CDIL rejects defendants' EMVR and SSPPU arguments and allows royalty base on entire products

The Central District of Illinois, in Philippi-Hagenbuch, Inc. v. Western Tech. Services Int'l, Inc., Case No. 12-1099 (Chief Judge James E. Shadid) (April 8, 2015), denied defendants' motion to exclude opinions of plaintiffs' damages expert, Michael E. Tate. Tate had offered opinions on lost profits and reasonable royalty. The reasonable royalty issue whether Tate's opinion that the royalty base should be the entire products at issue, which were truck bodies and water tanks, or should be apportioned is addressed here.

The case involved two sets of patents: water tank patents and truck body patents. The plaintiffs contended that their patented design process created a water tank or a truck body and that no smaller, salable unit was separable or could be apportioned from the larger products for purposes of damages computation. To this end, the court noted that the truck body patents claim a process for designing a custom truck body for specific environments by use of three-dimensional modeling of the loads to be hauled. Some of the evidence indicated that the defendants' customers purchased the custom truck bodies over generic bodies because the custom bodies were designed to meet the customers' specifications, to carry a particular load, and to "max out" the truck's performance, making the premium cost for the patented truck bodies worthwhile to the customers.

The defendants countered, arguing that the plaintiffs and their expert, Tate, had failed to prove that the patented features drove demand for the truck bodies or water tanks. Defendants cited the fact that Tate had failed to analyze demand for the truck bodies, for example, using the patented process, and there was thus no basis to use the entire value of the truck body as the royalty base.

The court sided with the plaintiffs and denied the motion to exclude Tate's reasonable royalty theory. The opinion is brief, but the court cited two factors to support its ruling: (1) that "the patented inventions ... are the entire water tank and the process for creating an entire truck body, whereas the relief sought by Defendants applies only where the patented invention/process is part of a larger, multi-component product that combines the patented invention/process along with other non-patented inventions/processes"; and (2) that the plaintiffs had licensed the entire water tank and the process for creating an entire truck body. Slip op. at 7. The plaintiffs also contended that they did elicit evidence to prove that the patented inventions drove demand, citing one of the defendant's own advertising that emphasized the benefits of the patented features. Id.

This case may be worth comparing to the University of Pittsburgh v. Varian case that was the subject of an earlier post and to the post from November 5, 2014, titled "Damages base - is the name of the game the claim?" In this case, and the two earlier posts, the claims at issue were deemed to cover the product(s) that the plaintiff contended should count as the base, and thus the plaintiffs were allowed to present such a base to the jury.