Vectura v. GlaxoSmithKline was decided on November 19, 2020 on appeal from the District of Delaware. At trial, Plaintiff Vectura prevailed on the issues of validity, infringement, and willful infringement, and the “jury awarded Vectura a royalty of 3% on a royalty base of $2.99 billion in sales for the accused [product], which resulted in an award of $89,712,069.” Following trial, the district court denied Defendant GSK’s motion for JMOL of noninfringement and for a new trial on infringement and damages. GSK appealed.
The Federal Circuit affirmed the judgment on infringement and damages.
The district court did not abuse its discretion in denying GSK’s motion for new trial on damages. At trial, Vectura presented a damages theory based on a 2010 license between the parties being a comparable license. “In 2010, Vectura granted GSK a non-exclusive, worldwide license to more than 400 patents.” “The centerpiece of the 2010 license was a now-expired Vectura patent.” “The 2010 license featured a tiered royalty structure in which GSK would pay a royalty of 3% on its first 300 million British pounds in sales, 2% on sales between 300 million and 500 million pounds, and no additional royalties on sales above 500 million pounds. The 2010 license expired on July 25, 2016.”
Vectura’s damages expert adopted the 2010 license’s first-tier royalty rate (3%) as a flat royalty rate and the 2010 license’s royalty base (total sales of the licensed products) as her royalty base. The expert “declined to adopt the royalty cap from the 2010 license, citing changed circumstances by the time of the hypothetical negotiation, which would have occurred in July 2016 when the 2010 license expired.”
GSK attacked the use of the total sales of the accused products as the royalty base. “Ordinarily, an entire-market-value royalty base is appropriate only when the patented feature creates the basis for customer demand or substantially creates the value of the component parts, and apportionment is required when an entire-market-value royalty base is inappropriate.” However, “when a sufficiently comparable license is used as the basis for determining the appropriate royalty, further apportionment may not necessarily be required.” “That is because a damages theory that is dependent on a comparable license (or a comparable negotiation) may in some cases have built-in apportionment.” (parenthesis in original).
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The evidence here “clearly supports Vectura’s contention that the 2010 license was sufficiently comparable for use in its damages calculation.” “[A] party relying on a sufficiently comparable license can adopt the comparable license’s royalty rate and royalty base without further apportionment and without proving that the infringing feature was responsible for the entire market value of the accused product.” This is what Vectura’s damages expert did. To support its damages theory, “Vectura offered evidence that the circumstances of the 2010 license and the hypothetical negotiation in 2016 were highly comparable and that principles of apportionment were effectively baked into the 2010 license.”
Vectura introduced sufficient evidence of comparability. Vectura’s expert testified that the 2010 license and the hypothetical negotiation cover “roughly very similar technologies.” “Similarity of scope is confirmed by the fact that the mixtures Vectura points to as infringing the [asserted] patent would have been the very same mixtures covered by the 2010 license.” Thus, “the fact that other patents were included in the 2010 license does not fatally undermine [Vectura’s] theory of comparability.” Regarding the royalty cap in the 2010 license, Vectura’s expert “testified that the assumption of validity and infringement in a hypothetical negotiation, among other changed circumstances, supported not including a cap on her proposed royalty.” The jury was entitled to credit this testimony.
Lastly, GSK argued “that the district court should have ordered a new trial on damages because Vectura made improper references during the trial to GSK’s $3.8 billion in U.S. sales for the accused [product].” Although it was improper for Vectura to make “pennies on the dollar” arguments or to make “statements emphasizing GSK’s sales beyond what’s strictly required by the law in proving damages,” GSK’s total sales were also necessary to Vectura’s damages case. “[I]t was necessary for Vectura to reference GSK’s total sales, either directly or indirectly, considering that Vectura’s damages theory asked the jury to multiply the three-percent royalty rate by the royalty base, i.e., GSK’s total sales.” “It was also proper for [Vectura’s expert] to refer to the sales figures when analyzing the comparability of the 2010 license and the 2016 hypothetical negotiation—an analysis critical to any built-in apportionment theory.” The district court did not abuse its discretion in finding that the improper “pennies on the dollar” remarks were not so prejudicial as to require a new trial.