Posts Tagged: "reasonable royalty"

On November 21st, a jury verdict entered in the Eastern District of Texas awarded $12.3 million in damages to Tinnus Enterprises and ZURU Ltd. in a patent infringement case against major U.S. telemarketing firms Telebrands and its subsidiary Bulbhead.com. The verdict, which also carries a finding of willful infringement of the patents-in-suit, further upheld the validity of patents owned by Tinnus in stark contrast to findings which have issued by the Patent Trial and Appeal Board (PTAB) on those patents.

On November 28 the parties requested an extension of the temporary stay, explaining: “The parties are still actively engaged in settlement discussions but require additional time to potentially resolve this matter.” A date of December 18, 2017, was jointly proposed for either the filing of a stipulated dismissal or joint status report. The District Court granted this extension on November 29, 2017… These requests for temporary stay follow a jury verdict issued in the case on August 3rd, which awarded reasonable royalties to both Philips and ZOLL for infringement of patents asserted by both parties in the case. That verdict awarded Philips a total of $10.4 million for infringement of three patents, while ZOLL was awarded a reasonable royalty of $3.3 million for two patents it asserted in the case.

Enforcement of patents through litigation occurs when licensing has failed to result in an arms length negotiated resolution. In other words, patent owners resort to litigation when there is a market failure… When Keller says that the value of a patent is inextricably tied to the value obtainable through litigation that is just an economic truism. If the patent has no value when enforced in litigation, whether because the subject matter of the innovation has become patent ineligible, or because of a bias that tends toward finding practically everything obvious, the patent has no enforcement value. These litigation realities spill over into the business dealings because a patent that has no enforcement value will have necessarily have no licensing value.

How can a patent that is deemed essential for a standard not be infringed in a product that implements that standard? One possible explanation could be that the claim of essentiality is incorrect. That’s why it is important to document essentiality with a claim chart and ask an independent expert to verify that infringement of the patent claim is prescribed by the standard. But an independent verification is still no guarantee that court will agree that such a patent is really infringed by a product. Another explanation is that the patent is essential for an option in the standard and that the product does not implement this particular option. Most technical specifications of interface standards have options, describing alternative methods to implement the standard. Manufacturers can choose one of the options and will not infringe patents that are essential for implementing another option.

The debate on RAND terms and conditions is mostly about the reasonability of the royalty rate, less about non-discriminatory part. So, what is a “reasonable rate”? Companies that manufacture products based on a standard will demand lower rates or royalty-free licenses, claim harm from patent hold-ups and from royalty stacking. These companies will argue that it is unfair when companies that contribute technology to the standard benefit from the lock-in of the standard because it is now unavoidable to use the essential patents in their products. On the other hand, companies that participated in standards development, and own essential patents because of that investment, claim that lower royalty rates will remove the incentives for future investments in standard setting and will stifle innovation. In the confusion generated by these lobbying interest groups, it makes sense to go back to the one thing everyone seems to agree on: Standards are good.

2015 is the second straight year in which the list of top plaintiffs has been led by eDekka LLC, a patent holding company, which at times has been accused of exhibiting trolling behaviors… Atop this list was the U.S. District Court for the Northern District of California (N.D. Cal.), which between 2005 and 2015 has awarded more than $2.1 billion in compensatory damages over the course of 2,169 cases filed. Following behind them was the U.S. District for the Southern District of California (S.D. Cal.), U.S. District Court for the Southern District of New York (S.D.N.Y.), and followed in fourth place by E.D. Tex. Median damages for cases terminating between 2000 and 2015 showed a different story, however, as that list was topped by the District of Delaware, which had a median award of $10.46 million in 40 cases with damages. The Eastern District of Texas follows in second with a $7.68 million median damages award and in third is the U.S. District Court for the Eastern District of Virginia (E.D. Va.), with a median award of $2.98 million. After that, there’s a steep drop and every other district is showing a median damages award of less than $1 million.

Damages for infringement of a design patent can be recovered for the greater of: (1) total profits from the infringer’s sales under 35 U.S.C. § 289, (2) damages in the form of the patentee’s lost profits or a reasonable royalty under § 284, or (3) $250 in statutory damages under § 289. Here, the Court held that the district court incorrectly instructed the jury to choose between awarding damages under § 284 or § 289. According to the Court, “[o]nly where § 289 damages are not sought, or are less than would be recoverable under § 284, is an award of § 284 damages appropriate.”

This all came to a head when, on February 22, 2012, Microsoft Corporation filed a formal competition law complaint against Google with European Union antitrust regulators. Microsoft’s complaint was brought about because Google (i.e., Motorola Mobility) “has refused to make its patents available at anything remotely close to a reasonable price” and “attempting to block sales of Windows PCs, our Xbox game console and other products.” Well isn’t Google’s “maximum per-unit royalty of 2.25% of the net selling price for the relevant end product” in compliance with FRAND!? If you consider that often dozens (and sometimes, hundreds) of patents cover a single device, the answer is a resounding “no.” At 2.25% per patent, it would take only about four dozen patents before the entire selling price would be paid in royalties – an obviously absurd result.