A split panel of the U.S. Court of Appeals for the Federal Circuit has overturned an $8.4 million patent verdict for a lawyer’s patent-holding company, citing a lack of evidence to support the award.
The majority in WhitServe v. Computer Packages, 2011-1206-1261, complained both that the jury hadn’t explained how it arrived at the amount and that the damages expert gave conclusory and speculative testimony. In an opinion released on Aug. 20, the panel ordered District of Connecticut Judge Alfred Covello to reassess the damages and decide a range of post-trial motions concerning WhitServe’s bid for a permanent injunction, attorney fees and additional relief.
Judge Kathleen O’Malley wrote the opinion, joined by Judge Sharon Prost.
“In this case, we believe that, had the trial court scrutinized the damages evidence properly, it would have concluded that the evidence did not support the award. Because the jury’s verdict lacked evidentiary support, we conclude that the trial court abused its discretion when it denied the motion for a new trial,” O’Malley wrote.
The Federal Circuit over the past few years has issued a number of opinions shifting its jurisprudence governing calculation of patent damages. In ResQNet.com v. Lansa, 594 F.3d 860, for example, the court said in February 2010 that a trial court should not rely on unrelated licenses in calculating reasonable royalty rates. The following January, in Uniloc USA v. Microsoft, 632 F.3d 1292, it rejected the so-called 25 percent “rule of thumb” as a starting point for determining the reasonable royalty rate a licensee would offer during a hypothetical negotiation with a patent owner.
The WhitServe ruling rejected a damages calculation ostensibly based on factors set in a 1970 Southern District of New York case, Georgia-Pacific v. U.S. Plywood, 318 F. Supp. 1116. The Federal Circuit has long relied on the Georgia-Pacific factors, but in this case rejected an expert’s unexplained conclusions about how each factor applies to case.
The case at hand concerned Wesley Whitmyer Jr., an inventor, patent attorney and partner at St. Onge Steward Johnston & Reens of Stamford, Conn., who is WhitServe’s sole principal and employee, according to court records. In 2006, WhitServe sued Computer Packages, which sells intellectual property and patent audit and management systems.
He claimed Computer Packages’ software for sending reminders of patent or trademark deadlines infringed four of his patents related to automating the delivery of professional services or technology for backing up client data.
O’Malley noted that the verdict form did not indicate how jurors calculated the award, whether it represented a lump sum or running royalty, or whether it included damages plus a reasonable royalty.
Both parties based their damages theories primarily on the 15 Georgia-Pacific factors. Most of those factors are “meant to provide a reasoned economic framework” for a royalty the parties might have established in hypothetical negotiations, O’Malley wrote.
WhitServe’s expert testified that almost all of the factors supported a higher royalty, but “did not explain how much each factor affected the rate,” she said.
“We do not require that witnesses use any or all of the Georgia-Pacific factors when testifying about damages in patent cases,” she continued. “If they choose to use them, however, reciting each factor and making a conclusory remark about its impact on the damages calculation before moving on does no more than tell the jury what factors a damages analysis could take into consideration.”
WhitServe’s expert’s suggested royalty rate “does not support the verdict because his testimony is conclusory, speculative and, frankly, out of line with economic reality,” she said.
O’Malley rejected WhitServe’s argument that the damages award had been based on a $3 million reasonable royalty plus “other damages.”
“WhitServe has not demonstrated lost sales, diminished royalty rates, or other compensable damages. Therefore, any additional damages would be speculative,” O’Malley wrote.
In dissent, Judge Haldane Robert Mayer wrote that he saw no infringement of the WhitServe patents because they are “directed to the abstract idea that it is useful to provide people with reminders of approaching due dates and deadlines” and therefore invalid.
“Because the WhitServe patents simply describe a basic and widely-understood concept—that it is useful to provide people with reminders of important due dates and deadlines—and then apply that concept using conventional computer technology and the Internet, they fail to meet [the patent statute's] section 101′s subject matter eligibility requirements,” Mayer wrote.
Gene Winter, a St. Onge partner who argued for WhitServe before the Federal Circuit, said his client was “pleased with the ruling, because it holds all the patents valid and infringed, and happy that the court sent the case back to the district judge for consideration of an injunction.” He expected the damages amount to “grow substantially” because the original number had been calculated several years ago.
Computer Packages’ lawyers at Fitzpatrick, Cella, Harper & Scinto in New York did not respond to a request for comment. John Krause, of counsel at the firm, argued before the Federal Circuit.
Computer Packages said in a formal statement on its website: “This decision confirms CPi’s long-held belief that WhitServe has overvalued the patents in suit and that the jury’s award was wholly unsupported by the evidence. CPi intends to defend itself vigorously until all remaining issues are resolved.”
@|Sheri Qualters, a reporter at The National Law Journal, an affiliate, can be contacted at email@example.com.