Federal Circuit Clarifies District Court’s Gatekeeper Role for Admissibility of Expert Testimony

Apple, Inc. v. Motorola, Inc., ___ F.3d ___, 2014 WL 1646435 (April 25, 2014 Fed. Cir.) Case No. 2012-1548 and 1549

On Friday, April 25, 2014, the Federal Circuit Court of Appeals reviewed Judge Posner’s decision in Apple, Inc. v. Motorola, Inc., addressing the trial court’s decisions on claim construction, damages, and injunctive relief. In the district court, Judge Posner of the Court of Appeals for the Seventh Circuit sat by designation as the trial judge. In that court, both Apple and Motorola asserted infringement of their respective patents.

After entering his claim construction order and excluding the majority of the expert damages testimony in response to Daubert motions submitted by each side, the district court entered summary judgment that neither party had proven damages or was entitled to injunctive relief. Finding that no remedies were available, the district court dismissed all claims with prejudice without trial.

The Federal Circuit reversed the district court’s narrow claim construction of one term in the Apple patents, then turned to the court’s analysis of relief requested by the parties. Applying Seventh Circuit law, the Federal Circuit reiterated a number of governing principles for the calculation of damages for patent infringement.

First, the court described the district court’s gatekeeping function in evaluating expert testimony as focused on whether the expert applied unreliable principles or methods or legally insufficient facts and data. In this effort, the trial judge is not supposed to weigh facts, evaluate the correctness of conclusions, impose its own preferred methodology, or judge witness credibility.

Second, the Federal Circuit recognized that the factual record may support a range of reasonable royalties rather than one correct single value. Similarly, the court held that there may be more than one reliable method for estimating that reasonable royalty, providing examples such as the use of royalty rates from sufficiently comparable licenses, valuation of the infringed features based on comparable features in the marketplace, or estimates of the value of the benefit provided by the infringed features in comparison to non-infringing alternatives. While consumer value for a patented feature may be important for estimating a reasonable royalty, it is not required in all cases. Similarly, a patentee is not required to value every potential non-infringing alternative for its damages testimony to be admissible.

Third, the court confirmed that reliance upon other experts hired by a party for expertise outside of the testifying expert’s field is routine and commonly accepted so long as that information is the type that experts in the particular field would reasonably rely upon.

Fourth, because a patent owner is assumed to have inherently suffered legal damage from infringement and is entitled to no less than a reasonable royalty, the fact finder is required to determine what royalty rate is supported by the record, even if no admissible expert testimony is offered to assist the finder of fact. Thus, summary judgment of no damages would only be appropriate when that is the only conclusion supported by the factual record.

The court also stated that questions of bias and disagreements about the factual underpinnings of an expert’s analysis should be explored on cross-examination and through the admission of competing evidence. Such questions go to the weight to be given to the evidence, not its admissibility.

The Federal Circuit reversed the district court’s exclusion of the testimony of Apple’s expert witness, finding that Judge Posner applied an improper claim construction and excluded the testimony based upon a determination that there was a better way to calculate damages. "Simply because other reliable methods of estimating a reasonable royalty may exist does note, by itself, render [Apple’s] approach inadmissible." Turning to Motorola’s evidence, the Federal Circuit affirmed the exclusion of a portion of testimony directed generally to the licensing of Standard Essential Patents (patents adopted by industry standardization groups that the patent owner has agreed to license on fair, reasonable and non-discriminatory terms) because the testimony was not sufficiently tied to the claimed invention, but reversed the exclusion of the remaining testimony regarding appropriate royalty rates for Motorola patent based upon comparable licenses.

Addressing the determination that neither party was entitled to injunctive relief, the Federal Circuit reversed the district court’s finding as to Apple ‘s injunction request because that determination necessarily relied on the improper narrow claim construction applied by the district court.

Turning to the summary decision addressing injunctive relief for the Motorola patent identified as a Standard Essential Patent (SEP), the Federal Circuit rejected a per se rule that injunctions are not available for SEPs. However, applying the Supreme Court’s eBay test for injunctive relief, the Federal Circuit affirmed the determination that Motorola was not entitled to injunctive relief for the patent at issue. Judge Rader dissented on this point, finding a genuine issue of material fact as to whether Apple’s posture as an unwilling licensee whose continued infringement of the Motorola patent caused irreparable harm.

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