They’re not quite the intellectual thrill of a JMOL ruling, but court orders determining whether to enhance damages and award ongoing royalties are where the money is, literally speaking. A recent order awarding ongoing royalties by declining to enhance damages provided more information when enhancement is and isn’t appropriate.
It’s been a busy few weeks finalizing some other projects, including tests, papers, seminar presentations and the like (and I finally finished that anime-ish P-40 for Parker with accurate paint colors), but I’m finally able to turn more of my attention to some of the very interesting activity in the district in the last few weeks. And speaking of interest, there are few cases that have generated more than VirnetX v. Apple, which just had its most recent trial’s postverdict motions come out. Most legal news is interested in the bottom line – that the verdict amount of $302 million resulted in a $439 million judgment, but for practitioners the analysis of how it got there is of great interest – I am not the only one out there that enjoys a good JMOL. So I wanted to work through the motions, but only after a short … well, that’s a lie, it’s not going to be short – procedural history.
Several recent opinions out of the EDTX provide litigants with more data points on enhanced damages – when are they appropriate and when are they appropriately set aside – on how future royalties are calculated, and and on when Section 285 awards of attorneys fees in “exceptional cases” are appropriate. They also provide a helpful analysis of which non-taxable fees and expenses are not recoverable under Section 285.
In an average year about fifteen patent cases are tried in the Eastern District of Texas. Statistically, about half are complete defense verdicts, and of the remaining ones, only a few have willfulness findings, so it’s a rare case that presents both a Section 284 claim for enhanced damages and a Section 285 claim for exceptional cases status. When we do have them it allows analysis of which conduct supports (or doesn’t) an award, since courts try to ensure that a party isn’t inadvertently penalized twice for the same conduct. But a recent case out of Beaumont presents both, and provides some useful insight into a trial court’s calculation of enhanced damages, as well as the more frequently presented question of whether a case is “exceptional” for Section 285 purposes.
Last fall I posted on a significant opinion awarding enhanced damages by Judge Mazzant in Sherman. He recently amended the order and judgment in response to a motion for reconsideration to reflect some additional activity since the original findings.
I mentioned previously that there’s really no “additur” by which a judge can scratch out the damages number awarded by a jury as insufficient under the evidence and increase it. While a trial court can effectively reduce a verdict via “remittuitur” or via JMOL/MNT practice, the reverse isn’t true. But to use an overused word, patent cases are exceptional in that judges do have the ability to “enhance” damage awards under 35 USC 284 where a jury has made a finding of willful infringement. Such was the case in
Back in September, a Marshall jury in Judge Rodney Gilstrap’s court returned a unanimous verdict finding that the claims asserted by Core Wireless against LG were infringed, willfully infringed, and not invalid. The jury set the damages at $2.28 million. Since the jury found that the infringement was willful, Judge Gilstrap exercised his discretion under 35 USC 284 to decide whether to award enhanced damages, noting the Supreme Court’s recent decision in Halo, which gave district court’s discretion in deciding whether to award enhanced damages, and in what amount. The Court decided that an award toward the lower end of the spectrum was appropriate in this case, and set the award at $456,000 (20% of the potential 200%). The court noted the following factors as supporting an award in this range: First, the court noted that it was undisputed that defendant LG had detailed knowledge of the patents in suit long before the filing of the lawsuit. That it was able to present a noninfringement position at trial the court concluded did not necessarily insulate it from enhanced damages. Additionally while it asserted and invalidity defense, the court noted that LG’s corporate representative testified in his deposition that after a thorough review of the patents in suit he had concluded that the patents were novel and nonobvious. But most important to the court appeared to be the manner in which LG abruptly terminated licensing negotiations. After requiring the plaintiff to send a representative to Korea, LG simply delivered a one page document stating that it would prefer to litigate the portfolio and wait until another major cell phone manufacturer had licensed to the portfolio and established a royalty scheme. The court concluded that this meant that LG’s decision to continue operations without a license was driven not by the merits or strength of its noninfringement and invalidity defenses, but its resistance to being the first in the industry to take a license.