Trading Technologies (TT) brought suit against IBG for patent infringement. A jury found the claims of two patents infringed and awarded damages. However, before trial, the district court excluded one of TT’s damages theories under Federal Rule of Evidence 702. TT appealed.
The excluded damages theory relied on IBG allegedly “making the accused products in the United States with foreign damages.” TT’s expert argued that TT should receive damages for foreign users’ copies of the accused product software. She proposed inclusion of all foreign active users in a given month in her damages calculation, without narrowing the pool to any identified subgroups of foreign active users. She did this, she opined, because IBG deliberately markets the accused product software worldwide. TT’s expert stated that it was her “understand[ing] that TT is entitled to worldwide patent damages for harm that is foreseeable and [the] but-for result of infringement in the United States.”
IBG argued that TT’s expert’s worldwide damages opinion improperly includes foreign users with no link to any U.S. infringing activities. The district court excluded the opinions because “the patentee may not recover damages for worldwide sales of the patented invention on the theory that those foreign sales were the direct foreseeable results of the infringers’ domestic infringement.”
On appeal, TT argued that the district court should have applied the extraterritoriality analysis articulated by the Supreme Court in WesternGeco, rather than the more restrictive principles the district court drew from Power Integrations. The Federal Circuit agreed that WesternGeco provided the framework for determining whether patent damages are properly awarded based partly on conduct abroad. But the court determined that, even under WesternGeco, the evidence offered by TT’s expert was properly excluded.
Specifically, the court held that WesternGeco provides a two-step framework for determining when an application of the statute is impermissibly extraterritorial. A court must first ask “whether the presumption against extraterritoriality has been rebutted” (by clear enough congressional action) and, second (if the presumption has not been rebutted), “whether the case involves the domestic application of the statute” (rather than extraterritorial application). The court also concluded that WesternGeco applies to a reasonable-royalty award, not only lost profits awards, though “its application must reflect the established differences in the standards for the two types of awards.”
In considering a reasonable royalty, the court noted that the royalty base may not include activities that do not constitute patent infringement because patent damages are limited to those “adequate to compensate for the infringement.” Such is true for foreign activities that do not themselves constitute infringement. The court noted that “if the patentee seeks to increase [the] amount [of reasonable royalty] by pointing to foreign conduct that is not itself infringing, the patentee must, at least, show why that foreign conduct increases the value of the domestic infringement itself.” Turning to the facts before it, the court found such a showing lacking.
First, TT’s expert did not differentiate between method claims and claims to a computer readable medium (CRM). That matters because infringement of method claims requires practicing the method. And the foreign practice of the patented method cannot by itself be sufficient to recover damages in the United States. Therefore, the court reasoned, the expert’s theory would have to refer to the specifically to the CRM claims, but they contained no such analysis.
Second, the court found that TT’s expert did not present a coherent explanation of any causal connection of foreign activity to domestic infringement. The court noted that the accused infringer, even before the patents issued, already had CRMs abroad containing the accused software that met the patents limitations. But this does not constitute infringement at least because the export happened before the patents issued.
This article appeared in the 2024 Federal Circuit IP Appeals: Summaries of Key 2024 Decisions report.
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