Trustees of Boston University v. Everlight Electronics Co., Ltd. et al
Chief Judge Patti B. Saris: MEMORANDUM and ORDER entered. The Court ALLOWS BU's motion to amend its July 22, 2016 order to permit an interlocutory appeal under 28 U.S.C. § 1292(b) (Docket No. 1782 ). The Court certifies the following cont rolling question of law for interlocutory review: When a trial court applies the maximum recovery rule, is the court limited to considering only the particular form of reasonable royalty identified by the jury on the verdict form (lump sum) or should it consider a running royalties calculation based on the evidence in the record? (Geraldino-Karasek, Clarilde)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
TRUSTEES OF BOSTON UNIVERSITY, )
) Consolidated Civil Action No.
EVERLIGHT ELECTRONICS CO., LTD.,)
TRUSTEES OF BOSTON UNIVERSITY, )
) Civil Action No. 12-12326-PBS
EPISTAR CORPORATION, et al.,
MEMORANDUM AND ORDER
August 9, 2016
On July 22, 2016, this Court denied the defendants’ motion
for judgment as a matter of law and/or a new trial, except with
respect to the issue of damages. See Trs. of Boston Univ. v.
Everlight Elecs. Co., No. 12-11935, 2016 WL 3962826, at *1 (D.
Mass. July 22, 2016). In November 2015, a jury awarded the
Trustees of Boston University (BU) $9,300,000 as a one-time,
lump-sum payment from Epistar, and $4,000,000 as a one-time,
lump-sum payment from Everlight. The Court allowed the
defendants’ motion for remittitur or a new trial on damages with
respect to Epistar and Everlight because the lump-sum damages
awards were not supported by the evidence under Lucent Techs.,
Inc. v. Gateway, Inc., 580 F.3d 1301, 1323-36 (Fed. Cir. 2009).
The Court assumes familiarity with that opinion.
On August 1, 2016, BU moved for reconsideration of the
order granting remittitur or a new trial on damages, which this
Court denied in a separate order. On August 5, 2016, BU notified
the Court that it had elected to have a new trial on damages and
moved, in the alternative, to amend the Court’s July 22 order to
permit an interlocutory appeal under 28 U.S.C. § 1292(b). The
Court ALLOWS the Motion to Amend its July 22 order to permit an
interlocutory appeal (Docket No. 1782).
Generally, the United States Courts of Appeal have
jurisdiction only to hear appeals from final decisions of the
district courts. See 28 U.S.C. § 1291. In limited circumstances,
however, district courts may certify interlocutory appeals of
decisions that are not final. See 28 U.S.C. § 1292(b).
Interlocutory appeals under § 1292(b) require an order that
(1) “involves a controlling question of law,” (2) “as to which
there is substantial ground for difference of opinion,” and
(3) as to which “an immediate appeal from the order may
materially advance the ultimate termination of the litigation.”
Id.; see Caraballo-Seda v. Mun. of Hormigueros, 395 F.3d 7, 9
(1st Cir. 2005). “Certification under § 1292(b) is an
extraordinary procedure and the party seeking it bears a heavy
burden of convincing the court that ‘exceptional circumstances
justify a departure from the basic policy of postponing
appellate review until after the entry of final judgment.’”
United Air Lines, Inc. v. Gregory, 716 F. Supp. 2d 79, 89 (D.
Mass. 2010) (quoting Coopers & Lybrand v. Livesay, 437 U.S. 463,
Appeals under § 1292(b) “require, among other things, leave
of both the trial and appellate courts.” Camacho v. P.R. Ports
Auth., 369 F.3d 570, 573 (1st Cir. 2004). The Federal Circuit
“grants interlocutory review in these multi-faceted patent cases
only rarely.” Jang v. Boston Sci. Corp., 767 F.3d 1334, 1339
(Fed. Cir. 2014).
Here, the Court agrees with the plaintiff that there is a
controlling issue of law on whether the Court must uphold the
jury’s choice of a lump-sum format for a reasonable royalty in
determining the maximum recovery for which there is evidentiary
support. Both the First Circuit and the Federal Circuit follow
the “‘maximum recovery rule,’ which remits an excessive jury
award to the highest amount the jury could ‘properly have
awarded based on the relevant evidence.’” Shockley v. Arcan,
Inc., 248 F.3d 1349, 1362 (Fed. Cir. 2001) (quoting Unisplay,
S.A. v. Am. Elec. Sign Co., 69 F.3d 512, 519 (Fed. Cir. 1995));
see also Trainor v. HEI Hosp., LLC, 699 F.3d 19, 33 (1st Cir.
2012). The evidence at trial would have supported damages awards
in the form of running royalties in the amounts the jury
awarded. However, the evidence did not support the amount of
damages based on the lump-sum calculation the jury actually
chose. In Lucent, the Federal Circuit emphasized that “certain
fundamental differences exist between lump-sum agreements and
running-royalty agreements.” 580 F.3d at 1330. “For a jury to
use a running-royalty license agreement as a basis to award
lump-sum damages . . . some basis for comparison must exist in
the evidence presented to the jury.” Id. In the present case,
the plaintiff’s expert did not provide a basis for comparison
between his running royalty framework and a lump-sum award.
Mr. Ratliff only testified in support of a running royalty,
and did not explain how the jury could convert his figures into
lump-sum payments should the jury choose to adopt a lump-sum
format. He highlighted one of the critical differences between a
running royalty and a lump-sum payment. He explained that when
parties enter “a running royalty, a percentage of sales is an
unknown. You don’t know how much someone’s actually going to use
your patents and what you’re going to sell. So on day one when
you enter a running royalty license, you may never see any
royalties.” Trial Tr. vol. 5, Docket No. 1595, at 107-08. In
contrast, in a lump-sum license, “you never know how much the
licensee is going to use the technology, but they’re paying you
money up-front. It’s a guaranteed return.” Id. at 108.
In contrast, the defendants’ damages expert, Dr. Mangum,
testified that the parties would have negotiated a hypothetical
license under which BU would have accepted the lesser of a
$500,000 lump-sum payment, a $250,000 lump-sum payment plus a
0.5% running royalty on sales of accused products, or a 1%
running royalty on sales of accused products, with respect to
each defendant. Dr. Mangum derived this royalty structure from a
2002 license agreement for the ‘738 patent between BU and Cree
Lighting Company (Cree). Mr. Ratliff also relied heavily on this
agreement in his analysis, even though he only testified in
support of a running royalty.
Dr. Mangum further testified that a “lump-sum royalty is
perfectly applicable in this case,” because the licensing
history of the ‘738 patent is mostly comprised of lump-sum
agreements. Trial Tr. vol. 9, Docket No. 1599, at 67-68. Under
his approach, the damages awards for each defendant were
essentially capped at a $500,000 lump-sum payment. The jury
ultimately agreed with Dr. Mangum that a lump-sum award was
appropriate, but selected damages amounts well above any of the
comparable lump-sum licenses in evidence.
If the Federal Circuit determines that this Court violated
the maximum recovery rule by relying on the jury’s choice of a
lump-sum format, then the Federal Circuit’s decision would avoid
the necessity of a new trial on damages. This Court has not
found a case where the Federal Circuit squarely addressed the
issue of whether a district court can correct a damages figure
on a motion for remittitur by extrapolating a royalty rate and
base from the jury’s lump-sum award without express expert
testimony explaining how to do so. Therefore, the Court finds
that the second requirement of § 1292(b), that the question of
law presents substantial ground for difference of opinion, is
Finally, an immediate appeal of this issue would materially
advance the ultimate termination of the litigation. A successful
determination for BU could forestall the need for a new trial on
damages. This case has been hard fought, lengthy, contentious,
and expensive. It seems counterproductive to retry damages only
to have one of the other issues necessitate a remand. Because
this Court has now issued final judgment on all other issues in
this litigation, an interlocutory appeal of the remaining
damages issue is particularly appropriate.
The Court ALLOWS BU’s motion to amend its July 22, 2016
order to permit an interlocutory appeal under 28 U.S.C.
§ 1292(b) (Docket No. 1782). The Court certifies the following
controlling question of law for interlocutory review:
When a trial court applies the maximum recovery rule, is
the court limited to considering only the particular
form of reasonable royalty identified by the jury on the
verdict form (lump sum) or should it consider a running
royalties calculation based on the evidence in the
/s/PATTI B. SARIS
Patti B. Saris
Chief United States District Judge
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