Cochlear Corp. v. Alfred E. Mann Foundation (Supreme Court 2020)
It is always tricky for a defendant to appeal solely on damages. Here, Mann filed this patent case back in 2007 and finally got to trial in 2014. The jury answered as follows:
- Infringement: Yes
- Willfulness: Yes
- Invalid: No
The jury form on damages focused on notice-of-infringement; reasonable royalty rates; and also a grand total for damages — $131 million.
Following the verdict, the district court held a bench-trial on indefiniteness and found some of the claims indefinite. Since some of the infringed-claims were now invalid, the court awarded a new trial on damages issues. In addition, the court granted JMOL of no-willful-infringement. On appeal, the Federal Circuit reversed the willfulness judgment since Halo‘s more flexible test had replaced Seagate by that time. The new damages trial was also appealed, but the Federal Circuit refused to consider the issue since a new trial order is not a final judgment.
On remand, the district court reconsidered its new trial order — and instead reinstated the verdict. The court decided that the verdict questions structured to allow damages on “either” of the patents. Since claims in one of the patents were still valid and infringed, the court found the verdict sufficient. This was supported by the evidence since the damages expert had apparently treated the patents together as a group. The court also reinstated the jury’s willfulness decision and then doubled the verdict — up to $268 million. Now the money is getting serious.
Cochlear appealed again and the Federal Circuit affirmed and then denied rehearing. Now the case is pending before the Supreme Court on petition for writ of certiorari and with three very specific damages questions:
- Whether the Federal Circuit has misapplied the “book of wisdom” set forth in Sinclair Refining Co. v. Jenkins Petroleum Process Co., 289 U.S. 689 (1933), by allowing a reasonable royalty for patent infringement under the Patent Act, 35 U.S.C. § 284, to be determined by evidence arising long after the hypothetical negotiation on which that royalty is based?
- Whether Maryland v. Baldwin, 112 U.S. 490 (1884), forecloses an award of damages under a general damages verdict where some claims underlying that award are overturned after trial, and if so, whether a party may challenge such a result notwithstanding agreement to a general damages verdict?
- Whether Garretson v. Clark, 111 U.S. 120 (1884), requires apportionment of patent damages to the inventive contribution of the claimed technology?
[Cochlear Petition]. A group of law professors have filed an amicus brief supporting certiorari of question 2: “to resolve the circuit split on how to treat general jury damages verdicts when the underlying verdict is overturned in part.” [Professor Petition].
The first question focuses on what information should be available during hindsight-focused hypothetical negotiation used to calculate damages. In Sinclair Refining Co. v. Jenkins Petroleum Process Co., 289 U.S. 689 (1933), the Supreme Court indicated that post-infringement evidence offers a “book of wisdom that courts may not neglect.” Still, the infringer argues that the book should not include evidence arising “long after the hypothetical negotiations” theoretically occurred.
The second question highlights the 1884 Supreme Court decision of Maryland v. Baldwin. Baldwin is an odd case to cite — it is an estates case involving inheritance and common-law marriage. But, the key of the case is its holding that a general verdict becomes faulty when one of several possible claims is found in error.
The third question asks about apportionment under Garretson v. Clark, 111 U.S. 120 (1884). In that case, the lower court found infringement, but awarded no damages. The Supreme Court affirmed with the following guidance:
The rule … is aptly stated by Mr. Justice BLATCHFORD in the court below: ‘The patentee,’ he says, ‘must in every case give evidence tending to separate or apportion the defendant’s profits and the patentee’s damages between the patented feature and the unpatented features, and such evidence must be reliable and tangible, and not conjectural or speculative; or he must show, by equally reliable and satisfactory evidence, that the profits and damages are to be calculated on the whole machine, for the reason that the entire value of the whole machine, as a marketable article, is properly and legally attributable to the patented feature.’ Garretson v. Clark, 10 F. Cas. 40 (C.C.N.D.N.Y. 1878), aff’d, 111 U.S. 120 (1884).
The plaintiff complied with neither part of this rule. He produced no evidence to apportion the profits or damages between the improvement constituting the patented feature and the other features of the mop. His evidence went only to show the cost of the whole mop, and the price at which it was sold. And, of course, it could not be pretended that the entire value of the mop-head was attributable to the feature patented. So the whole case ended, the rule was not followed, and the decree is therefore affirmed.
Id. The Federal Circuit has recognized that apportionment is important, but is considered as part of the traditional reasonable royalty analysis.