The Federal Circuit recently issued a decision in Provisur Technologies, Inc. v. Weber, Inc., No. 23-1438 (Fed. Cir. Oct. 2, 2024), partially reversing a $10.5 million jury verdict in a patent infringement case involving food processing machinery. This decision marks the latest chapter in an ongoing legal battle between the two food processing equipment manufacturers. The case has a complex procedural history, including parallel inter partes review (IPR) that is now on petition to the U.S. Supreme Court.
This October decision covers some of the ground that the court may address in the upcoming en banc rehearing of EcoFactor v. Google, offering some foreshadowing of likely outcomes. Here, the court strongly sided with the accused infringer in requiring particularized apportionment related evidence before allowing a patentee to use the entire market value of a product as the royalty base. In EcoFactor, the court will similarly focus on the evidentiary standard required of expert testimony on damages apportionment. Provisur was authored by Chief Judge Moore, one of the most ‘pro patentee’ judges — signaling that patent owners are unlikely to smile when they read the EcoFactor decision.
Although the decision focuses on both damages and infringement, I focus here just on the damages issues.
Background: In 2019, Provisur sued Weber in E.D. Missouri for willfully infringing three patents related to food processing machinery: U.S. Patent Nos. 10,625,436, 10,639,812, and 7,065,936. The patents cover various aspects of high-speed slicers, conveyors, and packaging equipment used in food processing plants. After a nine-day trial, a jury found Weber had willfully infringed claims from all three patents and awarded Provisur $10.5 million in damages. Weber appealed the district court’s denial of its motions for judgment as a matter of law (JMOL) on noninfringement, willfulness, and damages.
Damages and the Entire Market Value Rule: The Federal Circuit’s most significant ruling in this case concerns the application of the entire market value rule for calculating damages. The court reversed the district court’s denial of a new trial on damages, finding that the lower court abused its discretion in allowing Provisur to use the entire market value of Weber’s slicing lines as the royalty base.
For anyone who is comfortable with algebra and ratios, the entire market value rule (EMVR) may seem like a load of bologna, but there are some key reasons why it keeps arising. EMVR arises in the context of apportionment – the requirement that patent damages be awarded only for the value added by the invention. When the invention covers a sub-component of a larger product, courts have concluded that it is often improper to use the entire product value as the royalty base. For instance, in LaserDynamics, Inc. v. Quanta Comput., Inc., 694 F.3d 51 (Fed. Cir. 2012), the Federal Circuit held that a patentee may only use the entire value of a multi-component product as the royalty base if it proves that the patented feature is the basis for customer demand of the product as a whole.
At its core, a reasonable royalty calculation is simply the product of a royalty base and a royalty rate: Royalty = Base × Rate. Mathematically, there are infinite combinations of royalty bases and rates that can yield the same total royalty. For example:
- $10,000 = $1,000,000 × 1%;
- $10,000 = $100,000 × 10%; and
- $10,000 = $10,000 × 100%
In each case, the resulting royalty is $10,000, despite vastly different bases and rates. And, a larger base does not necessarily result in a larger (or smaller) ultimate award.
The Fallacy of the EMVR Debate: Given this mathematical reality, the intense focus on the entire market value rule might seem misplaced. After all, a jury can simply adjust the royalty rate downward when using a larger base to achieve the same equitable result. Despite this mathematical equivalence, courts have continued to emphasize the importance of the EMVR doctrine. Several rationales might explain this:
- Cognitive Bias: Juries (and even judges) might be unduly influenced by larger numbers, leading to inflated damages even if instructed to consider a lower rate. This is especially true if we’re dealing with percentages that are not whole numbers.
- Evidentiary Concerns: The EMVR doctrine forces patentees to present evidence specifically linking the patented feature to consumer demand, potentially leading to more accurate valuations. This evidence is typically more difficult to obtain and explain than simply the final retail price.
- Manufacturing Cost vs Retail Price: Because sub-components are generally not ‘sold’ at the retail level, the best available pricing is typically associated with the cost of manufacture or perhaps a wholesale b2b price. These are often several times lower than retail — resulting in an even lower base.
- A Mathematical Limit: The sub-component’s value serves as a limit on the royalty award. Thus, in a situation where the product costs $1000 and the sub-component’s value is only $5, the royalty award for a patent infringed by the sub-component will never be more than $5.
In this case, Provisur’s damages expert, Ms. Julie Davis, used the value of the entire slicing line as the royalty base and applied a royalty rate to calculate reasonable royalty damages. Ms. Davis relied on testimony from Provisur’s technical expert, Dr. Vorst, to support this approach. However, the Federal Circuit found this evidence woefully inadequate.
The court highlighted several key deficiencies in Provisur’s damages case:
- Lack of Consumer Evidence: Dr. Vorst’s testimony was conclusory and did not provide any evidence from customers showing that the patented features drove demand for the entire slicing line.
- Failure to Address Other Features: Dr. Vorst acknowledged that Weber’s slicing lines included other features and that customers buy slicing lines for different reasons. However, he failed to explain why these other features did not drive customer demand.
- Absence of Market Studies: Dr. Vorst did not conduct any market studies or consumer surveys to determine whether demand for Weber’s slicing lines was driven by the patented features.
- Complexity of the Product: The court emphasized that the entire slicing line includes multiple separate machines, from preparation machinery to end-of-line machinery, with the patented technology being just one component of one machine.
The Federal Circuit’s ruling aligns with its precedent in Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., 904 F.3d 965 (Fed. Cir. 2018), where it explained “[w]hen the product contains other valuable features, the patentee must prove that those other features do not cause consumers to purchase the product” in order to obtain EMVR damages. The court found that Provisur failed to meet this burden.
This decision underscores the high evidentiary bar patentees must clear to invoke the entire market value rule, especially for complex, multi-component products. It serves as a warning to patentees and their experts to develop robust, evidence-based damages theories that go beyond conclusory expert testimony.
Willfulness and the Advice of Counsel
The Federal Circuit also reversed the jury’s willfulness finding, providing important guidance on the interpretation of 35 U.S.C. § 298 and the evidence required to prove willful infringement. Section 298, enacted as part of the America Invents Act in 2011, indicates that an infringer’s failure to obtain an opinion of counsel can’t serve as a red flag (or even yellow flag) suggesting willfulness.
The failure of an infringer to obtain the advice of counsel with respect to any allegedly infringed patent, or the failure of the infringer to present such advice to the court or jury, may not be used to prove that the accused infringer willfully infringed the patent or that the infringer intended to induce infringement of the patent.
35 U.S.C. § 298.
Despite the statutory language, the district court still allowed Provisur’s expert, HarnessIP’s John White, about Weber’s failure to consult third parties to evaluate the allegedly infringed patents. The patentee here was careful to explain that White’s testimony regarding the failure to consult an attorney was about “industry standards for intellectual property management” rather than advice of counsel. On appeal, the court rejected this argument, holding that the patentee “cannot circumvent § 298 by substituting advice from a ‘third party’ for advice of counsel.” This ruling provides important clarity on the scope of § 298, indicating that courts should interpret it broadly to exclude not just evidence about formal legal opinions, but also evidence about any third-party evaluations that serve a similar purpose as advice of counsel.
After excluding this improper testimony, the court concluded that the remaining evidence was insufficient to support willfulness, even though Weber had knowledge of the asserted patents. At oral arguments, Craig Martin, the patentee’s attorney had explained: “The evidence clearly showed that Weber knew about the patents, that many of their senior executives, including their CEO, had rated the patents, had looked at them, had rated them for, they said, for relevance.” Still, the court concluded that knowledge and later proof of infringement were not sufficient for willfulness. In particular, the court reiterated its holding from Bayer Healthcare LLC v. Baxalta Inc., 989 F.3d 964 (Fed. Cir. 2021), that “knowledge of the asserted patent and evidence of infringement is necessary, but not sufficient, for a finding of willfulness.” The court emphasized that to prove willfulness, a patentee must show that the accused infringer had a specific intent to infringe at the time of the challenged conduct.
This ruling highlights the challenges patentees face in proving willful infringement, especially in light of § 298’s restrictions on using evidence related to advice of counsel. It suggests that patentees must develop other forms of evidence to demonstrate an accused infringer’s state of mind and specific intent to infringe. The case also provides a roadmap for companies to review and consider competitor patents without creating documentary evidence sufficient for a willfulness finding.
On remand, the court will need to permit a new trial on damages.
= = =
In my mind, Provisur v. Weber raises one strategy employed by some patent attorneys that we might call “claim expansion” — to attempt to ensure that the claim covers more than simply the advance. Consider the case of an inventor who develops an innovative intermittent windshield wiper mechanism. A conventional claim drafting approach might focus narrowly on the wiper mechanism itself: “An intermittent windshield wiper comprising…” However, a claim expansion strategy could lead to a much broader claim: “A vehicle comprising: a body; four wheels coupled to the body; an engine coupled to at least two of the wheels; and an intermittent windshield wiper coupled to the body, the intermittent windshield wiper comprising…” This expanded claim now covers the entire vehicle, not just the wiper mechanism. Such a strategy could potentially make it easier to prove infringement (as any vehicle incorporating the patented wiper would infringe) and might provide leverage in licensing negotiations. However, courts will typically see through this strategy unless the specification includes some explanation of how the entire vehicle approach involves a special synergy. The Provisur decision suggests to me that this broader claim language would not necessarily entitle the patentee to use the entire value of the vehicle as a royalty base for damages calculations. Courts would still require evidence that the intermittent wiper feature drives consumer demand for the entire vehicle – a challenging hurdle to clear.
= = =
Craig Martin of Willkie Farr argued for the patentee and was joined on the brief by Michael Babbitt, Ren-How Harn, Sara Horton, and Henry Thomas. William Milliken of Sterne Kessler argued for the defendants-appellants and was joined on the brief by Donald Banowit, Kristina Kelly, Richard Crudo, and Daniel Yonan.