I/P Engine, Inc. v. AOL, Inc. et al

Filing 848

Memorandum in Support re 847 MOTION re 822 MOTION for an Award of Post-Judgment Royalties Motion To Postpone Briefing And Ruling On Plaintiffs Motion For Post-Judgment Royalties MOTION re 822 MOTION for an Award of Post-Judgment Royalties Motion To Postpone Briefing And Ruling On Plaintiffs Motion For Post-Judgment Royalties filed by AOL Inc., Gannett Company, Inc., Google Inc., IAC Search & Media, Inc., Target Corporation. (Attachments: # 1 Exhibit 1, # 2 Exhibit 2)(Noona, Stephen)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF VIRGINIA
NORFOLK DIVISION

I/P ENGINE, INC.
Plaintiff,
Civil Action No. 2:11-cv-512

v.
AOL, INC., et al.,
Defendants.

BRIEF IN SUPPORT OF DEFENDANTS’ MOTION TO POSTPONE BRIEFING AND
RULING ON PLAINTIFF’S MOTION FOR POST-JUDGMENT ROYALTIES
Introduction
Defendants request that the briefing and consideration of Plaintiff’s Motion for an Award
of Post-Judgment Royalties be postponed until after the Court has ruled on the parties’ pending
post-trial motions. This postponement makes sense for several reasons. Both Plaintiff and
Defendants have made post-trial motions seeking to put aside some or all of the jury's verdict,
Defendants as to both liability and damages, and Plaintiff as to the dollar amount of damages
award and laches. Because analysis of post-judgment royalty rates begins with reference to the
jury’s award of pre-judgment damages, it would be an inefficient use of judicial and party
resources for the Court to determine post-judgment royalties, if any, at this stage.

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Moreover, Plaintiff’s Motion raises a new damages theory, requiring substantial time and
expense for Defendants to respond. The Motion appends a new damages expert declaration, in
which its expert provides a new opinion about a new hypothetical negotiation date, involving a
different party, resulting in a higher rate than in his previous reports (a rate that Plaintiff further
inflated in its Motion). Defendants need time to examine this new opinion, and likely take a
deposition of Plaintiff's expert and perhaps provide a rebuttal opinion. Additionally, allowing
the Court to first rule on the other pending post-trial motions would give the parties an
opportunity to negotiate post-judgment royalties themselves. Finally, Plaintiff would not be
prejudiced in any way by a postponement.
Factual Background
On December 18, 2012, Plaintiff filed a Motion for New Trial on the Dollar Amount of
Past Damages, and also a Motion for Judgment Under Rule 52(b) and a New Trial Under Rule
59. (D.N. 835,825.) Defendants filed a Renewed Motion for Judgment as a Matter of Law on
Damages or a New Trial, a Renewed Motion for Judgment as a Matter of Law on Invalidity or
New Trial, and a Renewed Motion for Judgment as a Matter of Law on Non-Infringement or
New Trial. (D.N. 833, 820, 831.)
The same day, notwithstanding the fact that it had moved for a new trial on pre-judgment
damages, Plaintiff also filed a Motion for an Award of Post-Judgment Royalties seeking to have
this Court determine what a reasonable royalty would be for the post-judgment period. (D.N.
822.) Plaintiff’s Motion included a “declaration” by its damages expert, Dr. Stephen Becker,
which was essentially a new expert report setting forth a new damages theory. (D.N. 824.) In
that report, Dr. Becker opined about a new hypothetical negotiation date (November 20, 2012)
involving a different party to the negotiation (I/P Engine instead of Lycos). (Id., 3.) Dr. Becker
also suggested that, although the comparable licenses would be the same three Overture
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agreements, “the range of rates that would reasonably result from these licenses would be
different.” (Id., 4.) Dr. Becker also for the first time in this litigation set forth a proposed
reasonable royalty rate of 5%, applied to an apportioned base. (Id., 6.) In its motion, Plaintiff
inflated that rate to 7% based on its theory of willful infringement. (D.N. 823, 11-12.)
Defendants requested that Plaintiff agree to extend the opposition and reply to Plaintiff’s
Motion for an Award of Post-Judgment Royalties until after the post-trial motions had been ruled
on. (Ex. 1.) Plaintiff would not agree. Yet, after the December 18 motions were filed, Plaintiff
proposed that the deadline for the oppositions to these motions be pushed back to January 18,
and for the reply briefs, February 1. (Ex. 2.) After further discussion, the parties agreed to
jointly move the Court to extend the briefing schedule such that opposition briefs would be due
January 25, and reply briefs February 15. (D.N. 846.) As this does not alleviate the waste of
resources from briefing Plaintiff's request for ongoing royalties at the same time as post-trial
motions that may moot that request, nor even provide time to properly respond to Plaintiff's
request, Defendants were forced to bring the present motion.
Argument
I.

POSTPONEMENT WARRANTED BECAUSE OF PENDING POST-TRIAL
MOTIONS
As an initial matter, it is well-established that in ruling on post-judgment royalties, courts

begin their analysis with reference to the jury’s award of pre-judgment royalties. See, e.g.,
Mondis Tech. Ltd. v. Chimei InnoLux Corp., 822 F. Supp. 2d 639, 646 (E.D. Tex. 2011) (“[T]he
Court will proceed by first determining a post-judgment reasonable (ongoing) royalty rate under
Georgia-Pacific and will use the jury’s verdict in this case as a starting point and determine how
the circumstances may have changed.”) (emphasis added). Indeed, Plaintiff’s brief consistently
refers back to the jury’s verdict in its attempt to persuade the Court of what would constitute
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reasonable post-judgment royalties. (See D.N. 823, passim.) Yet Plaintiff and Defendants both
believe that the jury erred in its award of pre-judgment royalties. (D.N. 825, 833.) Accordingly,
Plaintiff’s insistence that the Court rule now with respect to post-judgment royalties makes no
sense, and will result in an inefficient use of judicial resources given that both parties believe the
jury’s verdict with respect to damages was incorrect.
Nor is there any requirement that the Court rule on post-judgment royalties at this stage
of the proceedings. See, e.g., Paice LLC v. Toyota Motor Corp., 504 F.3d 1293, 1314-15 (Fed.
Cir. 2007) (explaining that a court may postpone ruling on post-judgment royalties). Because of
this, courts routinely decide to sever the issue of post-judgment royalties from the other post-trial
matters or postpone ruling on post-judgment royalties until other post-trial matters are resolved.
See, e.g., Fractus, S.A. v. Samsung Elecs. Co. Ltd., 2012 WL 2505741, at *45 (E.D. Tex. June
28, 2012) (severing the plaintiff’s claim for an ongoing royalty based on the defendant’s request
for an opportunity to negotiate an ongoing royalty); Mondis Tech. Ltd., 822 F. Supp. at 641
(severing sua sponte the motion for ongoing royalties because the court wanted to provide the
parties with an appealable final judgment in the event that the judge retired before determining
an ongoing royalty); see also Cordance Corp. v. Amazon.com, Inc., 2010 WL 3155505, *7-8 (D.
Del. 2010) (denying patentee’s motion for ongoing royalty pending appeal of infringement and
validity determinations). This Court should follow a similar course.
II.

OTHER PRACTICAL CONSIDERATIONS WARRANT POSTPONEMENT
Postponing the briefing on Plaintiff’s Motion for an Award of Post-Judgment Royalties

would also provide Defendants with the opportunity to marshal evidence in support of its
opposition. Plaintiff’s Motion presents an entirely new damages theory never previously raised
in this litigation and appends a new expert report. For the first time, Dr. Becker propounds a
hypothetical negotiation date of November 12, 2002 and explains how changes in the parties’
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positions would affect certain Georgia-Pacific factors. (D.N. 824, 3.) For the first time, Dr.
Becker concludes that a reasonable royalty rate is 5% applied to an apportioned base. (Id., 6.)
At a minimum, Defendants need time to depose Dr. Becker on his new opinions and to consult
with their own damages expert. See Paice, 504 F.3d at 1316-17 (Rader, J., concurring) (“In this
case, because the court imposed an ongoing royalty on the parties sua sponte after denying
injunctive relief, the parties had no meaningful chance to present evidence to the district court on
an appropriate royalty rate to compensate Paice for Toyota’s future acts of infringement.
Evidence and argument on royalty rates were, of course, presented during the course of the trial,
for the purposes of assessing damages for Toyota’s past infringement. But pre-suit and postjudgment acts of infringement are distinct, and may warrant different royalty rates given the
change in the parties’ legal relationship and other factors. When given choices between taking
additional evidence or not, and between remanding to the parties or not, a district court may
prefer the simplest course—impose its own compulsory license. This simplest course, however,
affords the parties the least chance to inform the court of potential changes in the market or other
circumstances that might affect the royalty rate reaching into the future.”). Defendants may also
need to obtain their own rebuttal expert.
The question of designing around the patents-in-suit may also be at issue, and Defendants
are entitled to a reasonable amount of time to investigate, including time to consult with
technical experts. Additional time would also provide the parties with an opportunity to
negotiate an agreeable post-judgment reasonable royalty, an approach strongly endorsed by the
Federal Circuit. See Telecordia Tech, Inc. v. Cisco Sys., Inc., 612 F.3d 1365, 1378 (Fed. Cir.
2010) (“If the district court determines that a permanent injunction is not warranted, the district

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court may, and is encouraged, to allow the parties to negotiate a license . . . . The district court
may step in to assess a reasonably royalty should the parties fail to come to an agreement.”).
III.

POSTPONEMENT WILL NOT PREJUDICE PLAINTIFF
There will be no prejudice to Plaintiff in postponing determination of post-judgment

damages until after the Court has ruled on the parties’ pending Rule 50, 52 and 59 motions.
Plaintiff itself sought an extension for the opposition briefs to the December 18 motions,
including its own Motion for New Trial on the Dollar Amount of Past Damages and Defendants’
Renewed Motion for Judgment as a Matter of Law on Damages or a New Trial. Furthermore,
Plaintiff agreed to postpone enforcement of the pre-judgment damages award until after the
Court ruled on these motions. (D.N. 808.) Plaintiff itself is seeking a new trial on damages, and
as a result the amount of pre-judgment damages that Plaintiff may be paid is still undetermined at
this stage. No post-judgment damages have been awarded yet, and therefore Plaintiff is not yet
entitled to any monies that it is not being paid. Finally, Defendants are financially solvent and
will be able to pay the appropriate amount of damages, or post an appropriate bond, if necessary,
once a final determination by the Court is made regarding post-judgment damages.
Conclusion
For the foregoing reasons, Defendants respectfully request this Court grant their Motion
to Postpone Briefing and Ruling on Plaintiff’s Motion for Post-Judgment Royalties until the
Court has ruled on all pending post-trial motions under Rules 50, 52, and 59. In the alternative,
should the Court not postpone briefing altogether until after a ruling on the parties' other posttrial motions, Defendants request that the Court extend the deadline for the opposition to
Plaintiff’s Motion for Post-Judgment Royalties to February 28, 2013.

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DATED: December 21, 2012

/s/ Stephen E. Noona
Stephen E. Noona
Virginia State Bar No. 25367
KAUFMAN & CANOLES, P.C.
150 West Main Street, Suite 2100
Norfolk, VA 23510
Telephone: [phone]
Facsimile: [phone]
[e-mail]
David Bilsker
David A. Perlson
QUINN EMANUEL URQUHART &
SULLIVAN, LLP
50 California Street, 22nd Floor
San Francisco, California 94111
Telephone: [phone]
Facsimile: [phone]
[e-mail]
[e-mail]
Counsel for Google Inc., Target Corporation, IAC
Search & Media, Inc., and Gannett Co., Inc.
By: /s/ Stephen E. Noona
Stephen E. Noona
Virginia State Bar No. 25367
KAUFMAN & CANOLES, P.C.
150 W. Main Street, Suite 2100
Norfolk, VA 23510
Telephone: [phone]
Facsimile: [phone]
Robert L. Burns
FINNEGAN, HENDERSON, FARABOW, GARRETT &
DUNNER, LLP
Two Freedom Square
11955 Freedom Drive
Reston, VA 20190
Telephone: [phone]
Facsimile: [phone]
Cortney S. Alexander
FINNEGAN, HENDERSON, FARABOW, GARRETT &
DUNNER, LLP
3500 SunTrust Plaza
303 Peachtree Street, NE
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Atlanta, GA 94111
Telephone: [phone]
Facsimile: [phone]
Counsel for Defendant AOL, Inc.

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CERTIFICATE OF SERVICE
I hereby certify that on December 21, 2012, I will electronically file the foregoing with
the Clerk of Court using the CM/ECF system, which will send a notification of such filing (NEF)
to the following:
Jeffrey K. Sherwood
Kenneth W. Brothers
DICKSTEIN SHAPIRO LLP
1825 Eye Street NW
Washington, DC 20006
Telephone: [phone]
Facsimile: [phone]
[e-mail]
[e-mail]
Donald C. Schultz
W. Ryan Snow
Steven Stancliff
CRENSHAW, WARE & MARTIN, P.L.C.
150 West Main Street, Suite 1500
Norfolk, VA 23510
Telephone: [phone]
Facsimile: [phone]
[e-mail]
[e-mail]
[e-mail]
Counsel for Plaintiff, I/P Engine, Inc.

/s/ Stephen E. Noona
Stephen E. Noona
Virginia State Bar No. 25367
KAUFMAN & CANOLES, P.C.
150 West Main Street, Suite 2100
Norfolk, VA 23510
Telephone: [phone]
Facsimile: [phone]
[e-mail]

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