On June 11, 2020, Jim McGovern, a Senior Director of The BERO Group, along with David Long of Essential Patent LLC, gave a presentation to the IPO Damages Committee. Jim and David discussed damages issues addressed in MLC Intellectual Property, LLC v. Micron Technology, Inc., No. 3:14-cv-03657 (N.D. Cal.), No. 2020-1413 (Fed. Cir.).
In 2014, MLC Intellectual Property, LLC (“MLC”) sued Micron Technology Inc. (“Micron”) for patent infringement of U.S. Patent No. 5,764,571 (the “ ‘571 patent”). The ‘571 patent generally related to non-volatile memory devices. MLC alleged that certain Micron flash memory products, that could be used in consumer products including tablet computers, personal music players, smart phones and other wireless devices, infringed the ‘571 patent.
MLC claimed a reasonable royalty of 0.375% for the ‘571 patent, which MLC’s damages expert derived from two MLC license agreements and extrinsic evidence as part of his Georgia-Pacific analysis. MLC’s damages expert concluded the two MCL license agreements supported a 0.25% starting point royalty rate even though: 1) neither license contained a specific royalty rate; 2) the license fees for both licenses included multiple “lump-sum” payments made over a few years; and 3) both licenses were for MLC’s entire portfolio of 30 U.S. patents (including the ‘571 patent) and 11 foreign patents. MLC’s damages expert derived the 0.25% starting point royalty rate from a “most favored customer” provision that was included in one, but not both, of the MLC license agreements.
Before trial, Micron moved to exclude the testimony of MLC’s damages expert for various reasons. The Court agreed with Micron, and excluded MLC’s damages expert from testifying. MLC subsequently appealed the exclusion of its expert to the Federal Circuit, which granted the appeal but has not yet ruled on it.
In their presentation, Jim and David discussed the exclusion of MLC’s damages expert and the following reasons cited by the Court:
1. His reliance on the two MLC license agreements for the patent at issue did not “reflect” a 0.25% royalty rate for each license because such testimony would be contrary to the plain language of the licenses and because the extrinsic evidence he relied upon was inadmissible parol evidence.
2. The evidence, including the disputed extrinsic evidence, did notsupport a 0.25% royalty rate for the two licenses MLC’s expert reliedon.
3. The disputed extrinsic evidence was never disclosed by MLC so itcould not be relied upon.
4. The plaintiff’s damages expert failed to properly apportion Micron’srevenue.
Since the Federal Circuit has taken on this appeal, patent litigators and damages experts will likely be watching to see if the Federal Circuit provides any guidance on these issues.