WesternGeco LLC v. Ion Geophysical Corp. (Supreme Court Decision – June 22, 2018)

Our previous post concerning this matter only touched upon the extraterritorial application of patent damages because we expected that issue would be dealt with more fully in the future.  That future is now our present!

The Supreme Court ruled that WesternGeco could receive lost profits based upon extraterritorial infringement of a U.S. patent.

WesternGeco represents itself to be a company which, “collaborates with you at every stage of the E&P life cycle to accelerate your discoveries in basins spanning the globe. From derisking prospects to optimizing reservoir monitoring, we have the expertise, digital capabilities, and seismic data to help you get to first oil faster and maximize your recoveries.”  In plain English, the company makes big equipment used to find and recover oil and offers services towards those ends.  Ion Geophysical appears to do the same thing.

The Supreme Court summarized the dispute between the two competitors as follows:

The Supreme Court pointed to a two-factor test. The first factor is “whether the presumption against extraterritoriality has been rebutted.” In this matter, however, the Court sidestepped the first factor, observing, “While ‘it will usually be preferable’ to begin with step one, courts have the discretion to begin at step two ‘in appropriate cases.'”

The second factor is “the [284] statute’s focus,” concerning which the majority concludes:

What fascinates A2C about this case is the dissenting opinion written by Justice Gorsuch and joined by Justice Breyer.  In that dissent, Justice Gorsuch argues that the ruling on lost profits may prove to have reverberations throughout the global patent system and may result in other countries attempting to assert foreign patents in the United States.  Justice Gorsuch writes, “Permitting damages of this sort would effectively allow U.S. patent owners to use American courts to extend their monopolies to foreign markets.  That, in turn, would invite other countries to use their own patent laws and courts to assert control over our economy.”

Justice Gorsuch’s primary basis for dissent is the notion that U.S patent infringement outside of the United States does not exist.  Products assembled abroad and put to use in a manner in line with claims of a United States patent does not constitute infringement because, by definition, infringement cannot occur outside of the United States:

Citing General Motors Corp. v. Devex Corp., Justice Gorsuch argues that the majority opinion on this matter would put “the patent owner in a better position than it was before by allowing it to demand monopoly rents outside the United States as well as within.” Justice Thomas rebutted this view for the majority by stating that the dissent, “wrongly conflates legal injury with the damages arising from that injury.”  Citing to General Motors again, he wrote:

 

Howmedica Osteonics Corp., v. Zimmer, Inc., Centerpulse Orthopedics, Inc. (Opinion May 23, 2018)

If you set aside a park bench for all those people on planet Earth who are utterly fascinated by the topic of prejudgment interest, the authors of A2C – together & alone – would share a quiet lunch, discussing PJI while tossing crumbs to the pigeons.

In that spirit, we report that Senior District Judge Walls from the District of New Jersey recently offered an opinion granting attorneys’ fees & costs, but no prejudgment interest, in a case of alleged infringement brought way back in 2005. In support of the decision, Judge Walls observes:

Judge Walls notes that the attorneys’ fees were reasonable except for those “hours billed due to inexperience, hours billed for tasks that should have been performed by more cost-effective actors, and hours and tasks that took an excessive amount of time to complete.”  Included in the opinion, but not replicated here, are details regarding hourly billing.*

As for prejudgment interest, however, Judge Walls provided the following justification for not granting the request:

We sit on our bench feeding pigeons, while struggling mightily to understand the economic logic of this decision.  Specifically, Judge Walls finds that there was deceit by the plaintiff over the course of a decade; and that attorneys’ fees are correspondingly justified… but there is no basis for affording the defendant the benefit of any compensation related to the time-value of its money?

Within the confines of the courtroom, this may make sense.

From the purview of our park bench, it is incoherent to us (and the pigeons).

From the opinion, it appears that prejudgment interest is just one in the line of many additional ways to exact money.  What appears to have been lost is that if the money was rightfully remitted by the losing party, then the time value of that money should also be considered.   If Judge Walls is operating with some conceptual economic cap to compensation (and below we provide evidence to suggest the possibility of such conceptual caps), the attorneys’ fees should arguably have been reduced, and then been adjusted for the time value of money to arrive at roughly the same monetary compensation.

* An interesting side-item from Judge Walls: despite what we would have assumed to be a relatively efficient market for legal services, an economic cap evidently exists on the professional value available from attorneys of $900/hour.

Apple Inc. v. Samsung Electronics Co. Ltd. et al. (Jury Verdict May 24, 2018)

Yesterday, a jury awarded Apple $533 million for the infringement of its design patents.  In doing so, the jury appears to afford design patents more value than patents supporting the underlying technology in a smart phone.  How could this determination have happened?

We think it useful to provide background to explain how this jury verdict came to be.

First, consider that this case revolves around the definition of the term “article of manufacture.”  The Supreme Court explained, “Section 289 of the Patent Act makes it unlawful to manufacture or sell an ‘article of manufacture’ to which a patented design or a colorable imitation thereof has been applied and makes an infringer liable to the patent holder ‘to the extent of his total profit.’ 35 U.S.C. §289.”

Way back in April 2011, Apple sued Samsung for infringement of (among other patents and a trade dress claim) three design patents which roughly cover: 1) a black, rectangular front screen face, 2) a front face with rounded corners and a bezel, and 3) a grid of colorful icons displayed on the screen face.  Judge Koh issued opinions on Daubert motions and the case went to a jury trial.

Samsung’s products were found to infringe multiple patents and found to violate trade dress allegations: as a result, a jury verdict awarded Apple close to $1 billion.  Judge Koh issued judgment for that jury verdict.

Samsung appealed to the Federal Circuit multiple times, and what remained for this most recent jury was the question of the monetary remedy associated with design patent infringement (N.b., there was an additional patent at issue which we are not discussing here).  During the appeals process, the Federal Circuit affirmed that the article of manufacture subject to disgorgement in this design patent matter should be the entire phone, because no portion was sold separately that might constitute a smaller, distinct article of manufacture.  Samsung appealed to the Supreme Court, which provided little guidance other than to observe that the Federal Circuit’s definition of the article of manufacture was too narrow.  Specifically, the Court found, “Because the term ‘article of manufacture’ is broad enough to embrace both a product sold to a consumer and a component of that product, whether sold separately or not, the Federal Circuit’s narrower reading cannot be squared with §289’s text.”

The Federal Circuit then issued an opinion and remanded the case back to Judge Koh for further proceedings; and specifically to articulate a test to define an article of manufacture.  In her order for a new trial on damages, Judge Koh provided the following definition of an “article of manufacture”:

After providing the new definition, expert reports were submitted, subject to new rounds of Daubert motions, resulting in new Daubert rulings.  Judge Koh excluded Samsung’s damages expert, Mr. Wagner, for relying on surveys that did not properly tie to the facts of the case or to the patents’ footprint in the marketplace.  Ms. Davis, Apple’s damages expert, was allowed to testify, but neither expert could offer opinions regarding the actual “article of manufacture,” which was left to other experts.

The jury instructions arguably led jurors to an inevitable verdict.  The instructions specifically guided those jurors through the requisite analysis to arrive at disgorgement of total profits:

No doubt, Samsung will appeal.

Again.

Chrimar Holding Company, LLC et al. v. ALE USA Inc. et al. (Federal Circuit – Decided May 8, 2018)

Plaintiff damages expert Robert Mills had his analysis excluded in part by Judge Love of the Eastern District of Texas.  The part that was not excluded formed Mr. Mills’ testimony in trial which resulted in a damages award of $324,558 for ALE’s patent infringement.

ALE challenged the damages award at the Federal Circuit stating that, “Mr. Mills, in calculating a reasonable royalty,  (1) relied on licenses not comparable to the hypothetical negotiation for the present case; (2) did not adequately separate the value of patented features from the value of standardization and the value of nonpatented features; and (3) prejudicially referred to ALE’s total net revenue and profit.”  The Federal Circuit sided with Chrimar and found ALE’s arguments wanting.

With regard to the first issue, the court noted that there was not sufficient basis to exclude Mr. Mills in the Daubert motion nor in the JMOL phase of the matter, and that his license analysis satisfied the standard of “reasonable adjustments for differences in contexts.”

Regarding the second issue, the court said that Mr. Mills relied upon a standards expert, and a damages expert has right to do so for their own opinion.

Finally, for the third issue, the court explained that it was ALE itself which had first “opened the door” to introduction of defendant’s net revenue.

As in Exmark v. Briggs, the court appears perhaps to afford EMV somewhat greater latitude as part of a comparable license approach, especially where licenses make reference to a unit larger than what might otherwise be considered “the smallest saleable unit” under other analytic approaches to damages.

Johns Hopkins University v. Alcon Laboratories, Inc. et al. (Order Issued April 25, 2018)

Judge Lawrence Stengel of the District of Delaware, Sitting by Designation, approved and adopted the recommendations of Magistrate Judge Sherry Fallon.  Among other recommendations, Judge Fallon recommended denying the motion to exclude plaintiff’s damages expert.

The case involves a method patent for performing eye surgery.  Alcon moved to exclude Brian Napper, plaintiff’s expert, based on alleged violation of the entire market value rule for his use of product and ancillary sales in his royalty base.  Mr. Napper relied upon a comparable patent licensing analysis to support his royalty base which included more than the accused cannula at issue.

Citing to Commonwealth Scientific and Industrial Research Organization (“CSIRO”) v. Cisco, Judge Fallon noted that the royalty base in the comparable license and the one contemplated by Mr. Napper were the same.

Judge Fallon also noted that Mr. Napper provided some accounting for non-infringing uses.  Accordingly, she recommended denying the Daubert motion related to these issues.

An additional issue that arose in the motions for summary judgment was whether the reasonable royalty could be tied to defendant’s sales.  Alcon explained that Alcon would not infringe the patented method because it only sells products; it does not use the products in an infringing manner.  Thus, Alcon reasoned, its sales are not the proper royalty base.  Judge Fallon denied Alcon’s motion because Johns Hopkins showed that the product was purchased for use in an infringing way and because both damages experts (for plaintiff and for defendant) used Alcon sales as the basis for their royalty base.

Ericsson Inc., et al. v. TCL Communication Technology Holdings, LTD., et al. – Part 3 (Jury Verdict Reinstated May 10, 2018)

Yesterday, this blog witnessed a sudden surge in search-engine referrals for Ericsson v. TCL. Our earlier posts on this matter are located here and here. A summary of the damages issues is newly-provided by the court:

In an unexpected turn of events, Judge Payne has reconsidered his decision to vacate the jury verdict and has reinstated the previous award.

The crux of Judge Payne’s reversal hinges on his reconsideration of whether “the Daubert filter” was called for in this matter.  Previously, he had concluded that it was; in his reversal, however, he decides instead that trial afforded sufficient opportunity to defendant to address issues of evidentiary weight.

With regard to the prior conclusion that future products – neither existing nor practicing – were improperly “accused” and thereby improperly made subject to damages, the indeterminate nature of a jury’s decision making now affords the plaintiff its award:

Judge Payne not only affirmed the jury’s verdict of $75 million, but he made the award subject to a $25 million enhancement.

His lengthy discussion of “willfullness” provides useful background to the topic and includes the pithy observation that, “One juror’s ‘malicious’ conduct might be another’s benign competitive business activity.” Finally, Judge Payne concludes:

We admit that we did not foresee Judge Payne’s reconsideration; we suspect TCL is even more surprised.  Yesterday’s developments make a “Part 4” seemingly inevitable.

Texas Advanced Optoelectronic Solutions, Inc. v. Renasas Electronics America, Inc. F/K/A Intersil Corporation – Part 2 (CAFC Opinion May 1, 2018)

A few months ago, we provided background on this matter and discussed the available oral argument.   A summary of Intersil’s appeal is provided by the Federal Circuit:

The Federal Circuit issued an opinion reversing the District Court regarding disgorgement of profits.  The Federal Circuit found that the monetary award for trade secret damages should be vacated, in part, because only one of three asserted trade secrets was found to have been misappropriated; whereas the plaintiff expert had advanced a single damages value concerning all three of those trade secrets… and the resulting monetary award had not been allocated on a trade-secret-by-trade-secret basis.

There were other issues relevant from this opinion.  The Federal Circuit directs damages experts to embrace a finite period of time when assessing disgorgement of profits in trade secrets matters, especially as it concerns analysis involving a supposed “head start.”

The court also decided that TAOS was not entitled to a jury decision on disgorgement, and that the District Court should make that determination.

The Federal Circuit rejected “double recovery” of damages/monetary remedy awards on sales of the same accused product.  In this instance, it was unacceptable that a reasonable royalty should be paid on the same accused sales for which disgorgement was afforded.

Finally, we were hoping for guidance on the issue of gross versus net profits, but alas… the Federal Circuit only briefly notes in passing:

Columbia Sportswear North America, Inc. v. Seirus Innovative Accessories, Inc. (Opinion April 17, 2018)

In yet another case, a judge has ruled that an appropriate prejudgment interest rate is the California statutory rate of 7%.

The case in question involved a design patent and an apparatus patent.  A jury found the apparatus patent invalid; however, it found the design patent infringed, and those claims not invalid.  As a result, the jury awarded the infringer’s profits to the plaintiff, Columbia Sportswear.

After trial and after judgment was rendered, Columbia Sportswear requested the California 7% statutory rate as prejudgment interest, as well as supplemental lost profits.  Judge Marco Hernandez from the Southern District of California awarded both, despite defendant Seirus’ arguments that awarding seven percent interest on top of profits would deprive it of more than it originally earned. The justification for the amount was as follows:

“Prejudgment interest removes the incentive to live off of the profits until caught.” This elegant formulation enjoys enormous economic and judicial leverage.

There is, however, a flip-side….

Court’s recourse to a 7% statutory rate set decades ago divorces compensation from the facts of a case, relies on a rate detached from current financial and economic reality, and we would argue is inappropriate for most awards.

Whirlpool v. TST Water (Judgment March 29, 2018)

Eastern District of Texas Judge Gilstrap denied TST’s motion for Judgment as a Matter of Law in this patent infringement case.  The jury award of $7.6 million stands.

Mr. Bruce McFarlene, Whirpool’s damages expert, offered the opinion that damages for infringement of the ‘894 patent should be $8.7 million.  TST sought to exclude Mr. McFarlene for violation of the entire market value rule; however, prior to the ruling, the parties had stipulated that a filter at issue was the smallest saleable unit.

When TST moved for judgment as a matter of law based upon for Mr. McFarlene’s failure to apportion, Judge Gilstrap reminded the parties of their stipulation and concluded that Mr. McFarlene “did engage in the proper apportionment required by the law, beginning with an appropriate rate.”

Rembrandt Wireless Technologies, LP v. Samsung Electronics Co. Ltd., et al. (Final Judgment March 28, 2018)

The long-running dispute between Rembrandt and Samsung may be over.  Eastern District of Texas Judge Gilstrap issued final judgment in which he determined that Samsung owes Rembrandt $11,111,920 as damages for Samsung’s infringement of the ‘580 and ‘228 patents. This judgment came after years of litigation, after a February 2015 jury verdict, after a ruling on a JMOL, and after an appeal to the Federal Circuit.

In February 2015, a jury determined that Samsung infringed both patents and that the patent claims were not invalid.  The jury awarded Rembrandt a lump sum of $15.7 million.  Judge Gilstrap determined that this award fell within the range offered by Mr. Roy Weinstein (Rembrandt’s damages expert), who had suggested a damages range of $14.5 million to $31.9 million.  Judge Gilstrap denied the JMOL on damages, and Samsung appealed to the Federal Circuit.

The Federal Circuit agreed with Judge Gilstrap’s opinions regarding infringement and damages, but it questioned his decision to allow Rembrandt to recover pre-notice damages.  In its defensive case, it appears Samsung argued that a licensee of Rembrandt’s practiced claim 40 of the ‘580 patent, but that Rembrandt did not require said-licensee to mark those products.  In response, Rembrandt disclaimed said-claim 40 which Samsung argued said-licensee practiced.  Rembrandt then successfully argued to the district court that, because it disclaimed said-claim 40 of the ‘580 patent, there was no marking requirement for the Rembrandt licensee, who did not practice any other claim of the ‘580 patent.  On appeal, the Federal Circuit questioned the district court’s allowance of pre-notice damages based upon disclaiming a claim, and remanded the case for adjustment of the damages award.

The Federal Circuit was interested in discussing whether the marking statute should be on a patent-by-patent basis – or instead, a claim-by-claim basis.  But it did not offer any definitive determination and instead left decision on the matter to the district court.  Ultimately, Rembrandt dropped its pre-notice damages award request, and accordingly, Judge Gilstrap left the patent-by-patent/claim-by-claim marking issue for another day.

The only remaining issue was how best to interpret the jury verdict in order to remove pre-notice damages.  Both parties volunteered competing guidance to Judge Gilstrap concerning how best to remove the pre-notice damages:

Ultimately, Judge Gilstrap decided Rembrandt’s method made more sense and that damages should be $11,111,920, to reflect the jury award minus the pre-notice time period.

Which all leads us to proclaim that the strategy of seeking to reclaim pre-notice damages by disclaiming a claimed claim is one meritorious of some acclaim….