This week, the US Court of Appeals for the Federal Circuit issued a precedential decision addressing two important patent damages issues: the entire market value rule and the proper application of the Nash Bargaining Solution in VirnetX, Inc. v. Cisco Systems, Inc., No. 13-1489 (Fed. Cir. Sept. 16, 2014). In vacating a $386 million damages award against defendant Apple Inc., the Federal Circuit first resolved conflicting treatment of the application of the entire market value rule (EMV) by the district courts in cases where the smallest saleable unit is the entire accused device. Holding that the district court’s jury instruction was improper, the Federal Circuit clarified that, unless the EMV rule is satisfied, damages must always be apportioned between patented and unpatented features—even in cases where the smallest salable unit is the accused device itself. Second, the Federal Circuit held that the patentee’s damages expert had improperly relied on the Nash Bargaining Solution because he failed to sufficiently tie the controversial theory (positing a 50 percent/50 percent profit split between the patentee and accused infringer) to the specific facts of the case.
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