The United States Court of Appeals for the Federal Circuit recently made an important ruling regarding the territorial limits of damages in a patent infringement lawsuit in Carnegie Mellon University v. Marvell Technology Group, Ltd., etc. In this case Carnegie Mellon successfully obtained a jury verdict against Marvell for patent infringement of two patents related to hard-disk drives. The jury awarded Carnegie Mellon approximately $1.17 billion as a reasonable royalty based upon a rate of 50 cents for each “of semiconductor chips sold by Marvell for use in hard-disk drives,” among other damages.
The Federal Circuit affirmed the finding of liability by the District Court but reduced part of the damages awarded, finding that a reasonable royalty could “embrace[s] those Marvell-sold chips that, though made and delivered abroad, were imported into the United States.” The Federal Circuit excluded from the royalty calculation those “Marvell chips made and delivered abroad but never imported in the United States,” and left for further determination the question of whether such sales occurred in the United States.
Thus, it would seem that the Federal Circuit has no problem allowing a reasonable royalty to be calculated based upon sales of an infringing product into the United States, even where the infringing product has been manufactured abroad. What the Federal Circuit has left open is whether infringing products manufactured abroad and never imported in the United States can be part of the reasonable royalty calculation. The central determination is the location of the sale of infringing products. If the location of the sale is in the United States, it is clear that it can be considered. Potential issues that arise from this ruling are difficulties in determining where a sale actually occurred (is it the place of signing a contract or other commitment, where the negotiations primarily occurred, or the place of delivery?) and whether one sale can have multiple locations. The Federal Circuit did not definitively rule on the standards for determining the location of a sale of an infringing product.
This ruling is important because as with other aspects of intellectual property, patent law is territorial and the same principles apply to damages. The typical types of monetary relief available in a patent infringement lawsuit are the lost profits of the patent holder, the profits realized by the alleged infringer through use of the subject technology, and a reasonable royalty. Generally, the amount of a reasonable royalty is measured based upon a “hypothetical negotiation” between a “willing licensor” and “willing licensee” to determine the royalty that such parties would have agreed to prior to the occurrence of infringement. Thus, the Federal Circuit’s decision seems to impact the type of infringing acts that can be considered in a “hypothetical negotiation” to determine a reasonable royalty. Please contact our office if you have any questions regarding the information in this article.