In Vectura, the Federal Circuit recently reiterated that the entire market value of an accused multicomponent product may serve as the royalty base if the patent damages analysis is built on sufficiently comparable licenses. Vectura Limited v. Glaxosmithkline LLC, 981 F.3d 1030, 1040-1042 (Fed. Cir. 2020). Pursuit of the entire market value of a multicomponent product ordinarily requires the patentee to demonstrate that the infringing feature drives customer demand for the product. Virnetx, Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1326 (Fed. Cir. 2014). Without such evidence, the patentee must apportion down either the royalty base or the royalty rate to account for the difference between the patented features and the conventional features of the accused product. Exmark Mfg. Co. v. Briggs & Stratton Power Prods. Grp., LLC, 879 F.3d 1332, 1348 (Fed. Cir. 2018); But the Federal Circuit has once again affirmed that apportionment can be baked into a comparable license.
In Vectura, the Federal Circuit affirmed the district judge’s admission of an expert opinion that relied on a sufficiently comparable license to satisfy the apportionment requirement. Vectura, 981 F.3d at 1041. Evidence shows that the circumstances surrounding the prior license and the hypothetical negotiation were “highly comparable” and the principles of apportionment were effectively “baked into” the prior license. Id. In other words, the expert demonstrated that “negotiators of a comparable license settled on a royalty rate and royalty base combination embodying the value of the asserted patent.” Id. This comparable license paved the way for damages at a 3% royalty instead of the accused infringer’s 0.0187% rate. Id. at 1040. The decision in Vectura is the fourth in the past six years in which the Federal Circuit permitted apportionment through a comparable license. Bio-Rad Labs., Inc. v. 10X Genomics Inc., 967 F.3d 1353 (Fed. Cir. 2020); Elbit Sys. Land & C4I Ltd. v. Hughes Network Sys., LLC, 927 F.3d 1292 (Fed. Cir. 2019); Commonwealth Sci. & Indus. Rsch. Organisation v. Cisco Sys., Inc., 809 F.3d 1295 (Fed. Cir. 2015). Thus, patentees and accused infringers have another avenue to meet the apportionment requirement in a reasonable royalty analysis.