Bank lawyers seek mistrial
By Robin Y. Richardson
March 19, 2010 at 4:55 p.m.
Royalty experts argued over royalty amounts Friday, while lawyers filed a flurry of midday motions as DataTreasury's joint patent infringement trial against U.S. Bank, ViewPointe Archive Services, the Clearing House Payments Company and SVPCo continued in the U.S. District Court, Eastern District of Texas.
DataTreasury rested its case Friday with the testimony of Christopher J. Bokhart, who specializes in intellectual property, evaluating patents and trademarks
U.S. Bank should pay DataTreasury a reasonable royalty of $201.9 million, estimated Bokhart. "It's my opinion that compensation that's due is a reasonable royalty."
He was retained by DataTreasury to do an independent evaluation of the patent and determine a reasonable royalty in damages.
Bokhart said he determined what a reasonable royalty would be in a hypothetical negotiation.
"The starting point begins at the date infringement began," he explained. "Here, it's late 2003, early 2004.
"U.S. Bank started its program with Viewpointe in 2003. It didn't start sending high volumes to Viewpointe until early 2004," he said.
To arrive at his calculations, he used a formula multiplying cents per check by the number of checks that were alleged to infringe from 2004 to 2008.
"It was approximately 1.5 cents per check. That has to be multiplied by 13.4 billion checks, which comes to a total of $201.9 million," he said.
Jerry A. Hausman, a professor of economics at Massachusetts Institute of Technology hired by U.S. Bank to do a similar damage report, disagreed. The award-winning economist said he thinks if the patents were found to be valid and infringed, a reasonable royalty U.S. Bank should pay based on an actual negotiation would be a lump sum of $6.25 million.
"I think they would've both bargained," he said.
Hausman said in making his analysis, he considered the maximum royalty U.S. Bank would be willing to pay and the minimum royalty DataTreasury would be willing to accept. The next step would be to negotiate.
"$12.5 million would be the maximum amount U.S. Bank would agree to pay to DataTreasury," he concluded.
He determined the two would negotiate the cost, splitting it in half.
"I think DataTreasury, given its financial condition (in 2003, 2004) would've settled on a lump sum payment," Hausman said.
Bokhart said he considered all DataTreasury's litigation and non-litigation licensing agreements with other entities when determining royalty rates. He noted DataTreasury has at least 29 licensing agreements it has issued to several banks, brokerages and equipment manufacturers. Five of those agreements were negotiated outside of a lawsuit and 24 of those weren't agreed upon until after entering in litigation.
"Some of them had running royalties greater than two cents per check," Bokhart noted.
In all, DataTreasury's licensing agreements exceed $350 million.
Bokhart noted Merril Lynch, Edward Jones, Diebold, Net Deposit and Community Bank Systems contacted DataTreasury themselves and entered into non-litigation agreements. He gave a breakdown of how much each of them pays DataTreasury to license its property.
"Community Banking Systems agreed to pay a lump sum of about $300,000," he noted.
Hausman said he disagrees with Bokhart's decision to rely on non-litigation agreements as a factor to set up a royalty rate.
"These licenses had many more patents than just two patents," Hausman said of his reasons for disagreeing with Bokhart. "The most important reason is Merril Lynch and Edward Jones are not banks. So, I think it's just wrong to compare somebody 5,000 times smaller and say U.S. Bank will get the same price. That just doesn't make much economical sense."
Nelson Roach, DataTreasury's attorney, asked Hausman if it was fair to say that his calculations were based on assumptions.
"Everybody's calculations are," Hausman said.
Hausman, who also factored in a design around in his calculations, said although he does not believe licenses entered into as a result of non-litigation need to be relied on in determining a reasonable royalty rate, he relied on it anyway in case the plaintiff decided to present it as evidence in court.
After lunch, before the jury returned, the attorneys attempted to file several motions and requests. A U.S. Bank attorney made a request to Judge David J. Folsom on behalf of all defendants that DataTreasury not be allowed to claim an invention date prior to the two patents being filed.
"They've failed to prove conception of complete invention," the U.S. Bank attorney argued, adding DataTreasury also failed to demonstrate diligence. "Mr. Ballard testified for a year that he was unable to do anything with his invention."
Anthony Bruster, DataTreasury's attorney, argued that his client has claimed an invention date.
"I believe it was late July 1994 that he conceived the idea. By November, he sketched it out," he said. "In terms of diligence, he started working on his prototype in a few short months and had it working by late '95."
Bruster said he showed it to an investor and raised money for the invention.
U.S. Bank, Viewpointe and Clearinghouse attorneys all requested to file motions to declare a mistrial.
"Viewpointe was sued alone for infringement in 2002," Viewpointe attorney Philip Philbin said. "Not until recently has DataTreasury asserted the theory that it infringes because it's being directed and controlled by U.S. Bank."
Clearing House's attorney had similar sentiments.
"Clearing House joins in U.S. Bank's motion for a mistrial," Clearinghouse's attorney said.
"Viewpointe moves for a mistrial," said Philbin, quickly chimed in.
The trial continues Monday at 9 a.m.