In Niazi Licensing, the U.S. Court of Appeals for the Federal Circuit excluded the testimony of a damages expert on the proper royalty rate for an infringed method patent. This article summarizes the case and explains where the expert went wrong. Niazi Licensing Corp. v. St. Jude Medical S.C., Inc., No. 21-1864 (Fed. Cir. April 11, 2022).
District court excludes expert
The patent in question covered a double catheter structure used in the treatment of congestive heart failure. The patent holder sued another medical device maker for infringement. One of the allegedly infringed claims covered a method for implanting an electrical lead into a vein using a double catheter. The method involves a lead, a guide wire, an inner catheter and an outer catheter.
The defense expert proposed a 14.6% royalty rate for infringement of the claim. As for the royalty base, he concluded — without explanation — that a royalty based on the alleged use of the method would be impractical. Instead, he determined that the royalty base should include sales of all four components.
The U.S. District Court for the District of Minnesota excluded the expert’s opinion as legally insufficient because 1) he failed to “apportion” between infringing and noninfringing uses of the components, and 2) he couldn’t properly include leads in the royalty base. The defense appealed.
Court of Appeals affirms
The Federal Circuit affirmed the district court ruling, enumerating multiple problems with the defense expert’s “conclusory and legally insufficient” analysis. It found that the expert didn’t explain why a royalty based on the method’s use would be impractical. The expert also didn’t attempt to value any efficiencies or patient health advantages gained by practicing the patented method rather than nonpatented methods — or explain why this couldn’t be done. Similarly, he didn’t cite any other evidence related to the patented method’s value compared with other methods — or explain why such a valuation wasn’t possible.
In addition, the court faulted the expert for including in his calculation sales of the defendant’s outer catheters, inner catheters, guide wires and leads — even though it was undisputed that not all of the sold components had been used in the patented method. It found the failure to account for noninfringing uses was “legally improper,” rejecting the plaintiff’s argument that apportionment doesn’t apply to method claims. Where the only asserted claim is a method claim, the court said the damages base should be limited to products that were used to perform the method.
Build a better case
Notably, the Federal Circuit found that the expert didn’t address or rely on any evidence that estimated the amount or percentage of sold components that were used to infringe the claimed method. Such evidence, it said, might include testimony of users of the method, other anecdotal testimony or survey evidence. Contact us if you have any questions.
