HYPOTHOSIZE A / REASONABLE ROYALTY / BUT DON'T SPECULATE

Resqnet.Com, Inc., v. Lansa, Inc., [2008-1365,-1366, 2009-1030] (February 5, 2010) [NEWMAN, LOURIE, and RADER] The Federal Circuit affirmed the finding that U.S. Patent No. 6,295,075 is valid and infringed, that U.S. Patent No. 5,831,608 is not infringed, reversed the imposition of sanctions, and vacated the damage award and remanded for recalculation.
DISCUSSION: Regarding the reasonable royalty damages, the Federal Circuit observed “a reasonable royalty analysis requires a court to hypothesize, not to speculate”. The Federal Circuit said that “the trial court must carefully tie proof of damages to the claimed invention’s footprint in the market place”. The licenses used by the plaintiff’s damages expert were silent about the patent in suit, and included rights beyond a license to the patent in suit. The Federal Circuit instructed that on remand the trial court should not rely on unrelated licenses to increase the reasonable royalty rate above rates more clearly linked to the economic demand for the claimed technology. The Federal Circuit reversed the award of sanctions as an abuse of discretion and untimely.