Imperium IP Holdings (Cayman), Ltd. v. Samsung Electronics Co., Ltd. et al

Filing 403

MEMORANDUM OPINION AND ORDER - GRANTING IN PART AND DENYING IN PART 380 Sealed Motion on the Appropriate Ongoing Royalty. Signed by Judge Amos L. Mazzant, III on 9/13/2017. (baf, )

United States District Court
EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION

IMPERIUM IP HOLDINGS (CAYMAN),
LTD.
v.
SAMSUNG ELECTRONICS CO., LTD.,
SAMSUNG ELECTRONICS AMERICA,
INC., SAMSUNG
TELECOMMUNICATIONS AMERICA,
LLC, and SAMSUNG SEMICONDUCTOR,
INC.

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Civil Action No. 4:14-CV-371
Judge Mazzant

MEMORANDUM OPINION AND ORDER
Pending before the Court is Imperium IP Holdings (Cayman) Ltd.’s (“Imperium”)
Motion on the Appropriate Ongoing Royalty (Dkt. #380).

After reviewing the relevant

pleadings, the Court grants in part and denies in part Imperium’s motion.
BACKGROUND
On June 9, 2014, Imperium filed the instant action against Defendants, alleging
infringement of United States Patent Nos. 6,271,884 (the “’884 Patent), 7,092,029 (the “’029
Patent”), and 6,836,290 (the “’290 Patent”). On February 8, 2016, the jury returned a verdict
finding the following: (1) Defendants infringed Claims 1, 5, 14, and 17 of the ’884 Patent; (2)
Defendants infringed Claims 1, 6, and 7 of the ’029 Patent; (3) Defendants willfully infringed the
patents-in-suit; and (4) Claim 10 of the ’290 Patent was invalid for obviousness (Dkt. #253).
The jury awarded $4,840,772 in damages for infringement of the ’884 Patent and $2,129,608.50
in damages for infringement of the ’029 Patent (Dkt. #253). The jury’s award represents an
implied royalty rate of four cents per product for the ’884 Patent and two cents per product for
the ’029 Patent.

On August 24, 2016, the Court awarded enhanced damages for willful

infringement and entered final judgment (Dkt. #329; Dkt. #330). The Court also imposed an
ongoing royalty in favor of Imperium and ordered the parties to negotiate the ongoing royalty
rate and the products covered by that rate. The parties’ discussions reached an impasse. Since
the parties were unable to resolve the issue of ongoing royalties themselves, the Court finds it
proper to address the issue now.
On June 2, 2017, Imperium filed the present motion (Dkt. #380). On June 9, 2017,
Defendants filed a response (Dkt. #385). On June 14, 2017, Imperium filed a reply (Dkt. #390).
On June 19, 2017, Defendants filed a sur-reply (Dkt. #392).
LEGAL STANDARD
Upon a finding of infringement for a patentee, courts have jurisdiction to “grant
injunctions in accordance with the principles of equity to prevent the violation of any right
secured by patent, on such terms as the court deems reasonable.” 35 U.S.C. § 283. The Federal
Circuit has clarified that in some cases, where an injunction is inappropriate, a court may decide
to award future royalties to be paid in light of post-judgment infringement. Paice LLC v. Toyota
Motor Corp., 504 F.3d 1293, 1314 (Fed. Cir. 2007); see Creative Internet Advert. Corp. v.
Yahoo! Inc., 674 F. Supp. 2d 847, 850 (E.D. Tex. 2009). The Federal Circuit has also given the
district court “broad discretion” in matters concerning an ongoing royalty rate. See Telcordia
Techs., Inc. v. Cisco Sys., Inc., 612 F.3d 1365, 1378 (Fed. Cir. 2010).
ANALYSIS
Imperium asserts it is entitled to an ongoing royalty rate for post-judgment infringement
at the trebled rates the Court imposed for any products found to infringe that were no more than
colorable variations of infringing products. Specifically, Imperium seeks an ongoing royalty rate
of twelve cents per product for the ’884 Patent and six cents per product for the ’029 Patent.

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Defendants contend the appropriate ongoing royalty rate should be 1.3 cents per product
for the ’884 Patent and 0.3 cents per product for the ’029 Patent. Defendants reduced the
implied jury rate for the ’884 Patent by 67% because the relevant claims of ’884 Patent are now
subject to reexamination by the Patent Office and may be found invalid. Defendants also
reduced the implied jury rate for the ’029 Patent by 85% because the Patent Trial and Appeal
Board (“PTAB”) found the relevant claims of the ’029 Patent to be invalid.
The starting point for the Court’s calculation of an appropriate ongoing royalty rate is the
rate determined by the jury for pre-verdict infringement.1 Here, the jury determined a reasonable
royalty rate of four cents per product for the ’884 Patent and two cents per product for the ’029
Patent. The Court will look mainly to any change in the bargaining positions of the parties and
other economic circumstances occurring between the jury’s hypothetical negotiation and a
negotiation conducted after the verdict. ActiveVideo Networks, Inc. v. Verizon Commc’ns, Inc.,
694 F.3d 1312, 1343 (Fed. Cir. 2012). The burden is on Imperium to show that it is entitled to a
royalty rate in excess of the rate initially determined by the jury. Creative Internet, 674 F. Supp.
2d at 855.
Imperium argues two changed circumstances warrant an upward adjustment of the jurydetermined royalty rate. First, Imperium argues in a post-verdict hypothetical negotiation, it
would be in a stronger position to negotiate with Defendants than at the time of the hypothetical
negotiation in 2007. Imperium points to $22.8 million it has received in licensing fees for its
patents in 2013. Imperium states these licensing fees prove that the patented technology is more
of a commercial success today than it was at the time of the hypothetical negotiation in 2007.

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Some courts begin the analysis of an ongoing royalty rate by turning to the factors outlined in Georgia–Pac. Corp.
v. United States Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970). Because the parties did not discuss those
factors in the briefing, the Court will not analyze those factors. Instead, the Court will look mainly to the purported
changes in bargaining position and economic circumstances to guide its analysis of the proper ongoing royalty rate.

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Defendants argue the same 2013 licenses were already accounted for in the jury’s verdict and
thus cannot support an upward modification of the jury-determined royalty rate.
The Court agrees with Imperium’s characterization of the 2013 licensing fees.

In

deciding the royalty rate for post-trial infringement, the Court can properly consider any new
evidence that was not before the jury and any changed circumstances between the hypothetical
negotiation occurring in 2007 and a hypothetical negotiation that would occur now after the
judgment. Mondis Tech. Ltd. v. Chimei InnoLux Corp., 822 F. Supp. 2d 639, 647 (E.D. Tex.
2011), affd sub nom. Mondis Tech. Ltd. v. Innolux Corp., 530 Fed. App’x. 959 (Fed. Cir. 2013).
Although the jury did consider the 2013 licensing fees during trial, this does not change the fact
the evidence may be weighed differently in a hypothetical negotiation occurring today than one
in 2007. For example, the patented technology today is more of a commercial success than in
the 2007, which is evidenced by the $22.8 million Imperium has received in licensing fees. This
would increase Imperium’s bargaining position in a 2017 hypothetical negotiation. However, the
Court must balance Imperium’s increased bargaining position with a December 1, 2016 PTAB
decision that invalidated every claim the jury found Defendants had infringed in the ’029 Patent.
Taking all of these circumstances together, Imperium would have a stronger bargaining position
with respect to the ’884 Patent2 but not with the ’029 Patent.
Second, Imperium urges the Court to enhance damages for Defendants continued willful
infringement based on several of the factors set out in Read Corp. v. Portec, Inc., 970 F.2d 816,
827 (Fed. Cir. 1992).

Imperium argues the jury’s verdict did not include damages for

Defendants’ willful infringement.

Thus, Imperium contends enhancement for Defendants’

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Despite Defendants’ arguments to the contrary, the Court does not consider the Patent Office’s reexamination of
the ’884 Patent to be compelling evidence of a changed circumstance.

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continued willful infringement is proper in the ongoing royalty context when using the jury’s
non-willfulness rate as a starting point. The Court agrees.
A court may, in its discretion, enhance damages up to three times when there is a finding
of willful infringement or bad-faith on the part of the infringing party. 35 U.S.C. § 284; Halo
Elecs. Inc. v. Pulse Elecs. Inc., 136 S. Ct. 1923, 1934 (2016). Here, it is undisputed that, since
the jury verdict, Defendants have continued to infringe the patents-in-suit. “Following a jury
verdict and entry of judgment of infringement and no invalidity, a defendant’s continued
infringement will be willful absent very unusual circumstances.” Affinity Labs of Tex., LLC v.
BMW N. Am., LLC, 783 F. Supp. 2d 891, 899 (E.D. Tex. 2011). The Court must determine
whether the implied royalty rate should be enhanced to account for Defendants’ ongoing willful
infringement.
The Read factors provide guidance in determining whether and in what amount damages
should be enhanced. These factors include: (1) whether the infringer deliberately copied the
ideas or design of another; (2) whether the infringer, when he knew of the other’s patent
protection, investigated the scope of the patent and formed a good-faith belief that it was invalid
or that it was not infringed; (3) the infringer’s behavior as a party to the litigation; (4) the
infringer’s size and financial condition; (5) the closeness of the case; (6) the duration of the
infringer’s misconduct; (7) any remedial action taken by the infringer; (8) the infringer’s
motivation for harm; and (9) whether the infringer attempted to conceal its misconduct. Read,
970 F.2d at 827. Many of these factors, however, are not well-suited for analyzing future willful
infringement. Mondis Tech., 822 F. Supp. 2d at 652. Therefore, the Court will consider those
factors it finds applicable, and the Court will also consider the egregiousness of Defendants’
conduct based on all of the facts and circumstances. Read, 970 F.2d at 826.

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The Court has twice applied the Read factors to this case for Defendants’ egregious
conduct, resulting in a trebling of the royalty rate to twelve cents per product for the ’884 Patent
and six cents per product for the ’029 Patent. In this matter, the Court does not find that trebling
the jury-determined rate to be appropriate. Imperium has not addressed any circumstances that
would relate to the egregiousness of Defendants’ conduct after the jury’s verdict. See, e.g.,
Mondis Tech., 822 F. Supp. 2d at 653 (considering InnoLux’s corporate attitude, which was
reflected by a statement made by its CEO’s after trial that said in part: “[t]he issue of patent
infringement is taken too seriously sometimes,” was strong evidence that enhancement was
warranted). Nevertheless, after balancing the Read factors, the Court considers Defendants’
continued infringement to be unreasonable, deliberate and willful in nature. As such, the Court
enhances the jury-determined rate by 1.5 times. Enhancing the jury-determined rate by 1.5 times
creates an ongoing royalty rate of six cents per product for the ’884 Patent and three cents per
product for the ’029 Patent. The Court’s decision to enhance the ongoing royalty rate in this
manner is consistent with other courts in this district. See Mondis, 822 F. Supp. 2d at 653
(enhancing the ongoing royalty rate by two times); Internet Machs. LLC v. Alienware Corp., No.
6:10-CV-23, 2013 WL 4056282, at *21 (E.D. Tex. June 19, 2013) (enhancing the ongoing
royalty rate by1.5 times); Affinity Labs, 783 F. Supp. 2d at 905 (enhancing the ongoing royalty
rate by 1.33 times).
The Court next decides what products are covered by the ongoing royalty rate. The
burden remains with the patentee to demonstrate the newly accused product is not more than
colorably different from the product found to infringe and that the newly accused product
actually infringes. TiVo Inc. v. Echostar Corp., 646 F.3d 869, 882 (Fed. Cir. 2011). This can be

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achieved by making a comparison between the original product, the modified product, and the
claims. Id.
Imperium requests the ongoing royalty apply to Defendants’ products made, used,
offered for sale, or sold in the United States, including (1) any phone, laptop, or tablet with
flicker reduction functionality for the ’884 Patent; and (2) any phone or camera with camera
flash functionality for the ’029 Patent. Imperium argues Defendants update models of phones
and tablets throughout the year, and these updated models are no more than colorable variations
of infringing adjudicated products.
The Court finds Imperium has not met its burden of demonstrating it is entitled to an
ongoing royalty for additional, unadjudicated products. Imperium has not shown how additional,
unadjudicated products are no more than colorable variations of products already litigated in this
case. Besides a chart that identifies a number of Defendants’ products that are “reasonabl[y]
similar to” adjudicated products, Imperium provides no explanation how each of these products
contain potentially infringing features of the either the ’884 or ’029 Patents (Dkt. #380, Exhibit
3). Because Imperium has not met its burden, the Court cannot award an ongoing royalty for
unadjudicated products that may be no more than colorably different from products found to
infringe. Accordingly, Imperium is entitled to an ongoing royalty only for all adjudicated
products.
CONCLUSION
It is therefore ORDERED that Imperium IP Holdings (Cayman) Ltd.’s Motion on the
Appropriate Ongoing Royalty (Dkt. #380) is GRANTED IN PART and DENIED IN PART.
The Court awards to Imperium an ongoing royalty of six cents per adjudicated product for the
’884 Patent and three cents per adjudicated product for the ’029 Patent.

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SIGNED this 13th day of September, 2017.

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AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE

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