Posts Tagged: "damages"

On August 26, the U.S. Court of Appeals for the Federal Circuit (CAFC) affirmed the U.S. District Court for the Northern District of California’s decision in an interlocutory appeal brought by MLC Intellectual Property, LLC (MLC) regarding orders that precluded certain opinions of MLC’s damages expert in its infringement suit against Micron Technology, Inc. (Micron). The orders precluded the expert from 1) characterizing specific license agreements as reflecting a 0.25% royalty; 2) discussing a reasonable royalty rate when MLC failed to provide essential information and documents related to its damages theory when requested prior to expert discovery; and 3) discussing the royalty base and rate because the expert did not apportion for non-patented features.

Calculating damages in patent infringement suits is a high-stakes, complex matter of law and economics that often starts with the Georgia Pacific factors at the district court and ends with recalculation by the Federal Circuit or an order for a new damages trial. The fight over damages at the conclusion of a patent infringement trial is always contested, and one issue lost, or one inappropriate calculation, can easily skew the math dramatically. Factor in compounding pre-judgment and post-judgment interest, as well as a potential enhancement multiplier for willful infringement under 35 U.S.C. 285, and it is easy to understand why parties fight over everything relating to damages calculations.

On June 13, 2016, the Supreme Court decided Halo Elecs., Inc. v. Pulse Elecs., Inc., addressing standards for recovery of enhanced damages for patent infringement pursuant to Section 284 of the Patent Act, under which a “court may increase the damages up to three times the amount found or assessed.” In Halo, the Supreme Court rejected damages-related requirements imposed by In re Seagate Tech., LLC, a 2007 decision from the U.S. Court of Appeals for the Federal Circuit. With patentee litigants freed from what the Supreme Court called Seagate’s “inelastic constraints” in favor of a totality-of-circumstances approach, a consensus developed that Halo would facilitate recovery of enhanced damages. Statistics suggest alignment with that view.

On April 14, 2021, in a somewhat surprising about face, Judge Rodney Gilstrap ordered a new trial with respect to damages in Optis Wireless Technology, LLC et al. v. Apple Inc., Civil Action No. 2:19-cv-00066-JRG (E.D. Texas), despite previously ruling that no FRAND based claims remained in the case. This ruling adds even more silt to the already murky waters of damages for patents related to standardized technology. In a previous article, we discussed the confusing and problematic convergence of FRAND licensing rates and reasonable royalty damages for patent infringement, despite these two concepts having different origins and seeking to achieve different objectives: i.e., patent damages being a creature of statute and case law and seeking to compensate a patent owner for infringement, whereas FRAND commitments are rooted in contract and seek, amongst other things, to ensure that licenses can be obtained for standardized technology and that royalty stacking does not become an issue (e.g. as reflected in “top-down” approaches used to determine FRAND rates for standards essential patents). As noted in that article, one problem with this convergence is that it facilitates hold out. Why put money in the parking meter if the fine is no more that the fee?

VLSI Technology, originally an integrated circuit manufacturer in the 1990s, is today a non-practicing, patent-owning entity, an affiliate of Fortress Investment Group. VLSI no longer makes or sells any products, but in 2019 it became the owner of U.S. Patent Nos. 7,523,373 and 7,725,759. Each of these patents relates to increasing the power and speed of computer processors. VLSI sued Intel, claiming that almost 1 billion microchips sold by Intel infringed VLSI’s patents. The jury ultimately agreed, entering a verdict of $2.18 billion dollars for VLSI. In simple terms, this amounted to an award of approximately $2 per chip (on a chip that likely is sold for $200 or less per chip based on third-party estimates).

In a previous article, we considered the difference between a reasonable royalty for infringement of a U.S. patent and a fair, reasonable and non-discriminatory (FRAND) rate for licensing standards essential patents (SEPs). Among other points, the article discussed the then ongoing case between Optis Wireless Technology, LLC et al. v. Apple Inc., Civil Action No. 2:19-cv-00066-JRG (E.D. Texas, September 10, 2020). Most recently, Judge Rodney Gilstrap issued an Opinion and Order as to Bench Trial Together with Supporting Findings of Fact and Conclusions of Law (“Opinion and Order”) and ordered Final Judgment be entered. This Opinion and Order sheds a little more light on the issue of damages for SEPs, including the role of exemplary damages for willful infringement, but also leaves some key questions unanswered.

Courts around the world have determined appropriate methodologies for calculating damages on standard essential patents (SEPs) for which patent holders have made an assurance to license on fair, reasonable and non-discriminatory (FRAND) terms. Determinations of patent holdup, licensee holdout, use of worldwide portfolio licensing, incremental value rule, etc. are included in these decisions. The court determines damages based on the below-referenced judgments and FRAND terms when reviewing SEP infringements. Under most patent laws, infringement damages are set based on factors including actual loss due to infringement, if the actual loss is difficult to determine, gains of the infringer, and if both actual loss and gains are not available—determination of appropriate multiples of a reasonable royalty fee. 

During a recent panel discussion at IP Watchdog’s SEP 2020 Conference, a question arose as to the difference, if any, between a reasonable royalty for infringement of a U.S. patent and a fair, reasonable and non-discriminatory (FRAND) rate for licensing standards essential patents (SEPs). The following discusses this question and highlights some recent related judicial developments. According to an article titled “The Effect of FRAND Commitments on Patent Remedies”, appearing in the Utah Law Faculty Scholarship (hereinafter “Contreas et al.”), “there appears to be nothing in U.S. law that compels courts to utilize either the Georgia-Pacific framework, or patent damages law in general, to determine royalties complying with an SEP holder’s FRAND commitment”. The authors further note that “these two concepts (patent damages and FRAND royalty rates) arose via different historical pathways and are intended to achieve different goals”; the former being rooted in statutes and case law, the latter being contractual in origin.

On November 19, the Federal Circuit issued a precedential decision in Vectura Limited v. GlaxoSmithKline LLC in which the court affirmed a judgment entered against GSK finding that Ellipta-brand inhalers infringed patent claims asserted by Vectura. On appeal, GSK had argued that it was entitled to new trials on infringement and damages, but the Federal Circuit disagreed.

On October 17, the Standing Committee of China’s National People’s Congress completed its amendments to China’s Patent Law, marking the fourth time that China has revised its Patent Law since 1992, as well as the first revision since 2008. The amendments, which will go into effect in July 2021, include several patent owner-friendly changes, including increased statutory damages for parties proving patent infringement and the creation of punitive damages to increase damages awards up to five times upon findings that a party intentionally infringed patent claims.

Earlier this week, the United States District Court for the Eastern District of Virginia (the Court) entered what is believed to be one of the highest damages awards ever issued in a patent case, following a 22-day bench trial in Centripetal Networks, Inc. v. Cisco Systems, Inc. In an opinion authored by Senior U.S. District Judge Henry Coke Morgan, Jr., the Court found that Cisco willfully infringed four out of five of Centripetal’s asserted patents and awarded enhanced damages in an amount of $755,808,545 (enhanced by a factor of 2.5X), and prejudgment interest in an amount of $13,717,925, which resulted in a total past damages award amount of $1,903,239,288. In addition, Judge Morgan ordered Cisco to pay Centripetal a running royalty of 10% on the apportioned sales of the accused products and their successors for a period of three years, followed by a second three-year term wherein the running royalty will be 5% on such sales. The royalties would bring the total to a minimum of $2.65 billion and could make it as high as $3.25 billion.

On April 20, international IP firm Rouse announced the positive results of a patent infringement case brought in Chinese courts on behalf of Spin Master, a Canadian children’s toy and entertainment firm. The decision from the Suzhou Intermediate People’s Court  found that defendant Guangzhou Lingdong Creative Culture Technology’s line of accused “Eonster Hunter” products infringed upon Spin Master patent claims covering the company’s line of Bakugan rollable transforming toys. The court awarded damages of 15 million RMB ($2.2 million USD), the largest damages award ever awarded by a Chinese court to a foreign patent owner.

Writing about tips for trying patent jury trials is, in some ways, like teaching skills for hunting dinosaurs. To start, patent jury trials are challenging, which (presumably, at least) would be true for hunting a T-Rex. But patent jury trials have also trended toward the same fate as dinosaurs over the last several years. Creating the Patent Trial and Appeal Board (PTAB) and Inter Partes Review (IPR) process has shifted patent litigation from district court to the U.S. Patent and Trademark Office (USPTO). The now infamous patent “death squads” at the PTAB have mooted the need for many jury trials. At the same time, the Federal Circuit and district courts have used the Supreme Court’s Alice decision and Section 101 as a tool to dismiss large swaths of cases on the pleadings with no discovery, let alone the opportunity to offer evidence or call witnesses at trial. Finally, changes in the law on venue selection have limited patent holders’ ability to select a venue with an express reverence for the right to trial by jury, like the Eastern District of Texas. Thus, like the overall trend in civil cases in general, patent jury trials today are in decline compared with even the last decade.  

On November 27, briefing concluded at the Supreme Court with the filing of Fossil’s respondent’s brief in Romag Fasteners, Inc., v. Fossil, Inc., et al. The final briefing sets the stage for the Court to hear the case on January 14, 2020. The Court will hopefully resolve a current Circuit split on the availability of disgorgement of profits as damages for trademark infringement. Currently, the First, Second, Eighth, Ninth, Tenth and D.C. Circuits all require willful infringement before allowing disgorgement of an infringer’s profits (the First Circuit requires willfulness if the parties are not direct competitors and there is also some disagreement on where the Eighth Circuit falls on the issue). The Third, Fourth, Fifth, Sixth, Seventh and Eleventh Circuits all allow for disgorgement of profits without willful infringement. There has been a Circuit split for some time on this issue and the Supreme Court previously denied certiorari on similar cases but the Court is now set to resolve the split.