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.