Takeaway: Reasonable royalty damages for patent infringement can be calculated as a percentage of a product’s sales price, but the damage award must be commensurate with the value of the improvement taught by the patent.
On January 12, the United States Court of Appeals for the Federal Circuit decided that a district court erred in its grant of summary judgment in Exmark Mfg. Co. v. Briggs & Stratton Power Prods. Grp., LLC. The case being appealed awarded over $48,000,000 to Exmark for the willful infringement of patent US5987863, which describes a lawn mower featuring “flow control baffles and removable mulching baffles.” The judges vacated this award and remanded to the district court for a new trial to determine damages.
The appellate judges objected to the procedure by which the district court came to the $48 million figure. The award amount was arrived at by doubling the $24 million that the jury reached in order to impose enhanced damages for willful infringement. The court found that the district court’s doubling did not align with the Supreme Court ruling in Halo, which requires that the jury determine willfulness.
Additionally, the appellant argued that the pre-doubled award was too high, because it was calculated using the value of the mower as a whole, rather than the value added to the mower by the addition of the baffles. In other words, the appellant felt that the damage calculation was contrary to the Ericson ruling that requires awards to “be based on the incremental value that the patented invention adds to the end product.”
Interestingly, because of the way the patent is written, the patented invention is the improved lawn mower with baffles, not just the baffles themselves. Even so, the appellant argued that damage awards should be calculated based only on the value apportioned to the innovative part of the patent—namely, the baffles. Briggs & Stratton claimed that using the sales price of the entire mower would be improper and would allow for exploitatively high damage rulings based on stylistic claim-drafting choices.
The court agreed in part with Briggs & Stratton, saying that the damage award must be apportioned properly to the value of the baffles, but that using the price of the entire mower does not indicate improper apportionment per se. Ultimately, the court explains that the process by which damages are calculated is flexible, but that damages must only be based on infringement of the improvement an invention has made.