The Court of Appeals for the Federal Circuit, in VIRNETX, Inc. v. Cisco Sys. Inc, recently reversed a $368 million dollar patent infringement verdict because the plaintiff calculated its damages as a portion of the entire market value of the product as opposed to apportioning its damages to the infringing software component of the product.
In its ruling, the Federal Circuit confirmed the general rule that a patentee cannot use the value of an entire device to calculate a royalty when the device consists of several non-infringing features with no relation to the patented feature unless the patented feature creates the basis for customer demand for the device. In summary, the plaintiff used the price of the Apple device (iPhone, iPad, etc.) that was sold with the infringing software as opposed to a portion of the value of the Apple device attributable to the infringing software to calculate a reasonable royalty. Thus, in claiming damages, a patentee must estimate the portion of the value of that infringing product that is attributable to the patented technology.
A copy of the decision is available on the United States Court of Appeals for the Federal Circuit’s Website. If you have any questions regarding this information, please contact your Davis & Kuelthau, s.c. attorney.