A Patent Win of $10 Million Reduced to a $1 Lesson in Damages

A Patent Win of $10 Million Reduced to a $1 Lesson in Damages

The jury’s finding that Intuitive had encroached Rex Medical’s patent for a surgical stapling device was affirmed by the Court which at the same time upheld the district court’s decision to cut the jury’s USD 10 million damages award to an insignificant USD 1.

In a stern warning to patent litigants, Rex Medical was handed a textbook Pyrrhic victory against Intuitive Surgical by the US Court of Appeals for the Federal Circuit. The jury’s finding that Intuitive had encroached Rex Medical’s patent for a surgical stapling device was affirmed by the Court which at the same time upheld the district court’s decision to cut the jury’s USD 10 million damages award to an insignificant USD 1.

This shows that winning on the technical merits of a patent infringement claim is only half the battle; amultimillion dollar verdict can evaporate into pocket change without a legally sound and factually supported damages model. A tragic failure in financial evidence finally rendered an otherwise successful infringement suit worthless.

The pre-trial exclusion of Rex Medical’s damages expert whose approach was found to be basically flawed was the main reason for reversal of the multimillion dollar award. Douglas Kidder, the expert, calculated damages based on an apparently comparable licence—a USD 10 million settlement agreement between Rex and Covidien. However, an entire portfolio was covered by that licence, including the ’650 patent at trial, another key US patent, and dozens of other US and foreign patents and applications.

Upon examination, the expert’s approach caved in. Firstly, he did not allocate the value of the single ’650 patent among the collective value of the entire portfolio licenced to Covidien. His analysis was full of other deficiencies: he gave no analysis of the licenced foreign patents; failed to consider whether they covered Covidien’s products; and depended on “general observations about other unrelated patent portfolios”.

Rex Medical’s dependence on the Covidien licence was misdirected. Rex had dropped the ’650 patent from its suit against Covidien before settlement negotiations began, “leaving only the ’892 patent at issue”, the court revealed. This turned the expert’s simple mistake of allotment into a puzzling attempt to assign value based on a settlement where the patent-in-suit was not even a factor. The Court reportedly deemed the expert’s opinion as “unreliable and untethered to the facts of this case.” Without this statement or any other adequate proof, the jury’s USD 10 million award was based on “mere speculation or guess,” compelling the Court to reduce it to USD 1.

Significantly, Intuitive Surgical’s own cross-appeal on the patent’s merits was entirely unsuccessful. The original findings that Intuitive’s surgical stapling products infringed the ’650 patent and that the patent claim was not invalid were affirmed by the Federal Circuit. Particularly, Intuitive’s attempt to develop a narrow construction of the claim term, “lower portion” was debunked by the Court. The dual outcome makes the ruling so informative.