The case is ADASA Inc. v. Avery Dennison Corp., decided this past Friday in a unanimous opinion authored by Chief Judge Moore. The patent in suit relates to RFID tags. The district court had granted summary judgment that the claims in suit were patent-eligible, and that they were neither anticipated nor obvious. The case proceeded to trial on infringement of claim 1 (infringement claims as to the other patent claims in suit having been severed and stayed) and on damages. Regarding the latter, the court excluded the defendant’s expert from testifying on the basis of three licenses that the court concluded were non-comparable, and denied the defendant’s request for an instruction on lump-sum damages. (On this last issue in particular, the defendant “had not advanced a lump-sum damages theory during trial,” but argued that the three licenses the patent owner introduced into evidence reflected lump-sum agreements.) The jury returned a verdict for the patent owner in the amount of a running royalty of $0.0045 per infringing tag, for a total of $26,641,876.75. After trial, the defendant discovered over two billion additional RFID tags in its database, which it stipulated (subject to appeal) also infringed. The district court “after multiple evidentiary hearings” entered discovery sanctions in the amount of an additional $0.0025 per tag (including “both the adjudicated and late-disclosed tags”), amounting to $20,032,889.80.
On appeal, the court affirms the ruling on eligibility, but concludes that there are genuine issues of material fact on anticipation and obviousness, and therefore reverses and remands for a new trial on these issues. Moving on to damages, the court first affirms the district court’s denial of the proffered instruction on lump-sum damages, stating:
Avery Dennison does not dispute it did not advance a lump-sum damages theory before the jury or offer any testimony that lump-sum damages were appropriate. Indeed, Avery Dennison’s expert expressly disclaimed any such opinions. . . . Instead, it contends a lump-sum instruction was required because certain admitted licenses, offered by ADASA, reflect lump-sum payments to practice the ’967 patent claims.8/
8/ The parties dispute whether each of the licenses at issue is accurately characterized as lump-sum. Because we find the district court did not err in omitting a lump-sum instruction even if the licenses are all lump-sum, we need not resolve that dispute.
It may be that in some circumstances licenses, standing alone without supporting lay or expert testimony, can support a lump-sum instruction. This is not such a case. Here, Avery Dennison clearly and repeatedly argued against the relevancy of the licenses upon which it now relies. Its damages expert opined at least two of the three licenses were not helpful to understanding the value of a hypothetical negotiation. . . . Avery Dennison’s counsel likewise characterized the licenses as unhelpful to “figur[ing] out what a reasonable royalty would have been.” . . . Avery Dennison instead focused its damages theory at trial on design-around costs, which it presented to the jury as a starting-point in a hypothetical negotiation for a running royalty, not a lump-sum payment.
Where Avery Dennison failed to present a lump-sum damages theory to the jury and, moreover, actively undermined the very evidentiary basis it now contends required a lump-sum instruction, the district court did not err in declining to include such an instruction. Further, because there was insufficient evidence to warrant a lump-sum instruction, the district court appropriately declined to include a lump-sum option on the verdict form (pp. 21-22).
As for the exclusion of the defendant’s proffered licenses and testimony thereon, the court also affirms, finding no abuse of discretion:
In support of its contention that the excluded licenses were sufficiently comparable, Avery Dennison relied on the opinions of its technical expert, Dr. Sweeney. Dr. Sweeney’s analysis, however, was inadequate to establish the technological comparability of the ’967 and licensed patents. As Dr. Sweeney acknowledges, the licenses at issue involved hundreds or thousands of patents that spanned a broad range of technologies. Nevertheless, Dr. Sweeney did not undertake any meaningful comparison of the licensed technology with the invention disclosed by the ’967 patent (pp. 24-25).
Finally, as for discovery sanctions, the court concludes that there was no abuse in the decision to award them, but that the “chosen method for calculating the remedy . . . cannot stand” (p.27). In particular:
. . . The district court’s award inappropriately includes in the sanction the timely disclosed RFID tags, for which there was no discovery violation and no established harm to ADASA. . . . [I]t divorced the remedy from the harm that flowed from Avery Dennison’s discovery violation. We therefore vacate the sanctions award and remand for the district court to reconsider the appropriate remedy . . . (p.27).