Replies to post #17294 on Finjan Holdings Inc (FNJN)

[Paullee]

fyi - interesting view from 360

The infringing product in Finjan was a software service for which Blue Coat sold individual user licenses. Finjan calculated the royalty base by multiplying the accused product’s total number of users by the percentage of web traffic that passes through a particular portion of the product that includes the infringing feature. The court found that “in calculating a royalty base (the number of infringing licenses), Finjan failed to apportion damages to the infringing functionality.”[3] Notably, Finjan’s model used that base to calculate a reasonable royalty by multiplying its base by a fixed per-license rate, not by taking a percentage of infringing revenue.

This appears to be the first time the Federal Circuit has vacated a damages verdict based on a per-unit royalty (and not a percentage of revenue) for failure to apportion the royalty base. It has not happened before because the “base” for a per-unit royalty is simply the number of infringing units. Whether the patentee used the complete product, the “smallest salable unit,” or some smaller component where the invention resides, the number of infringing units remains the same. As long as the patentee establishes that each unit infringes, there is no need for further “apportionment” of the unit base to account for the accused functionality. But the court found otherwise in Finjan.

The court’s decision demonstrates the risks of generalizing fact-specific decisions into “rules” like “apportionment” and attempting to apply those rules to every case. Here, the court expanded the concept of “royalty base apportionment” — which arose in the context of percentage royalties — into a different model based on a per-unit royalty methodology. And yet two days later, in Exmark v. Briggs & Stratton,[4] the court concluded that royalty base apportionment is not an absolute requirement even for percentage royalties.[5]