A Christmas IP Litigation Carol

1. A Christmas IP Litigation Carol The Austin Intellectual Property American Inn of Court December 15, 2011

2. Stave I: The Ghost of Marley LLP Tiny Tim's General Counsel Meets With the CEO

3. Model Order Limiting E-Discovery • General Production Requests – no electronic discovery • Specific Issues only • After general information exchanged • Number of custodians and search terms limited • Additional production paid for by requestor • No human review of attorney-client or work product

4. Stave II: The Ghost of Depositions Past Deposition of Scrooge Industries' Patent Damages Expert

5. Ignorance Group Licensees damagesRus.com bolsteryourdamages.com ifthisdoesnothelpyouestablisha25%royaltyratenothingwill.com Exhibit 1

6. Ignorance Group Licenses Exhibit 2

7. Marley License Exhibit 3

8. Stave III: The Ghost of Motions Present Daubert Challenge of Scrooge Industries' Patent and Trademark Damages Expert

9. Uniloc USA, Inc.v.Microsoft Corporation 632 F.3d 1292 (Fed. Cir. 2011) (decided January 4, 2011)

10. The 25 Percent Rule • “This court now holds as a matter of Federal Circuit law that the 25 percent rule of thumb is a fundamentally flawed tool for determining a baseline royalty rate in a hypothetical negotiation.” • “Evidence relying on the 25 percent rule of thumb” is inadmissible under Daubert “because it fails to tie a reasonable royalty base to the facts of the case at issue.” • Uniloc USA, Inc. v. Microsoft Corporation, 632 F.3d 1292, 1315 (Fed. Cir. 2011)

11. Entire Market Value Rule “The entire market value rule allows a patentee to assess damages based on the entire market value of the accused product only where the patented feature creates the ‘basis for customer demand’ or ‘substantially create[s] the value of the component parts.’” Uniloc USA, Inc. v. Microsoft Corporation, 632 F.3d 1292, 1318 (Fed. Cir. 2011)

12. Survey Evidence • Lucent v. Gateway, 580 F.3d 1301 (Fed. Cir. 2009) • Suggested that consumer survey evidence is a possible source of usage data that can aid in determining a reasonable royalty • Lucent v. Gateway, C.A. No. 07-cv-2000 H (CAB) (S.D. Cal. Nov. 10, 2011, order) • Upon remand from the Federal Circuit, the Southern District of California upheld a reasonable royalty calculation based on a probability survey. The court held that a probability based survey was a scientific model that is recognized as a reputable method for a survey, and that this survey was permissible under FRE 702 and Daubert.

13. Trademark Infringement Damages • Quick Technologies, Inc. v. The Sage Group PLC, 313 F.3d 338 (5th Cir. 2002) • Willful infringement is not a prerequisite to an accounting of profits • Test is a multi-factor based approach that evaluates: • Whether defendant has the intent to confuse or deceive • Whether sales have been diverted • The adequacy of other remedies • Any unreasonable delay by the plaintiff in asserting his rights • The public interest in making the misconduct unprofitable • Whether it is a case of palming off

14. Dear Santa: All I want for Christmas this year is: • A 120” TV to replace my meager 65” set (2) Unlimited use of my niew iPhone 5 (4S’s are for the masses); and (3) A complete set of Tiny Tim’s Official Occupy Camden Products Love, Suri Cruise -

15. Stave IV: The Ghost of Trial Future Cross-Examination of Experts at Trial

16. Cross-Examination of Scrooge Industries' Patent Damages Expert

17. Plaintiff Damages Calculation • Tiny Tim’s Total Profit • $40 per registered user profit during the infringing period • * 5 million registered users • = • $200 million total profit. • Scrooge Industries Damages Claims $50 Million • = 25% of $200 Million

18. Uniloc USA, Inc.v.Microsoft Corporation 632 F.3d 1292 (Fed. Cir. 2011) (decided January 4, 2011)

19. The 25 Percent Rule • “This court now holds as a matter of Federal Circuit law that the 25 percent rule of thumb is a fundamentally flawed tool for determining a baseline royalty rate in a hypothetical negotiation.” • “Evidence relying on the 25 percent rule of thumb” is inadmissible under Daubert “because it fails to tie a reasonable royalty base to the facts of the case at issue.” • Uniloc USA, Inc. v. Microsoft Corporation, 632 F.3d 1292, 1315 (Fed. Cir. 2011)

20. Entire Market Value Rule “The entire market value rule allows a patentee to assess damages based on the entire market value of the accused product only where the patented feature creates the ‘basis for customer demand’ or ‘substantially create[s] the value of the component parts.’” Uniloc USA, Inc. v. Microsoft Corporation, 632 F.3d 1292, 1318 (Fed. Cir. 2011)

21. Scrooge Industries Licenses Exhibit 4

22. ResQNet and Lucent Technologies • Lucent Technologies v. Gateway, Inc., 580 F.3d 1301, 1326-28 (Fed. Cir. 2009)(Court of Appeals reverses and remands for new trial on damages because, inter alia, award of $358 million as a “lump sum” royalty award was not supported by evidence of “running royalty” license agreements). • ResQNet.Com, Inc. v Lansa, Inc., 594 F.3d 860, 870-872 (Fed. Cir. 2010)(Court of Appeals reverses and remands damages award where the trial court erroneously adjusted the reasonably royalty rate upwards based on licenses with no demonstrated relationship to the claimed invention).

23. Cross-Examination of Scrooge Industries' Trademark Damages Expert

24. 35 USC §1117 [Lanham Act §35] Recovery for violation of rights; profits, damages and costs; attorney fees • (a) When a violation of any right of the registrant of a mark registered in the Patent and Trademark Office, a violation under section 43(a) or (d) [§1125(a) or (d)], or a willful violation under section 43(c), shall have been established in any civil action arising under this Act,the plaintiff shall be entitled, subject to the provisions of sections 29 and 32 [§1111, 1114] of this Act, and subject to the principles of equity,to recover (1) defendant's profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action. The court shall assess such profits and damages or cause the same to be assessed under its direction.In assessing profits the plaintiff shall be required to prove defendant's sales only; defendant must prove all elements of cost or deduction claimed.. . .

25. Aero Products International, Inc. v.Intex Recreation Corp., 466 F.3d 1000 (Fed. Cir. 2011) “Aero was fully compensated for defendants’ patent infringement when it was awarded a reasonable royalty for patent infringement based on sales of the infringing Intex mattresses. It could not also be awarded defendants’ profits for trademark infringement based on the same sales of the same accused devices.”

26. Website Referral Sales Exhibit 5

27. Cross-Examination of Tiny Tim Software's Patent Damages Expert

28. Defendant Damages Calculation • Tiny Tim’s Total Profit • $40 per registered user profit during the infringing period • * 5 million registered users • = $200 million total profit. • Profit from Infringing Feature • Infringing Feature only accounts for 0.1% of the profits of the software • $200 Million * 0.1% = $200,000 • Royalty Rate • Georgia-Pacific factors should give a 5% royalty rate. • $200,000 * 5% = $10,000

29. Tiny Tim's Proposed Royalty Rate

30. Stave V: The End of It God Bless Us, Every One! Happy Holidays!