Background
MLC Intellectual Property LLC owns patents related to methods of storing multiple bits per cell in flash memory — technology that is fundamental to NAND flash memory products used in smartphones, SSDs, USB drives, and countless other consumer electronics. MLC sued Micron Technology, Inc., one of the world’s largest memory chip manufacturers, for infringement.
MLC’s damages expert proposed a reasonable royalty based on a royalty rate applied to a large revenue base that encompassed the full revenue from Micron’s accused flash memory products. Micron challenged the expert’s methodology, arguing that the royalty base was far too broad because it included the entire value of the flash memory products — not just the value attributable to the patented features. The district court agreed with Micron, excluded the expert testimony under Daubert, and subsequently entered summary judgment of no damages. MLC appealed.
The Court’s Holding
The Federal Circuit affirmed. The court held that a damages expert in a patent infringement case must apportion the royalty base to reflect only the incremental value that the patented feature contributes to the accused product — not the value of the entire product when that product’s value derives from many features, only some of which are patented. The court reaffirmed the apportionment requirement as a fundamental constraint on reasonable royalty damages: a patentee is entitled only to a reasonable royalty on the economic value of the patented invention, not on the entire market value of multi-feature products that happen to include the patented features.
MLC’s expert failed to perform an adequate apportionment analysis. Rather than isolating the value of the multi-bit-per-cell storage technique from the many other features and technologies that make modern flash memory valuable, the expert applied a royalty to a base that captured the total revenue from Micron’s flash products — thereby effectively attributing the value of the entire flash memory ecosystem to the patented features. That approach violated the apportionment principle, and the district court did not abuse its discretion in excluding the testimony.
Key Takeaways
- The apportionment requirement in patent damages law is strict: a reasonable royalty must be based on the incremental value of the patented feature, not the total value of the accused product when that value reflects contributions from many features beyond those covered by the patent.
- Damages experts who fail to apportion the royalty base to the patented features risk exclusion under Daubert, which can be fatal to the entire damages case — as it was here, resulting in summary judgment of no damages.
- The entire market value rule — which allows using the full product revenue as the royalty base — applies only in narrow circumstances, such as when the patented feature is the basis for customer demand for the entire product.
- For complex technology products like memory chips, where value derives from numerous engineering advances and manufacturing innovations, patentees should work with economic experts who can rigorously isolate the value of the specific patented features rather than relying on top-level product revenues.
Why It Matters
Damages in patent cases involving widely-used technology components can involve enormous numbers — flash memory is a multi-hundred-billion-dollar global market. The apportionment requirement is the primary legal tool for ensuring that damages awards reflect the actual value of the patent, not the value of entire industries built on top of many innovations. The MLC v. Micron decision is an important reminder of how seriously courts take this requirement.
For patent owners in the semiconductor, electronics, and component manufacturing industries, the case reinforces the importance of building a rigorous damages case from the outset. Selecting a royalty base and rate requires real economic analysis of what the patented feature actually contributes to the product’s value — not simply picking the most favorable revenue figure. Expert opinions that skip this step face serious risk of exclusion, and with no admissible damages evidence, the entire case collapses at summary judgment.