Cornell Damage Apportionment Making Way Through Courts
The other week in Cornell University v. Hewlett-Packard, Judge Randall, sitting by designation in the Northern District of New York, chopped Cornell's damage award from $184M to $54M, stating that "Cornell simply stepped one rung down the Hewlett- Packard revenue ladder from servers and workstations to the next most expensive processor incorporating product without offering any evidence to show a connection between consumer demand for that product and the patented invention"(see more here).
In the high-profile case of Star Scientific v. R.J. Reynolds, (MJG 01-CV-1504, D. Md.) defendant counsel pounced on this ruling and filed a motion in limine to prevent Star from expanding their damages theory before the jury:
In Cornell University v. Hewlett-Packard Company, No. 01-CV-1974 (N.D.N.Y. Mar. 30, 2009) (Ex. 1), the Honorable Randall R. Radar, sitting by designation from the United States Court of Appeals for the Federal Circuit, issued a significant ruling limiting the scope of the royalty base for damages in patent infringement cases, and made clear that Star’s pie-in-the-sky damages theory in this case should be stricken.See also, "With Tobacco-Patent Suit, Star Scientific Presses for Clout" (link)
[T]he decision in Cornell bears directly on three of the fatal flaws in Star’s damages theory, as addressed in RJR’s pending motions in limine on damages (see Dkt. Nos. 603 and 749): (1) Star seeks a royalty base derived from cigarette sales, even though the output of the patented proces sends with tobacco, not with the cigarettes that only result many steps later; (2) there is no nexus between the farmers’ alleged use of the patented process and cigarette sales sufficient to invoke application of the entire market value rule; and (3) Star improperly aggregates license agreements under an A + B + C + D formula, even though only A – a license agreement setting forth a royalty base tied to pounds of tobacco – is related to Star’s patents. If Star is permitted to mislead the jury with its seriously flawed damages theory, the decision in Cornell demonstrates why the resulting award could not withstand review.
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Please excuse the form of the below comment...it is a reply to someone who posted this blog piece to one of the two large Yahoo finance groups following Star Scientific, and I do not have time to edit it.
See
http://finance.yahoo.com/q/mb?s=STSI
and look for the message title
"STSI RJR and Cornell decision"
[My "agenda" is ... I am a scientist, not an attorney, invested in Star and have followed this matter since 1998 ... and I'd like to get comments on what I bring up if you have the time. Thanks.]
Re: STSI RJR and Cornell decision by Rader (1)
Thanks.
Who are you, may I ask (that is, how may we assess your agenda)? Guess I'm asking what made you decided to go to the trouble to post what you did here today. The courtesy of an answer is appreciated.
Who is Peter Zura who writes the "blog" you referenced, so that we may assess his agenda? (I saw no attempt to put forth any counter argument by Star to balance his splash of RAI's position, so I presume he has one.)
Ask yourself this question: could RJR/RAI simply stop using the alleged infringing process (which their own atty hire said IS infringing) and go back to manufacturing all high TSNA cigarettes? Why not? RAI's apparent position here would be that there's no consumer demand for lowered TSNA in their cigarettes. The consumer, in fact, can tell absolutely NO difference in the cigarettes as they were before the INDUSTRY WIDE change in curing for low TSNAs and as they are now. Therefor there is NOTHING preventing RAI, under the "simpleton" theory of "consumer demand" as the driver for adoption of the process, that prevents RAI from simply reverting to its former practices, is there?
So why don't they just DO IT ... go back to using non-infringing, high TSNA tobacco?
Everyone who knows anything about this matter knows they do not and will not because they CANNOT! Why not? One word: "LIABILITY".
The Cornell/HP case completely lacks this element. It CHANGES EVERYTHING.
PLUS, "tobacco" is THE ESSENCE of each and every instance of product sold by RAI. Few consumers would call a filter and an empty paper tube "a cigarette" ... and NONE would bother to "smoke" one. RAI cannot make their top selling cigarette products (perhaps none of them) without "FLUE CURED TOBACCO" ... NOT AT ALL. They can't use other kinds of tobacco because their customers are extremely sensitive to "flavor" and the other properties that their exceedingly carefully blended products have. Thus without the infringing process, RAI would be essentially, if not literally, OUT OF BUSINESS. Certainly bankrupt. NOT HP.
(continued)
Re: STSI RJR and Cornell decision by Rader (2)
(continued)
The JUDGE (Rader) notes at
http://271patent.blogspot.com/2009/04/pa...
that
"Notably, Cornell chose this hypothetical royalty base in favor of another alternative more clearly relevant to the value of the patented invention—the revenue Hewlett-Packard would have earned had it sold each infringing processor as just that, a processor, without any additional noninfringing components."
This seems to tell the tale: RAI, due to liability considerations, COULD NOT HAVE SOLD ANY OF ITS INFRINGING PRODUCTS WITHOUT USING THE INFRINGING PROCESS in the period sued for OR SINCE because of liability considerations. PERIOD. My God, it's simple: IF THEY COULD HAVE THEY WOULD HAVE!
I have a writing in the making (that I may or may not need to post ... elaborates on points made here) that I think clearly shows that in this case of a hidden defect in a product that the consumer cannot detect (cannot tell the difference if the defect is present or absent), a defect that virtually the whole world of science agrees will make most consumers of the product sick, and kill many of them, then "liability" IS IN FACT a kind of consumer demand.
That is, liability is "back end" consumer demand, as acutely perceived by RAI, and that IT ALONE is the cause of RAI infringing, continuing to infringe, and HAVING ABSOLUTELY NO CHOICE in the matter. They MUST do so to stay in business.
It appears to me (I am not an attorney, however) that these facts completely removes this case from the scope of Cornell case above, especially in recognition of the quote by the judge in that case I cite above.
What do you think?
(I am an investor in Star.)
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