Wisconsin Alumni Research Foundation v. Apple Inc.
Filing
757
OPINION AND ORDER denying 677 Motion for Judgment as a Matter of Law Or In the Alternative, For A New Trial; denying 681 Motion to Alter or Amend Judgment as to Willfulness Under Federal Rule of Civil Procedure 59(e); granting in part and denyi ng in part 683 Motion for Equitable Relief; granting in part and reserving in part 685 Motion for an Accounting, Supplemental Damages Through the Date of Judgment, Prejudgment Interest and Post-Judgment Interest; granting in part and denying in part 689 Motion for Taxation of Costs and 725 Amended Bill of Costs; granting 744 Motion to Strike Declarations and Portions of Reply Brief. Signed by District Judge William M. Conley on 6/6/2017. (kwf)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
WISCONSIN ALUMNI RESEARCH
FOUNDATION,
v.
Plaintiff,
OPINION AND ORDER
14-cv-062-wmc
APPLE, INC.,
Defendant.
In this opinion and order, the court addresses a slew of post-trial motions. The
jury returned a verdict in favor of plaintiff Wisconsin Alumni Research Foundation
(“WARF”) and awarded damages in the amount of $234 million. Invoking Federal Rules
of Civil Procedure 50(b) and 59(3), defendant Apple, Inc., challenges virtually every
aspect of the jury’s verdicts, and myriad decisions made both before and during the trial
by the court. (Dkt. #677.) For the reasons that follow, the court will deny that motion
in its entirety. WARF also moves under Rule 59(e) to alter the court’s grant of judgment
in Apple’s favor on plaintiff’s willful infringement claim. Applying the new standard
articulated by the United States Supreme Court in Halo Electronics, Inc. v. Pulse Electronics,
Inc., 136 S. Ct. 1923 (2016), the court again concludes that WARF has failed to meet its
burden of demonstrating willful infringement.
Accordingly, that motion will also be
denied.
The remaining motions are all WARF’s: for equitable relief (dkt. #683); for an
accounting, supplemental damages through the date of judgment, and pre- and postjudgment interest (dkt. #685); and for taxation of costs (dkt. ##689, 725). For the
reasons that follow, the court will award an ongoing royalty rate of $2.74 per unit from
the date of judgment, October 25, 2015.
The court will also award supplemental
damages at the per unit royalty rate awarded by the jury from June 27, 2015, to October
25, 2015. 1
The court will also award pre-judgment interest at the prime rate,
compounded quarterly, and will award post-judgment interest at the statutory rate,
compounded annually.
The calculations for supplemental damages and pre-judgment
interest will await further submissions by the parties.
Finally, the court will award
WARF costs in the total amount of $841,587.66.
BACKGROUND
In this patent lawsuit, WARF alleged that Apple infringed U.S. Patent No.
5,781,752 (the “’752 patent”). In response, Apple asserted various counterclaims, which
challenge the validity of the patent.
On the parties’ cross motions for summary
judgment, the court granted partial judgment to WARF on: (1) Apple’s counterclaims
and defenses for anticipation under 35 U.S.C. § 102 with respect to U.S. Patent No.
5,619,662 (“Steely or the “Steely patent”); and (2) Apple’s counterclaim and defense for
indefiniteness under 35 U.S.C. § 112 ¶ 2 with respect to claims 5 and 6 of the ‘752
patent. (8/6/15 Op. & Order (dkt. #193).)
The case then proceeded to a jury trial. The jury returned a verdict in favor of
WARF, finding that Apple infringed all six of the asserted claims and rejecting Apple’s
invalidity defense as to each of those six claims. (10/13/15 Liability Special Verdict (dkt.
As described below, the court will also consider awarding supplemental damages for the A9 and
A9x chips, which Apple now concedes infringe (while maintaining its objections to the jury’s
verdict). This issue will, however, require additional briefing.
1
2
#603).) In the second phase of the trial, the jury answered two more questions in favor
of WARF, finding Apple vicariously liable for Samsung’s manufacture of Apple products,
and awarded WARF $234,277,669.00 in damages. (10/19/15 Damages Special Verdict
(dkt. #642).)
During the course of trial, the court also granted WARF judgment as a matter of
law on one of Apple’s noninfringement defenses based on the claim of a “prediction
threshold detector preventing data speculation for instructions having a prediction within
a predetermined range,” finding that Apple had failed to put forth a factual basis for that
defense to support a reasonable jury finding noninfringement on that basis. (10/16/15
Op. & Order (dkt. #639).) Finally, the court granted judgment in favor of Apple on
WARF’s willful infringement claim. (10/15/15 Op. & Order (dkt. #623).)
OPINION
I. Apple’s Renewed Motion for Judgment as a Matter of Law and/or New Trial
(dkt. #677)
Under Federal Rule of Civil Procedure 50, judgment as a matter of law may be
granted where there is no “legally sufficient evidentiary basis” to find for the party on
that issue. Fed. R. Civ. P. 50(a). In considering a Rule 50(a) motion, the court is to
“construe the facts strictly in favor of the party that prevailed at trial.” including drawing
“[a]ll reasonable inferences in that party’s favor and disregarding all evidence favorable to
the moving party that the jury is not required to believe.” May v. Chrysler Group, LLC,
692 F.3d 734, 742 (7th Cir. 2012) (internal citations and quotation marks omitted),
withdrawn in part on reh’g, Nos. 11-3000, 11-3109, 2013 WL 1955682 (7th Cir. May 14,
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2013). In particular, the court does not make credibility determinations or weigh the
evidence, although the court must assure that “more than ‘a mere scintilla of evidence’
supports the verdict.” Id. (quoting Hossack v. Floor Covering Assocs. of Joliet, Inc., 492 F.3d
853, 859 (7th Cir. 2007)). Essentially, the court’s “job is to decide whether a highly
charitable assessment of the evidence supports the jury’s verdict or if, instead, the jury
was irrational to reach its conclusion.” May, 692 F.3d at 742.
A further limitation applies as well: “Because the Rule 50(b) motion is only a
renewal of the preverdict motion, it can be granted only on grounds advanced in the
preverdict motion.” Wallace v. McGlothan, 606 F.3d 410, 418 (7th Cir. 2010); see also
Thompson v. Mem’l Hosp. of Carbondale, 625 F.3d 394, 407 (7th Cir. 2010) (refusing to
consider the defendant’s argument that plaintiff failed to demonstrate that he suffered an
adverse employment action, in part, because the defendant did not raise argument in
Rule 50(a) motion); see also Fed. R. Civ. P. 50 cmt. 1991 Amendments (“A post-trial
motion for judgment can be granted only on grounds advanced in the pre-verdict
motion.”).
Defendant also moves for a new trial under Federal Rule of Civil Procedure 59.
“A new trial may be granted only if the jury’s verdict is against the manifest weight of the
evidence.” King v. Harrington, 447 F.3d 531, 534 (7th Cir. 2006) (citing ABM Marking,
Inc. v. Zanasi Fratelli, S.R.L., 353 F.3d 541, 545 (7th Cir. 2003)). To meet this standard,
defendant must demonstrate that no rational jury could have rendered a verdict against
Apple. King, 447 F.3d at 534 (citing Woodward v. Corr. Med. Servs. of Ill., Inc., 368 F.3d
917, 926 (7th Cir. 2004)). In making this evaluation, the court must view the evidence
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in a light most favorable to plaintiff, leaving issues of credibility and weight of evidence
to the jury.
King, 447 F.3d at 534.
“The court must sustain the verdict where a
‘reasonable basis’ exists in the record to support the outcome.” Id. (quoting Kapelanski v.
Johnson, 390 F.3d 525, 530 (7th Cir. 2004)).
In this case, the evidence easily supports the jury’s findings of infringement on all
three disputed elements of the asserted claims of the patent-in-suit: (1) “detecting a misspeculation”; (2) “the particular data consuming instruction”; and (3) “flag value.”
(Def.’s Mot. (dkt. #555) 4-9.) While Apple’s Rule 50(b) motion extends beyond the
arguments raised in its 50(a) motion, WARF does not oppose it on that basis. As such,
the court will address that motion, briefly, while ultimately rejecting all of the arguments
raised by Apple.
A. Infringement
In its pending Rule 50(b) motion, Apple contends the accused products lack at
least three elements required by the ‘752 patent, and, therefore, no reasonable jury could
find that Apple literally infringed any of the asserted claims of the ‘752 patent. First,
Apple contends that no reasonable jury could have found that Apple’s accused products
satisfy the “detecting a mis-speculation” and “mis-speculation indication” elements.
Apple argues that the accused products detect only data dependence, not misspeculations, but WARF submitted evidence -- largely through its expert Professor Conte
-- showing Apple’s data speculation circuit, the Load-Store Unit, is capable of both
detecting data dependence and detecting mis-speculation.
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Specifically, Conte testified that the Load Queue in the Load-Store Unit detects a
mis-speculation between a Load and a Store by comparing the program order of the older
Store and younger Load, confirming that the instructions have an address overlap, and
ensuring that the younger Load has in fact executed before the older Store. (See Pl.’s
Opp’n (dkt. #711) 21 (citing Conte testimony).) When a mis-speculation is detected,
the Load Store Unit then produces a Store-Hit-Younger-Load Redirect, which is a misspeculation indication. (See id.) Conte further testified that, and provided an illustration
for the jury to better understand how, the timing of Apple’s processor necessarily satisfies
the “detecting a mis-speculation” and “mis-speculation indication” elements. (Id. at 3132.) In other words, this step is “baked into” Apple’s processor. (Id. at 31.)
In its reply, Apple argues principally that “a processor cannot literally detect or
indicate a mis-speculation absent an explicit check.”
(emphasis added).)
(Def.’s Reply (dkt. #728) 15
Whatever Apple means by “explicit,” the construction of “mis-
speculation” agreed on by the parties contains no such requirement. (See 8/6/15 Op. &
Order (dkt. #193) 10.) Instead, true to the language of the claim, all that is required is
that (1) mis-speculations occur and (2) Apple’s processor is capable of detecting and
indicating such occurrences.
Drawing all reasonable inferences in favor of WARF,
therefore, the jury’s finding of infringement of this element was certainly not irrational.
May, 692 F.3d at 742.
Second, Apple challenges the jury’s finding that the “particular data consuming
instruction” element is satisfied.
Specifically, Apple argues that the evidence
demonstrates that “each entry of Apple’s LSD Predictor includes a Load Tag and
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counter,” and that the Load Tags are generated using a hashtag function and are not
associated with a “particular” load instruction. (Def.’s Opening Br. (dkt. #678) 17-18.)
The court rejects Apple’s challenge for the same reason it denied Apple’s Rule 50(a)
motion, “a reasonable jury could conclude that a prediction was associated with a
particular load []instruction even if that same prediction may be associated with other
load instructions.” (10/26/15 Op. & Order (dkt. #655) 4-5.) In its reply brief, Apple
appears to step back from any defense based on aliasing and the frequency of aliasing.
Even if this shift does not amount to waiver, the court agrees with WARF that the
Apple’s processors are capable of operating for periods of time during which at least some
of the load tags will not alias. As such, the jury reasonably rejected any non-infringement
defense based on that theory. (See Pl.’s Opp’n (dkt. #711) 44 (citing Broadcom Corp. v.
Emulex Corp., 732 F.3d 1325, 1333 (Fed. Cir. 2013) (“[A]n accused device that
sometimes, but not always embodies a claim[] nonetheless infringes.” (internal citation
and quotation marks omitted)).) For these reasons, the court concludes that the jury
reasonably found this element satisfied.
Related to its Rule 50(b) challenge, Apple also seeks a new trial based on the
court’s failure to instruct the jury on the meaning of “the particular.”
During trial,
WARF moved to exclude evidence and argument on Apple’s aliasing non-infringement
theory, on the basis that this theory was one of claims construction, and Apple waived
any construction of the term “the particular” by failing to raise it timely. In response, it
was Apple who argued that the term “the particular” should be given its plain and
ordinary meaning of “of, relating to, or being a single person or thing,” no doubt at least
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in part to avoid a waiver for failing to seek a timely construction. (Def.’s Br. (dkt. #552)
3.) Regardless, the court agreed with Apple’s interpretation, concluding that claim 1
“disclosed a prediction associated with a single load instruction,” but given that this
interpretation was consistent with the plain meaning of the claim terms “the” and “the
particular” declined to insert a specific, untimely construction in the closing instructions.
(10/8/15 Op. & Order (dkt. #559); 10/9/15 Text Order (dkt. #575).) Moreover, in the
closing instructions, the jury was told that “[a]ll other claim terms should be given their
plain and ordinary meaning as viewed from the perspective of a person of ordinary skill
in the art or field of the invention.” (Closing Liability Instructions (dkt. #646) 5.)
Finally, Apple has failed to explain adequately how it was prejudiced by the denial of its
request, or why a new trial is required under Rule 59(a).
Third, Apple challenges the jury’s finding that Apple’s accused products satisfy the
“flag value indicating whether the certain respective date producing [store] instruction
has been executed” in claims 5 and 6. Apple argues that the Armed Bit in the LSD
Predictor only indicates “whether the store instruction is in the Reservation Station, not
whether it ‘has been executed’” as would be required to have a “flag value” under those
claims. (Def.’s Opening Br. (dkt. #678) 22.) As WARF explains, largely through Dr.
Conte’s review of RTL code, however, the change from 0 to 1 indicates that the Store
instruction is in the reservation and not yet executed, and then the change from 1 to 0,
further indicates that the stores are “data resolved,” issued from the Reservation Station,
and thus have been executed.
(Pl.’s Opp’n (dkt. #711) 48-49.) In response, Apple
simply argues that WARF’s explanation does not account for the Armed Bit value being
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“0” both before and after execution.
(Def.’s Reply (dkt. #728) 25-26.)
Apple’s
argument, however, fails to consider the passage of time and Conte’s testimony that the
value changed from 0 to 1 and then the de-assertion from 1 to 0.
Since the jury
reasonably credited Conte’s testimony, the court sees no basis for upsetting that finding.
In addition to raising challenges under Rule 50(b), Apple also argues that a new
trial on infringement is necessary because the court erred during the liability phase of
trial, granting WARF judgment as a matter of law on one of Apple’s non-infringement
theories -- namely, Apple’s defense with respect to the “prediction threshold detector”
limitation. (Def.’s Opening Br. (dkt. #678) 29.) Certainly, the court granted judgment
as a matter of law on this noninfringement theory in response to WARF’s oral motion.
The court subsequently issued an opinion and order more fully explaining its reasons for
doing so. (10/16/15 Op. & Order (dkt. #639).) Since Apple’s Rule 59 motion raises no
new bases for reviewing that decision, the court simply rejects Apple’s arguments for the
reasons already stated on the record during the trial and in its subsequent written order.
Finally, in a one-paragraph throw-away challenge, Apple purports to seek a new
trial on the basis that the jury’s infringement verdict was against the manifest weight of
the evidence.
The court rejects this motion for the same reasons the court rejected
Apple’s challenges under Rule 50(b).
B. Invalidity
Apple also seeks judgment as a matter of law as to its defenses and counterclaims
of invalidity with respect to two other arguments: (1) claims 1, 2, 3, 5, 6 and 9 of the
‘752 patent were obvious in view of U.S. Patent No. 5,666,506 (“Hesson”) and U.S.
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Patent No. 5,619,662 (“Steely”); and (2) claims 1, 2, 3 and 9 of the ‘752 patent are
anticipated by, or at least obvious in view of, the Chen prior art references.
“A party seeking to invalidate a patent based on obviousness must demonstrate
‘by clear and convincing evidence that a skilled artisan would have been motivated to
combine the teachings of the prior art references to achieve the claimed invention, and
that the skilled artisan would have had a reasonable expectation of success in doing so.’”
Procter & Gamble Co. v. Teva Pharm. USA, Inc., 566 F.3d 989, 994 (Fed. Cir. 2009)
(quoting Pfizer, Inc. v. Apotex, Inc., 480 F.3d 1348, 1361 (Fed. Cir. 2007)). Again, in the
context of a post-verdict motion, the court is directed to “presume that the jury resolved
the underlying factual disputes in favor of the verdict winner and [to] leave those
presumed findings undisturbed if they are supported by substantial evidence.” Jurgens v.
McKasy, 927 F.2d 1552, 1557 (Fed. Cir. 1991). The court then “examine[s] the legal
conclusion de novo to see whether it is correct in light of the presumed jury fact findings.”
Id.
In conducting this analysis, courts are instructed to “consider all of the Graham
factors prior to reaching a conclusion with respect to obviousness.” Kinetic Concepts, Inc.
v. Smith & Nephew, Inc., 688 F.3d 1342, 1360 (Fed. Cir. 2012) (citing Graham v. John
Deere Co., 383 U.S. 1, 17-18 (1966) describing four underlying factors for deciding
obviousness: (1) the scope and content of the prior art; (2) the differences between the
claims and the prior art; (3) the level of ordinary skill in the art; and (4) objective indicia
of nonobviousness).
As for the first defense, based on the Hesson and Steely patents, the court
considered this theory in its opinion and order granting Apple judgment on WARF’s
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willful infringement claim. (10/15/15 Op. & Order (dkt. #623) 3-4.) While the court
found Apple’s defense reasonable, the court also determined that the jury acted
reasonably in rejecting the defense, likely “because of the investment in computer
software simulations, and time and effort required to confirm that the ‘752 patented
invention would prove valuable in practice sometime in the future when processing
speeds had increased by a factor of 10 or more.” (Id. at 4.) As WARF’s expert, Dr.
Mudge, and others explained, WARF put forth sufficient evidence from which the jury
reasonably could have found that one skilled in the art would not have combined Steely’s
memory reference tags with Hesson’s solution to the problem of mis-speculations of store
instructions. At the very least, Apple failed to prove this defense by clear and convincing
evidence. Once again, therefore, the court sees no basis for upsetting the jury’s factual
findings as to Apple’s obviousness defense by combining the Steely and Hesson patents.
Apple also seeks a favorable judgment on its anticipation / obviousness defense
based on the Chen references. Through the testimony of the co-author of three of the
four Chen references -- Professor Scott Mahlke -- WARF put forth sufficient evidence
from which the a reasonable jury could have found, and indeed did find that (1) the
reordering contemplated in Chen is done in a software compiler not by a processor; and
(2) the focus of Chen is on in order, rather than out of order, executions. (Pl.’s Opp’n
(dkt. #711) 134-40.) Based on this, the jury reasonably concluded that Chen did not
disclose claims 1, 2, 3 and 9 of the ‘752 patent, or, again, the jury at least had a sound
basis for finding that Apple had not met its burden of demonstrating an anticipation
defense by clear and convincing evidence.
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As for its related obviousness defense, Apple argued that it would have been an
obvious to apply Chen to software.
Putting aside WARF’s challenges to Apple’s
anticipation defense, experts and others skilled in the art testified persuasively to the
deep divide between hardware-based and software-based approaches. (Id. at 143-33.) A
jury reasonably could have relied on this testimony to conclude that one skilled in the art
would not have combined these fundamentally different approaches. As such, the court
also rejects Apple’s motion to invalidate certain claims of the ‘752 patent based on
obvious in view of the Chen prior art references.
C. Vicarious Liability
Next, Apple seeks judgment as a matter of law or a new trial as to the jury’s
finding that: (1) the wafers infringe when they leave the United States; and (2)
Samsung’s manufacturing is attributable to Apple. These findings were material to the
jury’s determination of damages, specifically the appropriate royalty base.
Post-trial,
Apple raises three core challenges with respect to these jury findings.
First, Apple argues that no reasonable jury could have found that the wafers were
capable of infringing before they left the United States for further processing overseas.
Specifically, Apples argues -- as it did unsuccessfully to the jury -- that the wafers “are not
capable of performing the claimed functionality until ‘bumping’ occurs to apply power in
order for the circuitry to be able to function.” (Def.’s Opening Br. (dkt. #678) 51; see
also Def.’s Reply (dkt. #728) (arguing that the wafers also must be “fused and
singulated” before they can satisfy the claim limitations”).)
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This argument ignores the evidence presented largely through the testimony of Dr.
Conte, that “the circuitry in Accused Processors are defined by their RTL code, that this
circuitry contains each of the elements specific in the asserted claims, and all of the
circuitry” in the wafers is in place before being shipped overseas.
(Pl.’s Opp’n (dkt.
#711) 149.) Moreover, Dr. Conte testified that the wafers can be powered on and tested
on a test fixture after the wafer is manufactured in Austin, but before being shipped overseas.
(Id. at 154.) This evidence provided a sufficient basis for the jury to find that the wafers
were capable of infringement and indeed did infringe, before leaving the United States.
Second, Apple argues that no reasonable jury could find that Samsung’s
manufacturing was attributable to Apple. In so arguing, Apple contends that plaintiff
must prove that Apple and Samsung have a principal-agent relationship. (Def.’s Opening
Br. (dkt. #678) 55.) The court considered and previously rejected this argument as well,
relying principally on the Federal Circuit’s en banc decision in Akamai Technologies, Inc. v.
Limelight Networks, Inc., 797 F.3d 1020 (Fed. Cir. 2015). In that case, the court explained
that “Section 271(a) is not limited solely to principal-agent relationships, contractual
arrangements, and joint enterprise[.]” Id. at 1023. Instead, the court held that vicarious
liability for purposes of establishing direct infringement “can also be found when an
alleged infringer conditions participation in an activity or receipt of a benefit upon
performance of a step or steps of a patented method and establishes the manner or
timing of that performance.” Id.
While recognizing that there may be important distinctions between apparatus
and method claims, the court rejects Apple’s attempt to distinguish Akamai on the basis
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that its holding is limited to method claims.
See Centillion Data Sys., LLC v. Qwest
Commc’ns Int’l, Inc., 631 F.3d 1279, 1282 (Fed. Cir. 2011) (similarly focusing on “control
or direct” actions of another in determining whether there was vicarious liability for non
method claim). As the court explained in its opinion and order on Apple’s Rule 50(a)
motion, “the Federal Circuit is certainly moving in the direction of a more expansive view
of what satisfies control and direction in order to bring a third party’s actions within the
purview of the alleged infringer.” (10/26/15 Op. & Order (dkt. #655) 7.) 2
Finally, Apple argues that if the “control or direction” standard is correct, WARF
still failed to demonstrate that it controlled and directed Samsung, because Samsung
independently determined to manufacture the wafers in the United States as opposed to
doing so in Korea.
The court agrees with WARF that this argument conflates two
separate questions -- whether Samsung’s actions are attributable to Apple and whether
infringement occurred within the United States. (Pl.’s Opp’n (dkt. #711) 187.) There is
no merit to Apple’s argument that it needed to direct Samsung to manufacture the wafers
in the United States. As for Apple’s other arguments that it did not control or direct
Samsung’s actions, as the court indicated in its opinion and order on Apple’s Rule 50(a)
motion, there was more than sufficient evidence in the form of two related
manufacturing contracts for a reasonable jury to conclude that Apple did control or direct
Samsung’s actions.
For this same reason, the court rejects Apple’s arguments that a new trial is warranted because of
the court’s instruction to the jury that Apple was vicariously liable “if Samsung performed an act
of infringement under Apple’s control or direction” and because the evidence goes against the
manifest weight of the evidence. (Def.’s Opening Br. (dkt. #678) 65-66.)
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Third, Apple seeks a new trial on the basis that the court erred in allowing WARF
to try its vicarious liability claim during the damages phase of trial. Apple contends that
it was prejudiced by the decision. The argument is silly and warrants little attention. As
Apple itself acknowledges, the court has wide discretion under Rule 42(b) to determine
how best to try a case. Here, the first phase of the trial covered a lot of ground -- both
infringement and invalidity. To have added WARF’s vicarious liability claim would have
unnecessarily complicated that first phase of trial since this issue was only material to the
question of the scope of damages. If the jury had found no infringement or had found
the patent invalid, there would have been no need for the evidence and argument on
vicarious liability to be presented to the jury. 3
Nor is the court convinced by Apple’s argument that the jury was confused by the
vicarious liability questions given statements in the instructions that the jury had already
found infringement. In particular, the instructions explained that the vicarious liability
questions concerned processors manufactured in part in the United States and in part
overseas.
(Closing Damages Instructions (dkt. #649) 1 (“In determining whether to
include these [wafers] in the damages award, you must first consider whether the
products infringe at the time they leave the United States, before any additional
manufacturing or processing occurs outside of the United States.”).) Accordingly, there
appeared no risk of confusion. Indeed, the jury certainly was capable of understanding
Admittedly, all of Apple’s processors were manufactured in part overseas, then the calculus
would have been different. This is because the issue of vicarious liability would have been central
to plaintiff’s infringement claims and, therefore, those two questions likely would have been
posed in the first phase of trial, and likely as the first two questions on the verdict form, but those
were not the facts of this case.
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why it was being asked these questions in the second phase of the trial and how those
answers impacted the damages award.
D. Damages
Apple finally raises a variety of challenges to the jury’s damages award, which
roughly fall into three buckets: (1) the admission of certain evidence and expert
testimony; (2) errors in the instructions; and (3) the damages award was not supported
by the manifest weight of the evidence. The court will address each challenge in turn.
i.
Evidentiary Rulings
Apple challenges the introduction of evidence regarding patents that Apple
asserted in litigation were infringed by Samsung and the royalties that Apple sought from
Samsung.
Specifically, Apple argues that those patents did not involve comparable
technology, are reflective of the competitive relationship between Apple and Samsung,
and were adopted in an unrelated litigation.
The court already considered these
arguments in ruling on motions in limine and finds no basis for reconsidering its decision
to admit such evidence now. (9/29/15 Op. & Order (dkt. #468) 25-26.) For the most
part, the evidence was used by WARF to rebut Apple’s damages position. Moreover,
Apple was not unduly prejudiced by the evidence as it was free to present testimony and
argue -- and it did both -- that: these patents are not comparable; the negotiation
between Apple and Samsung involved a competitive dynamic not at issue in this
litigation; and the royalties were sought in the context of litigation. All of this simply
goes to the weight the jury may assign to the patents and their royalties, not the
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admissibility. 4 See Apple Inc. v. Motorola, Inc., 757 F.3d 1286, 1326 (Fed. Cir. 2014)
(“[W]hether these licenses are sufficiently comparable such that Motorola’s calculation is
a reasonable royalty goes to the weight of the evidence, not its admissibility.”).
Apple also challenges the admissibility of WARF’s expert Catharine Lawton’s
testimony that the parties would have agreed to split the profits 50/50. Here, too, the
court touched on this challenge at trial and sees no basis for revisiting its decision to
allow her testimony. (9/29/15 Op. & Order (dkt. #468) 36-37.) Lawton testified that
she isolated the patents attributable to the patented invention, and based on
“conversations with [WARF’s long-serving managing director] Dr. Gulbrandsen and
WARF’s history of licensing and negotiation and the nature of this technology, that
WARF would have sought at this hypothetical negotiation 50 to 70 percent of the
incremental additional profit that Apple realized.” (10/14/15 Trial Tr. (dkt. #671) 17172.) The court found that Lawton sufficiently tied her 50% profit split to the facts of the
case, and therefore her testimony is distinguishable from impermissible “rule of thumb”
expert opinions. See Carnegie Mellon Univ. v. Marvell Tech. Grp., Ltd., No. 09-290, 2012
WL 3679564, at *6 (W.D. Pa. Aug. 24, 2012) (distinguishing the holding in Uniloc from
expert testimony “tied to the facts of the case”). Here, too, the jury was free to place
little or no weight on this testimony, but Apple’s challenge does not go to its
admissibility.
Because the court rejects each of these challenges, the court need not address WARF’s argument
that even without this evidence, there was sufficient support from unchallenged evidence to
sustain the jury’s award. (Pl.’s Opp’n (dkt. #711) 212-15.)
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Also with respect to Lawton, Apple challenges the introduction of her testimony
regarding an estimated market price of the A7 chip. The court addressed this challenge
in its motions in limine order, and again sees no reason to revisit its decision allowing her
testimony and introduction of evidence.
(9/29/15 Op. & Order (dkt. #468) 35-36.)
Whether Lawton’s cost estimate was inflated was proper fodder for cross-examination -and Apple did explore this at trial -- but Apple’s arguments fall short of demonstrating
that her analysis was so unreliable that the court erred in not excluding it.
Finally, with respect to the first category of challenges to the damages award,
Apple contends that the court erred in allowing Dr. Knittel to present his regression
analysis. Apple also challenges the admissibility of Dr. Knittel’s testimony as part of its
motions in limine. Here, too, the court rejected Apple’s challenge, finding that it went to
the weight the jury may place on his opinion, not its admissibility. (9/29/15 Op. &
Order (dkt. #468) 32-25.) The court sees no basis to reconsider that decision either. 5
ii.
Jury Instructions
Apple takes issue with two aspects of the damages instructions.
First, Apple
contends that the court erred in including all fifteen of the Georgia-Pacific factors in the
instructions. Relying on Ericsson Inc. v. D-Link Systems, Inc., 773 F.3d 1201 (Fed. Cir.
2014), Apple argues that the court failed to consider the facts of this case in determining
As part of this challenge, Apple also claims that the court limited its cross-examination of Dr.
Knittel, thereby undermining its attempts to challenge this methodology. The court has reviewed
the portions of the trial transcript Apple cited in support of this argument, which actually reflect
an attempt to manage the trial and not undue interference with Apple’s cross-examination.
Moreover, Apple’s contention that the court required Apple to submit a proffer on further crossexamination of Knittel is belied by the record -- as WARF points out in its opposition brief.
(Def.’s Opp’n (dkt. #711) 258-60.) Regardless, Apple dropped this challenge in its reply brief.
5
18
which factors were relevant for the jury’s consideration. While certain of the factors were
more central to the parties’ respective damages cases, WARF’s expert did provide a slide
on all fifteen factors. (Demonstrative Ex. 93 (dkt. #650-9) 74.) Moreover, Apple fails to
explain how it was prejudiced from an instruction that permitted the jury to consider
certain factors rather than require consideration. (Intro. Damages Instr. (dkt. #649) 2
(“The following is not every possible factor, but it will give you an idea of the kinds of
things to consider in setting a reasonable royalty.”).)
More specifically and unlike
Ericsson, Apple fails to explain what factors would have been contrary to the licensing
requirements. (Pl.’s Opp’n (dkt. #711) 261-62.)
Apple also challenges the court’s refusal to provide a special instruction on noninfringing alternatives and switching costs. As an initial point, the court did instruct the
jury to consider “the availability of other non-infringing alternatives” in determining a
reasonable royalty.
The court simply rejected a more detailed instruction offered by
Apple, which the court deemed unnecessary and more suitable for argument. In no way
did the court restrict Apple’s efforts to produce evidence or argument on this factor. As
for switching costs, Apple acknowledged in its reply (Def.’s Reply (dkt. #728) 151) that
it failed to present any evidence on this subject which rendered the proposed instruction
irrelevant.
iii.
Manifest Weight of Evidence
Apple further contends that the verdict went against the manifest weight of the
evidence. In support of this challenge, Apple repeats the same arguments made to the
jury as to the lack of comparability of the 2009 WARF-Intel license and Apple licenses,
19
as well as the importance of WARF’s pre-litigation valuation of the patent. The jury
could have accepted those arguments, but obviously opted otherwise. As for Apple’s
challenge to specific evidence, a party “must do more than identify favorable evidence
that, if isolated from . . . opposing evidence, would support [its] conclusion.” Plyler v.
Whirlpool Corp., 751 F.3d 509, 513 (7th Cir. 2014).
As WARF described in its opposition, the record as a whole provides sufficient
support for the jury’s award. Specifically, the jury reasonably could have relied on the
2009 Intel agreement for $110 million, the significant performance and energy-saving
benefits Apple achieved through its use of the patented invention and the economic
importance of the invention to the exponentially faster processing speed now necessary
for Apple’s iPhones.
(Pl.’s Opp’n (dkt. #711) 212-15.)
Given this, Apple has not
established that the jury’s award went against the manifest weight of the evidence so as
to warrant a new trial.
II. WARF’s Motion to Alter or Amend Judgment as to Willful Infringement (dkt.
#681)
After the court granted Apple’s motion for judgment as a matter of law on
WARF’s willful infringement claim, the United States Supreme Court articulated a
different standard for proving such a claim. Halo Electronics, Inc. v. Pulse Electronics, Inc.,
136 S. Ct. 1923 (2016). Shortly after the Court granted certiorari in Halo, WARF filed
the present motion, anticipating that the standard defined in In re Seagate Technology,
LLC, 497 F.3d 1360 (Fed. Cir. 2007 (en banc), would be vacated and that the Supreme
Court would adopt a similar totality of the circumstances test described in Octane Fitness,
20
LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014), with respect to claims for
attorneys’ fees and costs under 35 U.S.C. § 285. WARF’s motion proved prescient, but
it does not change the result here.
In Halo, the Supreme Court rejected the “unduly rigid” objective and subjective
prongs set forth in Seagate, instead allowing courts to award enhanced damages based on
“subjective willfulness of a patent infringer, intentional or knowing, . . . without regard to
whether his infringement was objectively reckless.” 136 S. Ct. at 1933. Moreover, the
Court rejected Seagate’s requirement that willful infringement be shown by a heightened
clear and convincing evidence standard, instead adopting a preponderance of the
evidence standard. Id. at 1934. In adopting a more flexible standard, however, the Court
still cautioned that the award of enhanced damages should be limited to “egregious cases
of misconduct beyond typical infringement.” Id. at 1935.
In its original opinion and order granting judgment to Apple on WARF’s willful
infringement claim, this court applied the then-controlling two-part Seagate test,
concluding that certain of Apple’s invalidity defenses were not objectively unreasonable.
Certainly, Halo calls into questions whether Apple, and in turn this court, may rely on an
objective showing of plausible defenses absent a further showing that Apple actually
believed that the ‘752 patent was invalid at the time it commenced infringing the patent.
Indeed, the Supreme Court was quite critical of this aspect of the Seagate test:
The existence of such a defense insulates the infringer from
enhanced damages, even if he did not act on the basis of the
defense or was even aware of it. Under that standard,
someone who plunders a patent—infringing it without any
reason to suppose his conduct is arguably defensible—can
21
nevertheless escape any comeuppance under § 284 solely on
the strength of his attorney’s ingenuity.
Halo, 136 S. Ct. at 1933.
While Halo certainly grants more discretion in determining whether enhanced
damages are appropriate under § 284, a threshold element remains proof that the
defendant necessarily knew of the patent. Id. Prior to the court issuing its decision on
WARF’s willful infringement claim, the parties submitted briefs on their respective
positions on this claim.
(Dkt. ##587, 606.) Each side devoted a few pages to the
“subjective prong,” which primarily concerned Apple’s knowledge of the patent. The
court had no reason to previously consider these arguments, given that it rested its
decision on the objective prong but will do so now.
There appears to be no dispute that Apple was aware of the ‘752 patent before the
filing of this lawsuit. Apple engineer Stephen Meier testified at his deposition that he
was given the ‘752 patent by outside patent prosecution counsel for Apple in November
2013. The timing of Meier’s knowledge of the patent is interesting: it occurred two
months after Apple began selling iPhones containing the accused A7 chip, and two
months before WARF filed the present lawsuit. However, WARF argues that Apple was
aware of the patent as early as 2010 based on: (1) it being briefly mentioned in an article
that at least some Apple engineers reviewed; and (2) it being disclosed in one of Apple’s
own patent applications. As for the first basis, the patent was briefly mentioned in an
academic article, without any significant description. As for the second piece of evidence,
WARF merely offers a single reference to the ’752 patent among more than twenty other
patent references cited in a patent issued for a memory-hazard detection and avoidance
22
instructions for vector processing. (Def.’s Ex. 1176 (U.S. Patent No. 8,019,976B2).)
Without some linkage between the inventors of this patent or others working on that
technology and the inventors of Apple’s LSD Predictor, much less actual proof of Apple’s
copying of the ‘752 patented technology, this is not enough to impute knowledge to
Apple. See Potter Voice Techs., LLC v. Apple Inc., 24 F. Supp. 3d 882, 886 (N.D. Cal.
2014) (“In the context of willful infringement, it is safe to say that the employees
required to have knowledge of the asserted patent must have some connection to the
decision willfully to infringe.”). Even viewed together, this limited evidence does not
provide a sufficient basis for the court to find knowledge of the ‘752 patent pre-dating
November 2013.
The timing of Apple’s knowledge is material because a finding of willfulness “will
depend on an infringer’s prelitigation conduct.” In re Seagate Tech., LLC, 497 F.3d at
1374, abrogated on other grounds by Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923
(2016). 6 As the Federal Circuit explained:
It is certainly true that patent infringement is an ongoing
offense that can continue after litigation has commenced.
However, when a complaint is filed, a patentee must have a
good faith basis for alleging willful infringement. Fed. R. Civ.
Pro. 8, 11(b). So a willfulness claim asserted in the original
complaint must necessarily be grounded exclusively in the
accused infringer’s pre-filing conduct. By contrast, when an
accused infringer’s post-filing conduct is reckless, a patentee
can move for a preliminary injunction, which generally
provides an adequate remedy for combating post-filing willful
While the Supreme Court rejected the standard for determining willful infringement under §
284 in Halo Elecs., the opinion did not upset the Federal Circuit’s holding in Seagate that the focus
of such a claim should be on prelitigation conduct. See Dorman Prod., Inc. v. Paccar, Inc., No. CV
13-6383, 2016 WL 4440322, at *9 (E.D. Pa. Aug. 23, 2016), as amended (Oct. 17, 2016).
6
23
infringement. See 35 U.S.C. § 283; Amazon.com, Inc. v.
Barnesandnoble.com, Inc., 239 F.3d 1343, 1350 (Fed. Cir.
2001). A patentee who does not attempt to stop an accused
infringer’s activities in this manner should not be allowed to
accrue enhanced damages based solely on the infringer’s postfiling conduct. Similarly, if a patentee attempts to secure
injunctive relief but fails, it is likely the infringement did not
rise to the level of recklessness.
Id.; see also Dorman Prod., Inc. v. Paccar, Inc., No. CV 13-6383, 2016 WL 4440322, at *9
(E.D. Pa. Aug. 23, 2016), as amended (Oct. 17, 2016) (rejecting willful infringement claim
based primarily on post-litigation conduct, explaining Dorman’s conduct during the brief
pre-filing period is insufficient to allow PACCAR’s claims for willful infringement ‘in the
main’ to be based on pre-filing conduct” (citing Seagate, 497 F.3d at 1374)).
Similarly, WARF’s willful infringement claim is based solely on the two months
period before the filing of this lawsuit. Moreover, all the evidence shows that at the time
Apple learned of the ‘752 patent, it had already designed, manufactured and begun to
sell phones containing the infringing processor. In other words, there is no evidence of
copying or other egregious misconduct that would warrant a finding of willful
infringement. Indeed, once the case was filed -- assuming the court can consider postlitigation conduct -- Apple developed and pursued an invalidity defense, which the court
found to be objectively reasonable, albeit ultimately unsuccessful. Viewing the record as
a whole, under Halo, therefore, the court again concludes that WARF has failed to
demonstrate willful infringement by a preponderance of the evidence.
Accordingly,
WARF’s motion to alter or amend the court’s order granting judgment to Apple on that
claim is denied.
24
III. WARF’s Motion for Equitable Relief (dkt. #683)
A. Apple’s Motion to Strike
In support of its motion for a equitable relief, WARF filed two reply declarations
of its damages experts, Lawton and Knittel, providing Georgia-Pacific analysis on WARF’s
requested ongoing royalty rate. WARF’s managing director also provided a declaration,
describing WARF’s desire to maintain exclusivity over its patents and submitting
documents in support of that contention. Apple moved to strike these declarations, and
the portions of WARF’s reply brief relying on those declarations, on the basis that they
should have been submitted with the initial motion pursuant to Federal Rule of Civil
Procedure 62(c)(2).
(Dkt. #744.)
In response, WARF argues that: (1) Apple’s
concession in its opposition brief that the A9 and A9x chips infringe the ‘752 patent
justified the reply declarations; and (2) the experts were simply responding to Apple’s
own expert’s Georgia-Pacific analysis.
Without going through each argument, the court generally agrees with Apple that
as the party with the burden of proof, WARF should have provided Lawton and Knittel’s
analysis as part of its opening submission, not in reply. In particular, the court fails to
see Apple’s concession of infringement as any justification for the submission of
otherwise untimely expert opinions in support of WARF’s motion. As such, the court
will grant Apple’s motion to strike Lawton’s and Knittel’s reply declarations.
As for Gulbrandsen’s declaration and Exhibits 6, 7 and 8 to Proctor’s declaration
(dkt. ##734-6, 734-7, 734-8), the court again agrees with Apple that WARF’s focus on
exclusive licenses -- as distinct from its interest in excluding infringers from practicing its
25
patents -- is a new argument raised for the first time in reply. Accordingly, the court will
also grant the motion to strike this declaration and supporting exhibits.
B. Permanent Injunction
To be entitled to a permanent injunction, a patentee must show: (1) it has
suffered an irreparable injury; (2) remedies available at law are inadequate to compensate
for that injury; (3) considering the balance of hardships between the plaintiff and
defendant, a remedy in equity is warranted; and (4) the public interest would not be
disserved by a permanent injunction. See Douglas Dynamics, LLC v. Buyers Prod. Co., 717
F.3d 1336, 1344 (Fed. Cir. 2013) (citing eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388,
391 (2006)). Despite these requirements, the Supreme Court has rejected a categorical
rule barring non-practicing entities from seeking a permanent injunction: “University
researchers or self-made inventors might reasonably prefer to license their patents, rather
than undertake efforts to secure the financing necessary to bring their works to market
themselves. Such patent holders may be able to satisfy the traditional four factor test,
and we see no basis for categorically denying them the opportunity to do so.” eBay Inc.,
547 U.S. at 393. Even so, the awards of injunctive relief in cases since eBay appear
limited to cases where “a party that does not practice the asserted patent” still “sells a
competing product.” Trebro Manufacturing, Inc. v. Firefly Equipment, LLC, 748 F.3d 1159,
1171 (Fed. Cir. 2014) (citing cases).
Here, WARF does not manufacture or sell any competing product.
WARF
nevertheless offers various theories to support a finding of irreparable injury: (1) “[t]he
meaningful threat of an injunction is necessary to support a viable voluntary licensing
26
program for WARF for this industry”; (2) “having to initiate serious litigation against
Apple to address its ongoing infringement causes significant and not quantifiable
reputational harm to WARF”; and (3) litigation costs off-set WARF’s financial
contributions to the University of Wisconsin. All of these theories rest on an assumption
that a threat of a permanent injunction would motivate patent infringers to negotiate a
license upfront thus limiting the need for future litigation to enforce its patent rights.
While this theory may have some merit, it only works if the patent infringement is
knowing -- absent knowledge of the patent the alleged patent infringer would have no
basis for seeking a license. Otherwise, WARF is effectively proposing a new presumption
in favor of the entry of a permanent injunction that would be applicable in all cases.
Moreover, the award of an ongoing royalty and the threat of treble damages for willful
infringement still provide significant motivation for potential patent infringers to
negotiate licenses upfront.
There is also a flip-side to WARF’s theory, as Justice Kennedy explained in his
concurring opinion in eBay:
An industry has developed in which firms use patents not as a
basis for producing and selling goods but, instead, primarily
for obtaining licensing fees. For these firms, an injunction,
and the potentially serious sanctions arising from its
violation, can be employed as a bargaining tool to charge
exorbitant fees to companies that seek to buy licenses to
practice the patent. When the patented invention is but a
small component of the product the companies seek to
produce and the threat of an injunction is employed simply
for undue leverage in negotiations, legal damages may well be
sufficient to compensate for the infringement and an
injunction may not serve the public interest.
27
eBay Inc., 547 U.S. at 396–97 (Kennedy, J., concurring). As Apple points out, courts
routinely refuse to award injunctive relief where the patentee’s “motivation in seeking an
injunction is less about preventing irreparable harm and more about extracting . . .
leverage in negotiating with [the defendant].” Hynix Semiconductor Inc. v. Rambus Inc., 609
F. Supp. 2d 951, 983 n.29 (N.D. Cal. 2009). (See also Def.’s Opp’n (dkt. #709) 26-28
(discussing other cases where a court’s finding of irreparable harm due to damage to
reputation was at least based on the patentee competing in some form with the patent
infringer).)
The court is also unconvinced that WARF’s pursuit of patent litigation
meaningfully harms its reputation as an inventor.
In seeking an injunction, WARF
demonstrates that it is serious about enforcing its patent rights; the court’s decision
denying an injunction does not change that fact. Similarly, WARF filed this lawsuit and
another lawsuit against Apple, not to mention the earlier lawsuit on the same patent
against Intel -- all of which shows that WARF will pursue litigation to enforce its
intellectual rights.
Of course, as an affiliate of an institution of higher learning that generally
promotes the open exchange of scientific and other knowledge, there may be a downside
to WARF’s litigation strategy, including its expressed concern about being lumped in
with so-called patent trolls as supported by newspaper articles identifying WARF as just
that.
(See Pl.’s Opening Br. (dkt. #683) 16.) However, any reputational damage is
caused by the filing of litigation itself, and would, if anything, presumably be worsened
by the entry of an injunction in this case. However as Apple points out, the press’s
28
characterization of WARF as a patent troll pre-dates this litigation (Def.’s Opp’n (dkt.
#709 23-24).
Given the court’s skepticism that the threat of a permanent injunction would limit
(as opposed to foster) litigation, the court remains unconvinced that any reputational
injury caused by pursuing litigation serves as a credible basis for finding irreparable harm,
not to mention the obvious distinction between a research institution tied to a public
university protecting the patented work of its professors and entities from an entity that
simply buys up patent rights for purposes of extracting licenses through the threat of
litigation. Regardless, adding the threat of permanent injunctive relief going forward
would only enhance such a reputation.
At the end of the day, the court concludes that WARF has not met its burden of
demonstrating irreparable harm, and even if it had, the balance of equities and the public
interest both weigh in favor of denying entry of a permanent injunction. If the court
were to enter an injunction, Apple would have to disable the LDS Predictor, which would
likely prevent Apple from using non-infringing features, including features covered by
Apple’s own patents. Most importantly, until an alternative, non-infringing alternative
can be incorporated into the iPhone, removing the LSD Predictor may well deprive the
public of all of the technology contained in that product, not just the infringing
technology.
C. Ongoing Royalty
Likely recognizing that its request for a permanent injunction was a long-shot,
WARF also seeks, as an alternative, an award of an ongoing royalty based on per unit
29
sales. In its response, Apple also concedes that such an award is warranted. (Def.’s
Opp’n (dkt. #709) 39 (“Apple does not dispute that WARF is entitled to an ongoing
royalty for any infringement occurring after the entry of final judgment (and
supplemental damages before that time).”).) So the only question is what that royalty
should be.
WARF seeks an ongoing royalty of three times the implied jury’s per unit rate but
provided little justification for this figure in its opening brief.
WARF does offer
additional support in reply -- some of which the court struck above -- mainly focused on
the changed circumstances post-verdict, which obviously alters the parties’ relative
bargaining positions. WARF also argues that Apple’s now willful infringement supports
the requested per unit royalty rate.
In contrast, Apple urges the court to delay ruling on any ongoing royalty until
after resolution of any appeal of the jury’s findings of infringement and rejection of
Apple’s invalidity challenges. Alternatively, Apple proposes that the court provide an
opportunity for the parties to negotiate an ongoing royalty rate. Barring either of those
proposals, Apple argues that the court should simply adopt the same implied per unit
rate awarded by the jury as an ongoing royalty.
As an initial matter, the court can see little efficiency or justice in forgoing a
decision as to the award of an ongoing royalty. Absent a ruling, the Federal Circuit
would obviously be prevented from taking up the entire case in one appeal. Such a piecemeal review on appeal seldom makes sense, especially now that this remaining issue is
fully briefed. See Nystrom v. TREX Co., 339 F.3d 1347, 1350 (Fed. Cir. 2003) (describing
30
policy behind 28 U.S.C. § 1295). As for Apple’s request to allow the parties to negotiate
the ongoing royalty rate first, the court recognizes that the Federal Circuit has
encouraged this approach, but again sees little purpose in further postponing the
inevitable. See Paice LLC v. Toyota Motor Corp., 504 F.3d 1293, 1313 (Fed. Cir. 2007).
As WARF describes in its reply brief, the parties have already endeavored to negotiate an
award and obviously failed to reach a resolution.
(Pl.’s Reply (dkt. #736) 35.)
Regardless, given the parties’ behavior and failure to reach a settlement to date, the court
finds the likelihood of a negotiated, ongoing royalty unlikely. See Apple, Inc. v. Samsung
Elecs. Co., No. 12-cv-00630-LHK, 2014 WL 668122, at *13 (N.D. Cal. Nov. 25, 2014)
(“[T]he parties’ behavior indicates that any order to negotiate ongoing royalties is likely
to be futile and only delay the entry of final judgment.”).
With those preliminaries aside, the court takes up the appropriate amount of an
ongoing royalty. Apple’s proposal that the court simply award the rate awarded by the
jury for the past infringing sales is a non-starter. The Federal Circuit “easily dispose[d]”
of that very argument in Amado v. Microsoft Corp., 517 F.3d 1353 (Fed. Cir. 2008):
On the other side of the dispute, Microsoft argues that the
district court was entitled to award Amado no more than
$0.04 per infringing unit, the amount the jury found to be a
reasonable royalty. We easily dispose of this argument as
well. The jury’s award of $0.04 per unit was based on
Microsoft’s infringing conduct that took place prior to the
verdict. There is a fundamental difference, however, between
a reasonable royalty for pre-verdict infringement and damages
for post-verdict infringement. Cf. Paice LLC v. Toyota Motor
Corp., 504 F.3d 1293, 1317 (Fed. Cir. 2007) (“[P]re-suit and
post-judgment acts of infringement are distinct, and may
warrant different royalty rates given the change in the parties’
legal relationship and other factors.”) (Rader, J., concurring).
Prior to judgment, liability for infringement, as well as the
31
validity of the patent, is uncertain, and damages are
determined in the context of that uncertainty. Once a
judgment of validity and infringement has been entered,
however, the calculus is markedly different because different
economic factors are involved.
Id. at 1361-62 (emphasis added).
Since then, the Federal Circuit has reiterated its
holding that in the ongoing royalty context, courts should “take into account the change
in the parties’ bargaining positions, and the resulting change in economic circumstances,
resulting from the determination of liability.”
ActiveVideo Networks, Inc. v. Verizon
Communications, Inc., 694 F.3d 1312, 1343 (Fed. Cir. 2012) (quoting Amado, 517 F.3d at
1362).
Predictably, WARF also stakes out an extreme position, primarily relying on a
willful infringement framework in seeking an ongoing royalty rate -- thus, explaining its
request for a tripling of the jury’s award. The court finds this is also an ill-fit. While
equitable considerations certainly come into play, the court rejects WARF’s attempt to
describe Apple’s infringement post-jury verdict as willful, which would justify a pragmatic
trebling of damages under § 284. Rather, Apple reasonably believed that the court would
not enter a permanent injunction, after entry of judgment on October 26, 2015, and
instead would award an ongoing royalty based on a hypothetical negotiation -- an
expectation shared by this court. Given this context, Apple knew it was going to have to
pay for its continued use of the infringing technology, unlike a willfully infringing party
who hopes to conceal its knowing infringement. This then leaves the court with the task
of arriving at the parties’ bargaining positions and the outcome of the hypothetical
negotiation here.
32
At the outset, the court credits the jury’s consideration of the Georgia-Pacific
factors in setting an implied per unit rate for past infringement. From that amount, the
court is instructed to consider changes in the parties’ bargaining positions. See Amado v.
Microsoft Corp., 517 F.3d at 1361-62.
Certainly, the jury’s finding of infringement
bolsters WARF’s bargaining position in the hypothetical negotiation which is to occur on
the date of the jury’s verdict. In light of that change, WARF is in a better position to
demand a greater percentage of Apple’s profits that are attributable to the LSD predictor
than awarded by the jury. Relying on the expert testimony of Julie L. Davis, WARF
sought a royalty rate of $2.74 per unit, which the jury discounted, presumably because
the jury found WARF’s bargaining position during the hypothetical negotiation was not
as strong as it maintained. In light of WARF’s improved bargaining position after the
jury’s finding of infringement and validity, the court finds that the $2.74 rate is fair and
reasonable.
Accordingly, the court will award that amount as an ongoing royalty for all
sales of iPhones containing the LSD predictor from October 26, 2015, to the end date of
the patent.
IV. WARF’s Motion for Accounting, Supplemental Damages through the Date of
Judgment, Prejudgment Interest and Post-judgment Interest (dkt. #685)
A. Accounting
WARF seeks an accounting to determine the unit sales for purposes of establishing
supplemental and ongoing royalty payments.
Apple contends that the motion is
unnecessary because it will voluntarily produce the financial data as available.
Regardless, Apple is obligated to produce financial data showing the number of sales for
33
the court to calculate a supplemental and ongoing damages award, and that the financial
data should include sales of phones containing the A9 and A9x chips. Should WARF
believe in good faith that Apple has been dilatory or inaccurate in disclosing this data, it
may certainly pursue post-judgment and supplement discovery. Absent proof of either,
however, the court is disinclined to order a formal accounting. The parties are instructed
to act in good faith with respect to any discovery and efforts to arrive at the appropriate
figures, including a “meet and confer” before bringing any disputes before this court.
B. Supplemental Damages
WARF also seeks an award of supplemental damages, based on the jury’s per unit
award, from June 27, 2015 -- the end date of the parties’ stipulation on accused units
sold -- through the date of judgment, October 26, 2015. Here, too, Apple does not
oppose the request, but contends that any supplemental damages rate should also cover
sales through the date of the resolution of all post-trial motions.
As referenced above,
the court agrees with WARF that the date of judgment, October 26, 2015, is the
appropriate date from which to calculate an ongoing royalty. See Carnegie Mellon Univ. v.
Marvell Tech. Grp., Ltd., 807 F.3d 1283 (Fed. Cir. 2015). While the court will enter an
amended judgment, the amended judgment does not alter the jury’s finding of liability,
nor the changed circumstances from that decision, which in turn alters the ongoing
royalty rate. See Kaiser Aluminum & Chem. Corp. v. Bonjorno, 494 U.S. 827, 835 (1990)
(“By linking all post-judgment activity to the entry of judgment, the courts have been
provided a uniform time from which to determine post-judgment issues.” (internal
34
quotation marks omitted)). As such, the court will award supplemental damages at the
per unit royalty rate awarded by the jury from June 27 to October 25, 2015.
Preserving its right to appeal the jury’s findings on liability and damages, Apple
also seeks to include its products containing the A9 and A9x chips in the supplemental
damages award, since it concedes that the jury’s finding of infringement covers those
chips as well. 7
In response, WARF complains about Apple’s last minute switch in
position, especially in light of its earlier representation that these later chips may undergo
design changes as well as its unwillingness to engage in discovery of the A9 and A9x
chips. While the court is sympathetic to WARF’s positon, it fails to provide a credible
reason why the jury’s royalty rate for pre-judgment infringement as well as the court’s
awarded ongoing royalty rate for post-judgment infringement, should not apply to the A9
and A9x chips.
While WARF speculates that the jury may have awarded higher damages if it had
known about the A9 and A9x chips, the court is hard-pressed to understand how the
continued use of the LSD predictor would appreciably have changed either parties’
bargaining position at the time of the hypothetical negotiation in 2013, particularly since
the negotiated royalty rate was for ongoing use. All of this is to say, that the court is
inclined to include the sale of A9 and A9x (and possibly A10) chips, both in calculating a
supplemental damages award and in setting an ongoing royalty rate.
Both sides as
In the light of the above discussion, the supplemental damages award for those chips would also
cover all sales up to the date of judgment, October 26, 2015, with all other sales presumably
falling under the ongoing royalty rate.
7
35
directed to brief their positions for consolidating the 15-cv-621 case with this action and
awarding damages for infringement of the A9, A9x and A10 chips as part of this case.
C. Pre-judgment Interest
Next, WARF seeks an award of pre-judgment interest of 5.65% compounded
quarterly, from the date of infringement through the date of judgment. Title 35 U.S.C. §
284 governs the award of prejudgment interest in patent infringement claims. “In the
typical case an award of prejudgment interest is necessary to ensure that the patent
owner is placed in as good a position as he would have been in had the infringer entered
into a reasonable royalty agreement.” Gen. Motors Corp. v. Derex Corp., 461 U.S. 648, 655
(1983). For this reason, “prejudgment interest should be awarded under § 284 absent
some justification for withholding such an award.” Id. at 657; see also Energy Transp. Grp.,
Inc. v. William Demant Holding A/S, 697 F.3d 1342, 1358 (Fed. Cir. 2012) (“The award of
pre-judgment interest is the rule, not the exception.”) (quotation and citation omitted).
Consistent with this case law, Apple concedes that a pre-judgment interest award is
warranted, but argues that the court should award interest at the near record T-bill rate,
currently 0.31%, and that the interest should be compounded annually, not quarterly.
As for the appropriate rate, the court rejects both parties’ positions. Instead, it
will follow the practice approved by the Federal Circuit and Seventh Circuit, which is
also consistent with its own practice, by awarding prejudgment interest based on the
prime rate.
See Uniroyal, Inc. v. Rudkin-Wiley Corp., 939 F.2d 1540, 1545 (Fed. Cir.
1991) (explaining that a district court “is afforded wide latitude in the selection of
interest rates” and “may award interest at or above the prime rate”); First Nat. Bank of
36
Chi. v. Standard Bank & Trust, 172 F.3d 472, 480 (7th Cir. 1999) (ordinarily, to “award
something other than the prime rate is an abuse of discretion”); Partington v. Broyhill
Furniture Indus., Inc., 999 F.2d 269, 274 (7th Cir. 1993) (in federal cases, “district judges
should use the prime rate” for prejudgment interest); see also Chesemore v. Alliance Holdings,
No. 09-cv-413, 2014 WL 4415919, at *8 (W.D. Wis. Sept. 5, 2014); Nat’l Pasteurized
Eggs, Inc. v. Michael Foods, Inc., No. 10-cv-646-wmc, slip op. at *36 (W.D. Wis. Mar. 29,
2013) (dkt. #550).
As for compounding, the court credits WARF’s evidence and
argument that payment of running royalties on a quarterly basis is consistent with both
Apple’s and WARF’s respective practices. (Pl.’s Br. (dkt. #685) 15-16.) Accordingly, the
court will award prejudgment interest at the prime rate, compounded quarterly. Because
pre-judgment interest should also apply to the award of supplemental damages, the court
will await entering a pre-judgment interest award until the supplemental damages have
been calculated.
D. Post-judgment Interest
Finally, WARF seeks an award of post-judgment interest in the amount of 0.23%
compounded annually, as provided under 28 U.S.C. § 1961(a). Apple does not oppose
this request. As such, that motion will be granted as unopposed.
37
V. WARF’s Motion for Taxation of Costs (dkt. #689); Amended Bill of Costs (dkt.
#725) 8
This brings us to the last pending motion. WARF seeks an award of costs allowed
to the prevailing part under Federal Rule of Civil Procedure 54(d)(a).
Specifically,
WARF seeks reimbursement of the following costs:
(1) fees of the clerk and pro hac vice fees, totaling $750.00;
(2) fees for the service of summons and subpoena, totaling $339.72;
(3) fees for printed and electronically recorded transcripts, totaling $154,814.68;
(4) witness travel fees, totaling $26,943.96;
(5) fees for exemplification and the costs of printing and photocopying, totaling
$878,709.35;
(6) rental fees of photocopiers, totaling $5,475.24; and
(7) Apple infringing device purchases of $5,497.74.
(Pl.’s Mot. (dkt. #690).)
In response, Apple takes issue with certain categories of costs, arguing that the fees
requested are excessive or are inappropriate and should be eliminated. First, with respect
to WARF’s request for $878,709.35 in exemplification and copying, Apple contends that
the fees should be reduced by over $500,000. Specifically, Apple challenges WARF’s
inclusion of office supplies and freight costs, as non-taxable costs under Seventh Circuit
law. (Def.’s Opp’n (dkt. #705) 8.) While WARF concedes in its reply that the $4,500
cost for transporting documents (e.g., the freight cost) should be deducted, it contends
that its request for custom tabs and binders prepared by third-party copy vendors are
8
The Amended Bill of Costs moots the original submission (dkt. #688).
38
taxable, and distinguishable from general office supplies not allowed by the Seventh
Circuit. (Pl.’s Reply (dkt. #726) 4-5 (citing cases).) The court agrees with WARF that
the $18,023.13 actually incurred in “office supplies” charges used to compile documents
by a third-party vendor for use in this case are taxable. Accordingly, the court rejects
Apple’s objection as to this category. Accordingly, the amended bill of costs will reflect
only WARF’s deduction of the $4,500 cost for transporting documents.
In that same category, Apple objects to photocopying costs associated with five of
WARF’s depositions, and specifically, objects to the number of pages of exhibits that
were printed by WARF, pointing out that the number of pages of exhibits actually used
during the depositions was substantially less than that printed, and WARF opted for tens
of thousands of expensive color copies, rather than black and white. As for this request,
Apple seeks a reduction in taxable costs of $28,993.53. The court agrees with WARF
that requiring a justification on a document-by-document basis is “preposterous.” (Pl.’s
Reply (dkt. #726) 5 (citing NOW, Inc. v. Scheidler, 750 F.3d 696, 698 (7th Cir. 2014)).)
While perhaps WARF could have been more measured in its printing of exhibits, the
court will not fault it for thorough preparation to the extent the costs are amply
documented. Moreover, color copies, especially in the context of a deposition concerning
technical issues, appear reasonable.
Accordingly, the court rejects this challenge to
WARF’s cost request. 9
Even so, the court notes that WARF’s amended bill of costs appropriately reduced the amount
for photocopying after finding some duplication. (Pl.’s Reply (dkt. #726) 6.)
9
39
Next, Apple challenges the invoices submitted by local counsel, Godfrey & Kahn,
and by WARF’s graphics vendor, arguing that they do not provide sufficient detail to
know whether the costs are appropriately taxable, and requests a reduction of $3,660.45
for the former and $202,478.31 for the latter.
The court credits Attorney Gregor’s
affidavit, and sees no basis for requiring additional detail as to the copying costs incurred
by Godfrey & Kahn. As for the graphics vendor, here, too, the invoice is sufficiently
detailed to award costs, with the exception of certain categories identified by WARF in
its reply, totaling $3,274.64. WARF’s amended bill of costs also reflects this reduction.
Both objections are, however, otherwise overruled.
Under the same exemplification and copying category, WARF seeks $115,475.55
in data storage costs for its e-discovery database. Since the parties’ briefing on WARF’s
bill of costs, this court adopted the majority opinion, which “interpret[es] narrowly the
meaning of ‘making copies’ in § 1920(4) in the context of electronic discovery.” Split
Pivot, Inc. v. Trek Bicycle Corp., 154 F. Supp. 3d 769, 780 (W.D. Wis. 2015). Under that
approach, the court will award costs only for the copying of electronic data, including
copying metadata and hard drives. Id. As such, the court rejects WARF’s request for
costs of storing its e-discovery database. Apple’s objection, therefore, is sustained, and
the court will deduct $115,475.55 from WARF’s request for fees for exemplification and
copying.
Relatedly, Apple also challenges WARF’s request for $147,757.00 for ESI and
electronic discovery work performed by Irell & Manella’s litigation and database support
department personnel. The timesheets describe tasks ranging from converting documents
40
to PDF format, OCR’ing and uploading data to the database, or preparing documents for
production, and creating “review bins” based on attorney instructions, among other tasks.
(Def.’s Opp’n (dkt. #705) 16.)
The court agrees with Apple that costs for creating
review bins and database management are not taxable for the same reasons that the court
does not tax data storage costs. The court further agrees with Apple that a reduction by
50% is appropriate in light of the difficulty, if not impossibility, of determining which of
the costs are taxable and which are not. Accordingly, this objection also is sustained, and
the court will reduce the fees requests by an additional $73,878.50.
Finally, with respect to exemplification costs, Apple also challenges WARF’s
request for reimbursement of $30,616 in data purchases made by two of WARF’s
experts. For reasons set forth above, the court again agrees with Apple that these costs
do not constitute copying under § 1920(4).
Accordingly, the court sustains this
objection, and will deduct an additional $30,616.00. Based on all of the decisions above,
this means the court will award fees for exemplification and copying in the total amount
of $658,739.30.
Second, with respect to WARF’s request for $154,814.68 in fees for printed or
electronically
recorded
transcripts,
Apple
challenges
various
transcript
fees
as
unreasonable or not necessary. WARF seeks $4,220.65 for deposition videos of its ten
experts, which Apple inexplicably contends was unnecessary because WARF intended to
call its experts live at trial. While these videos were not used at trial, the court finds that
the expense was reasonable for trial preparation purposes. Therefore, that objection is
overruled.
41
Apple also challenges WARF’s expenses for rough transcripts, expedited
transcripts, Realtime and other miscellaneous deposition expenses, and seeks a reduction
of $51,580.35.
Here the court agrees with WARF that the complexity of patent
litigation justifies these expenses. Indeed, both sides appear to have benefitted from the
use of all of these technologies. Accordingly, this objection is overruled as well.
Third, Apple objects to certain witness travel fees as being unreasonably high, and
seeks a reduction of $6,034.78.
Specifically, Apple contends that WARF scheduled
depositions in Los Angeles for the convenience of counsel, thereby requiring WARF’s
witnesses to travel for depositions. Apple maintains that it was willing to travel to the
witness’s city for those depositions. The court agrees with WARF that in light of the
complexity of this case, this challenge is silly and the objection is overruled.
Fourth, and finally, Apple objects to WARF’s request for $5,497.74 for
reimbursement of device purchases, listed as an “other” cost category. WARF does not
maintain that these devices were used as demonstrative evidence or introduced into
evidence, unlike the costs for devices allowed in the Apple, Inc. v. Samsung Electronics case.
Moreover, WARF fails to cite to controlling case law allowing this category of costs as
taxable. As such, the court will sustain the objection and deduct that amount from the
bill of costs.
In sum, the court will award costs in the total amount of $841,587.66.
42
ORDER
IT IS ORDERED that:
1) Defendant Apple Inc.’s renewed motion for judgment as a matter of law and/or
new trial (dkt. #677) is DENIED.
2) Plaintiff Wisconsin Alumni Research Foundation’s motion to alter or amend
judgment as to willful infringement (dkt. #681) is DENIED.
3) Plaintiff’s motion for equitable relief (dkt. #683) is GRANTED IN PART
AND DENIED IN PART. Plaintiff’s motion for a permanent injunction is
denied, but its motion for an award of an ongoing royalty is granted. The
going royalty rate is set at $2.74 per unit.
4) Defendant’s motion to strike declarations and portions of reply brief (dkt.
#744) is GRANTED.
5) Plaintiff’s motion for accounting, supplemental damages through the date of
judgment, prejudgment interest and post-judgment interest (dkt. #685) is
GRANTED IN PART AND RESERVED IN PART.
a. Plaintiff’s unopposed motion for an accounting is denied without
prejudice to plaintiff renewing the motion if discovery efforts fail.
b. Plaintiff’s motion for supplemental damages through the date of
judgment is granted. Once the accounting is complete, the court will
award plaintiff supplemental damages on infringing units sold from June
27, 2015 through the date of judgment, October 26, 2015. The court
reserves on whether the supplemental damages award should cover
Apple products containing the A9, A9x and A10 chips.
c. Plaintiff’s motion for prejudgment interest is granted. The court awards
plaintiff prejudgment interest at the prime rate, compounded quarterly.
The court reserves on the amount of prejudgment interest, awaiting
calculation of supplemental damages award.
d. Plaintiff’s motion for post-judgment interest is granted. The court
awards plaintiff post-judgment interest at the statutory rate,
compounded annually, pursuant to 28 U.S.C. § 1961(a).
6) Plaintiff’s motion for taxation of costs (dkt. #689) and amended bill of costs
(dkt. #725) is GRANTED IN PART AND DENIED IN PART. The court
awards plaintiff costs in the total amount of $841,587.66.
43
7) On or before June 20, 2017, the parties should submit a joint statement, if
possible, updating the court on the status of discovery requests material to the
supplemental damages award.
8) On or before June 20, 2017, plaintiff should submit a brief responding to the
court’s proposal to award supplemental damages at the jury-awarded per unit
royalty rate for all sales of infringing Apple products containing A9 and A9x
chips prior to the entry of judgment and awarding an ongoing royalty for all
sales of Apple products containing the A9, A9x and A10 chips post-judgment.
Defendant may have until July 7, 2017, to respond.
Entered this 6th day of June, 2017.
BY THE COURT:
/s/
__________________________________
WILLIAM M. CONLEY
District Judge
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