Summit 6 v. Samsung (Fed. Cir. 2015)
A jury sided with the patentee – finding that Summit 6 had proven infringement and that Samsung had failed to prove invalidity of U.S. Patent No. 7,765,482 (claims 38, 40, 44-46, and 49). The award – $15 million in damages. On appeal, the Federal Circuit affirms that judgment. Here, I’ll focus on the damages issues.
Experts: In a Daubert appeal, Samsung asked the Federal Circuit to rule that Summit 6’s damages expert’s testimony was inadmissible. The general rules for expert testimony are found in Fed. R. Evid. 702 and allows testimony from a qualified expert relating to:
(a) the expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and methods; and
(d) the expert has reliably applied the principles and methods to the facts of the case.
Although a court may exclude testimony based upon unreliable principles or methods, once that threshold has been passed the question of expert credibility goes to the fact finder and may be uncovered by “[v]igorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof are the traditional and appropriate means of attacking shaky but admissible evidence.” Daubert.
Here, the damages expert (Paul Benoit) relied upon an unpublished methodology based upon the premise “that a feature’s use is proportional to its value.” On appeal, the Federal Circuit indicated that this type of “analytical method” for calculating damages was sufficient to pass as expert testimony and be relied upon by a jury.
[W]here the methodology is reasonable and its data or evidence are sufficiently tied to the facts of the case, the gatekeeping role of the court is satisfied, and the inquiry on the correctness of the methodology and of the results produced thereunder belongs to the factfinder.
The particular invention at issue involves pre-processing of an image on a mobile device before uploading it to a server. In estimating a reasonably royalty, Benoit estimated that 65% of phone users regularly use the cameras to take photos; 77% of those share the photos; and 41% of those share by MMS in a way that infringes the patent. Taking the product of these percentages, Benoit found that 20% of the relevant users regularly infringe. Taking a step back, Benoit estimated Samsung’s camera-related revenue as $14.15 per phone (calculated based upon proportional production costs) and then took the leap of concluding then that 20% of the $14.15 per phone ($2.93) is attributable to the infringement. Thinking proportionally again, Benoit then estimated that $0.56 of every $2.93 in revenue was profit for Samsung and that – based upon a Nash Bargaining Solution, that a reasonable royalty would split that profit – or $.28 per phone in license fees. Since Samsung has distributed about 100,000,000 phones, that would add up to $29 million.
Reviewing that methodology, the Federal Circuit found:
Mr. Benoit’s damages methodology was based on reliable principles and was sufficiently tied to the facts of the case. Mr. Benoit first estimated Samsung’s economic benefit from infringement by specifically focusing on the infringing features and by valuing those infringing features based on Samsung’s own data regarding use and on its own financial reports outlining production costs and profits. Mr. Benoit then envisioned a hypothetical negotiation in which the parties would have bargained for respective shares of the economic benefit, given their respective bargaining positions and alternatives to a negotiated agreement. Mr. Benoit’s methodology was structurally sound and tied to the facts of the case.
That Mr. Benoit’s methodology was not peer-reviewed or published does not necessitate its exclusion. We recognize that the fact-based nature of Mr. Benoit’s damages testimony made it impractical, if not impossible, to subject the methods to peer review and publication. . . . Here, the district court did not abuse its discretion in determining that Mr. Benoit’s methodology, involving the correlation of use with value, was not unreliable.