a royalty rate contained in a draft license agreement was improper.
Axcess International is represented by Steven Aldous and Robert Varner, both of Braden Varner & Aldous; Charles Cantine, Vivian Luo, and Joseph Diamante, all of Stroock & Stroock & Lavan LLP; David Skeels, Glenn Orman, Michael Cooke, and Jonathan Suder, all of Friedman Suder & Cooke PC.
Savi is represented by Eric Pinker, Chistopher Schwegmann, and Mark Turk, all of Lynn Tillotson Pinker & Cox; Boris Matvenko, Marvin Gittes, Peter Snell, and Timur Slonim, all of Mintz Levin Cohn Ferris Glovsky & Popeo PC.