Court Affirms Damages on Very Wide Royalty Range Testimony

Bayer Healthcare LLC v. Baxalta Inc. (Fed. Cir. 2021)

A jury sided with the patentee Bayer — finding the patent infringed and not proven invalid.  The judge refused to allow the jury to decide willfulness, and instead found no willful infringement as a matter of law. Affirmed here on appeal.

The basic setup: Bayer’s U.S. Patent No. 9,364,520 covers a conjugate that includes a “functional Factor VIII polypeptide” having a particular amino acid sequence (“or an allelic variant thereof”).  Factor VIII is normally produced by the human liver and is important to blood coagulation.  Thus, Factor VIII is also a helpful treatment for hemophilia A.  The conjugate also includes polyethylene glycol (PEG) that is used as a preservative and has a particular binding site on the polypeptide (“the B-domain”).  The process of joining the two factors together is known as PEGylation.  The B-domain binding site limitation was important because prior researchers had found that non-specific conjugation changed the Factor VIII in a way that reduced or eliminated its functionality.

First the damages: After finding infringement, the Jury was asked to determine a royalty rate (17.18%); a royalty base ($872 million); and then do the math for the damages ($155 million).  The district court also added another $18 million for pre-verdict supplemental damages.  The verdict here is based upon Baxalta’s distribution of Adynovate, a PEGylated FVIII hemophilia treatment.

I have included a snippet from the verdict below.

At trial, Bayer’s damages expert, Dr. Addanki, testified that the royalty rate range should be 5.1% to 42.4%. On appeal, the defendant argued that this range was simply too wide and effectively required the jury to speculate — or just pick a number, any number (within the wide range).   On appeal, the Federal Circuit found no problem and that the evidence presented supported the verdict. “[W]e are aware of no precedent that requires an expert to provide a single proposed royalty rate.”  I wonder if next-time Dr. Addanki will push his luck and go for a 0-100% predicted range. I’m confident that it is accurate if not precise.

RANDOM: Construing the Claim Construction.  The district court construed the claimed polypeptide conjugation as “not random” based upon statements in the patent and the prosecution history.  On appeal, the defendant argued that the term random – although not found in the claims – should have been construed by the district court.

On appeal, the Federal Circuit found no error — explaining that claim construction need not “purge every shred of ambiguity.” quoting Acumed LLC v. Stryker Corp., 483 F.3d 800 (Fed. Cir. 2007).  Here, the defendant had asked for a particular narrow construction and the district court had refused — finding it too narrow.

= = = =

Talk about functional claim language: The claims expressly require that the conjugate be “functional.”  Still, the jury found the claims enabled. On appeal, the Federal Circuit affirmed — noting the substantial evidence presented by the patentee at trial.  Further, “the specification need not include a working example of every possible embodiment to enable the full scope of the claims.”

= = = =

The patentee had cross-appealed on willfulness. The patentee presented evidence that the defendant knew about the patent and knew that its drug used the same targeted PEGylation at the B-Domain as claimed.

On appeal though the Federal Circuit agreed with the district court that this evidence was not enough to make a case of willfulness. “Knowledge of the asserted patent and evidence of infringement is necessary, but not sufficient, for a finding of willfulness. Rather, willfulness requires deliberate or intentional infringement.”

So, in the end, the verdict stands at only $100 million+.



5 thoughts on “Court Affirms Damages on Very Wide Royalty Range Testimony

  1. 3

    There is a little more to the damages issue here than the expert only presenting to the jury a range of royalty rates.

    In the case, the expert had attempted to apply a Nash bargaining solution to his determination of the royalty rate. He apparently had provided a sufficient analysis tied to the economic facts of the case and the GP factors to establish the lower and upper end points of his opined royalty range. The expert then assumed a 50/50 split of the incremental profits, to arrive at a single royalty rate that was the midpoint of his royalty range, 23.75%. On a Daubert motion, the district court found the expert’s final step of arriving at the single royalty rate that was the midpoint of the range was not sufficiently tied to facts of the case and therefore struck that portion of the opinion for being an unreliable methodology, but, the court allowed the expert to present the end points of the royalty range. Bayer Healthcare LLC v. Baxalta Inc., 2019 WL 330149, *6-*8 (D. Del. Jan. 25, 2019).

    Thus, in the case, the patentee’s expert’s testifying only as to the wide range of royalties was not an intentional strategic choice in the case. It was a salvaging of the patentee’s damages expert’s testimony after having a portion of his opinion struck on Daubert grounds.

    While allowing the testimony as to the range of royalties, the Federal Circuit cautioned that “[a] party runs the risk, however, of loss to its expert’s credibility on cross-examination if the expert does not identify a single royalty rate.” Bayer HealthCare LLC v. Baxalta Inc., __ F.3d __, __, 2021 WL 771700, *13 (Fed. Cir. 2021).

    Hence, going forward it seems unwise for parties to intentionally chose to present very wide royalty ranges. But it does seem possible that damages experts may now resort to presenting testimony of what they perceive to be reasonable ranges of royalty rates with range being skewed somewhat upward or downward depending on whether the patentee or accused infringer has hired the damages expert.

    In the case, the accused infringer’s damages expert opined that the royalty rate should only be 1%. One wonders had the accused infringer expert opined on a rate that was at the lower portion of the patentee’s expert’s wide range of rates, for example 8%, would the jury have found that more credible since it overlapped the patentee’s range and awarded that low of a rate rather than the almost 18% it did award.

  2. 2

    I don’t think this is functional claim language in the same way that the language in Amgen v. Sanofi was functional. “Functional Factor VIII” is a term of art for the polypeptide at issue – see, e.g., link to

  3. 1

    The defendant here got to cross-examine the wide % royalty range of the patent owner’s damages expert, and also put on its own damages expert. The latter’s proposed royalty rate was so low for such an apparently important invention that it is not surprising the jury went higher. But the jury stayed well within the former’s proposed range, so this is the kind of thing that juries DO get to speculate on, a gamble defendants should expect in going to trial.

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