Enplas Display Device Corp., et al. v. Seoul Semiconductor (Decided, November 19, 2018)

Although not considered “precedential,” the opinion by the Federal Circuit in this matter merits closer review. Often, damages experts are heard to discuss “freedom to operate” as a consideration at the hypothetical negotiation. The idea of freedom to operate is that one takes a license and then enjoys the freedom to practice any claim in the patent in any existing product and any future product.

The reason this becomes a relevant consideration is because any reasonable licensee would prefer to conduct one negotiation to allow the two companies to walk away and pursue business in any manner the licensee sees fit. This was the analytic approach Defendant’s expert took to damages in this matter, offering an opinion as to the “premium” that might be paid to afford freedom to operate.

The CAFC disagreed. The statutory language specifically states that a royalty rate should be “adequate to compensate for the infringement.” The language is not “adequate to compensate for any use of the patented technology.”

Arguments seeking to link a lump-sum construct to a broader freedom to operate were found unpersuasive, because the estimate relied on non-accused products.

This Enplas opinion is a gentle reminder that the hypothetical negotiation is not a real negotiation, but rather a fake one: one that didn’t happen and one that would never have happened. The CAFC reminded the district court that a damages expert does not enjoy freedom to operate in a manner that includes damages greater than the amount adequate to compensate for infringement.