Ongoing royalty same as jury verdict where circumstances had not changed

On April 25, 2012, the Western District of Pennsylvania in University of Pittsburgh v. Varian Medical Systems, Inc., Case 2:08-cv-01307-AJS, addressed ongoing royalties in this hotly contested case that we have previously featured on this blog. The court concluded that the ongoing royalty rate should be the same as the jury's rate because circumstances had not changed between the dates of the two hypothetical negotiations the date used at trial and the post-verdict date.

The court first observed that validity and infringement of the patent were the same for both hypothetical negotiations. The jury was told that, in the hypothetical negotiation, the patent was assumed valid and infringed. In the ongoing royalty negotiation, the patent had been adjudged valid and infringed.

The court distinguished the Federal Circuit's Amado and Paice opinions and Affinity Labs of Texas, LLC v. BMW North America, LLC, 783 F. Supp. 2d 891 (E.D. Tex. 2011), because in those cases the plaintiff had sought a permanent injunction, whereas here Pitt did not. The change in position in those cases was that a permanent injunction was not available for sales pre-judgment, but could have been for post-judgment. Here, Pitt never sought a permanent injunction and thus no such change in position existed.

The court rejected Pitt's argument to assign a higher ongoing royalty because the jury found Varian's infringement willful. The court distinguished Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., 2009 WL 920300, at *4- 9 (D. Ariz. March 31, 2009), aff'd, 670 F.3d 1171 (Fed. Cir. 2011), in which the district court increased the ongoing royalty in part due to willful infringement, and the Federal Circuit affirmed. The WDPA said it carefully read Bard and found the reason the district court awarded a higher royalty was the interaction between the willful infringement and other factors that were not present in the Pitt case. It cited as an example that the parties in Bard were direct competitors, and if the infringer stopped selling its product it would help the patentee while hurting the infringer. Pitt and Varian do not compete, and thus if Varian were forced to stop selling its product both parties would be hurt. The court concluded that enhancement of damages and attorneys' fees were the correct punitive measures for willful infringement not an increased ongoing royalty.

Finally, the court found that the jury's reasonable royalty will adequately compensate Pitt while leaving Varian with a substantial profit margin. The court opted not to undertake a detailed Georgia-Pacific analysis at this point because it had presided over the trial on damages and read all the damages expert reports. Based on this experience, the court concluded the jury's verdict adequately considered Georgia-Pacific and was just. The court thus awarded Pitt the same ongoing royalty rate as the jury had awarded.