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….

Greatbatch Ltd. v. AVX Corp. and AVX Filters Corp. Court Grants Motion to Set Aside Verdict (March 30, 2018)

Delaware District Court Judge Stark granted AVX’s motion to set aside the damages verdict. The reason for the set aside was solely because the jury verdict form did not separate damages for each patent accused, and thus constituted a damages award for all patents and all products.

Judge Stark himself observes this case possesses “a convoluted history.” It seems that Judge Stark sanctioned AVX because of its late production of core technical documents relevant to the infringement issues on one of the four patents in suit (i.e., the ‘715 patent). The sanctions levied involved the judge granting a motion for summary judgment that all of AVX’s Ingenio products infringed the ‘715 patent. When the case proceeded to trial concerning the three other patents in suit, the jury returned a damages award in the form of a lump sum of $37.5 million for infringement of all four patents by all of AVX’s accused products. After the jury trial, the court granted a motion for reconsideration of the sanctions. A new trial for the ‘715 patent was held and the result was that the jury found no infringement concerning some of AVX’s Ingenio products, while finding infringement with regard to a smaller subset of Ingenio products.

The reason for the jury award set-aside is attributed to the jury verdict form, which failed to request damages figures on a patent-specific and product-specific basis. Citing two Federal Circuit cases (Verizon Services Corporation v. Vonage Holdings Corp. and DDR Holdings, LLC v. Hotels.com, L.P.), the judge’s opinion seems to provide the only solution – a new trial on damages.

Important to note, AVX initially requested that the verdict form offer a damages line on a patent-by-patent basis; however, Greatbatch prevailed with its insistence for the general verdict form ultimately provided to the jury. Note in this instance, however, that because not all accused Ingenio products were found to infringe the ‘715 patent, a patent-by-patent jury verdict form might not have obviated the need for a new trial on damages under these specific circumstances.

Nox Medical EHF v. Natus Neurology Inc. (Order on Motion to Strike Issued March 26, 2018)

Delaware District Court Judge Andrews issued an order and an opinion regarding patent infringement damages analyses by Richard Bero and Scott W. Cragun. Judge Andrews granted in part the motion to exclude Mr. Cragun, while denying the motion to exclude Mr. Bero.

The alleged infringing product is a sleep belt that was used together with a non-accused sleep monitor. Plaintiff’s expert Mr. Cragun was excluded from issuing some, but not all of his lost profit opinions regarding accused belt sales. Mr. Cragun advanced the view that, but for the alleged infringement, 75 percent of accused belts would have been sold by plaintiff Nox. The basis for his 75 percent figure was grounded in three different categories of belt consumers: 1) those Nox monitor consumers who purchased the accused belt, 2) those Natus monitor consumers who, but-for infringement, would have purchased both Nox’s monitor and Nox’s belt, and 3) those consumers of defendant’s monitor or other third-party monitors, for which consumers would purchase an accused belt.

Judge Andrews allowed Mr. Cragun’s lost profit calculations on #1 (i.e., the installed base of Nox monitor users), but found that his categories #2 and #3 above were speculative.

With regard to category #2, Judge Andrews notes that Mr. Cragun failed to “identify a single customer who would have but did not purchase Plaintiff’s device due to Defendant’s alleged infringement.” With regard to category #3, Judge Andrews explains that Nox only had adapters which connected its patented belt to its own monitor base. To substantiate his third category, Mr. Cragun would have had to prove that “an adapter would have been available in the United States to use Plaintiff’s patented belt with Defendant’s or third-parties’ sleep-monitoring devices.” Mr. Cragun failed to prove any such adapter was available.

Judge Andrews did find Mr. Bero’s reasonable royalty calculation to be based on an acceptable methodology and chose not to exclude those opinions, despite what appears to be a strong motion by the plaintiffs. Mr. Bero appears to have used a novel method as the starting point for his royalty rate considerations: namely, he multiplied the estimate of plaintiff’s lost sales (i.e., 15%) times defendant’s profit margin on accused products to establish his starting point:

We will await to see whether the jury is convinced.

Limelight Networks, Inc. v. XO Communications, LLC and Akamai Technologies Inc. (Opinion March 23, 2018) Part 2

Earlier this year, we discussed Judge Gibney’s rulings on motions to strike the testimony of both Dr. Prowse (i.e., damages expert for plaintiff Limelight) & Mr. Meyer (i.e., damages expert for the defendants). On March 23, Judge Gibney granted another motion to strike new damages analysis provided by plaintiff Limelight.

In this new opinion, Judge Gibney recounts the basis for his earlier exclusion of Dr. Prowse’s damages:

With the most recent iteration, it appears Limelight – without benefit of any expert opinion – sought to apply Dr. Prowse’s royalty rate to a different royalty base: namely, defendant Akamai’s “network traffic” revenue. Doing so, presumably, sought to avoid running afoul of Judge Gibney’s guidance to apportion the sales base, and thereby limit damages so as only to include the incremental value of the patent.

With Limelight’s latest effort, Judge Gibney appears to have had enough:

We will continue to follow this case, especially with an eye on the question of how damages might be determined if Limelight wins on liability.

Ericsson Inc., et al. v. TCL Communication Technology Holdings, LTD., et al. (Jury Verdict Vacated on March 8, 2018) Part 2

In an earlier post, we discussed the possible reasons Judge Payne vacated a jury damages verdict of $75 million for TCL’s infringement of Ericsson’s patents. The redacted version of Judge Payne’s order now provides explanations for why he believes the jury’s award should not stand.

First, Ericsson’s damages expert, Mr. Robert Mills, relied upon a survey expert in a manner that, according to Judge Payne, was “not based on sufficient facts or data, not the product of reliable principles, and not reliably based on the facts of the case.” The survey asked consumers whether they would have purchased the accused products, had those products not possessed the commercial embodiment of the patented technology. Apparently, 28% of those survey respondents said they would not have made the purchase without the accused features. Mr. Mills linked that 28% survey response to a damages theory relating to 28% of TCL’s profits:

Judge Payne explains that Mr. Mills’ use of the otherwise-reliable survey: 1) fails properly to apportion the numerous “essential” features of the phone, and 2) fails to “account for how his theory would result in the erosion of all of TCL’s profit. Realistically, there are many features on a phone that would likely yield survey results similar to those obtained for the ’510 patent, e.g., ability to make a call, text messaging, Wi-Fi connection…. To conclude that any one of these features—simply because it is considered essential to a consumer—could account for as much as a quarter of TCL’s total profit is unreliable and does not consider the facts of the case, particularly the nature of smartphones and the number of patents that cover smartphone features.”

Second, Judge Payne found that Mr. Mills’ use of forecast-products, neither named nor accused in the case, together with a lump sum resulted in the inclusion of unaccused products in his royalty calculation.

Finally, more broadly and of expressed interest in our earlier post, Judge Payne notes timing issues involving a contemplated lump-sum payment, and implied consequences for discounting/interest, might need to be left for a jury to decide:

Ericsson Inc., et al. v. TCL Communication Technology Holdings, LTD., et al. (Jury Verdict Vacated on March 8, 2018)

Judge Payne of the Eastern District of Texas vacated a jury verdict awarding Ericsson a lump sum of $75 million for infringement of its ‘510 patent by TCL Communication. Noting “for reasons stated in a contemporaneous order” (which appears not to be on the PACER docket yet), Judge Payne decided that Plaintiff expert Robert Mills’ damages analysis – partially adopted by the jury – was not acceptable as a matter of law.

From defendant’s motion for judgment as a matter of law, it appears Mr. Mills relied upon sales forecasts which included products not accused of infringing. Further, he relied upon a survey expert who did not tie analysis to the claimed invention. He is also accused of violating the entire market value rule. Finally, Mr. Mills is accused of failing properly to discount his damages analysis back to the date of the hypothetical negotiation, having instead discounted back to the date of notice (i.e., that date damages began to accrue). All but the ultimate issue regarding discounting seem sound reasons for vacating a jury award.

This last alleged transgression is most interesting, however, because it is unclear which date might make most sense for discounting a damages value. Mr. Mills appears to have derived a lump-sum damages award using a hypothetical negotiation construct. The award appears to be based upon past and future (expected) infringement. Mr. Mills then adjusted his lump sum back to the date damages should begin to accrue based upon notice. The JMOL legal argument claims, in contrast, that he should have discounted the award back to the date of the hypothetical negotiation (which was years before the notice date):

The citation above to Wang Labs, Inc. v. Toshiba Corp. appears unrelated to the specific issue of discounting. Similarly, LaserDynamics addresses an issue unrelated to discounting a royalty payment. In both those cited cases, the expert failed to assess a reasonable royalty at the time of the hypothetical negotiation, and instead used the date damages began to accrue as the hypothetical negotiation date. This appears to be different from what Mr. Mills did. Defendants are not arguing that Mills used the wrong hypothetical negotiation date: rather, they are arguing that his proffered lump-sum damages should have been discounted to the date of the hypothetical negotiation. Judge Payne’s order, however, does not elaborate on which of the defendant’s arguments he found persuasive; nor does it afford guidance with regard to the specific issue of proper discounting.

Exergen Corporation v. Kaz USA, Inc. (CAFC decided March 8, 2018)

The Court of Appeals for the Federal Circuit affirmed the damages analysis conducted by Exergen’s damages expert, Barry Sussman, but remanded the case back to the Massachusetts District court for further proceedings.

The two patents at issue involve a thermometer which takes body temperature from the forehead. The jury verdict form shows that Exergen was awarded both reasonable royalty and lost profit damages. The questions before the CAFC were: 1) whether the royalty rate, amounting to 71% of defendant-Kaz’s projected per-unit net profit, was adequately supported, and 2) whether lost profits should have included infringing sales to CVS, a store which did not sell plaintiff-Exergen’s competing thermometer.

Citing to Asetek v. CMI USA, the CAFC determined that the damages could be split between reasonable royalties and lost profits. In its affirmation, the court notes that the expert provided substantial evidence from analysis of the Georgia Pacific factors to support the reasonable royalty damages award. The court also found that the lost profits analysis showed that in a but-for world where Kaz was not selling to CVS, Exergen would have been the only other branded product available for CVS to sell, and that such information was sufficient to support the lost profits award:

Interestingly, because the court reversed the jury’s finding on infringement of claims of one of the two patents-in-suit, the parties agreed that the damages would need to be recalculated: accordingly, the CAFC remanded the damages issue for further proceedings. This is odd given plaintiff’s damages expert was allowed to offer one reasonable royalty damages figure for both patents, and did not proffer a per-patent rate.

Prisua Engineering Corp. v. Samsung Electronics Co., Ltd., et al. (Verdict February 26, 2018)

A jury in the Southern District of Florida found that Samsung infringed Prisua’s asserted patent claims and owed $4.3 million for that infringement. Prior to that verdict, Judge Moore issued opinions and orders on cross Daubert motions, as well as multiple motions in limine.

Of interest is that neither of the Daubert motions – on Prisua’s expert or Samsung’s expert – were granted; however, a critical motion in limine was.

Prisua moved to exclude Samsung’s damages expert, Mr. Lettiere, based upon his use of information that: 1) post-dated the hypothetical negotiation, 2) pertained to litigation settlements, 3) relied upon software licensing agreements, and 4) used the market-based approach. Citing Lucent and Sinclaire Refinery, Judge Moore denied #1. The judge declined to grant #2 based upon citations from Cornell, but reserved judgment. With regard to #3, Judge Moore observed, “The Court is persuaded that the ArcSoft Licensing Agreements—which directly relate to the allegedly infringing technology—are relevant and the probative value of Mr. Lettiere’s related testimony outweighs the risk of prejudice.” Finally, with regard to #4, the market-based approach was permitted to stand.

Samsung moved to exclude Mr. Leathers’ damages analysis because he relied upon Prisua’s pre-litigation offer to Samsung to license its patents. While such basis for exclusion appears compelling, Judge Moore refused to exclude via Daubert the implied pre-litigation benchmark rate.

In a motion in limine, however, Samsung successfully argued exclusion of the licensing negotiations between Prisua and Samsung:

From Samsung’s JMOL on damages, it appears that Mr. Leathers advanced the $0.09 royalty rate, but represented that the rate was derived using the ArcSoft Licensing Agreement. We will see whether Judge Moore finds this testimony (and the implied disregard of the pre-litigation offer) compelling, or whether instead he will grant the JMOL offered by Samsung.