Reliably Determining Reasonable Royalty Rates from Lump Sum Licenses

In Ecofactor, Inc. V. Google LLC, Appeal No. 23-1101, The Federal Circuit held that license agreements containing a lump sum payment “based on” a royalty rate may provide evidence that a corresponding reasonable royalty rate has been reliably calculated.

EcoFactor sued Google for patent infringement over Google’s smart thermostat products. At trial, the jury found Google infringed the patent and awarded EcoFactor damages. Google moved for a new trial on damages, arguing that the opinion of EcoFactor’s damages expert should have been excluded from trial for being speculative and unreliable. The district court denied the motion, and Google appealed.

The Federal Circuit affirmed the district court’s decision to deny Google’s motion for a new trial. On appeal, Google argued the expert’s royalty rate was “plucked . . . out of nowhere” and that the damages testimony lacked comparability and apportionment. The Federal Circuit noted that the challenged expert’s testimony was based on three comparable licenses that contained lump sum payments that were “based on … a reasonable royalty calculation” at a particular rate and held that these licenses, along with various corroborating evidence, adequately supported the rate. The Federal Circuit also held that the three licenses were economically comparable to the hypothetically negotiated agreement and properly apportioned because the expert accounted for the difference in scope between the licenses in analyzing the hypothetical negotiation. Consequently, the Federal Circuit concluded that the expert relied on sufficiently comparable licenses and that the expert’s opinion adequately apportioned the value of the patent. Thus, the damages opinion was admissible, and the district court did not abuse its discretion when it denied Google’s motion for a new trial.

Relying on Computer-Implemented, Result-Focused Functional Language is a Bad Bet

In Beteiro, LLC v. Draftkings Inc, Appeal No. 22-2275, the Federal Circuit held that recitations of a computer-implemented method can be an abstract idea and non-eligible under 35 U.S.C. § 101 if the claims recite result-focused functional language that is analogous to longstanding “real-world” activities and do not improve technology.

Beteiro, LLC (“Beteiro”) filed several patent infringement suits against various online wagering companies (“Appellees”), including DraftKings Inc., in the district court alleging that the Appellees infringed certain claims by providing a plurality of gambling and event wagering services.  The Appellees filed motions to dismiss on the grounds that the asserted patents claim nonpatentable subject matter under 35 U.S.C. § 101.  The district court granted the motions to dismiss and denied Beteiro’s motions for reconsideration.  Beteiro appealed to the Federal Circuit.

The Federal Circuit affirmed the district court’s decision and held that the asserted claims were directed to the abstract idea of “exchanging information concerning a bet and allowing or disallowing the bet based on where the user is located.”  Applying the two step Mayo/Alice framework, the Federal Circuit determined that the asserted claims were directed to an abstract idea because the asserted claims (1) broadly recite generic steps of a kind frequently held to be abstract; (2) were drafted using largely result-focused functional language, containing no specificity about how the purported invention achieves those results; (3) involved methods of providing particularized information to individuals base on their locations; (4) could be analogized to longstanding “real-world” activities; and (5) did not improve technology (e.g., computers).  Further, under step two of the Mayo/Alice framework, the Federal Circuit held that the asserted claims achieved the abstract steps using generic computers and conventional technology.  Therefore, the claims were directed to ineligible subject matter, and the Federal Circuit affirmed the district court’s dismissal.

When Skinny Labeling is Not Skinny Enough

In Amarin Pharma, Inc. v. Hikma Pharmaceuticals USA Inc., Appeal No. 23-1169, the Federal Circuit held that the totality of the allegations may be taken into account for determination of whether induced infringement of a pharmaceutical drug is sufficiently pleaded.

Amarin Pharma (“Amarin”) sued Hikma Pharmaceuticals (“Hikma”) for induced infringement of two patents owned by Amarin.  The patents at issue cover claims directed to the use of Amarin’s drug for treatment of cardiovascular risks (“CV treatment”).  Amarin’s drug was initially approved by the FDA for treatment of severe hypertriglyceridemia (“SH treatment”) and only later approved for CV treatment.  Hikma sought approval of a “skinny label” for its generic product that would only include SH treatment and not the CV treatment.  However, Amarin alleged that the content of Hikma’s product label, press releases, and website constituted Hikma’s intent to directly infringe by prescribing its generic product for CV treatment.  The District Court granted Hikma’s motion to dismiss, concluding that Amarin’s complaint failed to plead inducement.

The Federal Circuit reversed the District Court’s decision.  In its determination, the Federal Circuit considered whether the totality of allegations (e.g., label, in combination with press releases, marketing materials) provided substantial evidence to support a jury verdict of induced infringement.  First turning to Hikma’s label, the Federal Circuit determined that although an implied or express instruction for CV treatment was not present, other portions of the label appeared to encourage use for CV treatment (e.g., overlapping patient population).  Other allegations, such as Hikma’s press releases indicating that its product was a “generic version” of a drug indicated for CV treatments, sales figures attributable to CV treatment, and use of broad marketing terms and content on its website led the Federal Circuit to find it plausible that Hikma was encouraging use of their drug for off-label use.  Accordingly, the Federal Circuit decided that Amarin had plausibly pleaded that Hikma induced infringement of the asserted patents.