Ericsson Inc. et al v. D-Link Corporation et al
Filing
615
MEMORANDUM AND OPINION AND ORDER DENYING #528 SEALED PATENT MOTION, GRANTING #527 SEALED PATENT MOTION, DENYING #501 MOTION for Judgment as a Matter of Law, DENYING #488 MOTION for Judgment as a Matter of Law, DENYING #491 MOTION for Judgment as a Matter of Law, DENYING #494 SEALED PATENT MOTION, DENYING #529 SEALED PATENT MOTION, DENYING #490 MOTION for Judgment as a Matter of Law, DENYING #493 MOTION for Judgment as a Matter of Law, DENYING #589 SEALED PATENT MOTION, DENYING #489 SEALED PATENT MOTION FOR JUDGMENT AS A MATTER OF LAW ON DAMAGES, DENYING #492 MOTION for Judgment as a Matter of Law, GRANTING #588 SEALED PATENT MOTION FOR JUDGMENT ON POST-TRIAL PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW, DENYING motion #555 . Signed by Judge Leonard Davis on 8/6/2013. (gsg) Modified on 8/6/2013 (gsg).
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
TYLER DIVISION
ERICSSON INC., ET AL.,
Plaintiffs,
vs.
D-LINK SYSTEMS, INC., ET AL.,
Defendants.
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CASE NO. 6:10-CV-473
MEMORANDUM OPINION AND ORDER
Before the Court are the following motions:
Ericsson’s Motion for a Compulsory Future Royalty and Pre-Judgment and PostJudgment Interest (Docket No. 527);
Defendants’ Rule 50(b) Renewed Motion for Judgment as a Matter of Law in Favor of
Defendants (Non-Infringement and Invalidity) and Motion for a New Trial (Docket No.
528);
Defendants’ Renewed Motion for Judgment as a Matter of Law on Ericsson’s Damages
Claims or, in the Alternative, for Vacatur, Remittitur or a New Trial on Damages (Docket
No. 529);
Defendants’ Post-Trial Proposed Findings of Fact and Conclusions of Law (Docket No.
539);
Defendants’ Motion for Judgment on Post-Trial Proposed Findings of Fact and
Conclusions of Law (Docket No. 588); and
Ericsson’s Motion to Supplement the Record (Docket No. 589).
For the reasons stated below, Ericsson’s Motion for a Compulsory Future Royalty and PreJudgment and Post-Judgment Interest (Docket No. 527) is GRANTED. Defendants’ Rule 50(b)
Renewed Motion for Judgment as a Matter of Law in Favor of Defendants (Non-Infringement
and Invalidity) and Motion for a New Trial (Docket No. 528) is DENIED. Defendants’ Renewed
Motion for Judgment as a Matter of Law on Ericsson’s Damages Claims or, in the Alternative,
for Vacatur, Remittitur or a New Trial on Damages (Docket No. 529) is DENIED. Defendants’
Motion for Judgment on Post-Trial Findings of Fact and Conclusions of Law (Docket No. 588) is
GRANTED as set forth below. Ericsson’s Motion to Supplement the Record (Docket No. 589)
is GRANTED. All other pending motions in this case are DENIED.
I.
Background
Plaintiffs Ericsson Inc. and Telefonaktiebolaget LM Ericsson (collectively “Ericsson”)
brought this infringement action against the following Defendants: D-Link Systems, Inc. (“DLink”); Netgear, Inc. (“Netgear”); Belkin International, Inc. (“Belkin”); Acer, Inc. and Acer
America Corp. (“Acer”); Gateway, Inc (“Gateway”); Dell, Inc (“Dell”); Intel Corp.1 (“Intel”);
and Toshiba, Inc. (“Toshiba”). Ericsson alleged infringement of the following patents: 6,772,215
(the “’215 Patent”); 6,330,435 (the “’435 Patent”); 6,466,568 (the “’568 Patent”); 6,424,625 (the
“’625 Patent”); and 6,519,223 (the “’223 Patent). Ericsson also alleged Defendants’ infringement
was willful. Defendants alleged they did not infringe, and that the ‘435 and ‘625 Patents were
invalid based on anticipation.
The Court conducted an eight day jury trial in June 2013, resulting in the following
infringement verdict:2
1
Intel intervened in the case (Docket No. 205), and Ericsson amended its complaint to include Intel as a Defendant.
See Docket No. 249.
2
“Yes” means the jury found the Claim infringed; “no” means the jury found the Claim not infringed. Ericsson only
asserted Claim 11 of the ‘223 Patent against Acer/Gateway, Dell, Toshiba, and Intel. Ericsson only asserted Claim 5
of the ‘568 Patent against D-Link, Netgear, and Belkin.
2
D-Link
Netgear
Belkin
Acer/Gateway
Dell
Toshiba
Intel
Claim 1
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Claim 5
Yes
Yes
Yes
N/A
N/A
N/A
N/A
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Claim 1
No
No
No
No
No
No
No
Claim 2
No
No
No
No
No
No
No
Claim 1
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Claim 2
Yes
Yes
Yes
Yes
Yes
Yes
Yes
N/A
N/A
N/A
No
No
No
No
‘568 Patent
‘625 Patent
Claim 1
‘435 Patent
‘215 Patent
‘223 Patent
Claim 11
Docket No. 508 at 2–3. The jury also determined the ‘625 and ‘435 Patents were not invalid, and
it found damages of $435,000 for D-Link, $3,555,000 for Netgear, $1,170,000 for
Acer/Gateway, $1,920,000 for Dell, $2,445,000 for Toshiba, and $600,000 for Belkin. Id. at 4–5.
The Court bifurcated willfulness into a separate portion of the trial, conducted after the jury
reached its infringement/validity verdict. The jury found that Ericsson failed to prove willful
infringement. Docket No. 510.
3
II.
Defendants’ Rule 50(b) Renewed Motion for Judgment as a Matter of Law in Favor
of Defendants (Non-Infringement and Invalidity) and Motion for New Trial (Docket
No. 528)
In this motion, Defendants challenge nearly every aspect of the infringement and
invalidity portions of the case. First, Defendants contend Ericsson did not present sufficient
evidence of direct infringement of the ‘215, ‘568, and ‘625 Patents. Next, Defendants contend
Ericsson did not present sufficient evidence that any Defendant infringed the asserted method
claims. Next, Defendants contend there was no evidence of indirect infringement. Finally,
Defendants contend the jury erred in finding the ‘625 and ‘435 Patents not invalid.
A. Judgment as a matter of law and new trial standards
Judgment as a matter of law is only appropriate when “a reasonable jury would not have
a legally sufficient evidentiary basis to find for the party on that issue.” FED. R. CIV. P. 50(a)(1).
“The grant or denial of a motion for judgment as a matter of law is a procedural issue not unique
to patent law, reviewed under the law of the regional circuit in which the appeal from the district
court would usually lie.” Finisar Corp. v. DirectTV Grp., Inc., 523 F.3d 1323, 1332 (Fed. Cir.
2008). The Fifth Circuit “uses the same standard to review the verdict that the district court used
in first passing on the motion.” Hiltgen v. Sumrall, 47 F.3d 695, 699 (5th Cir. 1995). Thus, a jury
verdict must be upheld, and judgment as a matter of law may not be granted, unless “there is no
legally sufficient evidentiary basis for a reasonable jury to find as the jury did.” Id. at 700. The
jury’s verdict must also be supported by “substantial evidence” in support of each element of the
claims. Am. Home Assurance Co. v. United Space Alliance, 378 F.3d 482, 487 (5th Cir. 2004).
A court reviews all evidence in the record and must draw all reasonable inferences in
favor of the nonmoving party. See Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133,
150–51 (2000). However, a court may not make credibility determinations or weigh the
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evidence, as those are solely functions of the jury. Id. The moving party is entitled to judgment
as a matter of law “only if the evidence points so strongly and so overwhelmingly in favor of the
nonmoving party that no reasonable juror could return a contrary verdict.” Int’l Ins. Co. v. RSR
Corp., 426 F.3d 281, 296 (5th Cir. 2005).
Under Federal Rule of Civil Procedure 59, a new trial may be granted to any party to a
jury trial on any or all issues “for any reason for which a new trial has heretofore been granted in
an action at law in federal court.” “A new trial may be granted, for example, if the district court
finds the verdict is against the weight of the evidence, the damages awarded are excessive, the
trial was unfair, or prejudicial error was committed in its course.” Smith v. Transworld Drilling
Co., 773 F.2d 610, 612–13 (5th Cir. 1985).
B. Direct Infringement
i.
Applicable Law
To prove infringement, the plaintiff must show the presence of every element or its
equivalent in the accused device. Lemelson v. United States, 752 F.2d 1538, 1551 (Fed. Cir.
1985). Determining infringement is a two-step process. First, the claim must be properly
construed to determine its scope and meaning. Second, the construed claim must be compared to
the accused device or process. Absolute Software, Inc. v. Stealth Signal, Inc., 659 F.3d 1121,
1129 (Fed. Cir. 2011) (citing Carroll Touch, Inc. v. Electro Mech. Sys., Inc., 15 F.3d 1573, 1576
(Fed. Cir. 1993)). “A determination of infringement is a question of fact that is reviewed for
substantial evidence when tried to a jury.” ACCO Brands, Inc. v. ABA Locks Mfr. Co., 501 F.3d
1307, 1311 (Fed. Cir. 2007).
ii.
The ‘215 Patent
Claim 1 of the ‘215 Patent contains the following limitation:
5
Responsive to the receiving step, constructing a message field for a second data
unit, said message field including a type identifier field.
‘215 Patent, Claim 1, at 10:25–27. The Court construed the phrase to mean “responsive to the
receiving step, generating a message field including a field that identifies the message type of the
feedback response message from a number of different message types.” Docket No. 341 at 9
(emphasis added). Defendants contend they do not infringe because their products only transmit
one type of feedback response message. Because their products only transmit one type of
message, their feedback response messages are not identified from “a number of different
message types.”
Ericsson relied on the BlockAck Control field within the 802.11n standard to satisfy the
type identifier field limitation. See Docket No. 528 at 5. The BlockAck Control field relates to
communications between a transmitter and a receiver. Pursuant to the 802.11n standard, the
receiver sends feedback response messages to the transmitter indicating which packets the
receiver has already received. The standard contains three different types of feedback responses:
Basic BlockAck, Compressed BlockAck, and Multi-TID BlockAck. Each response type has a
two-digit identifier to indicate which of the three variants is being used.3 Ericsson’s expert (Dr.
Nettles) testified that these two-digit identifiers satisfy the type identifier field limitation because
they indicate which of the three types of feedback responses is contained in a particular message.
The issue at trial (and in Defendants’ post-trial briefing) is Defendants’ products only use
Compressed BlockAck feedback response messages. Defendants contend their products do not
have the ability transmit Basic BlockAck or Multi-TID BlockAck responses, so they cannot
satisfy the “number of different message types” requirement. Docket No. 528 at 5. Defendants
believe the element of “choice” is critical to satisfying the asserted Claims, and they assert that
3
For example, the identifier for Compressed BlockAck is 01. See Docket No. 581 at 9.
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their receivers are incapable of choosing which type of feedback response message is transmitted
because they always transmit responses in Compressed BlockAck form. Id. at 6.
Defendants also contend Ericsson cannot satisfy the asserted Claims by arguing
Defendants’ engineers chose which feedback response type to transmit when designing the
product. Id. at 9. Instead, Defendants contend the “choice” must be made by the receiver in realtime while in operation. Id. at 10. Defendants argue any other result would vitiate the “from a
number of different message types” limitation. Docket No. 592 at 2. According to Defendants, if
Ericsson’s infringement evidence is sufficient, the Claim scope would be identical regardless of
whether the “number of different message types” language was included. Id.
Ericsson makes three arguments in support of the jury’s infringement verdict. First, it
argues Defendants previously conceded infringement was a factual matter for the jury. Docket
No. 581 at 3. About a week before trial, Defendants filed a Motion for Confirmation of the
Court’s Claim Construction. See Docket No. 448. In that motion, Defendants sought
confirmation that a device “where only one type of message is available” could not meet the
“from a number of different types” limitation. See id. at 5. In its response, Ericsson stated its
infringement theory—“even if the accused devices always choose to use a single Block ACK
variant, they infringe the ‘215 Patent.” Docket No. 460 at 6. Based on this statement from
Ericsson, Defendants withdrew their motion. Docket No. 460. In their brief withdrawing the
motion, Defendants stated “now that Ericsson has confirmed that it will not take a position
inconsistent with the Court’s claim construction or its assertions during the Markman
proceedings, the only remaining issues appear to be disputes of fact.” Id. at 4. Defendants further
stated “Ericsson’s allegations regarding the operation of Defendants’ products…are issues of fact
for the jury.” Id. Ericsson contends Defendants should not be allowed to retreat from their
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previous admission that infringement was a fact issue by now arguing Ericsson’s trial evidence
was legally insufficient. Docket No. 581 at 4–5.
Ericsson characterizes its second argument as a claim construction argument. Ericsson
argues Defendants are adding a “selecting” limitation to the Claim. Id. at 3. Ericsson asserts there
is no requirement that a receiver “select” between a number of different feedback response types.
Id. Instead, the Court’s construction only requires the receiver to “identif[y]” the response type.
Id. at 4.
Third, Ericsson contends it presented legally sufficient evidence to support an
infringement verdict. Id. at 8. Ericsson argues the 802.11n standard uses the type identifier field
to distinguish between three different types of feedback responses. Id. Ericsson asserts that the
type identifier field is mandatory, and Defendants’ transmitters always check the type identifier
field when receiving feedback response messages. Id. Thus, Ericsson argues it presented
sufficient evidence for the jury to find infringement. Id.
There is no real dispute how Defendants’ products operate; the only disputed issue is
whether Defendants’ one-message products could satisfy the “from a number of different
message types” requirement. The jury determined they did, and there is substantial evidence to
support their verdict.
There are three different types of feedback responses available in the 802.11n standard.
6/5/13 a.m. Tr. at 40:10–13 (Nettles). To distinguish between the different types of feedback
responses, each message contains a type identifier. Id. at 39:6–16. Dr. Nettles testified that this
type identifier in Defendants’ products satisfied the type identifier field limitation. Id. at 41:16–
42:5. Dr. Nettles stated that each accused product transmits a type identifier in each feedback
response message. Id. at 42:6–16. Dr. Nettles confirmed this infringed the ‘215 Patent because it
8
indicates which type of message is transmitted, given a number of potential options. Id. at 41:24–
42:3.
Defendants contend their products do not identify the message type from a number of
different types because their products exclusively use Compressed Block Ack. However, this
was an issue appropriately resolved by the jury. Dr. Gibson testified that the type identifier field
is mandatory, and Defendants’ products all check the type identifier field to determine the type
of message. See 6/10/13 p.m. Tr. at 19:4–11. Dr. Nettles further testified that Defendants’
products must include and check the type identifier field to ensure interoperability with other
802.11n-compliant products. See 6/5/13 a.m. Tr. at 43:3–5. Thus, even though Defendants’
products only use Compressed Block Ack, each feedback message must contain a type identifier
bit, and each receiver must check the type identifier bit. See 6/11/13 a.m. Tr. at 104:17–24
(Nettles) (“And they need to transmit that because there’s a possibility that some other
manufacturer will be transmitting some other value in that field, and they need to check that field
to make sure that their products are processing BlockAcks that their products understand how to
deal with. So it’s important to process that field, even though they don’t change it.”). The type
identifier bit indicates the message is in Compressed Block Ack form, one of three available
options in the 802.11n standard. 6/10/13 p.m. Tr. at 18:24–19:7 (Gibson). This was Ericsson’s
infringement theory at trial, a theory the jury accepted, and there was substantial evidence to
support it.
Much of Defendants’ JMOL briefing is an attempt to re-litigate claim construction
positions rejected by both the Magistrate Judge and this Court. During claim construction,
Defendants argued the “type identifier field” limitation should be construed as identifying the
type of feedback response “that is selected from multiple available feedback responses.” Docket
9
No. 341 at 6 (emphasis added). The Magistrate Judge rejected Defendants’ proposed
construction because it improperly imported limitations from the specification. Id. at 8–9.
Defendants objected to the Magistrate Judge’s construction because it failed to include their
proposed limitations, and this Court rejected their argument. See Docket No. 374 at 5 (“The
claim language itself does not include the limitations Defendants urge, and narrowing the claims
as Defendants wish would be inappropriate.”). Thus, there is no requirement the accused
products “select” the type of feedback message or that there be multiple “available” types of
messages. Compare 6/12/13 a.m. Tr. at 104:9–10 (“The multiple ACKs have to be available at
the time of response.”) (Defendants’ closing argument). It is sufficient that the products
“identif[y]” the message type from “a number of different message types.” See Docket No. 341
at 9.
Defendants’ motion for judgment as a matter of law that they do not infringe the ‘215
Patent is DENIED.
iii.
The ‘568 Patent
Claim 14 of the ‘568 Patent requires “a service type identifier which identifies a type of
payload information.” The Court construed the phrase to mean “an identifier that includes the
type of information conveyed in the payload. Examples of types of information include, but are
not limited to, video, voice, data, and multimedia.”
Ericsson relied on the TID subfield value in the 802.11n standard to meet the service type
identifier limitation. See 6/5/13 a.m. Tr. at 115:4–117:21 (Nettles). Each TID subfield contains
an integer ranging from 0 to 7. See PX283 at 253. These eight integers map to four access
categories: 1 and 2 correspond to AC_BK; 0 and 3 correspond to AC_BE; 4 and 5 correspond to
4
Ericsson asserted Claim 1 against all Defendants and Claim 5 against only the Router Defendants (D-Link,
Netgear, and Belkin). See Docket No. 508. The jury found infringement of all asserted ‘568 Claims. See id. Claim 5
depends from Claim 1.
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AC_VI; and 6 and 7 correspond to AC_VO. Each access category is assigned a further
“designation,” which the 802.11n standard describes as “informative.” AC_BK is designated
Background, AC_BE is designated Best Effort, AC_VI is designated Video, and AC_VO is
designated Voice. These “informative” designations are central to the parties’ dispute.
Defendants believe they do not infringe because the access category designations are not
mandatory (i.e. voice data need not be designated “AC_VO” or “Voice”), while Ericsson asserts
that Defendants infringe because their products are capable of using and in some instances
actually use the “informative” classifications.
Defendants contend they do not infringe because the TID subfield does not identify the
type of information contained in a packet’s payload. Docket No. 528 at 12. Instead, Defendants
contend the TID subfield value is only used to prioritize packets for transmission. Id. at 13.
Defendants presented evidence that different types of information can be assigned the same TID
value, and the same type of information can be assigned different TID values. Id. Thus,
Defendants believe the TID subfield does not meet the service type identifier limitation because
the TID subfield does not identify the type of information conveyed in the packet. Id.
Further, Defendants argue their products do not infringe even though the TID subfield
value may correspond to the type of information in the payload. Id. at 14. Defendants contend
merely having the capability of identifying the type of information is insufficient. Id. Defendants
assert there is no requirement in the 802.11n standard that certain TID values be used with
certain types of information. Id. Therefore, even though TID values may be configured to match
their descriptive designations, there is no infringement because TID values do not have to be
configured to match their descriptive designations. Id.
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Ericsson contends it presented sufficient evidence to support the jury’s verdict. Docket
No. 581 at 12. Ericsson argues when Defendants’ products are used in accordance with the
802.11n standard, the TID value identifies the type of information in the payload. Id. at 13. In
support, Ericsson cites internal Intel documents instructing customers to use TID values that
match the type of data in the payload. Id. Further, Ericsson argues both Dr. Nettles and Dr.
Gibson performed testing indicating where the TID values identified the type of data in the
payload. Id. Ericsson argues this is sufficient evidence to support the jury’s infringement verdict.
Id.
Dr. Nettles testified that when devices are used in accordance with the 802.11n standard,
the TID value identifies the type of information in the payload. 6/5/13 p.m. Tr. at 110:9–24; see
6/5/13 p.m. Tr. at 39:7–9 (noting the user can assign “any TID value that he or she chooses”).
Dr. Nettles stated that while the categories were not mandatory, someone using the standard
would actually use the given designations. 6/5/13 a.m. Tr. at 118:5–13; see 6/5/13 p.m. Tr. at
36:24–37:2 (“Q: So what they establish is how the system will treat them, not the kind of
information conveyed in the payload? A: No, I can’t agree with that in general.”). Further, Dr.
Nettles provided several specific examples of products where the TID values match the type of
information in the payload. See 6/5/13 a.m. Tr. at 123:10–15, 124:3–8, 124:16–22. There was
also evidence Intel encouraged its customers to follow the TID subfield designations for video
and voice. See PX514 at 65; 6/10/13 p.m. Tr. at 50:8–53:10 (Gibson).
At best, Defendants’ evidence showed their products can be configured in a noninfringing manner. In particular, Dr. Gibson presented testing data demonstrating that a
particular TID subfield was not required to match the content of the payload. See 6/10/13 a.m.
Tr. at 117:23–120:13. Conversely, Dr. Nettles identified instances where the TID values matched
12
the payload content. See 6/5/13 a.m. Tr. at 123:10–15, 124:3–8, 124:16–22; 6/10/13 p.m. Tr. at
57:16–58:18 (Gibson). The jury was not required to find Dr. Gibson’s testing data more
influential than Dr. Nettles’s product data.5 Further, even though the TID subfield classifications
are not mandatory, they are still included in the 802.11n standard. See PX283 at 253. It was
entirely logical for the jury to conclude that Defendants would choose to follow even the
“informative” portions of the standard.
Defendants’ motion for judgment as a matter of law that they do not infringe the ‘568
Patent is DENIED.
iv.
The ‘625 Patent
Claim 1 of the ‘625 Patent requires:
A transmitter in the data network commanding a receiver in the data network to a)
receive at least one packet having a sequence number that is not consecutive with
a sequence number of a previously received packet and b) release any expectation
of receiving outstanding packets having sequence numbers prior to the at least one
packet;
‘625 Patent, Claim 1, at 10:16–23 (emphasis added). Ericsson relied on transmitted data packets
to satisfy the command to receive limitation. Dr. Nettles testified that data packets sent either
individually (MPDUs) or aggregated (A-MPDUs) act as a command from the transmitter to the
receiver to accept an out of sequence packet. Docket No. 528 at 16. Defendants contend this is
insufficient evidence of a command to receive. Id. at 17. Defendants argue the normal operation
of 802.11n receivers is to receive all packets, regardless of whether the packets are out of
sequence. Id. Further, Defendants’ receivers receive all data packets the same—there is no
5
At the post-trial hearing, the Court repeatedly asked Defendants’ counsel why the specific instances identified by
Dr. Nettles where the TID subfield matched the content of the data were not sufficient to support the jury’s verdict.
Those questions were never directly answered. Instead, Defendants consistently reiterated their position that there
could only be infringement if the TID subfield was required to match the type of data contained within it. This is not
necessary to find infringement. See z4 Techs., Inc. v. Microsoft Corp., 507 F.3d 1340, 1350 (Fed. Cir. 2007)
(affirming an infringement verdict even though the accused products were capable of non-infringing modes of
operation); Golden Blount, Inc. v. Robert H. Peterson Co., 458 F.3d 1354, 1363 (Fed. Cir. 2006).
13
special process for receiving out of sequence packets. Id. at 18. Because all packets are received
the same, there is no need for a command to receive. Id. at 19.
Additionally, Defendants contend Ericsson cannot rely on the data packets themselves as
commands to receive. Docket No. 528 at 21. Defendants argue Ericsson did not present any
evidence of 802.11n programming forcing receivers to receive out of sequence packets. Id.
Therefore, there is no evidence to support the jury’s finding of infringement. Id. Finally,
Defendants argue Ericsson did not present any evidence that the steps of Claim 1 (a method
claim) were actually performed. Id. at 22. Defendants cite testimony from Dr. Nettles that
Defendants “program their devices to do these steps without human intervention.” Id. Defendants
believe this statement is insufficient to prove direct infringement because Ericsson never
demonstrated anyone actually performed the claimed method. See id. (citing Cybersettle, Inc. v.
Nat’l Arbitration Forum, Inc., 243 Fed. Appx. 603, 607 (Fed. Cir. 2007)).
In a footnote, Defendants also contend Ericsson failed to present sufficient evidence that
the accused products command a receiver to release any expectation of receiving outstanding
packets having sequence numbers prior to the at least one packet. Docket No. 528 at 22, n.14.
Defendants contend Ericsson failed to present any evidence the accused products send explicit
BARs when a block acknowledgment is lost. Id. Likewise, Defendants assert that transmission of
A-MPDUs does not meet the claim steps because A-MPDUs do not release expectation of
receiving outstanding packets. Id.
Ericsson argues it presented substantial evidence of a command to receive out of
sequence packets. Docket No. 581 at 17. Dr. Nettles testified that 802.11n receivers are
programmed to treat all packets as commands to receive, so 802.11n-compliant products must
receive all out of sequence packets. Id. Ericsson also contends the jury resolved Defendants’
14
semantic arguments in Ericsson’s favor. Id. at 19. Because all packets must be received,
Defendants contend this indicates 802.11n devices do not need a command to receive. Id.
Ericsson believes the opposite is true. Id. Ericsson argues 802.11n devices receive all packets
because of the command to receive. Id. Ericsson posits that this is a fact issue the jury was
entitled to resolve, and did resolve, in Ericsson’s favor. Id. Accordingly, there is substantial
evidence to support the verdict. Id.
Regarding the “at least one packet” limitation, Ericsson first argues Defendants waived
this argument. Id. at 21. Ericsson contends Defendants never presented this issue in their JMOL
at trial, and they did not make any argument about it to the jury. Id. at 22. Second, Ericsson
argues it presented substantial evidence this limitation was met. Id. at 21. Ericsson asserts it
demonstrated that the accused products command a receiver to release any expectation of
receiving outstanding packets when a receiver receives an A-MPDU. Id. at 22. When a receiver
receives an A-MPDU, it shifts the window forward, releasing any expectation of packets before
the window. Id. Ericsson contends this same function discards packets below the window, so it
satisfies the referenced claim language. Id.
Dr. Nettles testified that 802.11n receivers treat MPDUs and A-MPDUs as commands to
receive out of sequence packets. 6/5/13 a.m. Tr. at 80:4–10. Each receiver contains programming
instructing it to treat out of sequence packets as commands to receive, so the receiver knows to
accept the packets. Id. at 82:4–17. Because of this programming, 802.11n receivers accept all
packets. Id. at 83:7–13. Dr. Nettles further testified that 802.11n receivers operate similarly to a
preferred embodiment in the ‘625 Patent. See 6/11/13 a.m. Tr. at 108:5–11. The ‘625 Patent
contains an embodiment where each transmitted packet contains an enforcement bit. Id. Dr.
Nettles hypothesized that in the embodiment, the system could be configured so the enforcement
15
bit was always set to one. Id. If every enforcement bit was set to one, every packet would be a
command to receive. Id. at 108:12–14. Dr. Nettles contends this is similar to the 802.11n system.
Id. at 108:15–19. Since every “enforcement bit” is set to one, Defendants no longer need to
transmit them. Id. However, every packet is still treated as a command to receive. Id.
Additionally, Dr. Nettles provided substantial testimony about the releasing expectations
limitation. Dr. Nettles stated when a window of expected packets shifts, the receiver releases any
expectation of receiving packets before the window. 6/5/13 a.m. Tr. at 87:14–17. Dr. Nettles
presented two animations explaining how this occurred to the jury. See id. at 87:18–88:6. Dr.
Nettles also testified that the receipt of an A-MPDU causes the window to shift. Id. at 92:6–15.
This window shift causes the receiver to release expectation of receiving packets outside the
window. Id.
Based on Dr. Nettles’s testimony, there is substantial evidence to support the jury’s
verdict. Both sides presented competing evidence about the command to receive. Dr. Gibson
testified that because 802.11n receivers accept all packets, there is no command to receive. See
6/10/13 a.m. Tr. at 30:14–24. Dr. Nettles testified that 802.11n receivers accept all packets
because of the command to receive. See 6/5/13 p.m. Tr. at 57:3–5. This was a fact issue ripe for
jury resolution, and there was substantial evidence to support their decision.
Defendants’ motion for judgment as a matter of law that they do not infringe the ‘625
Patent is DENIED.
v.
Direct Infringement of Method Claims
Defendants argue Ericsson failed to present any evidence any Defendant infringed the
asserted method claims. Docket No. 528 at 23. Defendants contend Ericsson’s only evidence of
direct infringement of the method claims is a statement from Dr. Nettles that Defendants’
programming performs the asserted methods without user intervention. Id. at 24. Ericsson
16
counters that it introduced substantial evidence to support the jury’s verdict. Ericsson argues a
manufacturer can be liable for direct infringement of a method claim through use by its
customers. Docket No. 581 at 24. Further, Ericsson asserts that it presented evidence showing
Defendants’ customers used the accused products without modification. Id. at 25. Therefore,
Ericsson believes Defendants are liable for direct infringement for both making and selling the
accused products. Id.
Ericsson presented substantial evidence that Defendants directly infringed the asserted
method claims. A method claim is directly infringed when someone practices the patented
method. Cardiac Pacemakers, Inc. v. St. Jude Med., Inc., 576 F.3d 1348, 1359 (Fed. Cir. 2009).
A manufacturer can directly infringe a method claim if its products “automatically perform the
disputed steps” without user modification. See SiRF Tech., Inc. v. Int’l Trade Comm’n, 601 F.3d
1319, 1331 (Fed. Cir. 2010) (finding direct infringement when the accused products
automatically performed every step of a method claim). This is exactly the type of evidence
Ericsson presented at trial. Dr. Nettles testified that the accused products perform the patented
methods automatically without user intervention. See 6/5/13 a.m. Tr. at 25:7–11 (‘215 Patent);
78:25–79:10 (‘625 Patent). This is not an issue of joint infringement, as Defendants contend. See
Docket No. 592 at 8. Rather, Ericsson presented evidence Defendants directly infringed by
performing all the steps of the asserted claims.
There was substantial evidence to support the jury’s infringement verdict of the method
claims. Defendants’ motion for judgment as a matter of law that they do not infringe the asserted
method claims is DENIED.
17
C. Indirect Infringement
i.
Applicable Law
Infringement is a question of fact that is reviewed for substantial evidence when tried to a
jury. Finisar Corp., 523 F.3d at 1332. Under 35 U.S.C § 271(b), a party is liable for infringement
if it “actively induces infringement of a patent.” “In order to prevail on an inducement claim, the
patentee must establish first that there has been direct infringement, and second that the alleged
infringer knowingly induced infringement and possessed specific intent to encourage another's
infringement.” ACCO Brands, 501 F.3d at 1312 (internal quotation marks omitted). Thus, to
support a finding of inducement, there must be “evidence of culpable conduct, directed to
encouraging another's infringement, not merely that the inducer had knowledge of the direct
infringer's activities.” DSU Med. Corp. v. JMS Co., 471 F.3d 1293, 1306 (Fed. Cir. 2006).
Furthermore, “[t]he plaintiff has the burden of showing that the alleged infringer's actions
induced infringing acts,” and that the infringer “knowingly induced infringement.” Id. at 1306. A
party has the requisite knowledge if it knew “that the induced acts constitute patent
infringement,” or was willfully blind to the infringement. A party is willfully blind if it believed
there was a high probably that the acts constituted patent infringement and took deliberate steps
to avoid learning of the infringement. Global-Tech Appliances, Inc. v. SEB S.A., --- U.S. ----, 131
S. Ct. 2060, 2068, 2070 (2011); see Smith & Nephew, Inc. v. Arthrex, Inc., 2013 U.S. App.
LEXIS 1038, *10–12 (Fed. Cir. 2013).
A patentee may prove both indirect infringement and the underlying direct infringement
by circumstantial evidence. See Liquid Dynamics Corp. v. Vaughan Co., 449 F.3d 1209, 1219
(Fed. Cir. 2006). “There is no requirement that direct evidence be introduced, nor is a jury's
preference for circumstantial evidence over direct evidence unreasonable per se.” Id. Moreover,
“[t]he drawing of inferences, particularly in respect of an intent-implicating question . . . is
18
peculiarly within the province of the fact finder that observed the witnesses.” Rolls-Royce Ltd. v.
GTE Valeron Corp., 800 F.2d 1101, 1110 (Fed. Cir. 1986); see also Fuji Photo Film Co. v. Jazz
Photo Corp., 394 F.3d 1368, 1378 (Fed. Cir. 2005) (declining to disturb jury's verdict because
intent to induce infringement “is a factual determination particularly within the province of the
trier of fact”).
ii.
Analysis
Defendants contend Ericsson failed to present sufficient evidence of indirect infringement
for two reasons. First, Defendants believe Ericsson failed to prove direct infringement by
Ericsson’s customers for all the reasons recited above. Docket No. 528 at 24. Second,
Defendants argue no reasonable jury could have found they intended for their customers to
infringe the asserted claims. Id. at 25. Defendants contend Ericsson’s proof regarding knowledge
of infringement is lacking. Id. Defendants argue the evidence only demonstrated they were aware
of Ericsson’s lawsuit; they were not aware their products actually infringed. Id. at 26. Defendants
contend they have maintained reasonable and consistent positions regarding non-infringement
and invalidity throughout this trial, so Ericsson failed to prove the knowledge requirement of
induced infringement. Id. at 27. Additionally, Defendants contend Ericsson failed to present any
evidence that Defendants manifested a specific intent to encourage their customer’s infringing
acts. Id. at 28.
Ericsson argues its evidence was “more than sufficient” to support a finding of induced
infringement. Docket No. 581 at 27. Ericsson cites eight different pieces of testimony, including
testimony from Dr. Nettles, that operation in an infringing manner is “the whole reason for
selling” Defendants’ products. See id. at 27–28. Ericsson also cites evidence that Defendants
submitted their products for 802.11n compatibility testing, and they advertised their products’
19
802.11n compliance. Id. at 28. Ericsson believes this evidence “goes far beyond what has been
found to be sufficient evidence to find inducement.” Id.
There was substantial evidence to support a verdict of induced infringement. First,
Ericsson presented substantial evidence of direct infringement by Defendants’ customers.6 See
Akamai Techs., Inc. v. Limelight Networks, Inc., 692 F.3d 1301, 1308 (Fed. Cir. 2012) (en banc)
(“There can be no indirect infringement without direct infringement.”). Dr. Nettles testified that
end customers performed the patented methods when they used the accused products. 6/5/13 a.m.
Tr. at 25:12–14. Ericsson also presented evidence that Defendants sold infringing units to end
customers. See 6/6/13 a.m. Tr. at 10:21–12:2 (Bone). This is sufficient evidence to infer end
customers used the infringing products. See Liquid Dynamics, 449 F.3d at 1219 (noting that a
patentee may prove indirect infringement through circumstantial evidence).
Second, Ericsson presented substantial evidence Defendants “knowingly induced
infringement and possessed specific intent to encourage another’s infringement.” See Akamai
Techs., 692 F.3d at 1308. The parties stipulated that Ericsson notified each Defendant of its
infringement allegations before the suit was filed. 6/4/13 p.m. Tr. at 7:5–10:20; see id. at 7:1–4
(Petersson) (“Q: Did Ericsson contact each of the Defendants in this case about taking a license
to Ericsson’s Wi-Fi patents? A: Yes, we did.”). After receiving notice, Defendants continued
selling the accused products. See 6/6/13 a.m. Tr. at 11:18–21 (Bone). Dr. Nettles testified that
Defendants’ accused products comply with the 802.11n standard, and the accused products
automatically infringe without user intervention. 6/5/13 a.m. Tr. at 25:21–26:2. Ericsson also
presented evidence Defendants advertise their 802.11n compliance. See 6/6/13 p.m. Tr. at
175:18–176:13 (McFarland) (describing testing by the Wi-Fi Alliance). Defendants submit their
6
Defendants also re-urge non-infringement arguments made previously in their Motion. See Docket No. 528 at 24.
For the reasons set forth above, those arguments are without merit.
20
products for independent compliance testing, then indicate on their packaging the products are
compliant. See 6/4/13 p.m. Tr. at 123:15–22, 130:18–136:17 (Nettles); 6/5/13 p.m. Tr. at
144:15–24 (Bone). Taken together, this is substantial evidence of “specific intent to encourage
another’s infringement.” See DSU Med., 471 F.3d at 1306.
Defendants’ motion for judgment as a matter of law regarding indirect infringement is
DENIED.
D. Invalidity
i.
Applicable Law
Patents are presumed valid, and overcoming this presumption requires clear and
convincing evidence. Ariad Pharm., Inc. v. Eli Lilly & Co., 598 F.3d 1336, 1354 (Fed. Cir. 2010)
(en banc). A patent claim is invalid as anticipated if the claimed invention was known or used by
others in this country, or patented or described in a printed publication in this or a foreign
country, before the invention by the applicant. 35 U.S.C. § 102(a) (2006). Anticipation requires
the presence in the prior art of each and every limitation of the claimed invention. Amgen, Inc. v.
Hoffman-La Roche Ltd., 580 F.3d 1340, 1366 (Fed. Cir. 2009).
ii.
The ‘625 Patent
At trial, Defendants presented evidence that a submission to the European
Telecommunications Standards Institute (“ETSI”) by Dietmar Petras anticipated Claim 1 of the
‘625 Patent. See DX120 (“Petras Reference” or “Petras”). Ericsson argued the Petras Reference
did not disclose a command to receive, as required by Claim 1. Defendants now contend they
presented clear and convincing evidence the Petras Reference disclosed a command to receive,
as well as every other limitation in Claim 1.
21
Dr. Nettles testified at trial (and Ericsson argues now) that Petras was not anticipatory
because it failed to show a command to receive an out of sequence packet. Docket No. 581 at 33.
In particular, the discard message relied on by Defendants was not a command to receive; it was
merely a notification the transmitter has discarded a packet. Id. Further, Ericsson contends Dr.
Heegard admitted the Petras Reference did not need a command to receive. Id. at 34. Defendants
contend their evidence demonstrates that in the Petras Reference, a discard message is a
command to receive. Docket No. 592 at 9. Defendants argue the discard message forces the
receiver to accept the packet to which the message is attached, but the receiver would not
otherwise accept the packet. Id. at 9. Thus, Defendants believe the Petras Reference discloses
every element of Claim 1. Id.
Anticipation of the ‘625 Patent presents a classic fact issue for the jury. At issue was
whether a single reference disclosed a single limitation. Ericsson’s expert testified it did not;
Defendants’ expert testified it did. After reviewing the evidence, the jury determined the
Defendants failed to prove by clear and convincing evidence that the reference contained the
limitation. Such a determination is squarely within the purview of the jury, and Defendants failed
to present sufficient evidence to overturn the verdict. See Palasota v. Haggar Clothing Co., 499
F.3d 474, 480 (5th Cir. 2007); The Johns Hopkins Univ. v. Datascope Corp., 543 F.3d 1342,
1344 (Fed. Cir. 2008).
Dr. Nettles testified the Petras discard message in was not a command to receive. 6/11/13
a.m. Tr. at 99:23–100:2. According to Dr. Nettles, the only effect of the Petras discard notice is
to shift the window of anticipated packets. Id. at 100:7–11. However, shifting the window has no
impact on whether out of sequence packets are received. Id. at 100:12–14. Further, Dr. Nettles
testified there was “definitely no disclosure” in the Petras Reference indicating a discard notice
22
was a command to receive. Id. at 100:15–21; see 6/11/13 p.m. Tr. at 17:20–24 (Nettles) (“Q:
And that’s what they said—and that’s what Dr. Heegard said represented a command to receive,
right? A: That’s what he identified. I don’t agree with him.”).
Dr. Heegard testified the discard message in Petras was a command to receive. See
6/10/13 p.m. Tr. at 142:22–143:15. According to Dr. Heegard, the Petras discard message acts
like the enforcement bit in the ‘625 Patent, and it commands a receiver to accept out of sequence
packets. See id. Ericsson presented evidence that Dr. Heegard’s position conflicted with the
analysis of Dr. Gibson, Defendants’ non-infringement expert. Ericsson cross-examined Dr.
Heegard on a statement from Dr. Gibson’s expert report where Dr. Gibson stated that a “message
that informs a receiver that the transmitter has discarded packets, does not command the receiver
to receive any packets.” 6/10/13 a.m. Tr. at 159:2–9. Dr. Heegard then conceded that discard
messages are “generally speaking” not commands to receive. Id. at 160:16–19; see id. at 160:25–
161:2 (“So generally is a discard message a command to receive, no. In this system, this message
is a command to receive.”). Thus, Dr. Heegard admitted his view of the Petras discard messages
conflicted with the generally understood operation of discard messages. Given that Dr.
Heegard’s entire invalidity analysis was based on Petras discard messages being commands to
receive, the jury was entitled to view this concession in Ericsson’s favor.
Both sides presented competing views of the Petras reference, and the jury accepted
Ericsson’s view. Cf. Goodman v. Harris Cnty., 571 F.3d 388, 398 (5th Cir. 2009) (quoting
United States v. Anderson, 933 F.2d 1261, 1274 (5th Cir. 1991)) (“We accept all credibility
choices that tend to support the jury’s verdict.”). There is sufficient evidence to support the
jury’s finding of no invalidity of Claim 1 of the ‘625 Patent. Defendants’ motion for judgment as
a matter of law is DENIED.
23
iii.
The ‘435 Patent
Defendants also relied on the Petras Reference to show anticipation of Claims 1 and 2 of
the ‘435 Patent. At trial, Ericsson presented testimony that Petras did not disclose removing
entries from a list of expected packets. Ericsson now argues this evidence was sufficient to
support the jury’s verdict. See Docket No. 581 at 35. Ericsson contends Dr. Heegard made
inconsistent statements about the list of expected packets. Id. at 35. Ericsson believes Dr.
Heegard first testified a buffer was the list, then later testified a buffer was not the list. Id.
Regardless, Ericsson argues Dr. Heegard’s final list does not track packets but instead makes
timestamp calculations. Id. at 36. Therefore, because the Petras Reference does not teach
removing entries from a list of expected packets, it is not anticipatory. Id.
Defendants contend no reasonable jury could have found Claims 1 and 2 not invalid in
light of the Petras Reference. Docket No. 528 at 33. Dr. Heegard testified that the Petras
Reference discloses a list that tracks which packets are expected or missing from the receiver’s
buffer. Id. at 34. Defendants argue this evidence mandated a finding of invalidity by the jury. Id.
Analysis of the ‘435 Patent is very similar to the analysis of the ‘625 Patent. Once again,
Dr. Heegard testified the Petras Reference contained a particular limitation, and Dr. Nettles
testified it did not. Both sides presented competing expert opinions, and the jury sided with
Ericsson. This is no reason to disrupt the jury’s verdict.
Ericsson presented substantial evidence to support the verdict. Dr. Nettles testified Petras
failed to disclose removing entries from a list of expected packets. 6/11/13 a.m. Tr. at 101:5–13.
Dr. Nettles explained that the figure identified by Dr. Heegard was something “you would never
want to remove expectations from.” Id. at 101:23–25. According to Dr. Nettles, the figure
identified by Dr. Heegard is used to make calculations about timestamps. Id. at 102:2–6.
24
Consequently, if an entry was removed from the list, the timestamp calculation would be
incorrect. See id.
Dr. Heegard presented a somewhat muddled view of how he believed the Petras
Reference actually disclosed a list of expected entries. On direct examination, Dr. Heegard
testified the receiver keeps track of which packets “have been received and are sitting in the
buffer.” 6/10/13 p.m. Tr. at 137:13–17. Heegard explained that a receiver must “keep track of
what things are received and they’re sitting in the buffer, and it’s got to keep track of what things
it expects to receive.” Id. at 137:18–22. On cross examination, Dr. Heegard then stated “the
buffer’s not the list.” Id. at 162:23. Instead, one of ordinary skill would know to keep a list.7 Id.
at 163:3–15. Dr. Heegard further testified that the buffer was not the list, but “a list keeps track
of a buffer.” Id. at 164:21–22. On re-direct, Dr. Heegard clarified that Petras shows “a buffer and
with a list keeping track of it.” Id. at 166:22–23.
As is apparent from the quoted testimony, Dr. Heegard struggled to consistently articulate
his reasoning for anticipation. Combined with the testimony of Dr. Nettles, there was more than
enough evidence to support the jury’s verdict of no invalidity of the ‘435 Patent. Defendants’
motion for judgment as a matter of law is DENIED.
E. Motion for New Trial
As an alternative to judgment as a matter of law, Defendants request a new trial on all
validity and infringement issues. As discussed above, there was substantial evidence to support
the jury’s verdict of both infringement and no invalidity. Accordingly, Defendants’ motion for a
new trial on infringement and validity is DENIED.
7
See 6/10/13 p.m. Tr. at at 164:14–17 (“The buffer has 1 and 3 in it. So I know, okay, 1 and 3 sitting in the buffer, 0
and 2 is missing. I keep track. 0 and 2 is missing. 1 and 3 is in the buffer. That’s the list.”) (Heegard).
25
III.
Defendants’ Renewed Motion for Judgment as a Matter of Law on Ericsson’s
Damages Claims or, in the Alternative, for Vacatur, Remittitur or a New Trial on Damages
(Docket No. 529)
In this motion, Defendants challenge the jury’s damage award. First, Defendants contend
the damages violate the entire market value rule. Next, Defendants contend Ericsson’s expert
(Mr. Bone) relied on non-comparable licenses and failed to apportion between patented and nonpatented features. Next, Defendants contend the damage award is inconsistent with Ericsson’s
RAND obligations and fails to account for royalty stacking. Finally, Defendants request a new
trial on damages. Defendants contend the Court’s jury instructions and verdict form contained
prejudicial errors.
A. Applicable Law
A patentee is entitled to damages for infringement under 35 U.S.C. § 284. The burden of
proving damages falls on the patentee. Dow Chem. Co. v. Mee Indus., Inc., 341 F.3d 1370, 1381
(Fed. Cir. 2003). There are two alternative categories of infringement compensation—the
patentee’s lost profits, and the reasonable royalty the patentee would have received through
arms-length bargaining. Lucent Tech., Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir.
2009).
To ascertain a reasonable royalty, patentees commonly consider a hypothetical
negotiation in which the asserted patent claims are assumed valid, enforceable, and infringed,
and attempt to ascertain the royalty upon which the parties would have agreed had they
successfully negotiated an agreement just before infringement began. Id. at 1324–25; see also
Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1554 n.13 (Fed. Cir. 1995) (en banc). Calculation of
a reasonable royalty requires determination of two separate and distinct amounts: 1) the royalty
base, or the revenue pool implicated by the infringement; and 2) the royalty rate, or the
26
percentage of that pool “adequate to compensate” the plaintiff for the infringement. Cornell
Univ. v. Hewlett-Packard Co., 609 F. Supp. 2d 279, 286 (N.D.N.Y. 2009).
The entire market value rule “recognizes that the economic value of a patent may be
greater than the value of the sales of the patented part alone.” See King Instruments Corp. v.
Perego, 65 F.3d 941, 951 n.5 (Fed. Cir. 1995). “The entire market value rule allows a patentee to
assess damages based on the entire market value of the accused product [if] the patented feature
creates the ‘basis for customer demand’ or ‘substantially create[s] the value of the component
parts.’” Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1318 (Fed. Cir. 2011) (citing
Lucent, 580 F.3d at 1336). “[T]he patentee . . . must in every case give evidence tending to
separate or apportion the defendant’s profits and the patentee’s damages between the patented
feature and the unpatented features, and such evidence must be reliable and tangible, and not
conjectural or speculative,” or show that “the entire value of the whole machine, as a marketable
article, is properly and legally attributable to the patented feature.” Id. (citing Garreston v. Clark,
111 U.S. 120, 121, 4 S.Ct. 291, 28 L.Ed. 371 (1884)); see also Lucent, 580 F.3d at 1336–67. For
minor patent improvements, a patentee cannot justify using the entire market value of an accused
product simply by asserting a lower royalty rate. Uniloc, 632 F.3d at 1319–20 (rejecting contrary
interpretation of Lucent, 580 F.3d at 1338–39). Although a reasonable royalty analysis
“necessarily involves an element of approximation and uncertainty,” Unisplay, S.A. v. Am. Elec.
Sign Co., 69 F.3d 512, 517 (Fed. Cir. 1995), the Court must ensure the jury verdict is supported
by sufficient evidence.
“A district court’s duty to remit excessive damages is a procedural issue, not unique to
patent law.” Imonex Servs., Inc. v. W.H. Munzprufer Dietmar Trenner GMBH, 408 F.3d 1374,
1380 (Fed. Cir. 2005). In the Fifth Circuit, a decision on remittitur and new trial is within the
27
sound discretion of the trial court. See Volger v. Blackmore, 352 F.3d 150, 154 (5th Cir. 2003).
The standard is highly deferential, and damages are set aside “only upon a clear showing of
excessiveness.” i4i Ltd. v. Microsoft Corp., 598 F.3d 831, 857 (Fed. Cir. 2010) (quoting Duff v.
Werner Enters., Inc., 489 F.3d 727, 730 (5th Cir. 2007)). An excessive award exceeds the
“maximum amount calculable from the evidence.” Carlton v. H.C. Price Co., 640 F.2d 573, 579
(5th Cir. 1981).
B. Entire Market Value Rule and Apportionment
Defendants first contend they are entitled to judgment as a matter of law because the
jury’s damages award violates the entire market value rule. Docket No. 529 at 2. Defendants
contend Mr. Bone derived his $0.50 per unit royalty from the value of end products (i.e. routers
and computers) instead of limiting his royalty base to the smallest salable patent-practicing unit.
Id. at 3. Defendants argue the WiFi chips are the smallest salable unit, and there was no evidence
the chips drove demand for the end products. Id. at 4. Accordingly, Defendants assert that Mr.
Bone improperly relied on end-product revenues to arrive at his royalty. Id.
Ericsson argues Mr. Bone’s analysis did not violate the entire market value rule because
it did not implicate the entire market value rule. Docket No. 584 at 8. Ericsson contends Mr.
Bone’s royalty base was not the market value of the end products; it was the market value of the
asserted patents’ contributions to the end products. Id. at 9. Additionally, Ericsson contends both
sides agreed on the proper royalty base—the stipulated number of accused products sold—and
Defendants’ own expert used router and computer sales as his base. Id. at 9.
Defendants next contend they are entitled to judgment as a matter of law because Mr.
Bone failed to apportion between patented and unpatented features. Docket No. 529 at 6.
Defendants argue Mr. Bone did not properly apportion Ericsson’s portfolio rate to account for
28
the value of the patented features as opposed to non-patented features. Id. As an example,
Defendants cite testimony from Dr. Perryman that only 17.5% of a WiFi chip relates to 802.11n,
and that 17.5% covers significantly more than the accused Quality of Service and Block
Acknowledgment features. Id. Ericsson counters that Mr. Bone’s analysis contained two distinct
levels of apportionment to arrive at an appropriate royalty. Docket No. 584 at 10. Further,
Ericsson argues the Court rejected an identical argument in Defendants’ pre-trial Daubert
motion, so there is no reason to reach a different result post-trial. Id.
Defendants’ entire market value rule and apportionment arguments are nearly identical to
those raised (and rejected) pre-trial. See Docket No. 443. These same arguments are once again
rejected post-trial. Defendants’ apportionment argument ignores two different levels of
apportionment in Mr. Bone’s analysis. At the first level, Bone only considered revenue from the
licensing of Ericsson’s 802.11 portfolio. At the second level, Mr. Bone apportioned the 802.11
licensing revenue to extract the value attributed to non-asserted patents. Combined, these two
levels limit the revenue pool to the market value of the asserted patents’ contribution to the
802.11 standard.
The first level of apportionment reduced the revenue pool to the value of Ericsson’s
802.11 contributions. On multiple occasions, Ericsson licensed its 802.11 portfolio to third
parties. See 6/5/13 p.m. Tr. at 148:6–20 (Bone). Each license covered only a particular portion of
the 802.11 standard—namely, the portion of the 802.11 standard the third party licensees
believed was covered by Ericsson’s portfolio.8 Defendants attempt to downplay the significance
of these licenses, but they reflect a real-world valuation of Ericsson’s 802.11 patents. See 6/5/13
p.m. Tr. at 146:15–17, 150:24–152:18 (Bone); Monsanto Co. v. McFarling, 488 F.3d 973, 978–
8
6/6/13 a.m. Sealed Tr. at at 3:10–7:3 (HP); 7:5–9:17 (Buffalo); 9:18–11:23 (RIM); 11:24–13:18 (Option); 13:19–
14:22 (Ascom); 14:23–16:5 (Sonim).
29
79 (Fed. Cir. 2007) (“An established royalty is usually the best measure of a “reasonable” royalty
for a given use of an invention because it removes the need to guess at the terms to which parties
would hypothetically agree.”). The licensees would not have paid value for a license unless they
believed Ericsson’s patents covered at least a portion of the standard. Similarly, the licensees
would not have paid value for the portion of the standard not covered by Ericsson’s patents.
Consequently, the money paid under these licenses represents the market’s valuation of the
802.11 contributions of Ericsson’s patents. See LaserDynamics, Inc. v. Quanta Computer, Inc.,
694 F.3d 51, 67 (Fed. Cir. 2012) (quoting ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 869
(Fed. Cir. 2010)) (“The trial court must carefully tie proof of damages to the claimed invention’s
footprint in the market place.”).
The five patents asserted in this case are not the entirety of Ericsson’s 802.11 portfolio—
they are only a subset of it. However, Mr. Bone’s second level of apportionment factors this into
account. Mr. Bone reduced his rates “to account for the fact we’re only dealing with five patents
in this case.” 6/6/13 a.m. Sealed Tr. at 18:24–19:1. He further testified that the five asserted
patents comprise at least fifty percent of the value of Ericsson’s 802.11 portfolio. Id. at 20:3–14.
This was a realistic and thorough attempt to apportion revenue to only the asserted patents.
Compare VirnetX Inc. v. Cisco Sys., Inc., 2013 WL 789288, at *2 (E.D. Tex. Mar. 1, 2013)
(Davis, J.). The end result of Mr. Bone’s analysis is a royalty pool comprising money paid by
third party licensees for the value of the asserted patents’ contributions to the 802.11 standard.
See 6/6/13 a.m. Sealed Tr. at 58:20–59:1 (“Q: Okay. Is there some indications to you in this case
that Ericsson’s portfolio is worth 50 cents? A: Yes. Q: And what is that? A: The actual
agreements that companies were willing to pay for Ericsson’s technology, the six agreements
30
we’ve talked about.”); LaserDynamics, 694 F.3d at 68 (requiring courts to examine only
revenues associated with the patented components).
Defendants also argue Mr. Bone’s analysis violates the entire market value rule by using
the value of end products without proving the patented feature is the basis for customer demand
of the accused product. This argument fails for many of the same reasons as Defendants’
apportionment argument. Mr. Bone’s revenue base is not the market value of the end products.
Rather, it is the market value of the contribution of the asserted patents to the end products. This
distinction is critical to the analysis. The licensing revenue from Ericsson’s portfolio is
attributable only to the value Ericsson’s patents add to the licensees’ end products; it is not
attributable to the end products as a whole. It goes without saying that the licensees would not
have paid value for portions of the 802.11 standard unrelated to Ericsson’s patents. Therefore,
Mr. Bone’s report does not implicate the entire market value rule. See Versata Software, Inc. v.
SAP Am., Inc., --- F.3d ----, 2013 WL 1810957, at *12 (Fed. Cir. May 1, 2013) (finding that a
plaintiff’s damage model did not implicate the entire market value rule because it “merely
accounted for all infringing sales”); Fractus, S.A. v. Samsung Elecs. Co., 876 F. Supp. 2d 802,
833 (E.D. Tex. 2012) (Davis, J.).
Additionally, Mr. Bone’s analysis calls for a per unit royalty on all sales of accused
products. As a per unit royalty, it does not fluctuate with the price of the end product. Regardless
of the ultimate sale price of the end product, the royalty rate remains constant. 6/5/13 p.m. Tr. at
147:16–17 (“So the value is on a per-unit basis regardless of whether it’s in a router or a
laptop.”) (Bone). This further illustrates that Mr. Bone did not rely on the value of end products
in his analysis.9 See SynQor, Inc. v. Artesyn Techs., Inc., 709 F.3d 1365, 1383 (Fed. Cir. 2013)
9
Mr. Bone acknowledges that it would not have been appropriate to calculate damages as a percentage of the sales
of end products like routers and computers. See 6/5/13 p.m. Tr. at at 147:8–17.
31
(determining that a plaintiff did not invoke the entire market value rule when it “never sought to
justify its damages figure based on the price of the customer end products”).
Defendants’ motion for judgment as a matter of law regarding the entire market value
rule and lack of apportionment is DENIED.
C. Ericsson’s RAND Obligations
Next, Defendants contend they are entitled to judgment as a matter of law because the
jury’s damages award is inconsistent with Ericsson’s RAND obligations. Docket No. 529 at 8.
Defendants argue Ericsson is under a RAND obligation to provide licenses to an “unrestricted”
number of licensees, but Ericsson refused to offer a license to Intel. Id. At Ericsson’s request, the
verdict form did not include a space to award damages against Intel. Id. Defendants contend this
is equivalent to a refusal to offer a license to Intel, which runs contrary to Ericsson’s RAND
obligations. Id.
Ericsson contends Defendants waived this argument because Defendants never objected
to the verdict form on the grounds that it did not contain a space to assess damages against Intel.
Docket No. 584 at 11. Additionally, Ericsson contends this issue is moot because it has now
offered a license to Intel. Id.
Defendants basically argue Ericsson breached its RAND obligations by not suing Intel,
then not seeking damages against Intel after it intervened in the case. This argument fails for two
reasons. First, Ericsson is the plaintiff. As the plaintiff, it is the master of its own case.
Originally, Ericsson elected not to sue Intel, and Defendants cite no law requiring a patentee to
sue all potential licensees.10 After Intel intervened in the case, Ericsson elected not to pursue
10
Defendants argue Ericsson must license an unrestricted number of users on fair and reasonable terms. See Docket
No. 529 at 7.
32
damages from Intel. See 6/5/13 p.m. Tr. at 145:12–146:7 (Bone). Once again, Defendants cite no
authority that a plaintiff must seek damages from all Defendants in a case.
Second, this issue is moot because Ericsson offered Intel a license prior to trial. See
6/4/13 p.m. Tr. at 51:2–15 (Petersson). The license offer was on the same terms as Ericsson’s
offers to other Defendants, and it was at the same rate Ericsson sought against the other
Defendants at trial. See id. Intel may argue the license offer was superficial, but Intel itself never
meaningfully engaged in licensing talks with Ericsson after Ericsson’s initial offer. See id. at
57:4–15. Intel cannot rely on its failure to negotiate to prove Ericsson’s failure to make a
legitimate license offer.
Defendants’ motion for judgment as a matter of law that Ericsson breached its RAND
obligation by not seeking damages against Intel is DENIED.11
D. Non-Comparable Licenses
Next, Defendants contend they are entitled to judgment as a matter of law because
Ericsson presented evidence of non-comparable licenses. Docket No. 529 at 8. Initially,
Defendants argue Mr. Bone’s $0.50 royalty rate is not found in any of the prior licenses. Id.
Instead, it is an artificial value manufactured by Mr. Bone for the purposes of this litigation. Id.
Defendants also argue the licenses are non-comparable because they cover different scopes. Id.
None of the licenses were limited to the asserted patents, and several licenses had a worldwide
scope. Id. at 10. Defendants next contend the licenses are non-comparable because they include
value derived from Ericsson’s “overall patent leverage in the cellular space.” Id. at 12. Finally,
Defendants assert that none of the licenses were comparable because none were negotiated with
Ericsson’s RAND obligations in mind. Id. at 9.
11
There is further analysis of Ericsson’s licensing policy towards Intel below in the Court’s findings of fact and
conclusions of law. See infra.
33
Ericsson argues it only presented comparable licenses at trial, and the jury was in the best
position to determine the degree of comparability of the licenses. Docket No. 584 at 11.
Additionally, it argues Defendants’ arguments about the value of the previous licenses are
misplaced. Id. at 12–13. Ericsson contends third party licensees like Buffalo, HP, and RIM are in
the best position to determine the value of Ericsson’s 802.11n portfolio, so their licenses are
highly relevant. Id. at 13.
Defendants’ arguments regarding the comparability of Mr. Bone’s licenses were more
appropriate for cross examination than for judgment as a matter of law. See ActiveVideo
Networks, Inc. v. Verizon Commc’ns, Inc., 694 F.3d 1312, 1333 (Fed. Cir. 2012) (“The degree of
comparability of the…license agreements as well as any failure on the part of [the plaintiff’s]
expert to control for certain variables are factual issues best addressed by cross examination and
not by exclusion.”). All of the licenses Mr. Bone cited contain the patents in suit, and he gave
detailed testimony addressing his apportionment of those licenses.12 See 6/5/13 p.m. Tr. at
149:5–14 (Bone); 6/6/13 a.m. Sealed Tr. at 3:10–27:7 (Bone); 6/4/13 a.m. Sealed Tr. at 3:11–
12:16, 14:4–28:7 (Petersson); LaserDynamics, 694 F.3d at 79–80 (“Actual licenses to the
patented technology are highly probative as to what constitutes a reasonable royalty for those
patent rights because such actual licenses most clearly reflect the economic value of the patented
technology in the marketplace.”); compare ResQNet, 594 F.3d at 870 (vacating a damages award
because the plaintiff relied on licenses with no relationship to the claimed invention). Defendants
had the opportunity to cross-examine Mr. Bone about his apportionment, and they presented
their own damages expert to rebut Mr. Bone’s analysis. See 6/6/13 a.m. Sealed Tr. at 27:24–
50:25 (Bone cross examination); 6/11/13 a.m. Sealed Tr. at 3:18–25 (Perryman). The
12
Defendants contend Mr. Bone’s analysis was flawed because he failed to rely on the Infineon license. See Docket
No. 529 at 9–10. However, the Infineon license did not even contain the patents in suit.
34
determination of which expert’s apportionment was more credible was an issue for the jury, and
there is no reason to re-open the jury’s factual determination.
Defendants also argue the licenses are incomparable because “there is no evidence that
the licenses were negotiated with Ericsson’s RAND obligations in mind.” See Docket No. 529 at
9. However, they cite no binding authority that a prior license is incomparable as a matter of law
if it was not negotiated within the RAND framework. See id. at 8–13; Docket No. 593 at 4. Even
if there were binding authority on the issue, Mr. Bone testified that the prior licenses were all
negotiated within the framework of Ericsson’s RAND obligations. 6/6/13 a.m. Tr. at 13:4–8.
Ericsson also presented evidence that it considered its RAND obligations when establishing a
$0.50 per unit royalty. 6/4/13 a.m. Sealed Tr. at 15:22–16:17 (Petersson); 6/4/13 p.m. Tr. at
14:11–25, 53:13–54:6 (Petersson).
Additionally, Ericsson’s RAND obligations are public knowledge. Ericsson’s letters of
assurance to the IEEE are publically available, so any potential licensee would be able to
determine whether Ericsson had RAND obligations. The previous licensees were sophisticated
parties, making it likely they would have been aware of Ericsson’s RAND obligations during the
negotiations. Taken together, there was substantial evidence that the prior licenses were
negotiated within the framework of Ericsson’s RAND obligations.
Defendants’ motion for judgment as a matter of law regarding the comparability of prior
licenses is DENIED.
E. Royalty Stacking
Defendants next contend they are entitled to judgment as a matter of law because the
verdict failed to account for royalty stacking. Docket No. 529 at 13. Defendants believe “a
legally proper damages model would necessarily account for the danger that royalty stacking
35
would block or impede the 802.11 standard.” Id. at 14. Defendants argue one of Ericsson’s
RAND obligations is to account for the impact of royalty stacking, but said accounting is missing
from Mr. Bone’s analysis. Id. Defendants contend the “undisputed evidence” established that a
proper RAND rate should be limited to “pennies or fractions thereof” per unit. Id.
Ericsson counters that Defendants’ royalty stacking arguments are purely hypothetical.
Docket No. 584 at 14. Ericsson argues Mr. Bone considered the possibility of royalty stacking,
but he could not find any evidence that a rate of $0.50 per unit would create royalty stacking
problems. Id. Additionally, Ericsson asserts that Defendants failed to present any evidence of
actual royalty stacking on 802.11n-compliant products. Id. at 15.
The best word to describe Defendants’ royalty stacking argument is theoretical. At trial,
Defendants extensively cross-examined Mr. Bone regarding the impact of royalty stacking on
standard-essential patents.13 See 6/6/13 a.m. Tr. at 22:15–29:21 (Bone). At one point,
Defendants’ counsel even suggested a theoretical stack could be $23.30 on a $2.50 standardessential chip. See id. at 29:12–21. However, given the opportunity to present evidence of an
actual stack on 802.11n essential products, Defendants came up empty. Dr. Perryman did not
testify the actual royalty stack was $23.30. Nor did he testify the actual stack was $16, as
Defendants’ counsel also hypothesized. See id. at 29:3–10. Instead, Dr. Perryman never
identified an actual royalty stack; he never even attempted to determine the actual amount of
royalties Defendants currently pay for 802.11 patents. See 6/11/13 a.m. Tr. at 64:19–65:3 (“Q:
Did you try to figure out the cost per unit that these Defendants are paying for standard essential
802.11 patents? A: No, sir, I did not.”). Further muddling Defendants’ royalty stacking
13
Mr. Bone testified that third party licensees considered royalty stacking during negotiations with Ericsson. See
6/6/13 a.m. Sealed Tr. at 17:3–20.
36
argument, their infringement expert conceded that “very little of the standard is patented.” See
6/10/13 p.m. Tr. at 5:16–23 (Gibson).
Defendants’ motion for judgment as a matter of law regarding royalty stacking is
DENIED.
F. Method Claims
Next, Defendants contend they are entitled to judgment as a matter of law because the
jury failed to properly account for the method claims found infringed. Docket No. 529 at 14.
Defendants assert that damages should be limited to the demonstrated number of accused
products that have been used in an infringing manner. Id. Defendants argue Ericsson did not
provide any evidence regarding how often Defendants or their customers actually performed the
claimed methods. Id. at 15. Thus, Ericsson’s damages theories with respect to method claims are
insufficient as a matter of law. Id.
Ericsson argues it presented substantial evidence to support the jury’s damages award
regarding the methods claims. Docket No. 584 at 15. Ericsson contends Dr. Nettles testified that
Ericsson’s method claims are infringed during normal operation of the devices. Id. Thus, it
presented evidence that Defendants infringed by making and selling the accused products. See id.
(citing SiRF Tech., 601 F.3d at 1331).
As discussed above in the infringement section, Ericsson presented substantial evidence
to support the jury’s infringement verdict for the method claims. There was substantial evidence
to support both direct and induced infringement by Defendants. Accordingly, Defendants’
motion for judgment as a matter of law regarding method claim damages is DENIED.
G. Defendants’ Motion for Vacatur, Remittitur, or a New Trial
37
In the alternative, Defendants ask the Court to either vacate or remit the jury’s damages
award or grant a new trial on damages. See Docket No. 529 at 16–21. Remittitur is within the
sound discretion of the trial court and is only appropriate when the damages verdict is “clearly
excessive.” See Alameda Films S.A. v. Authors Rights Restoration Corp., 331 F.3d 472, 482 (5th
Cir. 2003). Most of Defendants’ arguments in this section are identical to their JMOL arguments
presented above.14 For the reasons set forth above, there was substantial evidence to support the
jury’s verdict.
Defendants also present two additional arguments that they are entitled to a new damages
trial. First, the verdict form did not include an entry for a paid-up lump sum license. Docket No.
529 at 22. The verdict form instructed the jury to determine the amount of damages that “would
fairly and reasonably compensate Ericsson for infringement of the patents by the following
Defendants up to the time of trial.” Id. at 23. Defendants contend this was a prejudicial error
requiring a new trial, going so far as to say their “Constitutional rights to have the jury decide the
appropriate form of the reasonable royalty” had been violated. See Docket No. 593 at 8.
Defendants assert that they presented evidence at trial a lump-sum license was the appropriate
form of damages. Id. Second, Defendants argue the Court committing prejudicial error by
instructing the jury “an infringer’s net profit margin is not the ceiling by which a reasonable
royalty is capped.” Docket No. 529 at 23. Defendants contend there was no evidence about their
profit margins, so this instruction was improper. Id. at 24.
Regarding the lump sum license issue, Ericsson argues no new trial is needed. Docket
No. 584 at 16. Ericsson contends Defendants’ argument is illogical because both sides stipulated
to the number of infringing sales. Id. Because both sides agreed at trial to the proper damages
14
For example, Defendants contend a new trial is appropriate because: (1) the verdict was against the great weight
of the evidence; (2) prejudicial error occurred by allowing Mr. Bone to testify; and (3) prejudicial error occurred
because the Court admitted several non-comparable licenses.
38
base, Defendants should not be permitted to challenge that stipulation after the fact. Id. Ericsson
also argues Defendants failed to cite any authority indicating they are entitled to a jury
determination of future royalties. Id. at 17. With regard to the jury instruction regarding
Defendants’ profit margins, Ericsson makes two arguments. First, it argues the instruction was an
accurate statement of the law. Id. Second, Ericsson contends the instruction was necessary. Id. at
18. Ericsson contends Defendants’ statements to the jury about the cost of the 802.11n chip
necessitated the instruction. Id.
A new trial is not warranted based on the verdict form. The verdict form stated:
What sum of money, if paid now in cash, do you find from a preponderance of the
evidence would fairly and reasonably compensate Ericsson for infringement of
the patents by the following Defendants up to the time of trial?
Docket No. 508 at 5. Defendants contend this instruction constitutes prejudicial error because it
prevented the jury from awarding a lump sum royalty. Docket No. 529 at 23. However, the jury
was specifically instructed that a lump sum royalty was appropriate. See Docket No. 504 at 28.
Further, Defendants cite no authority for the proposition that there is a constitutional right to
have a jury award future damages. See Brooktree Corp. v. Advanced Micro Devices, Inc., 977
F.2d 1555, 1581 (Fed. Cir. 1992) (affirming a district court’s refusal to present the issue of future
damages to the jury); Telecordia Techs., Inc. v. Cisco Sys., Inc., 612 F.3d 1365, 1377–78 (Fed.
Cir. 2010); Paice LLC v. Toyota Motor Corp., 504 F.3d 1293, 1316 (Fed. Cir. 2007).
Nor is a new trial warranted based on the Court’s instruction about profit margins. The
Court gave the following instruction to the jury:
An infringer’s net profit margin is not the ceiling by which a reasonable royalty is
capped. The infringer’s selling price can be raised, if necessary, to accommodate
a higher royalty rate. Requiring the infringer to do so, may be the only way to
adequately compensate the patentee for the use of its technology.
39
6/12/13 a.m. Tr. at 43:18–24. This is an accurate statement of the law, taken almost verbatim
from a recent Federal Circuit opinion. See Douglas Dynamics, LLC v. Buyers Prods. Co., --F.3d ----, 2013 WL 2158423, at *7 (Fed. Cir. May 21, 2013); Rite-Hite, 56 F.3d at 1555.
Defendants do not contest the legal correctness of the statement. Rather, they argue there was no
basis for giving the instruction because Ericsson did not present any evidence of Defendants’
profit margins. See Docket No. 529 at 24; 6/11/13 p.m. Tr. at 81:10–23. However, Defendants
repeatedly referenced the impropriety of a $0.50 royalty on a $2.50 chip. See 6/11/13 a.m. Tr. at
27:4–28:11, 46:5–15 (Perryman); 6/6/13 a.m. Tr. at 20:11–18 (Bone cross examination). These
arguments are thinly-veiled references to Intel’s profit margin. In light of these statements, it was
not improper or prejudicial to give the instruction.
Defendants’ motion for vacatur, remittitur, or a new trial on damages is DENIED.
IV.
Ericsson’s Post-Trial Motion for a Compulsory Future Royalty and Pre-Judgment
and Post-Judgment Interest (Docket No. 527)
In this motion, Ericsson requests an ongoing future royalty of $0.15 per unit. Ericsson
also requests pre-judgment and post-judgment interest at the Texas statutory rate, compounded
quarterly.
A. Applicable Law
A court should award interest in patent cases after a finding of infringement. 35 U.S.C.
§ 284. The purpose of prejudgment interest is to place the patentee in as good a position as it
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). Prejudgment interest
should be awarded unless there is a significant justification for withholding such an award, such
as a delay in bringing suit against the infringer. See Gen. Motors Corp. v. Devex Corp., 461 U.S.
648, 657 (1983); Bio-Rad Labs. v. Nicolet Instrument Corp., 807 F.2d 964, 967 (Fed. Cir. 1986).
40
The interest rate used to calculate prejudgment interest and the method and frequency of
compounding are left to the discretion of the district court. See Uniroyal, Inc. v. Rudkin-Wiley
Corp., 939 F.2d 1540, 1545 (Fed. Cir. 1991); Studiengesellschaft Kohle, m.b.H. v. Dart Indus.,
Inc., 862 F.2d 1564, 1579–80 (Fed. Cir. 1988) (citing Bio-Rad Labs., 807 F.2d at 969). Interest
should be awarded from the date of infringement to the date of judgment. Nickson Indus., Inc. v.
Rol Mfg. Co., 847 F.2d 795, 800 (Fed. Cir. 1988).
B. Future Royalty
Ericsson contends it is entitled to an ongoing future royalty of $0.15 per unit. Docket No.
527. At the post-trial hearing, Defendants stated they did not oppose a $0.15 per unit future
royalty if the Court denied their JMOL motions. Accordingly, the Court GRANTS Ericsson’s
motion for an ongoing royalty of $0.15 per unit.
C. Pre-Judgment and Post-Judgment Interest
At the post-trial hearing, Defendants stated they would not oppose awarding interest to
Ericsson. However, the parties debate which interest rate should be used.
Ericsson argues it should be awarded pre-judgment and post-judgment interest at the
Texas statutory rate, compounded quarterly. Docket No. 527 at 5. Ericsson acknowledges that
this Court generally awards interest at the prime rate, compounded quarterly. Id. However,
Ericsson contends the prime rate is artificially low because of the Federal Reserve’s recent
efforts to combat the recession. Id. Therefore, Ericsson believes the Texas statutory rate more
accurately reflects current market conditions. Id. at 6. Defendants believe the appropriate interest
rate is the prime rate, compounded quarterly. Docket No. 579 at 5.
This Court’s standard practice is to award interest at the prime rate, compounded
quarterly. See VirnetX Inc. v. Apple Inc., ---F. Supp. 2d----, 2013 WL 692652, at *19 (E.D. Tex.
41
Feb. 26, 2013) (Davis, J.) (collecting cases). In keeping with its standard practice, the Court
GRANTS Ericsson’s motion for pre-judgment15 and post-judgment16 interest at the prime rate,
compounded quarterly.
V.
Ericsson’s Motion to Supplement the Record (Docket No. 589)
As stated at the hearing, Ericsson’s motion to supplement the record is GRANTED.
Defendants may respond by supplementing the record with brief portions of Mr. Bone’s report.
VI.
Defendant’s Motion for Judgment on Post-Trial Proposed Findings of Fact and
Conclusions of Law (Docket No. 588)
On June 12, 2013, the Court conducted a bench trial on the issue of Ericsson’s RAND
obligations. See 6/12/13 p.m. Tr. at 6:15–194:4. Defendants now ask the Court to make three
findings. See Docket No. 588 at 2. First, Defendants ask the Court to determine the RAND rate
for Ericsson’s 802.11n essential patents. Second, Defendants seek a determination that Ericsson
breached its RAND obligations by refusing to license chip suppliers (i.e. Intel) on RAND terms
and by demanding a royalty rate that exceeds RAND amounts. Third, Defendants request a
determination that Ericsson is not entitled to injunctive relief. The Court will address each issue
individually.
A. Determination of a RAND Royalty
There is no need for the Court to determine an appropriate RAND royalty for the
infringed patents because the jury already determined a reasonable royalty for those same
patents, and the jury considered Ericsson’s RAND obligations when rendering its verdict. In
their post-trial briefing, Defendants asked the Court to determine an appropriate RAND rate for
the patents in suit. See Docket No. 588 at 2. However, Defendants wavered on whether they
15
Each Defendant is responsible for the following pre-judgment interest: $98,275 for Acer/Gateway; $127,626 for
Dell; $22,508 for D-Link; $224,141 for Netgear; and $152,798 for Toshiba.
16
Each Defendant is responsible for the following post-judgment interest, per day, from the date this judgment
issues: $113 for Acer/Gateway; $182 for Dell; $41 for D-Link; $336 for Netgear; and $231 for Toshiba.
42
would agree to actually pay the RAND rate determined by the Court. In essence, Defendants
asked the Court to determine Ericsson’s initial RAND offer, but they refused to make any
assurances they would accept such an offer. This would have amounted to nothing more than an
advisory opinion as to Ericsson’s initial RAND license offer. See Artic Corner, Inc. v. United
States, 845 F.2d 999, 1000 (Fed. Cir. 1988) (“At the heart of the ‘case or controversy’
requirement is the prohibition against advisory opinions.”); Teva Pharm. USA, Inc. v. Novartis
Pharm. Corp., 482 F.3d 1330, 1337–38 (Fed. Cir. 2007).
Defendants cannot ask the Court to determine a RAND rate but refuse to be bound by it.
At the post-trial hearing, the Court ordered the Defendants to notify it whether they would accept
a RAND rate entered by this Court. Defendants responded that they would “accept a Courtdetermined RAND rate limited to the Subject Products and Subject Patents.” See Docket No. 612
at 1. A RAND rate limited to the Subject Products and Subject Patents is another way of saying
Defendants would accept the jury’s verdict. The jury’s verdict was limited to the asserted
patents, and it was limited to the accused products. Thus, Defendants will only agree to pay a
RAND rate for the territory already covered by the trial. Because there was substantial evidence
to support the jury’s verdict, there is no need for this Court to make its own factual determination
of an appropriate royalty rate.
Defendants attempt to distinguish the jury verdict from the RAND case on three grounds:
(1) Defendants presented additional evidence to the Court that was not presented to the jury; (2)
Ericsson did not present a damages claim against Intel to the jury; and (3) the jury trial “was
restricted in scope to the five U.S. patents-in-suit. It thus did not consider the appropriate RAND
rate for Ericsson’s worldwide portfolio of alleged 802.11 patents.” Docket No. 599 at 11. The
Court will address each argument in turn.
43
First, Defendants contend the jury verdict does not dictate the RAND rate because
Defendants presented additional evidence during the bench trial. This argument fails because
Defendants presented substantial RAND evidence to the jury. 6/11/13 a.m. Tr. at 9:15–10:17
(Forslund); 6/11/13 a.m. Tr. at 75:9–77:11 (Perryman); 6/6/13 a.m. Tr. at 21:16–20 (Bone cross
examination). By presenting additional evidence during the bench trial, Defendants attempted to
hedge their RAND position post-trial. Essentially, Defendants sought to use RAND as their jury
defense while keeping an equitable RAND defense in their back pocket. Thus, Defendants
wanted to use RAND as their primary defense and their fallback position. There was no
justification for doing so—all of the RAND evidence presented during the bench trial would
have been equally appropriate during the jury trial.
Defendants presented significant RAND evidence during the jury portion of the trial. In
fact, a significant portion of Defendants’ damages argument was based on Ericsson’s RAND
obligations. Defendants requested multiple RAND instructions, two of which were given to the
jury. In particular, the Court gave the following instruction:
Moreover, because Ericsson has agreed that it is under an obligation to license the
patents-in-suit on Reasonable and Non-Discriminatory (“RAND”) terms, you
must ensure that any damages award is consistent with and does not exceed the
amounts permitted under Ericsson’s RAND obligations.
Docket No. 504 at 23. The Court also modified the traditional Georgia-Pacific factors in its
instructions to include Ericsson’s obligation to license its patents on RAND terms. See id. at 28.
Defendants cannot now argue the jury’s verdict failed to consider Ericsson’s RAND obligations
when they based their jury defense on RAND.
Second, Defendants contend the jury’s verdict does not reflect the RAND rate because
Ericsson did not present a damage calculation against Intel. Defendants cross-examined Mr.
Bone on this exact issue. Defendants asked Mr. Bone if his royalty rate would apply to chips, and
44
he responded that it would. See 6/6/13 a.m. Tr. at 20:11–18. Thus, Defendants’ argument
regarding Intel damages is incorrect.
Third, Defendants argue the jury did not consider the appropriate RAND rate for
Ericsson’s worldwide 802.11 portfolio. This argument rings hollow in light of Defendants’
refusal to agree to pay a Court-determined worldwide RAND rate. Defendants contend the jury
verdict is not a proper RAND rate because it is not a worldwide license, but Defendants refuse to
agree to pay a worldwide RAND license. See Docket Nos. 612, 614. Defendants cannot have it
both ways. Since Defendants refuse to agree to pay a Court-determined worldwide RAND
license, they cannot use the lack of worldwide RAND evidence to distinguish the jury verdict.
For the foregoing reasons, the Court need not determine an appropriate RAND rate
because the jury already made this determination. The appropriate United States RAND rate is
$0.15 per product for the three infringed patents.
B. Ericsson’s RAND Obligation to License Intel
i.
Findings of Fact
Ericsson is a member of the IEEE. 6/3/13 p.m. Tr. at 137:8–9 (Brismark). As an IEEE
member, Ericsson has an obligation to license its standard-essential patents on reasonable and
non-discriminatory terms. Id. at 128:4–8. A RAND license offer must be “at a price which is
reasonable in light of the contribution [the] technology gives to the end user who is using that
standard.” Id. at 128:16–19. A RAND offer must also be non-discriminatory, meaning a licensor
may not discriminate against any particular licensee. Id. at 129:13–20.
An IEEE participant declares its patents standard-essential through letters of assurance.
Id. at 141:1–10. A letter of assurance is a commitment from a patent holder to potential licensees
that it will offer licenses on RAND terms. Id. Participation in standard setting is voluntary, and a
45
company is not required to participate in the standard-setting process to hold standard-essential
patents. See 6/12/13 p.m. Tr. at 29:14–31:24 (Shoemake). Further, because participation is
voluntary, an IEEE member may restrict or limit its participation in the process. See id. at 32:20–
24.
Ericsson committed to offer RAND licenses to “fully compliant” products, and it gave
notice of this position in its letters of assurance to the IEEE. See 6/4/13 p.m. Tr. at 40:23–41:4,
52:3–21 (Petersson). Ericsson’s objective in licensing only fully compliant products was to
isolate a particular level of the supply chain and to license companies at that level. 6/12/13 p.m.
Tr. at 148:8–149:11 (Brismark). By licensing end product manufacturers, Ericsson believed it
was indirectly licensing chip manufacturers such as Intel. See id. Ericsson believed it complied
with its RAND obligations because it did not discriminate against competitors. 6/3/13 p.m. Tr. at
129:21–130:4 (Brismark); see 6/12/13 p.m. Tr. at 34:7–14 (Shoemake). There is no IEEE rule
preventing restricted RAND commitments, and other companies have adopted the same “fully
compliant” licensing policy as Ericsson. See 6/12/13 p.m. Tr. at 137:5–8 (Perryman).
Ericsson offered Intel a license to the asserted patents in March 2013 at the rate of $0.50
per unit. 6/12/13 p.m. Tr. at 149:20–150:5, 166:1–8 (Brismark). Ericsson made this offer in an
attempt to settle the pending litigation. Id. at 149:20–150:5; 6/4/14 p.m. Tr. at 51:13–15
(Petersson). After Ericsson made its initial offer to Intel, Intel requested a proposed draft license
agreement. 6/12/13 p.m. Tr. at 166:16–22 (Brismark). Ericsson submitted a proposed agreement
to Intel on April 25, 2013, but Intel never responded to the proposed agreement. Id. at 166:21–
167:12. When Ericsson submitted the draft agreement to Intel, Ericsson was prepared to
negotiate the final terms of the license. Id. at 167:3–6.
46
ii.
Conclusions of Law
Ericsson did not violate its RAND obligations by refusing to license Intel because it
offered a license to Intel in March 2013. Ericsson offered a license to Intel at the same rate and
terms as the remaining Defendants. Intel contends Ericsson’s offer was illusory, but it presented
no evidence to support this assertion. Compare id. at 167:3–12 (testifying that Ericsson was
prepared to negotiate the terms of a potential license). After the trial, Ericsson amended its
license offer to Intel to reflect the jury verdict. See PX628. Both of these offers were legitimate
RAND offers to which Intel never countered. Ericsson therefore satisfied any RAND obligation
to offer a license to Intel.
Defendants have no breach of contract remedy against Ericsson for its policy of licensing
only “fully compliant” products.17 Participation in standard-setting organizations such as the
IEEE is voluntary, and parties are free to restrict or limit their level of participation. There is
nothing inherently wrong or unfair with Ericsson’s practice of licensing “fully compliant”
products, and they gave notice of this position in their initial letter of assurance. Further, other
large companies have adopted similar policies of only licensing fully compliant products.
Defendants cite no IEEE rule or guideline requiring full participation in order to have standardessential patents. Thus, Defendants have no right to equitable relief for Ericsson’s practice of
licensing only fully compliant products.
Ericsson did not violate its RAND obligations by refusing to license Intel.
17
At the outset, this issue is moot because Ericsson offered a license to Intel, and there are no remaining Defendants
asserting that Ericsson refused to offer them a license because their products were not fully compliant. Cf. 6/12/13
p.m. Tr. at 149:15–16 (Brismark) (“Ericsson has never attempted to block any chipset player.”).
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C. Ericsson’s $0.50 RAND Rate
i.
Findings of Fact
Ericsson is a sophisticated licensing entity, with over 100 outstanding patent licenses. See
6/3/13 p.m. Tr. at 109:22–110:14 (Brismark); 6/4/13 a.m. Tr. at 132:23–25 (Petersson). It has an
incentive to establish a reasonable licensing rate to maintain credibility in the licensing
community. See 6/12/13 p.m. Tr. at 180:23–182:9 (Bone). For its 802.11 portfolio, Ericsson
believes an appropriate royalty rate is $0.50 per unit. 6/3/13 p.m. Tr. at 133:4–11 (Brismark).
Ericsson calculated this rate based on collaboration between technical and licensing experts, and
it sought feedback from third party licensees about the reasonableness of its rate. See 6/4/13 a.m.
Tr. at 127:24–129:22 (Petersson). Ericsson supported its rate with expert testimony from Mr.
Bone. Mr. Bone relied on six previous licenses involving the asserted patents to determine an
appropriate royalty rate. See 6/5/13 p.m. Tr. at 149:5–14 (Bone); 6/6/13 a.m. Sealed Tr. at 3:10–
27:7 (Bone); 6/4/13 a.m. Sealed Tr. at 3:11–12:16, 14:4–28:7 (Petersson).
Ericsson considered its RAND obligations when determining its rate. 6/4/13 p.m. Tr. at
14:11–25 (Petersson). Ericsson has a team of employees tasked with monitoring Ericsson’s
compliance with its RAND obligations. See 6/12/13 p.m. Tr. at 142:8–24 (Brismark). These
individuals attempt to determine the number of standard-essential patents, and they attempt to
determine Ericsson’s share of 802.11n patents. Id. at 142:25–143:15; see 6/4/13 p.m. Tr. at 21:4–
12 (Petersson) (“We are, of course, taking into consideration that there are other patent holders in
the standard when we set our rate.”). This is an ongoing process shaped by feedback from
potential licensees. 6/12/13 p.m. Tr. at 143:16–24 (Brismark); 6/4/13 p.m. Tr. at 53:13–54:6
(Petersson).
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There is no way to determine the exact number of standard-essential patents. Cf. 6/12/13
p.m. Tr. at 29:7–9 (Shoemake); id. at 134:9–15 (Perryman). The IEEE makes no determination
whether the patents identified in a letter of assurance are essential to the standard, so companies
may wrongly declare “non-essential” patents essential. See 6/6/13 a.m. Tr. at 23:11–25:4 (Bone)
(discussing letters of assurance). Neither side attempted to determine the exact number of
standard-essential patents. Dr. Shoemake testified about the number of patents related to the
802.11n standard, but he did not try to determine how many patents are standard-essential. See
6/12/13 p.m. Tr. at 29:4–9. Mr. Bone based his analysis on previous licenses—he made no
attempt to determine the number of essential patents. Additionally, Dr. Gibson testified that very
little of the 802.11n standard is actually patented. See 6/10/13 p.m. Tr. at 5:16–23.
Defendants did not present any evidence of an actual royalty stack on the asserted
patents. Dr. Perryman did not attempt to calculate the actual royalties Defendants currently pay
on 802.11n products. See 6/11/13 a.m. Tr. at 64:19–65:3. Dr. Perryman even refused to provide a
maximum hypothetical royalty a company should be expected to pay on an 802.11 product.
6/12/13 p.m. Tr. at 139:2–11. Dr. Shoemake attempted to calculate the number of patents related
to the 802.11n standard, but he did not opine on a potential royalty stack on those patents. See
6/12/13 p.m. Tr. at 27:6–12.
Dr. Perryman identified one license to the 802.11n standard (the CSIRO license). See
6/12/13 p.m. Sealed Tr. at 8:8–21. Dr. Perryman found that Intel’s royalty obligation from the
CSIRO license was $0.13. Id. at 9:15–22. However, Dr. Perryman could not identify any further
royalty obligations on 802.11n products. See id. at 12:22–13:6; 6/12/13 p.m. Tr. at 34:21–23
(Shoemake).
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Defendants did not present any evidence any licensee ever complained to Ericsson about
hold-up, and Mr. Brismark testified he never heard a licensee complain its royalty rate was the
result of hold-up or lock-in. See 6/12/13 p.m. Tr. at 148:4–7 (Brismark); id. at 180:12–14 (Bone)
(“Q: As part of your analysis, did you find that any of Ericsson’s actual agreements included
holdup? A: No.”); id. at 183:2–8 (Bone); id. at 94:21–95:6, 96:13–22 (Leonard).
ii.
Conclusions of Law
The paradox of RAND licensing is that it requires a patent holder to offer licenses on
reasonable terms, but it offers no guidance over what is reasonable. See Microsoft Corp. v.
Motorola, Inc., 2013 WL 2111217, at *10 (W.D. Wash. Apr. 25, 2013). Thus, RAND creates an
obligation that must be followed, but it provides no guidance on how to follow that obligation.
This creates a situation ripe for judicial resolution. If two parties negotiating a RAND license are
unable to agree to the financial terms of an agreement, it is entirely appropriate to resolve their
dispute in court. See Microsoft Corp. v. Motorola, Inc., 854 F. Supp. 2d 993, 1001–02 (W.D.
Wash. 2012) (“Because the policies leave it to the parties to determine what constitutes a RAND
license, when such a genuine disagreement arises, it appears to the court that the only recourse
for the parties is to file a lawsuit in the appropriate court of law.”). A patent holder does not
violate its RAND obligations by seeking a royalty greater than its potential licensee believes is
reasonable. Similarly, a potential licensee does not violate its RAND obligations by refusing a
royalty the patent holder believes is reasonable. Instead, both sides’ initial offers should be
viewed as the starting point in negotiations. Even if a court or jury must ultimately determine an
appropriate rate, merely seeking a higher royalty than a potential licensee believes is reasonable
is not a RAND violation.
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RAND licensing also includes an obligation to negotiate in good faith. This obligation is
a two-way street. As potential licensees in a RAND negotiation, Defendants possessed an
obligation to negotiate in good faith and earnestly seek an amicable royalty rate. They failed to
do so. Defendants’ entire argument boils down to the fact that they believed Ericsson’s initial
RAND offer was too high. However, Ericsson’s $0.50 offer was only the starting point in the
negotiations. Defendants never meaningfully engaged Ericsson in RAND licensing negotiations
after the initial offer. Further, the fact that the RAND rate was ultimately litigated in court does
not make Ericsson’s initial offer unreasonable. Compare 6/12/13 p.m. Tr. at 130:6–10
(Perryman) (“Q: Okay. Now, is Ericsson’s 50-cent rate so high in relation to the chip price that
from an economic perspective, it amounts to a refusal to deal? A: Given all the technology in the
chips, absolutely, yes, sir.”). Ericsson demonstrated the reasonableness of its offer by presenting
substantial evidence of its licensing policies and its attempts to comply with RAND obligations.
Further, Defendants failed to present any evidence of actual hold-up or royalty stacking.
Neither Dr. Perryman nor Dr. Shoemake calculated an actual royalty stack on the accused
products or the 802.11n standard. Further, Dr. Perryman could only identify one “block” in the
actual royalty stack. See 6/12/13 p.m. Sealed Tr. at 12:19–13:6. All of Defendants’ concerns
about royalty stacking were just that—concerns. Faced with no actual evidence of stacking,
Defendants were forced to argue hypothetically. However, their hypothetical arguments would
have carried more weight if Defendants presented any real evidence of stacking. Further,
Ericsson presented evidence that it considered royalty stacking issues when it established its
royalty rates. Accordingly, Ericsson’s RAND rate did not fail to account for hold-up or royalty
stacking.
Ericsson did not violate is RAND obligations by seeking a $0.50 per unit royalty.
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D. Injunctions for the Patents in Suit
Ericsson did not seek an injunction for the infringed patents. See Docket No. 527.
Accordingly, there is no need for the Court to determine whether injunctions are available for the
infringed patents. See Docket No. 588 at 15.
VII.
Conclusion
For all the foregoing reasons, Ericsson’s Motion for a Compulsory Future Royalty and
Pre- and Post-Judgment Interest (Docket No. 527) is GRANTED. Defendants’ Rule 50(b)
Renewed Motion for Judgment as a Matter of Law in Favor of Defendants (Non-Infringement
and Invalidity) and Motion for a New Trial (Docket No. 528) is DENIED. Defendants’ Renewed
Motion for Judgment as a Matter of Law on Ericsson’s Damages Claims or, in the Alternative,
for Vacatur, Remittitur or a New Trial on Damages (Docket No. 529) is DENIED. Defendants’
Motion for Judgment on Post-Trial Findings of Fact and Conclusions of Law (Docket No. 588) is
GRANTED as set forth above. Ericsson’s Motion to Supplement the Record (Docket No. 589) is
GRANTED. All other pending motions in this case are DENIED. The Clerk of Court is
ORDERED to terminate all other pending motions.
So ORDERED and SIGNED this 6th day of August, 2013.
__________________________________
LEONARD DAVIS
UNITED STATES DISTRICT JUDGE
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