Federal Circuit Affirms Damage Award Based on Lost Profits

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Last week, the U.S. Federal Circuit unanimously upheld a damage award based on lost profits in the latest round of a decade-long litigation between Akamai Technologies and Limelight Networks.  Akamai Technologies v. Limelight Networks, Nos. 09-1372, 09-1380, 09-1416, 09-1417 (Fed. Cir. Nov. 16, 2015). 

The Federal Circuit first reviewed this case after a jury verdict finding Akamai’s patent (U.S. Pat. No. 6,108,703) valid and directly infringed by Limelight was overturned by the district court’s entry of judgment as a matter of law (“JMOL”).  Akamai Technologies v. Limelight Networks (Akamai II), 614 F. Supp. 2d 90 (D. Mass. 2009).  In the present appeal, the Federal Circuit considers, inter alia, whether the district court erred in allowing Akamai to present a lost profits theory based on the testimony of its expert. 

In a precedential opinion, Chief Judge Prost, Judge Linn, and Judge Moore reaffirmed the Federal Circuit’s en banc reversal of the district court’s JMOL determination, and remanded with instructions to reinstate the jury’s $45.4 million damage award.

To collect lost profits, a “patentee must show a reasonable probability that ‘but for’ the infringing activity, the patentee would have made the infringer’s sales.”  Such a showing “must be supported by ‘sound economic proof of the nature of the market and likely outcomes with infringement factored out of the economic picture.’”  (Citing Ericsson, Inc. v. Harris Corp., 352 F.3d 1369, 1377 (Fed. Cir. 2004) and Grain Processing Corp. v. Am. Maize-Prods. Co., 185 F.3d 1341, 1350 (Fed. Cir. 1999)). 

Here, the Federal Circuit found that Akamai’s expert reasonably calculated Akamai’s lost profits.  Limelight argued that its customers would have been less likely to buy Akamai’s products because its customers preferred lower-priced alternatives.  As Akamai’s expert accounted for this preference by excluding the lowest-earning 25% of Limelight’s customers, the Federal Circuit declined to opine whether this discount was sufficient.  The Federal Circuit reasoned that Limelight was not challenging the availability of lost profits, but rather the amount of lost profits which Limelight failed to address in its briefing.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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