Introduction
As part of a damages analysis, when assessing whether a license agreement is comparable for the purposes of a hypothetical negotiation for a reasonable royalty, economic and technical comparability is important to consider. In this post, we posit certain high level guiding principles, focusing on a two pronged approach of technical and economic comparability.
Technical Comparability
Technical comparability involves evaluating whether licenses that are being considered as benchmarks for the purposes of a reasonable royalty are technically comparable to the case at hand. Engaging in discussions with the technical experts to assist in assessing the similarities and differences between the subject license and your damages case is well-advised. If a license agreement you consider using as a benchmark involves the subject patents, but also other IP assets, the technical experts may be able to assist, at least directionally, in assessing relative contribution of any additional assets included in the benchmark license to the accused product. Benchmark licenses for a portfolio of patents can be tricky, and technical experts may be able to help assess relative contribution through ranking and rating the patents, as one example. Once technical comparability has been established, an expert moves to an analysis of economic comparability.
Economic Comparability
Economic comparability requires a thoughtful examination of economic variables present in the benchmark license as compared to the specifics of the case at hand. The benchmark license should be assessed for similarities or differences in relevant aspects, such as the following:
- In market positioning, such as between competitors or involving similar products.
- Licensing terms (such as exclusive/non-exclusive or US/Worldwide).
- Extent and type of use.
- Difference in IP assets licensed (such as if the benchmark license includes other IP assets).
- Timing of license and economic backdrop.
Each case is fact specific, and availability of information across cases varies, but certain courts have emphasized the need for a thorough analysis of economic comparability.
Settlement Agreements
As another economic aspect, depending on the court, and the facts and circumstances of the case, settlement agreements can be the best available and relevant evidence as addressed in a number of recent Federal Circuit cases. Experts should acknowledge the circumstances of settlement agreements, which are typically settled with the licensee denying validity and infringement of the licensed property, as opposed to a reasonable royalty as part of a damages case where validity and infringement are presumed. While discovery as to other litigation is often not available, researching the case that resulted in the settlement can often shed light on the situation that resulted in the settlement, including the patents and products at issue, any Markman rulings or IPR institutions, timing of settlement in the litigation process, etc. If your client is a party to the settlement agreement, discussions with the negotiators of the settlement can be informative. Responses to deposition questions about the economic circumstances in the settlement agreement may be informative if the deponent is an employee of a party to the settlement agreement.
To explore this topic and how it could impact your case, please contact Shelly Irvine, Managing Director [email protected] or +1 415 946 2556.