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Supplemental damages and ongoing royalty vacated for relying almost exclusively on expired patent

Supplemental damages and ongoing royalty vacated for relying almost exclusively on expired patent

EcoServices v. Certified Aviation is a nonprecedential case decided on October 8, 2020, on appeal from the Central District of California. Plaintiff EcoServices sued Defendant Aviation for infringement of two patents. One patent expired before trial. Following trial, the jury returned a verdict that Aviation infringed both patents, that the claims were not invalid, and awarding EcoServices $1,949,600 in damages. Post trial, the district court denied motions by Aviation challenging the patent eligibility, definiteness, and infringement of the patents. The court also denied EcoServices’ motion for a permanent injunction. Finally, the district court denied Aviation’s challenge to the jury award and its challenges to the court’s supplemental damages award of $175,000 and the ongoing royalty rate set by the court for the unexpired patent. The supplemental damages and ongoing royalty were based on the $400 per use rate found by the jury. Aviation appealed.

The Federal Circuit affirmed the judgment of infringement and of validity, and vacated the supplemental damages and ongoing royalty.

The district court abused its discretion in awarding the supplemental damages and an ongoing royalty at the $400 per use rate found by the jury.  “EcoServices’ expert specifically stated that he did not perform a royalty valuation for the [unexpired] patent alone because the [expired] patent would have been the driver of the negotiation.” “EcoServices’ expert valued the [expired] patent alone at $500 per [use], but also noted that the patent expired approximately 77% of the way through the damages period.” “Accordingly, he accounted for the loss in the value of the [expired] patent by reducing his royalty.” “The jury’s award of $1,949,600 is equivalent to a $400 per [use] rate for the number of [uses] that occurred in the total infringement period.” “Multiplying $500 per [uses] times the number of [uses] that occurred in the infringement period before the [expired] patent expired (3,845 [uses]) would have resulted in damages of $1,922,500.” (parenthesis in original). This “shows that EcoServices’ expert awarded little, if any, value to the [unexpired] patent.”

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“Supplemental damages compensate the patentee for periods of infringement not considered by the jury.” “One purpose of an ongoing royalty is to effectively serve as a replacement for whatever reasonable royalty a later jury would have calculated in a suit to compensate the patentee for future infringement.” “Here, the record does not support that a later jury would have calculated a royalty of $400 per [use] as a royalty award for infringement of the [unexpired] patent alone.” “The district court abused its discretion by awarding supplemental damages and an ongoing royalty based upon the jury’s per-[use] damages rate that included compensation for infringement of the now-expired … patent.” The Federal Circuit thus remanded the case “to the district court for a redetermination of the proper supplemental damages and ongoing royalty.”

Judge Dyk concurred in part and dissented in part, arguing that the claims of the unexpired patent are not patent eligible.