Anascape, Ltd v. Microsoft Corp. et al

Filing 351

SUR-REPLY to Reply to Response to Motion re 337 MOTION for New Trial -- Nintendo of America Inc.'s Motion for Remittitur or, in the Alternative, a New Trial on Damages filed by Anascape, Ltd. (Cawley, Douglas)

Anascape, Ltd v. Microsoft Corp. et al

Doc. 351

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS LUFKIN DIVISION Anascape, Ltd., Plaintiff, v. Microsoft Corp., and Nintendo of America, Inc., Defendants. Civil Action No. 9:06-cv-158-RC

ANASCAPE'S SUR-REPLY TO NINTENDO'S MOTION FOR REMITTITUR OR, IN THE ALTERNATIVE, A NEW TRIAL ON DAMAGES

Dallas 257130v2

Dockets.Justia.com

Anascape, Ltd. ("Anascape") files its sur-reply to Nintendo of America, Inc.'s ("Nintendo") Motion for Remittitur or, in the Alternative, a New Trial on Damages (the "Motion"), and respectfully shows as follows: I. THE JURY WAS ENTITLED TO INCLUDE WII REMOTES IN THE ROYALTY BASE The jury found that the Wii Classic connected to the Wii Remote infringed claims 19, 22, and 23 of the `700 patent.1 The Wii Remote is required to infringe those claims, as the Wii Classic alone cannot communicate with the Wii console and the Wii Classic alone does not have a "rumble" feature. (Tr. 434:3-436:16.) Thus, the jury could properly consider the Wii Remote as part of the royalty base as a patented product, and not a mere convoyed or derivative sale. See Am. Seating Co. v. USSC Group, 514 F.3d 1262, 1268 (Fed. Cir. 2008) ("A `convoyed sale' refers to the relationship between a patented product and a functionally associated nonpatented product.").2 The size of the royalty base is a question of fact for the jury. The maximum royalty base would include all sales of Wii Remotes, Wii Classics, GameCube controllers, and Wavebird wireless controllers--which would result in a base of approximately $700 million. Nintendo argues that the only Wii Remotes that could "conceivably" be included in the royalty

The jury found that the Wii Classic connected to the Wii Remote infringed the `700 patent, and made no finding of non-infringement as to any particular subset of Wii Remotes, despite Nintendo's argument to the contrary. Compare Docket No. 333 with Reply at 4 ("Anything in excess of such number of units would constitute Wii Remotes that the jury found to be non-infringing[.]"). Even still, the fact that the Wii Classic cannot function without the Wii Remote would support the inclusion of Wii Remotes in the royalty base as convoyed or derivative sales, as a reasonable jury could conclude that users purchase Wii Remotes in order to use Wii Classics. This certainly qualifies as a "functional relationship" between Wii Classics and Wii Remotes.
ANASCAPE'S SUR-REPLY TO NINTENDO'S MOTION FOR REMITTITUR OR, IN THE ALTERNATIVE, A NEW TRIAL ON DAMAGES
Dallas 257130v2 2

1

PAGE 1

base would be "an amount equal to the number of units of Wii Classics sold in the damages period." To the contrary, the evidence does not require the royalty base to be so limited. The jury heard evidence that the Wii Classic was compatible with Wii Remotes--not only compatible with a single Wii Remote (i.e., the evidence did not show that any given Wii Classic was only compatible with one Wii Remote). Although Mr. Bratic testified that, in his analysis, he matched a single Wii Remote to a single Wii Nunchuk (see Tr. 757:15-758:10), the jury is not confined to the specific ratio advocated by a party's expert. See, e.g., SmithKline Diags., Inc. v. Helena Labs. Corp., 926 F.2d 1161, 1167 (Fed. Cir. 1991). Based on the Wii Remotes' compatibility with the Wii Classic, and/or its contribution to the infringing combination, a reasonable jury could include all Wii Remotes, or a subset thereof, in the royalty base. Therefore, the jury's $21 million award is supported by the evidence. II. THE SONY LICENSE AGREEMENT SUPPORTS THE JURY'S VERDICT Without citing any authority, Nintendo argues that the Sony License Agreement "does not and cannot support any damages award." (Reply at 7.) Anascape's Response, however, explained why the Sony License Agreement supports the jury's award and, at minimum, a $10 million award. (Response at 8-10, 12.) The License Agreement provided Sony with a license to a patent with similar technology to the `700 patent. It also licensed the patent application that matured into the `700 patent. Trial testimony indicated that this was a "sweetheart deal" for Sony, and that Anascape received valuable rights from Sony through a cross-license of three Sony patents and related technology. Based on these facts, under GeorgiaPacific and this Court's jury instructions, a reasonable jury could conclude that $21 million was a reasonable royalty for the relevant infringement period considering that it was not a sweetheart

ANASCAPE'S SUR-REPLY TO NINTENDO'S MOTION FOR REMITTITUR OR, IN THE ALTERNATIVE, A NEW TRIAL ON DAMAGES
Dallas 257130v2

PAGE 2

deal, did not involve any cross-license or technology rights, and would have been negotiated with an assumption of validity and infringement. III. NINTENDO HAS NOT MET ITS REMITTITUR BURDEN In an effort to meet its arduous remittitur burden, Nintendo (i) attempts to lower its remittitur burden, (ii) violates a stipulation entered into by the parties and relies on an e-mail sent after the jury's verdict as allegedly being "part of the record," and (iii) claims an exhibit which was sent back to the jury room is not evidence. These arguments and tactics are without merit. Nintendo cites Oiness v. Walgreen Co., 88 F.3d 1025, 1031 (Fed. Cir. 1996) for the alleged proposition that a court "upholds a jury's damages award unless grossly excessive or monstrous, clearly not supported by evidence, or based on speculation or guesswork." (Reply at 4 (emphasis in Reply).) Nintendo, however, omits the key word "only" from the quoted sentence's last clause, which actually reads: "or based only on speculation or guesswork." Oiness, 88 F.3d at 1031 (emphasis added). The omitted word is meaningful, and Nintendo, by omitting it, has attempted to lower its remittitur burden.3 Nintendo tacitly acknowledges that Wii Remotes should be included in the royalty base (Reply at 3-4 & n.3), but claims that the record is "devoid of" any evidence as to the number of units of Wii Classics that should be paired with an equal number of Wii Remotes (Reply at 7). This is incorrect for two reasons. First, as explained in Anascape's Response, This is not the first time Nintendo has manipulated text to further its arguments. See Memorandum Opinion and Order Construing Claim Terms of United States Patent Nos. 6,222,525 and 6,906,700 - Part I, Docket No. 182 at 14 ("Nintendo's brief quoted the same section of the `525 patent and then cleverly substituted `on' for `along' in its discussion of the term, as though the specification itself used `on' and not `along' when referring to linear movement. Microsoft took the same approach - quickly define `on' as `along,' hope that the court would not notice, and then state that `common sense' tells us that `on' means `along.'").
ANASCAPE'S SUR-REPLY TO NINTENDO'S MOTION FOR REMITTITUR OR, IN THE ALTERNATIVE, A NEW TRIAL ON DAMAGES
Dallas 257130v2 3

PAGE 3

testimony and evidence before the jury indicates that the Wii Remotes are approximately 2.206 times as expensive as Wii Classics (i.e., the Wii Classic sold for an average price of $14.347 and the Wii Remote for $31.657). Using these figures, it is possible to calculate a 1:1 ratio between units of Wii Remotes and Wii Classics, resulting in $72,302,685 worth of sales of Wii Remotes being added to the royalty base. (Response at 12 n.11.) Nintendo claims that PX 215, a Nintendo document showing units to revenue information for Wii Classics and Wii Nunchuks, is not part of the record. This Court's records, however, show that the exhibit is indeed part of the record, and was therefore provided to the jury in the jury room:4

(Docket No. 335 at 13.)5

Nintendo's Reply represents that Docket No. 335 does not list PX 215. (Reply at 8.) This is incorrect. Docket No. 335, filed by the Court's clerk (not by Anascape), is the official record of exhibits admitted at trial and that the jury received in the jury room. (Tr. 1645:15-18 ("Now, when you retire to the jury room to deliberate on your verdict, you will take the charge with you as well as the exhibits which the court has admitted into evidence.").) Although PX 215 may not have been specifically mentioned by the parties at trial, it nevertheless was admitted into evidence and sent back to the jury room without objection. As such, the jury could properly have used it to award damages. Despite arguing that a trial exhibit marked as admitted by the Court's clerk and sent back to the jury room with the jury is not part of the record, Nintendo urges that an e-mail sent by Anascape's expert Walt Bratic to Nintendo's counsel immediately after the jury's verdict is somehow "part of the record that the Court can and should consider in deciding the motion." (Reply at 9 n.7.) This post-verdict e-mail is obviously not evidence or part of the record, and is irrelevant in deciding Nintendo's Motion. Additionally, Nintendo has violated a stipulation entered into between the parties that states "work product . . . generated by experts . . . in connection with this litigation shall be considered undiscoverable and inadmissible, as will any litigation-related communications . . . between counsel for the parties and their experts[.]" (Reply, Ex. B.)
ANASCAPE'S SUR-REPLY TO NINTENDO'S MOTION FOR REMITTITUR OR, IN THE ALTERNATIVE, A NEW TRIAL ON DAMAGES
Dallas 257130v2 5

4

PAGE 4

Second, even without PX 215, the jury would be justified in including $72,302,685 of Wii Remote sales in the royalty base. The undisputed evidence before the jury indicates that the Wii Remote is 2.206 times as expensive as the Wii Nunchuk. (Response at 12 n.11.) The Wii Nunchuk, like the Wii Classic, is an extension of the Wii Remote, and will not work without the Wii Remote. (Tr. 434:3-10; 435:15-19; 1029:1-9.) Because of these similarities between the Wii Nunchuk and Wii Classic, the jury could find that they were sold (as they are sold) for substantially the same price, and that, therefore, the Wii Remote is 2.206 times more expensive than the Wii Classic.6 See, e.g., Lindemann Maschinenfabrik GmbH v. Am. Hoist & Derrick Co., 895 F.2d 1403, 1407 (Fed. Cir. 1990) ("When a `reasonable royalty' is the measure . . . there is room for exercise of a common-sense estimation of what the evidence shows would be a `reasonable' award."). IV. CONCLUSION For these reasons, as well as those articulated in its Response, Anascape respectfully requests that this Court deny Nintendo's Motion.

Likewise, the QPSX decision cited by Nintendo has no bearing on the remittitur inquiry. In that case, Judge Ward sustained an objection to a question posed to Mr. Bratic at trial because Mr. Bratic's expert report apparently did not discuss a 3.5% royalty rate. Later, Judge Ward granted a remittitur request stating simply that "[a]fter considering the evidence as a whole, the court agrees with Nortel that the jury's award of $28 million was against the great weight of the evidence." 2008 WL 728201, at *3. Nortel had put forth four separate arguments in support of its remittitur request--one relating to lack of evidentiary support, two relating to the royalty base, and one relating to excessiveness. Id. It is unclear which argument persuaded Judge Ward, and Judge Ward certainly did not state that his decision had anything to do with Mr. Bratic's testimony. The jury would also have been justified in assuming a 1:1 sales ratio between Wii Classics and Wii Remotes, which would add $32,775,469 to the royalty base.
ANASCAPE'S SUR-REPLY TO NINTENDO'S MOTION FOR REMITTITUR OR, IN THE ALTERNATIVE, A NEW TRIAL ON DAMAGES
Dallas 257130v2 6

PAGE 5

DATED: June 6, 2008 Respectfully submitted, MCKOOL SMITH, P.C. By: /s/ Douglas A. Cawley Douglas A. Cawley Attorney-in-Charge Texas State Bar No. 04035500 [e-mail] Theodore Stevenson, III Texas State Bar No. 19196650 [e-mail] Christopher T. Bovenkamp Texas State Bar No. 24006877 [e-mail] Anthony M. Garza Texas State Bar No. 24050644 [e-mail] Jason D. Cassady Texas State Bar No. 24045625 [e-mail] Steven Callahan Texas State Bar No. 24053122 [e-mail] McKool Smith, PC 300 Crescent Court, Suite 1500 Dallas, Texas 75201 Telephone: [phone] Telecopier: [phone] Sam Baxter Texas State Bar No. 01938000 [e-mail] P.O. Box O, 505 E. Travis, Suite 105 Marshall, Texas 75670 Telephone: [phone] Telecopier: [phone] ATTORNEYS FOR PLAINTIFF ANASCAPE, LTD.

PARKER, BUNT & AINSWORTH P.C. Robert M. Parker Texas State Bar No. 15498000 [e-mail] Robert Christopher Bunt Texas State Bar No. 00787165 [e-mail] Charles Ainsworth Texas State Bar No. 00783521 [e-mail] Parker, Bunt & Ainsworth P.C. 100 E. Ferguson Street, Suite 1114 Tyler, Texas 75702 Telephone: [phone] Telecopier: [phone]

ANASCAPE'S SUR-REPLY TO NINTENDO'S MOTION FOR REMITTITUR OR, IN THE ALTERNATIVE, A NEW TRIAL ON DAMAGES
Dallas 257130v2

PAGE 6

CERTIFICATE OF SERVICE The undersigned certifies that the foregoing document was filed electronically in compliance with Local Rule CV-5(a) on June 6, 2008. As such, this document was served on all counsel who are deemed to have consented to electronic service. Local Rule CV-5(a)(3)(A). /s/ Steven Callahan Steven Callahan

ANASCAPE'S SUR-REPLY TO NINTENDO'S MOTION FOR REMITTITUR OR, IN THE ALTERNATIVE, A NEW TRIAL ON DAMAGES
Dallas 257130v2

PAGE 7