The Federal Circuit’s recent Exmark v. Briggs-Stratton decision further confirms that there is no categorical rule about selecting a royalty base when litigating a reasonable royalty in order to apportion value to the patented invention, but that “apportionment can be addressed in a variety of ways … [s]o long as [the patent owner] adequately and reliably apportions between the improved and conventional features” of the accused product. Thus, in this case, the Federal Circuit ruled that the patent owner properly could use the entire lawn mower as the royalty base and was not limited to the innovative baffle component of the lawn mower as a royalty base. This case continues the clarification made in the Federal Circuit’s CSIRO decision involving standard essential patents that recognized that “adaptability [in determining patent damages] is necessary because different cases present different facts” and rejected as “untenable” the argument that every damages model must start with the smallest salable patent practicing unit (SSPPU) (see our Dec. 3, 2015 post).
A persistent dispute in the standard essential patent (SEP) community is whether a patent owner may license its SEPs based on the sales price of the end product or if the patent owner must license its SEPs based on the sales price of a component within that end product (e.g., the smallest salable patent practicing unit or SSPPU). The Federal Circuit’s Ericsson v. D-Link decision explained that the SSPPU theory was based on an evidentiary principle to avoid confusing jury’s in U.S. patent damages litigation (see our December 5, 2014 post). Yet some continued to claim that the SSPPU principle was a substantive rule of law required in all circumstances, including outside of litigation in private negotiations for SEP licenses. The Federal Circuit’s CSIRO decision later held it was “untenable” to argue that all damages methodologies must start with the SSPPU (see our December 3, 2015 post). Yet the debate somehow continued. The Federal Circuit’s Exmark decision here may finally settle and dispel arguments that the royalty base cannot be the end product, but must be the SSPPU. But we will see … Continue Reading Federal Circuit confirms flexibility in determining royalty base (Exmark v. Briggs & Stratton)