AVAYA INC. AV-1022
`Avaya Inc. v. Network-1 Security Solutions, Inc.
`IPR2013-00071
`
`

`

`S9983
`
`September 27, 2008
`some support
`in the macro evidence.
`Data
`collected
`by
`PricewaterhouseCoopers and FTI Con—
`sulting indicate that the majority of
`the largest patent-damages awards and
`settlements of all time have been en-
`tered only since 2002. Also,
`the infla—
`tion adjusted value of awards entered
`since 2000 is more than 50 percent high—
`er than it was during the early 19905.
`And it also appears that jury awards
`tend to be about ten times higher than
`the average damages award entered by
`a judge, and that results vary mark—
`edly by jurisdiction. These facts sug-
`gest that the problems that sometimes
`lead to inflated damages awards are to
`some extent systemic.
`The task of reforming substantive
`damages standards presents a very dif—
`ficult
`legislative question. Damages
`calculation is an inherently fact-inten—
`sive inquiry and requires legal flexi-
`bility so that the best evidence of a
`patent‘s value may always be consid-
`ered. Any proposed changes to the law
`must be evaluated in light of the kalei—
`doscope of factual scenarios presented
`by the calculation of damages for dif—
`ferent types of patents.
`I have largely given up on the idea of
`developing a unified field theory of
`damages law that solves all problems
`at once. I also oppose proposals to re-
`quire a prior-art subtraction in every
`case. Most measures of a reasonable
`royalty, such as established royalties,
`costs of design—arounds. comparisons to
`noninfringing alternatives, or cost sav—
`ings produced by use of the patented
`invention. already effectively deduct
`the value of prior art out of their esti—
`mate of the patented invention‘s value.
`To mandate prior-art subtraction when
`using such measures would be to dou—
`ble count that deduction, effectively
`subtracting the prior art
`twice and
`undervaluing the invention.
`And for reasons mostly explained in
`my minority views to the committee
`report for S. 1145, S. Rep. 110—259 at
`pages 64455, I also disagree with the ar—
`gument that defendants should be al-
`lowed to revisit validity questions,
`such as a patent‘s novelty or non-
`obviousness, during the damages phase
`of
`litigation. To those comments I
`would simply add that.
`if Congress
`were to desire that patents be defined
`more specifically and narrowly, then it
`would need to provide express guidance
`as to how to do so. Simply using adjec-
`tival phrases such as “specific con-
`tribution" or “inventive features” will
`not suffice. These terms merely express
`a hope or objective. But
`legislation
`needs to be about means, not ends. par—
`ticularly if it is intended to achieve its
`results by altering the practices and
`outcomes of litigation.
`I should also
`add that although I have consulted
`with many neutral experts in the field
`of patent damages, and many of those
`experts described to me what they be-
`lieved to be serious problems with pat—
`ent damages litigation, none of those
`experts told me that insufficiently spe—
`cific claim construction is causing ex—
`
`CONGRESSIONAL RECORD — SENATE
`gation the same damages calculation
`cessive damages
`awards.
`If overly
`broad claim constructions were
`a
`methods that they routinely employ in
`arm‘s length licensing negotiations.
`major source of problems with damages
`The bill that I have introduced today
`litigation,
`I undoubtedly would have
`uses what
`I call an enhanced gate-
`come across at least one neutral expert
`keeper to address problems with dam-
`who expressed that view.
`Discussions that I have had with sev-
`ages awards. The bill strengthens judi-
`cial
`review of expert witness testi-
`eral proponents of S.
`1145 indicated
`mony, provides greater guidance to ju-
`that they understand the principal evil
`ries, and allows for sequencing of the
`of current damages litigation to be the
`damages
`and
`validity/infringement
`award of damages as a percentage or
`phases of a trial. The bill also codifies
`portion of the full price of the infring—
`the principle that all relevant factors
`ing product. It also appears that some
`can be considered when assessing rea-
`proponents of S. 1145 believe that a
`sonable royalty damages. while adopt—
`statutory instruction to define the in—
`ing guidelines and rules that favor the
`vention more narrowly and clearly
`use of an economic analysis of
`the
`would prevent parties from seeking
`value of an invention over rough or
`damages based on the entire value of
`subjective methodologies such as the
`the infringing product. The linkage be-
`rule of thumb,
`industry averages, or
`tween claim construction and the dam-
`the use of comparables. Allow me to
`ages base is not clear to me. Even a
`provide
`a
`subsection—by-subsection
`concededly limited invention could be
`summary of the bill’s revisions to sec—
`fairly valued by using the full prod-
`tion 284, the basic patent damages stat-
`uct‘s price as the damages base, so long
`ute.
`as the rate applied to that base was ap—
`Subsection (a) of the bill's proposed
`propriately small.
`section 284 copies and recodifies all of
`excessive
`and
`Many
`unjustified
`current section 284,
`including its au-
`awards certainly do use the full value
`thorization of treble damages and its
`of the infringing product as the dam-
`admonition that compensatory dam—
`ages base. Indeed, awards that are de—
`rived from the rule of thumb almost al-
`ages shall “in no event be less than a
`reasonable royalty for the use made of
`ways are based on the entire value of
`the invention.“
`the infringing product, as is the typical
`Subsection (b) codifies current Fed—
`industry averages award. Precluding or
`eral circuit precedent defining a rea-
`sharply limiting the use of net sales
`sonable royalty as the amount that the
`price as a damages base certainly
`infringer and patent owner would have
`would block the path to many of the
`agreed to in a hypothetical negotiation
`bad outcomes that are produced by the
`at
`the time infringement began.
`It
`use of these methodologies.
`tracks the language of the Rite-Hite
`The problem with a rule that bars
`case. 56 F.3d 1538 (Fed. Cir. 1995), and
`the use of net sales price as the dam—
`follow—on decisions. Some supporters of
`ages base when calculating a reason—
`S. 1145 are critical of the hypothetical
`able royalty is that in many industrial
`negotiation construct and believe that
`sectors, net sales price is routinely
`it leads to bad results. Not only is this
`used as the damages base in voluntary
`test established law, however, but it is
`licensing negotiations. It is favored as
`also inherent in the concept of a “rea—
`a damages base because it is an objec-
`sonable royalty." That standard re-
`tive and readily verifiable datum. The
`quires the trier of fact to determine
`parties to a licensing negotiation do
`what would have been—i.e., what the
`not even argue about its use. Instead,
`parties would have agreed to. As long
`they fight over the rate that will be ap-
`as the patent code requires a “reason-
`plied to that base. Even if the net sales
`able royalty,” courts and juries will
`price of the product is very large and
`the economic contribution made by the
`need to engage in a hypothetical in-
`quiry as to how the invention reason—
`patented invention is small, net sales
`ably would have been valued at the
`price can still serve as the denominator
`time of infringement. Indeed, it is not
`of an appropriate royalty if the numer-
`ator is made small.
`apparent by what other means the
`Thus in these industries, the initials,
`factfinder might approach the calcula-
`tion of a reasonable royalty. And in
`NSP, appear frequently and repeatedly
`in licensing contracts. A legal rule that
`any event, the source of occasional bad
`results in damages trials is not
`the
`precluded use of net sales price as the
`mental framework used for approach—
`damages base would effectively prevent
`ing the question of a reasonable roy-
`participants in these industries from
`alty, but rather the particular evidence
`making the same royalty calculations
`and methods used to value some inven-
`in litigation that they would make in
`tions. It would be a noteworthy omis—
`an arm’s length transaction. Such an
`sion to avoid mention of the hypo—
`outcome would be deeply disruptive to
`thetical negotiation concept in a bill
`the valuation of patents in these fields.
`Evidence and techniques whose use is
`that regulates damages analysis to the
`degree that this one does. This sub—
`endorsed by the market via their reg—
`section thus codifies the Federal cir-
`ular use in voluntary negotiations are
`cuit’s
`jurisprudence
`on
`the
`hypo—
`likely to offer the best means of val—
`thetical negotiation.
`uing a patent in litigation. After all,
`Subsection (0) simply makes clear
`what is an object in commerce worth,
`other than what the market is willing
`that, despite subsection (d),
`(e), and
`(f)’s codification and modification of
`to pay? We simply cannot enact a law
`several of the Georgia—Pacific factors,
`that bars patentees from using in liti—
`
`

`

`S9984
`the Georgia—Pacific fac-
`the rest of
`tors—as well as any other appropriate
`factor—may be used as appropriate to
`calculate the amount of a reasonable
`royalty.
`Subsection (d) is probably the most
`important subsection in the bill’s re—
`vised section 284. It bars the use of in-
`dustry averages,
`rule-of—thumb profit
`splits, and other standardized measures
`to value a patent except under par-
`ticular
`circumstances. Standardized
`measures are defined as those methods
`that, like rule of thumb and industry
`averages, do not gauge the particular
`benefits and advantages of the use of a
`patent.
`Instead,
`they are relatively
`crude,
`cookie-cutter measures
`that
`purport
`to value all patents—or at
`least all patents in a class—in the same
`way, without regard to a particular
`patent’s economic value. These back-
`of—the envelope methods are occasion—
`ally used in arm‘s—length, voluntary li—
`censing negotiations,
`as are things
`such as gut instinct and intuition. But
`they are
`rough methods
`that
`can
`produce wildly inaccurate results. Sub—
`section (d) disfavors their use.
`This subsection restricts the use of
`Georgia—Pacific factor 12, which largely
`describes the rule of thumb. Subsection
`(d)‘s general
`rule cites the rule of
`thumb and industry averages as impor-
`tant
`and
`illustrative
`examples
`of
`standardized measures. But it also ex—
`pressly applies to other methods that
`are “not based on the particular bene—
`fits and advantages” of an invention,
`to ensure that variations on these ex-
`amples and other methods that consist
`of the same evil also are brought with-
`in the scope of subsection (d)'s main
`rule.
`An example of a standardized meas-
`ure other than profit splits and indus—
`try averages that is also currently in
`use and that also falls within sub—
`section (d)’s scope is the so—called IBM
`l—percent—up-to—5
`formula. This
`for—
`mula apparently was used by IBM in
`the past to license its own portfolio of
`patents. Under this methodology, each
`patent receives 1 percent of the reve—
`nues on a product until a 5 percent
`ceiling is reached, at which point the
`whole portfolio of patents is made
`available to the licensee.
`I have heard more than one rep-
`resentative of a high—technology com—
`pany describe the use of this formula in
`litigation against his company. Appar—
`ently, there exists a stable of plaintiff—
`side damages expert witnesses who will
`testify that this formula is appropriate
`for and is customarily used to cal—
`culate the value of any patent in the
`computer or information—technologies
`sectors. These experts start at 1 per—
`cent and then adjust
`that number
`based on the other Georgia—Pacific fac—
`tors, supposedly to account for the par-
`ticular aspects of the patent in suit,
`though these adjustments almost
`al—
`ways seem to push the number higher.
`Obviously,
`1 percent of revenues or
`even profits is a grossly inflated value
`for many high—technology patents, It is
`
`CONGRESSIONAL RECORD — SENATE
`September 27, 2008
`found the bill ambiguous on this point,
`not uncommon for high—technology
`and in any event the lack of an excep—
`products to be covered by thousands of
`tion would have forced parties to liti-
`different patents, which are of greatly
`gate the question whether an estab-
`differing value. Not every one of those
`lished royalty was,
`in fact, based on
`patents can be worth 1 percent of reve—
`the benefits and advantages of the use
`nues. Some patents inevitably will be
`for features that are trivial, that are
`of the patent. Since established royal—
`ties are widely considered to be the
`irrelevant to consumers, or that could
`gold standard for valuing a patent, we
`be reproduced by unpatented, off—the-
`should avoid making it harder to use
`shelf noninfringing substitutes. One
`this method. It is thus expressly placed
`percent of the sales revenue from, for
`outside the scope of subsection (d)’s re-
`example, a laptop computer is an enor—
`strictions by paragraph (2).
`mous sum of money. Many patents are
`Paragraph (3) of subsection (d) allows
`worth nothing near
`that,
`and any
`industry averages to continue to be
`methodology that starts at that num-
`used to confirm that results produced
`ber is likely to produce a grossly in—
`by
`other,
`independently
`allowable
`flated result in a large number of cases.
`methods fall within a reasonable range.
`It bears also mentioning some of
`The paragraph speaks of “independ-
`those
`common methodologies
`that
`ently" allowable methods in order to
`clearly are not standardized measures.
`make clear that an industry average
`In addition to established royalties,
`cannot be used to confirm an estimate
`which are afforded an express exemp-
`produced solely by reference to a
`tion from this subsection by paragraph
`“comparable” patent. Subsection (e)
`(2),
`there are the methods of calcu-
`requires that comparables only be used
`lating the costs of designing around a
`in conjunction with or to confirm other
`patent. drawing comparisons to the ex—
`methods,
`and thus under
`this bill
`perience of noninfringing alternatives,
`comparables are not a method whose
`or calculating the costs savings pro—
`use is allowed “independently” of other
`duced by use of the invention. All of
`methods.
`these factors gauge the benefits and ad-
`A brief explanation is in order as to
`vantages of the use of the invention
`why this bill regards industry averages
`and therefore are outside the scope of
`as a potentially unreliable metric and
`subsection (d).
`restricts their use. An industry average
`Paragraph (1) of subsection ((1) allows
`often will reflect a broad range of li-
`parties to use a standardized measure,
`censing rates within a technological
`such as a rule—of—thumb profit split, if
`sector. Even a licensed patent whose
`that party can show that the patented
`value is included in the calculation of
`invention is the primary reason why
`such a range may fall at a far end of
`consumers buy the infringing product.
`that
`range, producing highly inac-
`If the patented invention is the pri—
`curate results if that average is used as
`mary reason why people buy the prod-
`a starting point
`for calculating the
`uct, then the patent effectively is the
`value of that patent. Moreover, many
`reason for the commercial success of
`existing patents, though valid and in—
`the product, and its owner is entitled
`fringed by a product, disclose trivial
`to a substantial share of the profits,
`inventions that add little to the value
`minus business risk, marketing, and
`of the product. But the types of patents
`other contributions made by the in—
`that typically are licensed—and that
`fringer.
`therefore would be a source of avail-
`Some have advocated a lower stand-
`able data for calculating an industry
`ard than "primary reason" for allowing
`average—are the ones that are substan—
`use of profit splits and other standard—
`tial and valuable. Trivial patents don't
`ized measures—for example, using a
`"substantial basis” standard. I rejected
`get licensed, and their value does not
`the use of a lower standard because a
`enter
`into industry average calcula—
`tions. Thus particularly in the case of
`profit split should basically award to
`a minor patent that has never been and
`the patent owner all of the profits on
`likely never would be licensed, an in-
`the product minus those attributable
`to business risk. Thus the test for al—
`dustry average would provide an in-
`flated estimate of the patent’s value.
`lowing such profit splits must be one
`This is because the industry average is
`that only one patent will meet per
`not
`the average licensing rate of all
`product, since the bulk of the profits
`patents in a field, but merely the aver—
`can only be awarded once. If the test
`were “substantial basis," for example,
`age of those that have been licensed
`and for which data is publicly avail-
`multiple patents could meet the stand-
`able.
`ard and multiple patent owners could
`Paragraph (4) of subsection (d) cre-
`demand all of the profits minus busi—
`ates a safety valve that allows parties
`ness risk on the product.
`to use standardized measures if no
`Paragraph (2) of subsection ((1) makes
`other method is reasonably available
`established royalties an express excep—
`to calculate a reasonable royalty, and
`tion to the bar on standardized meas—
`the standardized method is otherwise
`ures. In earlier drafts, I did not include
`shown to be appropriate for the patent.
`this exception in the bill because I
`Over the course of drafting this bill, I
`thought it obvious that an established
`have consulted with a number of ex-
`royalty is based on the benefits and ad-
`perts with broad experience in patent
`vantages of the use of the invention
`and is thus outside the scope of the
`damages calculation. Only a few be-
`lieved that they had ever seen a case
`subsection ((1) rule. Some parties who
`where use of a standardized measure
`reviewed those earlier drafts, however,
`
`

`

`S9985
`
`September 27, 2008
`was necessary—that is, where a more
`precise economic analysis was not fea—
`sible. I thus anticipate that this safety
`valve may almost never need to be
`used, but I nevertheless include it in
`the bill, because it is impossible to say
`with certainty that no situation will
`ever arise in the future where parties
`will be unable to calculate a reasonable
`royalty without use of
`the rule of
`thumb or other standardized measures.
`Suffice to say that if one party to a
`suit presents appropriate evidence of a
`patent’s value and that evidence falls
`outside the scope of subsection ((1) or
`within one of
`the other exceptions,
`then that method is "reasonably avail-
`able" and paragraph (4) could not be in—
`voked.
`sub—
`the need for
`A word about
`stantive standards: some critics of S.
`1145 have made the argument
`to me
`that any problems with damages litiga—
`tion can be cured through procedural
`reforms,
`and that changes
`to sub—
`stantive legal standards such as those
`in subsections (d) through (f) are un—
`necessary. These parties
`also have
`made the related, though different ar-
`gument that to the extent that liti—
`gants are using unreliable evidence or
`methodologies, this problem should be
`addressed through cross examination
`and advocacy.
`Though I share these critics’ dis-
`pleasure with S. 1145, I do not think
`that problems such as the overuse of
`rule of thumb and industry averages
`will
`be
`completely solved through
`purely procedural reforms. The most
`likely mechanism for excluding these
`methodologies would be rule 702. But
`the use of some of these methods for
`valuing patents is endorsed by multiple
`experts. These methods, while ulti—
`mately unsound,
`represent a signifi—
`cant minority view that is backed by
`some published commentary,
`albeit
`sometimes only commentary in jour—
`nals that are exclusively written by,
`subscribed to, and read by plaintiff—side
`damages expert witnesses. In such cir—
`cumstances, it is no sure thing that a
`party will be able to exclude under
`Daubert
`the testimony of an expert
`employing these methodologies. These
`metrics
`are
`sufficiently entrenched
`that the only way to ensure that the
`courts will disallow them when their
`use is not appropriate is for Congress
`to tell the courts to disallow them.
`As to the second point, it is true that
`it is the lawyer’s duty to identify the
`flaws in the other side‘s arguments and
`to debunk unsound theories. But the
`reality is that because of the limited
`expertise and experience of many ju—
`rors and the limited time allowed to
`argue a case at trial, often the trier of
`fact will not divine the truth of the
`matter. And some unsound damages
`methodologies are particularly likely
`to be appealing to those untutored in
`the field. An industry average analysis,
`for example, employs the one statis-
`tical concept that is understood by vir—
`tually everyone, and this method’s use
`may amount to no more than a simple
`
`CONGRESSIONAL RECORD — SENATE
`too broad. Parties might define “indus—
`try” so expansively that every patent
`in the universe would fall into one of
`only two or three “industries."
`Paragraph (2) of subsection (e) sets
`out guideposts for determining whether
`a patent is economically comparable to
`another patent. It suggests requiring a
`showing that the supposed comparable
`is of similar significance to the li-
`censed product as the patent in suit is
`to the infringing product, and that the
`licensed and infringing products have a
`similar profit margin. Obviously, a pat—
`ent that makes only a trivial contribu-
`tion to a product cannot accurately be
`valued by reference to a comparable
`that makes a critical and valuable con-
`tribution to its licensed product, or
`vice versa. And similarity in the profit—
`ability of the licensed and infringing
`products will also generally be impor—
`tant to establishing the economic com—
`parability of two patents. As an eco—
`nomic reality, when the profits on a
`product are high,
`the manufacturer
`will be more generous with the royal-
`ties that he pays for the patented in-
`ventions that are used by the product.
`This economic reality is undergirded
`by the fact that it will typically be the
`patented inventions used by a product
`that make that product unique in the
`marketplace and allow it to earn high—
`er profits. Even if two patents are the
`principal patent on products in the
`same field, if one patent’s product has
`a 2—percent profit margin and the oth—
`er's has a 20-percent profit margin.
`that first patent evidently is doing less
`to distinguish that product in its mar-
`ket and to generate consumer
`de—
`mand—and thus has a lower economic
`value.
`com—
`of
`analysis
`thorough
`A
`parability, of course, likely will depend
`in a given case on many factors beyond
`those listed here. Subparagraphs (A)
`and (B) are simply guideposts that de—
`scribe two factors that are likely to be
`relevant
`to comparability. The bill
`only provides that these two factors
`may be considered. It does not preclude
`consideration of other factors, nor does
`it require that
`these two factors be
`considered in every case. A party as-
`serting the propriety of a comparable
`may be able to show that one or even
`both of these factors are not appro—
`priate to establishing economic com-
`parability in a given case.
`Subsection (f) bars parties from argu—
`ing that damages should be based on
`the wealth or profitability of the de-
`fendant as of the time of trial. Some
`lawyers have been known, after mak—
`ing their case for an inflated royalty
`calculation,
`to emphasize how insig—
`nificant even that inflated request is in
`light of the total revenues of the de—
`fendant infringer. Such arguments do
`not assist the jury in gauging a reason-
`able royalty. Rather, they serve to re—
`duce the jury’s sense of responsibility
`to limit a reasonable royalty to the ac-
`tual value of the use made of the inven—
`tion. This subsection does not bar all
`
`back-of—the—envelope calculation that
`requires only one expert
`to give you
`the industry average licensing rate and
`another to calculate the gross revenues
`on the product. When a complex eco—
`nomic analysis that
`focuses on non—
`infringing alternatives to the patented
`invention or
`the costs of a design—
`around is forced to compete for the
`jury’s favor with a simple average—rate—
`times—sales calculation, many jurors
`may find the simpler and readily un—
`derstandable method more intuitively
`appealing, even if it is less accurate.
`And of course, when two different and
`even slightly complex damages calcula—
`tions are presented to a jury, there al—
`ways exists a risk that the jury will re—
`solve the dispute by splitting the dif—
`ference between the two methods. In a
`high—value case where the patent owner
`uses an unsound method that produces
`a wildly inflated number, the risk that
`the jury will pick the wrong method or
`even split the difference may easily be
`unacceptable from a business perspec—
`tive.
`In the end, it is the premise of the
`rules of evidence that some types of
`evidence are so unsound, so prejudicial,
`or so likely to produce an unjust result
`that we do not require the other side‘s
`lawyer to debunk this evidence, but
`rather we require the judge to bar it
`from the courtroom altogether. If we
`find that particular methodologies rou—
`tinely produce inaccurate and unjust
`results,
`it
`is appropriate that we
`amend the law to directly restrict the
`use of those methodologies.
`Subsection (6) restricts and regulates
`the use of licenses paid for supposedly
`comparable patents as a means of cal-
`culating the value of the patent in suit.
`The use of comparables is authorized
`by Georgia-Pacific factor two and can
`generate probative evidence of a pat—
`ent’s value. Nevertheless, such use is
`regulated and restricted by this sub—
`section. Comparables are a valuation
`method that is often abused, both to
`overvalue and to undervalue patents.
`When an infringer is sued for infringing
`an important patent, he often will cite
`as evidence of a reasonable royalty the
`license paid for a patent that is in the
`same field but that is much less valu—
`able than the patent in suit. Similarly,
`a plaintiff patent owner asserting a
`trivial patent may cite
`as
`“com—
`parable” other patents in the same
`field that are much more valuable than
`the plaintiff‘s patent. The fact that an—
`other patent is licensed in the same in—
`dustry should not alone be enough to
`allow its use as a comparable in litiga—
`tion.
`Comparability is a subjective test.
`By definition, every patent is unique
`and no two patents are truly com—
`parable. Subsection (e)
`thus requires
`that comparables be used only in con-
`junction with or to confirm the results
`of other evidence, and that they only
`be drawn from the same or an analo—
`gous technological
`field.
`I chose the
`latter term rather than “same indus—
`try” because the term “industry” is
`
`

`

`CONGRESSIONAL RECORD — SENATE
`S9986
`September 27, 2008
`that exist only in litigation expert wit-
`condi—
`the financial
`consideration of
`ness‘
`testimony and are never em-
`tion of the infringer. It may be appro—
`ployed in actual licensing negotiations.
`priate to consider
`the infringer’s fi—
`Use of this reliability indicator should
`nances at the time of infringement es-
`inject more honesty into the hypo-
`pecially if there is some evidence that
`such information is considered when li—
`thetical negotiation. It should force
`parties to use methodologies that actu-
`censing patents in the relevant indus—
`ally would have been used had the in-
`try. But in no case should a court allow
`such information to be presented when
`fringer and claimant negotiated a li—
`cense, rather than metrics that are
`the evident purpose of doing is to tell
`only ever employed in an expert’s
`the jury that the defendant has deep
`imaginary parallel universe.
`pockets and will not be burdened by an
`inflated award.
`The second new reliability indicator,
`whether the expert has accounted for
`Subsection (g) gives either party a
`readily available alternative theories,
`presumptive right to demand that va-
`should exclude the expert who ignores
`lidity and infringement be decided be—
`precise and objective metrics of value
`fore the jury hears arguments about
`damages. Currently,
`some plaintiffs
`in favor of subjective and manipulable
`methodologies
`that
`allow him to
`will
`force a premature debate over
`produce the result
`that happens to
`damages in order to color the jury's
`most favor his client. If there is clear
`view of validity and infringement. For
`evidence, for example, of the market
`example,
`in some cases, the same de—
`fense witness who testifies as to valid-
`price of a noninfringing alternative to
`ity and infringement will also know
`the infringing product, of the costs of
`facts relevant
`to the patent‘s value.
`noninfringing substitutes for
`the in—
`vention or the costs of a design—around,
`This may allow the plaintiff’s lawyer
`or of the cost savings produced by use
`to question that witness about dam—
`of
`the invention, an expert witness
`ages, forcing the defendant to begin ar—
`should not be allowed to ignore that
`guing about the amount of his liability
`evidence. He must consider that evi—
`before the jury has even heard all the
`dence or at least provide a persuasive
`arguments as to whether the patent is
`account as to why it should not be con-
`valid and infringed. A defendant who is
`sidered. One common sign of a bad or
`already arguing about what a patent is
`worth will tend to look as if he has al—
`biased expert witness is his disregard of
`ready conceded that he owes
`some—
`readily available alternative theories
`or techniques. Paragraph (6) will help
`thing, and that the dispute is simply
`over the amount.
`to ensure that Federal courts exercise
`This tension also exists even when all
`their gatekeeper role and bar such wit—
`validity and infringement arguments
`nesses from misleading the jury.
`Finally, subsection (c) of proposed
`are presented before damages are ar—
`section 299A requires district courts
`gued. Current law routinely allows the
`defendant to be forced to argue in the
`and circuit courts to explain their
`alternative to be made to argue in one
`Daubert determinations, which should
`breath that he is not liable and in the
`facilitate appeal of those decisions.
`Section 5 of the bill authorizes the
`next that if he is liable, then this is the
`creation of post grant
`review pro-
`amount for which he is liable. A pre—
`ceedings for challenging the validity of
`sumptive right to have one issue re-
`solved before the other is addressed
`patents. It allows both first— and sec—
`ond-window review of a patent, with
`would cure this tension. This
`sub—
`procedural restrictions that will limit
`section allows only sequencing of the
`the time and expense of
`these pro-
`trial, not full bifurcation. It does not
`ceedings and protect patent owners.
`require the use of a second jury, and al-
`The bill uses a procedural model that is
`lows all pretrial activity,
`including
`favored by PTO and is calculated to
`that related to damages,
`to be com-
`allow quick resolution of petitions. Im-
`pleted before the validity and infringe—
`portantly. the bill also imposes proce—
`ment case is presented and decided.
`dural limits on when a second-window
`The jury would decide validity and in-
`proceeding may be sought after civil
`fringement and then proceed imme-
`litigation has
`commenced.
`and re-
`diately to hear the damages case,
`if
`still needed.
`stricts duplicative or second and suc-
`Subsection (h) requires an expert to
`cessive proceedings, preventing infring—
`ers from using post grant review as a
`provide to the opposing party his writ—
`litigation or delaying tactic.
`ten testimony and the data and other
`information on which his conclusions
`Section 5(a) of the bill repeals the
`and methods are based, and to also pro—
`procedures for inter partes reexam ef—
`fective 1 year after the date of enact—
`vide the written testimony to the
`ment of the bill, while allowing re—
`court. This
`subsection supplements
`quests for reexam that are filed before
`current
`law, codifying and enforcing
`that effective date to continue to be
`the better interpretation of what
`is
`considered by the office. Director—initi—
`currently required by the rules of pro-
`ated reexam is also repealed, out of
`cedure. It is necessary because those
`current rules are sometimes not fully
`concern that
`in the future political
`pressure may be brought
`to bear on
`enforced, and experts sometimes are al-
`PTO to attack patents that are a nui—
`lowed to testify,
`for example, as to
`sance to politically important busi—
`what is customary in an industry with—
`nesses.
`out providing the facts and figures or
`The bill’s proposed section 321 au—
`evidence of actual events that are the
`thorizes two types of post grant review
`basis for the expert’s view that some-
`
`thing is customary. Rule 702 exists to
`ensure that expert witnesses are not
`simply allowed to argue from author—
`ity. It allows opposing counsel to chal—
`lenge the expert’s methods as unsound,
`but that right becomes illusory if the
`expert
`is allowed to testify without
`ever disclosing an objective foundation
`for his conclusions. Requiring the ex-
`pert’s written testimony to also be pro-
`vided to the judge should allow the
`ju