DDR Holdings, LLC v. Hotels.com et al

Filing 570

MEMORANDUM OPINION and ORDER - the Court awards costs to DDR. Final Judgment is entered contemporaneously herewith. Signed by Judge Rodney Gilstrap on 6/20/13. (ehs, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION
§
§
§
Plaintiff and Counterdefendant,
§ CIVIL ACTION NO. 2:06-cv-42-JRG
v.
§
§
§
HOTELS.COM, L.P., et al.
§
Defendants and Counterclaimants. §
DDR HOLDINGS, LLC

MEMORANDUM OPINION AND ORDER
I.

INTRODUCTION
Before the Court is Plaintiff DDR Holdings, LLC’s (“DDR”) Motion for Entry of

Judgment. (Dkt. No. 538.) Having considered the parties’ written submissions, the Court
GRANTS DDR’s Motion as set forth below. The Court has separately entered a Final Judgment
contemporaneously herewith, consistent with the findings and holdings of this Opinion.
II.

FACTS & PROCEDURAL BACKGROUND
On October 12, 2012, following a week-long trial, the jury returned a verdict in favor of

DDR, finding that Digital River, Inc. (“Digital River”) had infringed claims 13, 17 and 20 of
United States Patent No. 6,993,572 (“the ’572 Patent”) and awarding DDR $750,000.00 in
damages. The jury also found that Defendant National Leisure Group, Inc. and World Travel
Holdings, Inc. (“NLG/WTH”) infringed claims 13, 17 and 30 of the ’572 Patent, as well as claims
1, 3 and 19 of United States Patent No. 7,818,399 (“the ’399 Patent”) and awarded damages to
DDR of $750,000.00. The jury further determined that claims 13, 17 and 20 of the ’572 Patent
were not invalid.

III.

DISCUSSION
A. Prejudgment Interest
The parties dispute whether pre-judgment interest should be awarded in DDR’s favor and,

if so, in what amount. DDR contends that it is entitled to prejudgment interest from both
Defendants beginning from the date of the parties’ hypothetical negotiation calculated at the
average prime rate (4.83%), compounded annually. (Dkt. No. 538, at 3.) Digital River contends
that (1) DDR is entitled to prejudgment interest at the statutory, not the prime, rate; (2) that DDR is
not entitled to prejudgment before 2010; and (3) that DDR is not entitled to prejudgment interest
during the four-year stay of this litigation during a USPTO reexamination of the asserted patents.
(Dkt. No. 545.) NLG/WTH joins in Digital River’s opposition, and further asserts that DDR is
not entitled to prejudgment interest because “DDR is a non-practicing entity and should not be
entitled to prejudgment interest.” (Dkt. No. 543.)
Upon a finding of patent infringement, “the court shall award patent damages … together
with interest and costs as fixed by the court.” 35 U.S.C. § 284. Prejudgment interest should be
awarded under Section 284 absent some justification for withholding such an award. Gen.
Motors Corp. v. Devex Corp., 461 U.S. 648, 657 (1983); Telcordia Techs., Inc. v. Cisco Sys., Inc.,
612 F.3d 1365, 1378 (Fed. Cir. 2010). The purpose of prejudgment interest is to place the
patentee in as good a position as he would have been had the infringer paid a reasonable royalty
instead of infringing. Beatrice Foods v. New England Printing, 923 F.2d 1576, 1580 (Fed. Cir.
1991).

2

1. Prejudgment Interest Begins at the Date of the Hypothetical Negotiation
The first question the Court must resolve in determining the issue of pre-judgment interest
is the date when pre-judgment interest should begin to accrue. DDR contends that such date
should be January 31, 2006, which was the date of the hypothetical negotiation as set by
Defendants’ joint damages expert. (Dkt. No. 531, at 12-13) (“And that’s the opinion I have with
respect to the payment structure that the parties would have agreed to, if they had gotten together
and negotiated a license earlier in time, in [January] 2006, during … a hypothetical negotiation.”)
Digital River argues, however, that the date of the parties’ hypothetical negotiation is
immaterial, because DDR’s damages expert based his damages model against Digital River upon
accused products sold only from 2010 to 2012. (Dkt. No. 545.) Digital River contends that
DDR is precluded from obtaining prejudgment interest from 2006 to 2012, when DDR’s expert
only calculated damages based on revenue from 2010 to 2012. Id.
In this case, the Court instructed the jury to award damages running from the date of the
hypothetical negotiation, which in this case was agreed to by all parties to be January 31, 2006.
As Digital River’s damages expert testified at trial, “you kind of need the hypothetical negotiation
to happen right around the time of the alleged first infringement, because that’s the time when
whoever’s accused of using the technology or the teachings of the patents-in-suit would have
needed a license … And that would be in January 2006 …” (Dkt. No. 531, at 15) (emphasis
added). Although DDR’s expert presented Digital River from only 2010 to 2012, the jury was
clearly instructed to award DDR a “royalty payment that a patent holder and the infringer … would
have agreed to in a hypothetical negotiation taking place at a time period just prior to when the
infringement first began.” (Dkt. No. 532, at 61-62.) Thus, the jury’s $750,000.00 damages

3

award constituted an award to DDR for Digital River’s infringement occurring just prior to the first
infringement; in this case, January 2006.
2. DDR is Entitled to Prejudgment Interest During the Time-Period that this Case
was Stayed Pending Reexamination
Both Digital River and NLG/WTH argue that, regardless of the time when prejudgment
interest begins to accrue, DDR is not entitled to prejudgment interest during the four year stay of
this case while the asserted patent claims were undergoing reexamination at the USPTO. (Dkt.
No. 545, at 4); (Dkt. No. 543, at 2.) Specifically, the Defendants ask this Court to toll the
prejudgment interest from December 19, 2006 (the date this Court granted DDR’s motion to stay
the litigation) to October 6, 2010 (the date this Court granted DDR’s motion to reopen the case).
(Dkt. No. 178, 194.)
Defendants acknowledge that Court’s customarily decline to toll prejudgment interest
while re-examination proceedings are pending, but argue that the present case is distinguishable
because: (1) the party seeking to recover prejudgment interest (DDR) is the party that initiated the
re-examination proceedings; (2) DDR initiated the re-examination proceedings voluntarily and
unilaterally; (3) DDR is the party that moved to stay the litigation; (4) Digital River opposed the
stay of the litigation; and (4) the re-examination proceeding stayed the litigation for four year, a
period longer than the parties actually spent litigating the case; and (5) the re-examination
proceeding did not result in the narrowing of any issues in the litigation. (Dkt. No. 545, at 5)
(Dkt. No. 543, at 2-5.)
Withholding prejudgment interest “is the exception, not the rule.” Lummus Indus., Inc. v.
D.M. & E. Corp., 862 F.2d 267, 275 (1988). Defendants do not cite one case where another Court
has denied a plaintiff’s motion for prejudgment interest during the period of reexamination. At

4

best, Defendants cite to cases that suggest that a Court may deny prejudgment interest for undue
delay. But at least one other District Court, in a case directly on-point, has expressly ruled that a
Plaintiff-initiated reexamination does not constitute undue delay with regard to the prejudgment
interest inquiry:
In this case … Plaintiff sought the stay and Defendant opposed it.
However, just as in Allen, the stay conserved judicial and attorney
resources. Had the reexamination resulted in the rejection of the
claim in question, Krippelz would have had to narrow or cancel the
claim, or appeal the decision of the reexamination, and the litigation
would have taken a different track or come to an end. Even though
Krippelz ‘caused’ the delay by requesting a stay, because the stay
conserved the resources of the parties and the court, it was neither
unreasonable nor unjustified. For this reason, prejudgment interest
should be awarded for the period during with the case was stayed.
See Krippelz v. Ford Motor Co., 670 F. Supp. 2d 815, 819-20 (N.D. Ill. 2009). The Court agrees
with the analysis in Krippelz, the reexamination conserved judicial and party resources and it was
not unreasonable or unjustified for DDR to seek a stay. For at least this reason, the Court declines
to toll accrual of prejudgment interest during the reexamination of the claims.
3. DDR’s Status as a Non-Practicing Entity Does Not Preclude an Award of
Prejudgment Interest
NLG/WTH contends that “DDR is a non-practicing entity and should not be entitled to
prejudgment interest.” (Dkt. No. 543, at 4.) NLG/WTH does not cite to any case law to support
its position, but rather argues that “any damage DDR has sustained has been addressed through the
jury award, and adding prejudgment interest to such an award would give DDR, a non-practicing
entity, a windfall. (Dkt. No. 543, at 4.) After reviewing the parties’ written submissions, the
Court finds no justification or basis to support NLG/WTH’s argument that DDR should be
precluded from an award of prejudgment interest because it is a non-practicing entity.

5

4. Prejudgment Interest is Calculated Using the Prime Rate
Prejudgment interest on the actual damages assessed against Digital River and NLG/WTH
shall be paid from the date of the hypothetical negotiation calculated at the average prime rate
(4.83%), compounded annually.
B. Post-Judgment Interest
The parties agree that post-judgment interest should be set, pursuant to 28 U.S.C. §1961(a),
at the statutory rate. The Court concurs.
C. Costs
DDR argues that, as the prevailing party in this litigation, it is entitled to costs consistent
with Federal Rule of Civil Procedure 54(d) and 28 U.S.C. § 1920. The Defendants do not oppose
this request. Therefore, the Court awards costs to DDR.
IV.

Conclusion

A consistent Final Judgment is entered contemporaneously herewith.
So Ordered and Signed on this

Jun 20, 2013

6