Judge Bryson Admits Royalty Calculation Based on Pre-Issuance Sales

On March 17, 2017, Judge Bryson denied defendant Eli Lilly & Company (“Lilly”) motion to exclude a portion of plaintiff Erfindergemeinschaft UroPep GbR (“UroPep”) damages analysis.  Lilly argued that UroPep's analysis was faulty because it incorporated information about unpatented sales.

The patent-in-suit is titled "Use of Phosphordiesterase Inhibitors in the Treatment of Prostatic Diseases" and issued on July 29, 2014.  Lilly markets and sells a Phosphordiesterase Inhibitor called Cialis®.  The U.S. Food and Drug Administration ("FDA") approved Cialis® to treat the signs and symptoms of benign prostatic hyperplasia ("BPH") on October 6, 2011.

UroPep's economic expert calculated reasonable royalty damages using information about sales that took place before the patent-in-suit issued.  The expert first computed Lilly's incremental revenues due to sales of Cialis® for the BPH indication by comparing sales of Lilly's Cialis® before and after the FDA's October 2011 approval.  He then calculated incremental profit by deducting incremental costs from those incremental revenues.  Incremental profit was an input into the expert's reasonable royalty damages calculation.

Lilly argued that UroPep's economic expert improperly used unpatented, non-infringing revenue in the damages calculation.  Lilly cited Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1318-19 (Fed. Cir. 2011) in support of their position.  Judge Bryson denied Lilly's motion for a number of reasons, including because "The economic data from the period before the issuance of the [patent-in-suit] provided a sound basis from which to determine the value of the invention that was ultimately patented."

About the Author
Dr. Eric Becker is an economic expert at Becker North, Inc.  He specializes in the application of economics to complex commercial disputes.  His experience in intellectual property matters includes the analysis of economic damages, lost profits, reasonable royalty and commercial success.  Dr. Becker earned his Ph.D. in economics from Yale University.

Sources
1. Erfindergemeinschaft UroPep GbR v. Eli Lilly and Company et al., Civil Action No. 2:15-cv-01202, "Original Complaint for Patent Infringement" (E.D. Tex., July 1, 2015) at 2, 6.

2. Erfindergemeinschaft UroPep GbR v. Eli Lilly and Company et al., Civil Action No. 2:15-cv-01202, "Memorandum Opinion and Order" (E.D. Tex., March 17, 2017) at 17-21.

3. Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1318-19 (Fed. Cir. 2011).

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