Reasonable Royalty Should Be Determined Anew in Trial Against New Infringing Product

Case: Applied Medical Resources Corp. v. United States Surgical Corp., No. 05-1149 (Fed Cir. 1/24/06)


The One Sentence Summary: Collateral estoppel did not apply to a jury's determination of a reasonable royalty where the two infringing products were sold at different times, making the hypothetical royalty negotiations different.

Vocabulary Words You Can Learn From This Decision: Trocar and Sufflation


What They Were Fighting About: After losing an earlier patent infringement suit concerning a floating seal trocar (an access port to the abdomen for laparoscopic surgery), defendant US Surgical began marketing a redesigned product. Plaintiff Applied Medical sued again, alleging infringement by the new trocar. After summary judgment of infringement and entry of an injunction, a jury trial on damages found willful infringement and damages of $43.6 million. Plaintiff's motion for enhanced damages and attorneys' fees were granted.

Federal Circuit Holdings:

• There was no collateral estoppel from the jury's determination of royalties in the earlier infringement action. The issue of a reasonable royalty rate from a hypothetical negotiation was not identical as required for application of collateral estoppel. The hypothetical negotiations would have been held before the start of infringement which differed for each trocar.


• The hypothetical negotiation is used to determine a reasonable royalty. "A reasonable royalty is the amount that ‘a person, desiring to manufacture [,use, or] sell a patented article, as a business proposition, would be willing to pay as a royalty and yet be able to make [, use, or] sell the patented article, in the market, at a reasonable profit.’” Trans-World Mfg. Corp. v. Al Nyman & Sons, Inc., 750 F.2d 1552, 1568 (Fed. Cir. 1984) (citations omitted). “The objective of [a] reasonable royalty calculation is to determine the amount necessary to adequately compensate for an infringement.” Maxwell v. J. Baker, Inc., 86 F.3d 1098, 1109 (Fed. Cir. 1996)."


• Each infringing product could be the basis of its own reasonable royalty damages determination because each was a separate and distinct infringement.


• The trial court properly denied the defendant's motion for judgment of a matter of law on willful infringement because there was substantial evidence supporting the jury verdict. The jury had evidence allowing it to find willful infringement where defendant rushed development of its new product after the previous product was found to be infringing, where it began redesign under threat of an injunction, and where it did not rely on opinions of patent counsel but merely sought opinions for their evidentiary value.


• The trial court properly allowed the jury to hear evidence of the earlier infringement verdict where it was necessary to establish the factual background for the hypothetical reasonable royalty negotiations.