I told you that the jury's damages award in Apple v. Samsung would not stand. And this isn't even the end, but Judge Lucy Koh has just ruled on both Apple and Samsung's motions on damages. The jury's award, she says, was excessive, being based on wrong theories. In some cases, she can't even figure out what they did, and so she has ordered a new trial on damages for certain products and has reduced the award on those she could figure out herself to $598,908,892:
Apple’s motion for an increase in the jury’s damages award is DENIED. The Court declines to determine the amount of prejudgment interest or supplemental damages until after the appeals in this case are resolved.
Because the Court has identified an impermissible legal theory on which the jury based its award, and cannot reasonably calculate the amount of excess while effectuating the intent of the jury, the Court hereby ORDERS a new trial on damages for the following products: Galaxy Prevail, Gem, Indulge, Infuse 4G, Galaxy SII AT&T, Captivate, Continuum, Droid Charge, Epic 4G, Exhibit 4G, Galaxy Tab, Nexus S 4G, Replenish, and Transform. This amounts to $450,514,650 being stricken from the jury’s award. The parties are encouraged to seek appellate review of this Order before any new trial.
The jury’s award stands for the Galaxy Ace, Galaxy S (i9000), Galaxy S II i9100, Galaxy Tab 10.1 WiFi, Galaxy Tab 10.1 4G LTE, Intercept, Fascinate, Galaxy S 4G, Galaxy S II Showcase, Mesmerize, Vibrant, Galaxy S II Skyrocket, Galaxy S II Epic 4G Touch, and Galaxy S II T-Mobile. The total award for these 14 products is $598,908,892.
This jury goofed big time, more than Judge Koh has so far acknowledged, in my view, but this order absolutely states as clearly as words can achieve that their award was based on mistakes. I'll be curious to see what happens on appeal. And all the words spilled by Apple's lawyers and Apple supporters in the media on what a great job the jury did and how mean Groklaw was being to criticize the jury's verdict are now proven to be mistaken. And that's putting it nicely. This jury goofed. The End. That's how it goes down in history. Because they did. And when you see something that you know is a mistake in a courtroom, you have a journalistic duty to call it like you see it, even if the whole world stands against you. That is what journalism is. And that is what Groklaw did. And now time has, once again, proven that Groklaw called it right.
The docket, with the order and the latest filings:
2269 -
Filed & Entered: 03/01/2013
Declaration of Ranae McElvaine in Support of [2268] Administrative Motion to File Under Seal Motion by Non-Parties InterDigital Holdings, Inc., InterDigital Technology Corporation, and IPR Licensing, Inc. To Seal Patent License Agreement with Apple Inc. filed byIPR Licensing, Inc., InterDigital Holdings, Inc., InterDigital Technology Corporation. (Related document(s)[2268]) (Cacovean, Corina) (Filed on 3/1/2013)
2270 -
Filed & Entered: 03/01/2013
Declaration of Corina I. Cacovean in Support of [2268] Administrative Motion to File Under Seal Motion by Non-Parties InterDigital Holdings, Inc., InterDigital Technology Corporation, and IPR Licensing, Inc. To Seal Patent License Agreement with Apple Inc. filed byIPR Licensing, Inc., InterDigital Holdings, Inc., InterDigital Technology Corporation. (Related document(s)[2268]) (Cacovean, Corina) (Filed on 3/1/2013)
2271 -
Filed & Entered: 03/01/2013
ORDER by Judge Lucy H. Koh granting in part and denying in part [1819] Motion for Judgment as a Matter of Law; temporarily granting in part and denying in part [2002] Motion for Judgment as a Matter of Law (lhklc2, COURT STAFF) (Filed on 3/1/2013) I'll work on the text version for you, so stop back by.
Update: Here it is, but I can't resist pointing out that the judge herself even uses the phrase, This award cannot stand. Do you recall when the jury foreman justified the speed with which the jury reached a verdict, saying that they did not need to read the jury instructions, because they had just heard them read? Well, they should have read them, because they didn't follow instructions, the judge writes: "The Galaxy Prevail, however, was found to infringe
only utility patents. As the Court instructed the jury, infringer's profits are not a
legally permissible remedy for utility patent infringement. See Final Jury
Instruction Nos. 36 (utility patent lost profits); 40 (utility patent reasonable
royalty); 54 (design patent defendant’s profits); 55 (design patent lost profits); 56
(design patent reasonable royalty). Accordingly, as in First Alliance
Mortgage, it is apparent that the jury failed to follow the Court’s instructions
on the law, and awarded damages based on a legally impermissible theory. This award
cannot stand." No one can persuade me that Apple's lawyers didn't know this. I'm just a paralegal, and I knew it. That's the part I can't admire. If you can't prevail by telling the truth, you should lose. Because upholding the rule of law in a civilized nation is more important than winning a particular case. And lawyers are officers of the court, so they have a duty.
********************
ORDER RE: DAMAGES
In this patent case, a jury found that a range of Samsung products infringe several
of Apple’s design and utility patents, and that several Samsung products dilute
Apple’s trade dress. The jury awarded $1,049,343,540.00 in damages, and provided a
breakdown of this award by Samsung product. In their post-trial motions, the parties
have raised a number of issues concerning the damages in this case. Specifically,
Apple has requested additur, supplemental damages, and prejudgment interest,
see Apple’s Motion for Judgment as a Matter of Law (“Apple JMOL”), ECF No.
2002, and Samsung has moved for a new trial on damages or for remittitur, see
Samsung’s Motion for Judgment as a Matter of Law (“Samsung JMOL”), ECF No. 2013. The
Court will address each of these requests in turn.
I. ADDITUR
1
Apple has requested that the Court increase the damages award for five products
because the jury awarded less than the amount calculated by Samsung’s damages
expert.1 See Apple JMOL at 18.
However, there is a longstanding rule that the Seventh Amendment prohibits a judicial
increase in a damages award made by a jury. See Dimick v. Scheidt, 293 U.S.
474, 486-87 (1935). Apple argues that that prohibition does not apply here because
there is no dispute about the proper amount of damages. That is simply not the case.
The amount of damages is heavily disputed here, as evidenced by extensive testimony
provided by both parties concerning the proper amount of compensation. The jury was
“not bound to accept the bottom line provided by any particular damages expert,”
In re First Alliance Mortg. Co., 471 F.3d 977, 1002 (9th Cir. 2006), but
rather was free to evaluate the testimony of both sides’ experts in arriving at its
award. It is not the proper role of the Court to second-guess the jury’s factual
determination as to the proper amount of compensation. Accordingly, Apple’s motion
for an increase in the jury’s damages award is DENIED. II. SUPPLEMENTAL
DAMAGES Apple seeks an award of supplemental damages for infringing sales not
considered by the jury. The Court agrees that an award of supplemental damages is
necessary here. Section 284 requires that the Court award compensation for every
infringing sale, and the Federal Circuit has held that where the jury does not make
an award, the Court must do so. See Finjan, Inc. v. Secure Computing Corp.,
626 F.3d 1197 (Fed. Cir. 2010). The parties do not dispute that there are sales for
which the jury did not make an award, because they occurred after the trial had
concluded. Because the Court must make an award for any sale for which the jury did
not, an award of supplemental damages is required.
There are three primary issues the Court must address in resolving Apple’s request
for supplemental damages: (1) the date from which the award should begin; (2) whether
the law permits supplemental damages for post-verdict sales where an award of
infringer’s profits is made
2
pursuant to 35 U.S.C. § 289; and (3) the proper method for calculating post-verdict
damages in a case where the jury made no determination as to royalty rate.
First, regarding the date from which the award should be made, Apple argues that the
supplemental damages award should include sales beginning on July 1, 2012, because
the evidence presented to the jury ran only through June 30, 2012. Samsung argues
that the jury considered all the sales made through the date of the verdict, whether
or not explicit evidence of those sales was presented at trial, and thus, the
supplemental damages award should begin on August 25, 2012 (the day after the
verdict). There is no clear statement in the case law as to which approach is
correct. While it is true that the jury did not hear evidence of sales between June
30 and August 24, it is also possible that the jury considered this fact in arriving
at its ultimate award. Thus, there are reasons to support either date. However, the
Federal Circuit recently affirmed a portion of a district court order refusing to
grant supplemental damages for sales made before the verdict. The Court explained
that the Plaintiff “could have-but did not-argue to the jury that its suggested
amount . . .should be proportionally increased for the two months not accounted for
in the sales data,” and that “[u]nder these circumstances, awarding additional
amounts of damages incurred before trial would be an improper invasion of the jury's
province to determine actual damages and an inappropriate use of 35 U.S.C. § 284 to
enhance inadequate compensatory damages.” Presidio Components Inc. v. Am.
Technical Ceramics Corp., 08-CV-335-IEG, 2010 WL 3070370 (S.D. Cal. Aug. 5, 2010)
aff'd in part, vacated in part, 2012 WL 6602786 (Fed. Cir. Dec. 19, 2012)
(internal citation omitted). The same is true here; nothing precluded Apple from
arguing that the jury should consider sales from June 30 through August 24, or from
presenting evidence on how to estimate such sales. Thus, consistent with the
Presidio Components decision, the Court intends to calculate the supplemental
damages award beginning on August 25, 2012, the day after the verdict.
Second, regarding the question of whether a supplemental damages award is appropriate
where the jury’s award was made, at least in part, pursuant to § 289, the law is not
clear. Both parties have made arguments, but neither party has cited, and the Court
is not aware of, any cases squarely addressing the issue of whether supplemental
damages are appropriate for an award of infringer’s profits made under § 289.
3
Samsung argues that no supplemental damages may be awarded where the jury’s award
included infringer’s profits under § 289, because the purpose of supplemental damages
is purely to compensate the plaintiff, where an award of infringer’s profits goes
beyond compensation. This argument is belied by the approach courts have taken to
enhancements in the context of supplemental damages. Specifically, courts have
allowed a supplemental damages award pursuant to § 284 to be doubled for continuing
willful infringement. See Aero Products Int'l, Inc. v. Intex Recreation Corp.,
02 C 2590, 2005 WL 1498667 (N.D. Ill. June 9, 2005). This outcome is clearly
inconsistent with Samsung’s contention that supplemental damages serve solely to
compensate. Moreover, courts have recognized that supplemental damages serve to
prevent the “inefficient and unhelpful” outcome of a second suit being filed to
collect damages for post-verdict, pre-judgment sales. Hynix Semiconductor Inc. v.
Rambus Inc. 609 F.Supp.2d 951, 961 (N.D. Cal. 2009). Damages under § 289 would be
available in a follow-on suit, and so should be available in this procedure designed
to avoid such a suit.
Moreover, although § 289 does not contain § 284’s explicit instruction that “[w]hen
the damages are not found by a jury, the court shall assess them,” § 289 does specify
that “[n]othing in this section shall prevent, lessen, or impeach any other remedy
which an owner of an infringed patent has under the provisions of this title.”
However, in cases where both design and utility patents are infringed in a single
product, an award made pursuant to § 289 compensates plaintiffs for both types of
infringement. See Catalina Lighting, Inc. v. Lamps Plus, Inc., 295 F.3d 1277,
1291 (Fed. Cir. 2002). A prohibition on supplemental damages where an award is made
pursuant to § 289 would thus run afoul of this requirement that other patent
remedies, which include supplemental damages, remain available.
In sum, the purposes of supplemental damages and the text of §§ 284 and 289 indicate
that supplemental damages are, indeed, available for awards made pursuant to § 289,
in addition to awards made pursuant to § 284.
Finally, regarding the proper method for calculating supplemental damages, as other
courts in this district have noted, the cases discussing supplemental damages in the
patent context are few. See Hynix, 609 F. Supp. 2d at 960. In most of those cases, a
jury determined what the appropriate
4
royalty rate would be, allowing the court to simply apply the jury’s stated
methodology to the proven or estimated post-verdict sales. See, e.g., Finjan,
626 F.3d at 1212 (“The district court granted Finjan additional damages by
multiplying the jury’s royalty rates against previously uncalculated sales.”);
Hynix, 609 F. Supp. 2d at 964 (“Although the existing case law on supplemental
damages does not explain why, it recommends applying the royalty rates determined by
the jury.”); see also Presidio Components, 2012 WL 6602786. Here, the jury did
not make a finding as to the appropriate royalty rate, and the Court cannot now do so
without trenching on Samsung’s Seventh Amendment right to a jury trial on that
issue. See Boston Scientific Corp. v. Johnson & Johnson, 550 F. Supp. 2d 1102,
1122 (N.D. Cal. 2008) (“Even if there were evidence sufficient for the Court, as
opposed to the jury, to determine a reasonable royalty, doing so at this point would
violate BSC's Seventh Amendment rights.”). However, in applying the same royalty rate
used by the jury, courts have explained that the rationale for continuing the jury’s
award, rather than using some other method, is that there is an “absence of any
meaningful distinction between pre-verdict and post-verdict infringement.”
Hynix, 609 F. Supp. 2d at 965. Under this rationale, it would be appropriate
for the Court to attempt to award supplemental damages consistent with the jury’s
award.
In this case, Apple has proposed dividing the jury’s total damages award for all
products by the total number of sales for all products to determine a per-sale
amount, which the Court could then multiply by the number of post-verdict sales. The
Court does not find this type of averaging appropriate, as the jury’s awards for
different products differed significantly, and only a few of the products for which
the jury made an award have remained on the market post-verdict. Rather, it would be
more appropriate to determine the per-sale amount on a product-by-product basis, and
use that per-sale amount to determine the supplemental damages amount for each
product that has remained on the market for any post-verdict period. Because the jury
returned an award for each product separately, the Court can simply divide the jury
award for each product by that product’s number of sales to calculate this
per-product amount. This leaves the question of the actual number of post-verdict
sales. Apple has proposed an elaborate method of estimating the appropriate number of
sales. The Court finds that there is no
5
need to estimate because the parties can present evidence of the actual number of
sales. Moreover, courts have found it appropriate to delay orders for the submission
of such evidence and hearings thereon pending the resolution of appeals, to “avoid
potentially unnecessary expenditures of time and money in preparing such an
accounting.” Intron, Inc. v. Benghiat, 2003 WL 22037710, at *16 (D. Minn.
2003); see also Eolas Technologies, Inc. v. Microsoft Corp., 2004 WL 170334 at
*8 (N.D. Ill. 2004), vacated in part on other grounds, 399 F.3d 1325 (Fed.
Cir. 2005) (“I grant the motion and will require an accounting after any appeal in
this case is terminated.”). In the instant case, one of this Court's post-trial
orders has already been appealed to the Federal Circuit, and the parties have
indicated that more appeals are anticipated. Moreover, as discussed above, there are
complex issues with regard to supplemental damages for which there is no clear
precedent. Thus, proceeding without the Federal Circuit’s guidance may cause
unnecessary expenditures of time and resources. Given the number and complexity of
the issues in this case that remain unresolved, the Court finds that it would be
appropriate to delay the consideration of evidence of actual post- verdict sales
until after the completion of the appeals in this case.
III. PREJUDGMENT INTEREST
The purpose of prejudgment interest is to “compensate the patent owner for the use of
its money between the date of injury and the date of judgment.” Oiness v. Walgreen
Co., 88 F.3d 1025, 1033 (Fed. Cir. 1996). The Court has considerable discretion
in awarding prejudgment interest in patent cases. See Bio-Rad Labs., Inc. v.
Nicolet Instrument Corp., 807 F.2d 964, 969 (Fed. Cir. 1986). However,
“prejudgment interest should ordinarily be awarded absent some justification for
withholding such an award.” General Motors Corp. v. v. Devex Corp., 461 U.S.
648, 657 (1983). Although Devex addressed a royalty award under § 284, the
Federal Circuit has also upheld awards of prejudgment interest on awards of
infringer’s profits under § 289. See Catalina Lighting, 295 F.3d at 1292.
Several of the products for which the jury made a damages award here involved not
just patent infringement, but also Lanham Act claims, and thus resulted in damages
awards that, pursuant to Aero Products Intern., Inc. v. Intex Recreation
Corp., 466 F.3d 1000 (Fed. Cir. 2006), compensate Apple for both trade dress
dilution and patent infringement. The law is not clear on
6
whether prejudgment interest may be awarded for Lanham Act claims. The Ninth Circuit
has suggested that prejudgment interest is not available for Lanham Act claims not
involving counterfeiting. See Moscow Distillery Cristall v. Pepsico, Inc., 141
F.3d 1177 (9th Cir. 1998) (“Prejudgment interest is available under the Lanham Act
only for counterfeiting.”). On the other hand, the Ninth Circuit has also upheld an
award of prejudgment interest in a Lanham Act case that did not involve
counterfeiting. See Clamp Mfg. Co., Inc. v. Enco Mfg. Co., Inc., 870 F.2d 512,
514 (9th Cir. 1989).
However, the Court sees no need to resolve this conflict here. An award that is made
to compensate both for trade dress dilution and for patent infringement is, in part,
an award for patent infringement. See Aero Products, 466 F.3d at 1019. Because
prejudgment interest is clearly appropriate for this award based on patent
infringement, the Court finds that there would be no reason to forbid prejudgment
interest simply because the award also compensates for a Lanham Act violation, even
if the Lanham Act did not separately authorize prejudgment interest. Thus, the Court
finds that Apple is entitled to prejudgment interest.
The parties have proposed two different rates for calculating interest. Apple has
proposed the prime rate. Apple JMOL at 29. Samsung suggests that the lower 52-week
Treasury bill rate would be more appropriate here. Samsung Opp’n at 30. In
determining the appropriate rate, courts have considered whether, during the period
of infringement, the plaintiff “borrowed money at a higher rate, what that rate was,
or that there was a causal connection between any borrowing and the loss of the use
of the money awarded as a result of [the defendant’s] infringement.” Laitram Corp.
v. NEC Corp., 115 F.3d 947, 955 (Fed. Cir. 1997). Such factors would make an
award at a higher rate more appropriate. Here, Apple maintains substantial cash
reserves and there is no evidence that Apple borrowed any money because it was
deprived of the damages award. Thus here, as in Laitram, the Court finds that
the 52-week Treasury Bill Rate is sufficient.
The parties also disagree about the appropriateness of compounding: Apple is in favor
of annual compounding, and Samsung objects to any compounding. The Federal Circuit
has explained that “the determination whether to award simple or compound interest
similarly is a matter largely within the discretion of the district court,” and that
both simple and compound
7
interest awards have been upheld. Gyromat Corp. v. Champion Spark Plug Co.,
735 F.2d 549, 557 (Fed. Cir. 1984). Apple has submitted expert evidence that
compounding is appropriate here, see Robinson Decl. at ¶ 18 & Exh. 4, and
Samsung has presented no evidence to the contrary. The Court finds that compounding
more closely approximates the actual borrowing costs Samsung would have faced.
Accordingly, when the appeals are resolved, and the final damages amount settled, the
Court will award prejudgment interest at the 52-week Treasury Bill Rate, compounded
annually. IV. JURY’S DAMAGES AWARD A. Permissibility of examining nature of award
Samsung argues that it is apparent, from the damages amount the jury returned, that
some of the awards rested on impermissible legal theories. Apple argues that the
Court should not consider how the jury arrived at its award, but should rather only
look at the final number, and consider whether that number could have been supported
by the evidence in the record as a whole.
Apple is correct that courts are generally required to give great deference to jury
awards, and to uphold them where they are supportable by the evidence in the
record. See Los Angeles Mem’l Coliseum Comm’n v. NFL, 791 F.2d 1356 (9th Cir.
1985); Yeti by Molly Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101 (9th Cir.
2001); Revolution Eyewear, Inc. v. Aspex Eyewear, Inc., 563 F.3d 1358 (Fed.
Cir. 2009). These cases address the general question of whether a damages award is
supported by sufficient evidence in the record. However, the Ninth Circuit case most
analogous to the present case recognized an exception to this general principle of
deference in cases where it is readily apparent from the numbers that the jury
applied an impermissible legal theory in arriving at its award. See In Re First
Alliance Mortgage Co., 471 F.3d 977 (9th Cir. 2006). In First Alliance
Mortgage, the Ninth Circuit observed that the jury’s damages number was the
precise numerical average “to the dollar” of the amounts proposed by the two
competing damages experts. Id. at 1002. One of the experts, however, presented
a theory that the Court had ruled legally impermissible. Though the Court gave a
curative instruction, explicitly telling the jury that it was not allowed to apply
that theory, the amount of the award made plain that the jury had applied the
impermissible theory anyway. Because the award was clearly based in part on an 8 impermissible
legal theory, the Ninth Circuit held that it had been error for the district court to
“bend over backwards” to identify some conceivable theory on which the jury might
properly have made the same award. The Federal Circuit has applied similar reasoning
(though never in a case dispositive manner). See Lucent Technologies v.
Gateway, 580 F.3d 1303 (Fed. Cir. 2009).
In this case, it is apparent that the jury awarded 40% of Apple’s expert Terry
Musika’s calculation of Samsung’s profits for a wide range of products, and in some
cases, added the same expert’s calculation for Apple’s lost profits. Moreover, it is
clear that for several products, the jury awarded exactly half of the reasonable
royalty award proposed by Mr. Musika. As in First Alliance Mortgage, these
numbers are “to the dollar;” it is thus quite apparent how the jury arrived at them.
Indeed, Apple does not dispute this inference in its opposition, relying instead on
the purported impermissibility of acknowledging what is apparent. The chart below
details the formulas the jury apparently used. All percentages correspond to an exact
and consistent percentage of the amount Mr. Musika testified was warranted for each
category.
Samsung Product | Jury
Award | Formula |
Captivate | $80,840,162 | 40% of Samsung’s Profits |
Continuum | $16,399,117 | 40% of Samsung’s Profits |
Droid Charge | $50,672,869 | 40% of Samsung’s Profits |
Epic 4G | $130,180,896 | 40% of Samsung’s Profits |
Exhibit 4G | $1,081,820 | 50% of Apple’s Royalties |
Fascinate | $143,539,179 | 100% of Apple’s Lost Profits +
40% of Samsung’s Profits | Galaxy Ace | $0 | n/a (no
award) | Galaxy Prevail | $57,867,383 | 40% of
Samsung’s Profits | Galaxy S (i9000) | $0 | n/a (no
award) | Galaxy S 4G | $73,344,668 | 100% of Apple’s
Lost Profits + 40% of Samsung’s Profits | 9
Galaxy S II AT&T | $40,494,356 | 40% of
Samsung’s Profits | Galaxy S II i9100 | $0 | n/a (no
award) | Galaxy S II T-Mobile | $83,791,708 | 40% of
Samsung’s Profits | Galaxy S II Epic 4G Touch |
$100,326,988 | 40% of Samsung’s Profits | Galaxy S II
Skyrocket | $32,273,558 | 40% of Samsung’s Profits |
Galaxy S II Showcase | $22,002,146 | 100% of Apple’s Lost
Profits + 40% of Samsung’s Profits | Galaxy Tab |
$1,966,691 | 50% of Apple’s Royalties | Galaxy Tab 10.1
WiFi | $833,076 | n/a (no calculation apparent) |
Galaxy Tab 10.1 4G LTE | $0 | n/a (no award) |
Gem | $4,075,585 | 40% of Samsung’s Profits |
Indulge | $16,011,184 | 40% of Samsung’s Profits |
Infuse 4G | $44,792,974 | 40% of Samsung’s Profits |
Intercept | $0 | n/a (no award) |
Mesmerize | $53,123,612 | 100% of Apple’s Lost Profits +
40% of Samsung’s Profits | Nexus S 4G | $1,828,297 |
50% of Apple’s Royalties | Replenish | $3,350.256
| 50% of Apple’s Royalties | Transform
| $953,060 | 50% of Apple’s Royalties |
Vibrant | $89,673,957 | 100% of Apple’s Lost Profits + 40% of
Samsung’s Profits |
Under First Alliance Mortgage, this Court cannot ignore the import of these
numbers, even if the evidence as a whole could have supported an award of a similar,
or even higher, amount. Accordingly, the Court will consider which of these awards
entailed the use of an impermissible legal theory, and what the appropriate response
is. B. Appropriate Response to Excessive Award 10
When a Court detects an error in the jury’s damages verdict, the Court has two
choices: the Court may order a new trial on damages, or the Court may reduce the
award to a supportable amount. If the Court chooses the latter option, known as
remittitur, the prevailing party then has the option of demanding a new trial on
damages or accepting the reduced award. See, e.g., Hynix Semiconductor Inc. v.
Rambus Inc., No. CV-00-20905-RMW (July 14, 2006), 2006 WL 1991760.
The Court generally may not award any amount lower than the maximum amount that would
have been supportable by the evidence. See D & S Redi-Mix v. Sierra Redi-Mix &
Contracting Co., 692 F.2d 1245, 1249 (9th Cir. 1982) (“Although this circuit has
not stated its position, others consistently approve remitting the judgment to the
maximum amount sustainable by the proof. This rule prevents the court’s substitution
of its judgment for that of the jury. We adopt this standard.”) (internal citations
omitted). The Federal Circuit also uses this so-called “maximum recovery rule.”
See Unisplay, S.A. v. Am. Elec. Sign Co., Inc., 69 F.3d 512, 519 (Fed. Cir.
1995) (“When calculating an amount to remit, in order to encourage use of the
efficient remittitur option, we will follow the ‘maximum recovery rule,’ which
requires that the determination be based on the highest amount of damages that the
jury could properly have awarded based on the relevant evidence.”). The theory
underlying this practice is that it carries out the jury’s intention to the extent
permissible by law, and thus remains consistent with both parties’ Seventh Amendment
right to a jury trial. See Dimick, 293 U.S. at 486 (“Where the verdict is
excessive, the practice of substituting a remission of the excess for a new trial is
not without plausible support in the view that what remains is included in the
verdict along with the unlawful excess-in that sense that it has been found by the
jury-and that the remittitur has the effect of merely lopping off an
excrescence.”).
However, there is an exception to this rule, wherein the Court may remit an excess
amount where the excess is readily identifiable as such, even if the resulting award
does not necessarily correspond to the maximum amount supportable by the evidence.
See, e.g., Cornell Univ. v. Hewlett-Packard Co., 609 F. Supp. 2d 279, 292
(N.D.N.Y. 2009) amended, 01-CV-1974, 2009 WL 1405208 (N.D.N.Y. May 15, 2009)
(Rader, J., by designation) (multiplying jury's explicitly stated royalty rate by
lower royalty base Court found as a matter of law); Joiner Sys., Inc. v. AVM
Corp., 11
Inc., 517 F.2d 45, 49 (3d Cir. 1975) (jury calculated damages per square feet
and number of square feet; Court found a lower number of square feet supportable by
evidence, and multiplied jury's amount per square foot by the new, smaller number of
square feet). Though the jury in the present case did not make an explicit finding as
to what percentage of Apple’s requested amount it deemed appropriate for each
product, it is apparent from the amount of the award, which is “to the dollar” an
exact and consistent percentage of Mr. Musika’s amount. See First Alliance
Mortgage, 471 F.3d 977. Thus, this multiplier is analogous to a jury’s finding of
an appropriate royalty rate. Accordingly, where the Court can detect a specific
amount that ought to be subtracted from the award because of an identifiable error
while otherwise preserving the jury’s findings as to damages, the Court may offer
Apple the option of remittitur in that amount, or a new trial.
The Court will now consider each of Samsung’s allegations of error in the jury’s
award, and will determine which of these responses is appropriate for each
situation.
C. Specific allegations of error
1. Design Patent / Trade dress apportionment
First, Samsung argues that for Apple to be entitled to Samsung’s profits for design
patent infringement, Apple was required to prove which portions of Samsung’s profits
were earned by the patented design features. Samsung reasons that Apple’s expert
presented a damages calculation for all of Samsung’s profits on the
design-patent-infringing products, but that Apple never proved that Samsung’s alleged
acts of design patent infringement were responsible for all of Samsung’s profits.
Thus, Samsung argues, each award that includes an award of Samsung’s profits for
design patent infringement must be set aside.
This argument is clearly foreclosed by Federal Circuit precedent. As explained in
Nike Inc. v. Wal–Mart Stores, Inc., 138 F.3d 1437, 1442–43 (Fed. Cir.1998),
Congress specifically drafted the design patent remedy provisions to remove an
apportionment requirement that the Supreme Court had imposed. Thus, there is simply
no apportionment requirement for infringer’s profits in design patent infringement
under § 289.
Next, Samsung argues that Apple presented no evidence that could have supported the
jury’s award of Samsung’s profits for trade dress dilution. However, there are no
products for 12
which the jury found trade dress dilution without design patent infringement. Thus,
the jury’s award for these products could be supported by design patent infringement
alone, which, as explained above, does not require apportionment. Therefore, even if
there were no evidence to support a trade dress dilution award, the award as a whole
would be supportable on the basis of design patent infringement. Because the award as
a whole is supportable irrespective of Samsung’s trade dress apportionment theory,
the Court need not consider whether there was sufficient evidence in the record to
independently justify the jury’s award for these products on the basis of trade dress
dilution. In sum, the Court finds that the jury’s award is not excessive on the basis
of apportionment for design patent or trade dress damages.
2. Entitlement to lost profits
Samsung next argues that Apple has not established entitlement to lost profits, and
that accordingly, all of the awards that include a lost profits component must be set
aside. “To recover lost profits, ‘a patent owner must prove a causal relation between
the infringement and its loss of profits.’ In other words, the burden rests on the
patentee to show a reasonable probability that ‘but for’ the infringing activity, the
patentee would have made the infringer’s sales.” Crystal Semiconductor Corp. v.
TriTech Microelectronics Int'l, Inc., 246 F.3d 1336, 1353 (Fed. Cir. 2001)
(quoting BIC Leisure Prods., Inc. v. Windsurfing Int'l, Inc., 1 F.3d 1214,
1218, 27 USPQ2d 1671, 1674 (Fed.Cir.1993)). The Court’s task here is to review
whether there is sufficient evidence to support a jury’s lost profit award. See
Crystal Semiconductor, 246 F.3d at 1355-57 (“Between Crystal’s unadjusted market
share, the testimony of TriTech’s and OPTi’s experts, and the testimonies of
Crystal’s other fact witnesses, the record supplied sufficient evidence to support
the jury’s 35% lost profit award”); Ericsson, Inc. v. Harris Corp., 352 F.3d
1369, 1377 (Fed. Cir. 2003) (“We agree with Ericsson that substantial evidence
supports the jury’s damages award for lost profits due to lost sales.”).
Here, Apple presented the testimony of Apple’s damages expert, Terry Musika. Mr.
Musika provided detailed evidence regarding how the market would likely have behaved
absent Samsung’s infringement, including: (1) the market share of various smartphone
manufacturers, based on data collected and analyzed by independent research firm IDC
(including Apple,
13
Samsung, and other manufacturers, to whom he assigned the largest market share)
(PX25A1.8; Tr. 2084:23-2085:9); (2) Apple’s capacity to manufacture additional phones
and tablets (PX25A1.14- 15; Tr. 2085:13-2086:3); and (3) consumer demand, based on
both expert survey evidence and fact witness testimony (Tr. 2076:3-2077:8). The
Federal Circuit has noted that it “has affirmed lost profit awards based on a wide
variety of reconstruction theories where the patentee has presented reliable economic
evidence of ‘but for’ causation.” Crystal Semiconductor, 246 F.3d at 1355. Mr.
Musika’s opinion reconstructs the market based on market share, capacity, and demand,
thus demonstrating how many additional sales Apple would likely have made, but for
Samsung’s infringement. This constitutes exactly the type of economic evidence of
causation that the Federal Circuit requires in sustaining an award of lost profits.
Accordingly, the Court finds that the record supported a jury award of lost profits.
The Court thus declines to set aside the jury’s damages awards that include Apple’s
lost profits on the grounds that Apple has not proven entitlement to lost profits.
3. The Galaxy Prevail: Award of Samsung’s Profits
For the Galaxy Prevail, the jury awarded $57,867,383, which is 40% of Apple’s
calculation of Samsung's profits. The Galaxy Prevail, however, was found to infringe
only utility patents. As the Court instructed the jury, infringer's profits are not a
legally permissible remedy for utility patent infringement. See Final Jury
Instruction Nos. 36 (utility patent lost profits); 40 (utility patent reasonable
royalty); 54 (design patent defendant’s profits); 55 (design patent lost profits); 56
(design patent reasonable royalty). Accordingly, as in First Alliance
Mortgage, it is apparent that the jury failed to follow the Court’s instructions
on the law, and awarded damages based on a legally impermissible theory. This award
cannot stand.
The jury’s award was apparently based on Samsung’s profits, which is an impermissible
type of compensation for utility patent infringement. Thus, rather than including
some identifiable portion of excess, such as particular sales for which there should
have been no damages, the entire award was tainted. Further, the jury did not award
the full amount Apple requested for Samsung’s lost profits, but rather awarded only
40% of Apple’s requested amount of $142,893,684. Thus, it does not appear that
awarding the full amount that Apple requested for either of the two
14
permissible forms of compensation for utility patents (Apple’s lost profits, for
which Apple requested $8,573,370, or a reasonable royalty, for which Apple provided
no calculation), which is the usual method for calculating a remittitur, could
reasonably be thought to represent the jury’s award, stripped only of the
impermissible excess. Cf. Dimick, 293 U.S. at 486. Accordingly, the Court
cannot reasonably and fairly calculate an appropriate remittitur.
Nor can the Court, having identified the impermissible legal theory on which the jury
made its award, turn a blind eye or “bend over backwards” to find a possible
permissible justification for the amount awarded. See First Alliance Mortgage,
471 F.3d at 977. Accordingly, the Court hereby ORDERS a new trial on damages for the
Galaxy Prevail.
4. Notice dates
Samsung next contends that a new trial is warranted, or, in the alternative, that the
Court should remit the jury’s award, because the jury based its awards on Mr.
Musika’s calculations that used a notice date that was not supported by any evidence
at trial. This argument is essentially two separate motions: (1) a motion for
judgment as a matter of law that the evidence does not support any notice dates
earlier than the filing of the relevant complaints for any patent except the ’381
Patent; and (2) a motion for new trial on damages or remittitur because the jury made
its award based on incorrect early notice dates. The Court will address the question
of appropriate notice dates first, and will then consider what effect this may have
on the damages award.
Under 35 U.S.C. § 287(a), there can be no damages award where a defendant did not
have actual or constructive notice of the patent or registered trade dress at issue.
Thus, it is improper to award damages for sales made before the defendant had notice
of the patent, and an award that includes damages for sales made before notice of any
of the intellectual property (“IP”) infringed is excessive as a matter of law.
Moreover, different types of IP allow for different types of damages awards.
Specifically, damages for utility patent infringement may take the form of lost
profits or a reasonable royalty, see 35 U.S.C. § 284; damages for trade dress
dilution may take the form of lost profits and/or infringer’s profits, see 15
U.S.C. § 1125; and damages for design patent infringement may include lost profits, a
reasonable royalty, or infringer’s profits, see 35 U.S.C. § 289. Accordingly,
it is also erroneous to award infringer’s profits for a time period where the
defendant
15
had notice only of utility patents, because infringer’s profits are not an authorized
form of damages for utility patent infringement.
The parties dispute whether Apple had given Samsung notice of each of the patents
prior to the filing of the complaint and the amended complaint, which the parties
agree gave Samsung notice of all of the asserted IP. Regarding the ’381 Patent, Apple
has presented evidence that Apple specifically put Samsung on notice of that patent
in a meeting between Apple and Samsung on August 4, 2010. See PX52.12-PX52.16
(Apple’s presentation listing specific patents, including the ’381 Patent). Samsung
argues that there is no evidence that Apple gave Samsung actual notice of alleged
infringement of any specific patents other than the ’381 Patent prior to the filing
of the complaint on April 15, 2011, which gave notice of three Apple patents and
Apple’s registered trade dress, or the amended complaint on June 16, 2011, which gave
notice of all the remaining Apple patents. Apple argues that the August 4, 2010
meeting put Samsung on sufficient notice of all of the asserted IP, even though the
specific list of patents included only the ’381 Patent.
Section 287 requires not only notice that a product allegedly infringes some
unspecified patents, but notice of what specific patent the product is accused of
infringing. This notice can be accomplished by marking the patented product with the
patent number (“constructive notice”). See 35 U.S.C. § 287(a); Minks v.
Polaris Indus., Inc., 546 F.3d 1364, 1376-77 (Fed. Cir. 2008); Funai Elec.
Co., Ltd. v. Daewoo Elecs. Corp., 616 F.3d 1357, 1373 (Fed. Cir. 2010).
Alternatively, a notice can be delivered directly to the accused infringer (“actual
notice”). Funai, 616 F.3d at 1373. Like constructive notice, actual notice
appears to require that the accused infringer be informed of the specific patents it
is accused of infringing. See, e.g., Minks, 436 F.3d at 1366-67 (conducting
notice analysis for a specific patent); Gart v. Logitech, Inc., 254 F.3d 1334,
1346-47 (Fed. Cir. 2001) (same).
Apple contends that notice need not identify the specific patent at issue. However,
Apple cites only one case finding actual notice without actual disclosure of a
specific patent number, a 1992 case from the District of Massachusetts that does not
itself cite any case holding that actual notice is possible without an actual patent
number. See Ceeco Machinery Manufacturing, Ltd. v Intercole, Inc., 817 F.Supp.
979 (D. Mass. 1992). 16
As an initial matter, Ceeco was an unusual case. The Ceeco Court
explained that:
To the extent that [the plaintiff's] warning was less explicit than would
typically be required, [the defendant] appears to be largely responsible . . . By
[defendant's] own admission, [defendant] continued to reassure [plaintiff] that it
had not purchased [an accused machine] well after it in fact had. The provision for
giving actual notice would be rendered meaningless if defendants could evade such
notice by deliberately concealing their infringement.
817 F. Supp. at 987. In other words, the plaintiff did not give specific notice
because the defendant continued to lie to the plaintiff to deliberately conceal
defendant’s infringement. There are no allegations of such deception here.
Furthermore, the Ceeco Court reasoned that if a defendant knows that its
product is accused of infringing some unspecified patent that also covers a known
competitor product, that defendant has sufficient notice of the patent, even without
specific knowledge of the actual patent at issue.
This reasoning is unpersuasive, and has never been adopted by the Federal Circuit.
This kind of non-specific notice is insufficient because a patent may have a broad or
narrow scope, and a product may be covered by a multitude of patents, and also
include many unpatented features. Mere notice that some unknown patent allegedly
covers some aspect of both the accused product and the competitor product does not
provide meaningful notice as to what patented territory the accused device is alleged
to infringe upon. The wide variety of patents covering the complex products in this
very case illustrates this problem well. In sum, the Court finds that where a
plaintiff relies on actual, rather than constructive notice, the notice must include
the specific patents at issue.
Apple argues that Samsung received actual notice for all of its asserted acts of
infringement at the August 4, 2010 meeting between the parties. However, Apple cites
no evidence whatsoever that any patent-in-suit other than the ’381 Patent was
specifically identified during the meeting. Instead, Apple points to general
comparisons drawn at that meeting between the industrial design and user interfaces
of the iPhone 3GS and the Galaxy S, as well as references to general “user interface”
patents. See PX52 (Apple’s presentation). A side-by-side comparison of the
iPhone 3GS and the Galaxy S that implies that the iPhone 3GS embodies some
unspecified design and utility patents that may be infringed by the Galaxy S,
however, does not provide notice of the
17
specific patents alleged to be infringed, as required to satisfy § 287(a)’s notice
requirement. Accordingly, the Court finds that the August 4, 2010 date is not
supported by evidence in the record for any patent other than the ’381 Patent.
Apple does not suggest that any notice occurred between the August 4, 2010 meeting
and the filing of the original complaint on April 15, 2011. The original complaint
gave Samsung notice of the ’915 and D’677 Patents. Thus, the correct notice date for
the ’915 and D’677 Patents is April 15, 2011.
Apple also does not suggest any notice occurred on any date between the April 15,
2011 filing of the original complaint, and the filing of the amended complaint on
June 16, 2011. The amended complaint gave Samsung notice of the ’163, D’305, D’889,
and D’087 Patents. Thus, the correct notice date for the ’163, D’305, D’889, and
D’087 Patents is June 16, 2011.
In sum, Samsung is entitled to judgment as a matter of law that the earliest notice
dates supported by the evidence are: August 4, 2010 for the ’381 patent; April 15,
2011 for the ’915 and D’677 Patents; and June 16, 2011 for the’163, D’305, D’889, and
D’087 Patents.
The damages numbers Mr. Musika presented to the jury were based on the August 4, 2010
notice date for all patents. See PX25A at 4, 5. Thus, the jury’s awards for patent
infringement, which are based on Mr. Musika’s numbers using the early notice dates,
may have contained some amount of excess compensation covering the period before
Samsung had notice of the relevant IP, depending on the combination of IP infringed.
The following chart indicates the correct notice dates, available remedies, and
infringing products for each form of IP:
18
IP | Notice Date | Available Remedies2 | Products Infringing |
’381 Patent | August 4, 2010 | Reasonable Royalty or Lost
Profits | Captivate, Continuum, Droid Charge, Epic 4G, Exhibit
4G, Fascinate, Galaxy Ace, Galaxy Prevail, Galaxy S i9000, Galaxy
S 4G, Galaxy S II AT&T, Galaxy S II i9100, Galaxy Tab, Galaxy Tab
10.1 WiFi, Gem, Indulge, Infuse 4G, Mesmerize, Nexus S 4G,
Replenish, Transform, Vibrant |
’915 Patent | April 15, 2011 (original complaint) |
Reasonable Royalty or Lost Profits | Captivate, Continuum Droid
Charge, Epic 4G, Exhibit 4G, Fascinate, Galaxy Prevail, Galaxy S
i9000, Galaxy S 4G, Galaxy S II AT&T, Galaxy S |
19
- | - | - |
II
i9100, Galaxy S II T- Mobile, Galaxy Tab, Galaxy Tab 10.1 WiFi, Gem, Indulge, Infuse
4G, Mesmerize, Nexus S 4G, Transform, Vibrant |
MD’677 Patent | April 15, 2011 (original
complaint) | Infringer’s Profits or Reasonable Royalty or Lost Profits | Fascinate,
Galaxy S i9000, Galaxy S 4G, Galaxy S II AT&T, Galaxy S II i9100, Galaxy S II
T-Mobile, Galaxy S II Epic 4G Touch, Galaxy S II Skyrocket, Galaxy S Showcase i500,
Infuse 4G, Mesmerize, Vibrant |
Registered Trade Dress | April 15, 2011 (original
complaint) | Infringer’s Profits and Lost Profits (actual damages) | Fascinate, Galaxy S
4G, Galaxy S II AT&T, Galaxy S Showcase i500, Mesmerize, Vibrant |
D’889 Patent | June
16, 2011 (amended complaint) | Infringer’s Profits or Reasonable Royalty or Lost
Profits | None |
D’087 Patent | June 16, 2011 (amended complaint) | Infringer’s Profits or
Reasonable Royalty or Lost Profits | Galaxy S i9000, Galaxy S 4G, Vibrant |
D’305 Patent |
June 16, 2011 (amended complaint) | Infringer’s Profits or Reasonable Royalty or Lost
Profits | Captivate, Continuum, Droid Charge, Epic 4G, Fascinate, Galaxy S i9000,
Galaxy S 4G, Galaxy S Showcase i500, Gem, Indulge, Infuse 4G, Mesmerize, Vibrant |
Unregistered trade dress | N/A | Infringer’s Profits and Lost Profits (actual damages) |
Fascinate, Galaxy S i9000, Galaxy S Showcase i500, Mesmerize, Vibrant |
Apple has provided to the Court and to the jury the numbers necessary to calculate
the
20
infringer’s profits and reasonable royalty awards based on Mr. Musika’s damages
numbers, but with later notice dates. Thus, the Court can, for some products,
calculate how much of the jury’s award compensated for the sales before Samsung had
notice of the relevant IP. Indeed, where the award simply compensated for too many
sales, the situation is analogous to cases in which the jury used a royalty base that
was not supported by the evidence, and the Court found it permissible to multiply the
royalty rate by the correct royalty base. See Cornell Univ., 609 F. Supp. 2d at 292.
For the products where this type of error occurred, the Court can calculate the
appropriate remittitur by multiplying the corrected maximum damages amount, adjusted
per Mr. Musika’s instructions (see Tr. at 2073:21-2074:19; 2163:24-2164:7) to remove
the sales before Samsung had notice, by the multiplier used by the jury.
However, for
other products, the jury awarded an impermissible form of damages for some period of
time, because Samsung had notice only of utility patents for some period, but an
award of infringer’s profits was made covering the entire period from August 4, 2010
to June 15, 2012. For these products, the Court cannot remedy the problem by simply
subtracting the extra sales.
The products fall into four distinct categories,
depending on the combination of IP infringed and award made. The Court will discuss
each in turn.
a. Unregistered Trade Dress Dilution Does Not Require Notice, Thus
There Is No Excess Damages Award
Damages for dilution of unregistered trade dress do
not require notice for an award of damages. See PAF S.r.l. v. Lisa Lighting Co.,
Ltd., 712 F. Supp. 394, 401 (S.D.N.Y. 1989) (“Moreover, the holder of a legal
trademark, in this case unregistered trade dress, ‘is under no obligation to give
advance notice of its rights to an infringer before seeking damages or injunctive
relief for infringement.’”); see also 4 Callmann on Unfair Comp., Tr. & Mono. § 23:79
(4th Ed.) (“[S]tatutory notice is irrelevant to claims for infringement of an
unregistered mark under § 43(a) of the Lanham Act or under state law.”). Moreover,
infringer’s profits are a permissible remedy for dilution of registered and
unregistered trade dresses. See 15 U.S.C. § 1117(a). Thus, for any product for which
the jury found dilution of unregistered trade dress, there can be no excess on the
basis of notice dates, because an award of Samsung’s profits, the highest amount
sought by Apple,
21
would be permissible for the entire period requested by Apple,
from August 4, 2010 through the beginning of trial, based on trade dress dilution
alone. Because the award is per sale, rather than per type of IP, see Aero Products,
466 F.3d at 1000, as long as the award of infringer’s profits is authorized for any
given sale, there is no need for the award to be separately authorized for each type
of IP. There is thus no excess due to notice dates for the following products, all of
which were found to dilute Apple’s unregistered trade dress: Fascinate, Galaxy S 4G,
Galaxy S II Showcase, Mesmerize, and Vibrant. Accordingly, the jury’s award of
$381,683,562 for these 5 products stands.
b. Impermissible Infringer’s Profits
Award
Next, there are 8 phones for which the jury awarded 40% of Samsung's profits
for the entire period, but for which, during some of the damages period, infringer’s
profits was not an authorized remedy. These phones are: Gem, Indulge, Infuse 4G,
Galaxy SII AT&T, Captivate, Continuum, Droid Charge, and Epic 4G. All eight of these
phones were found to infringe the ’381 Patent, for which the correct notice date is
August 4, 2010, and one or more design patents, for which the correct notice dates
are later. However, an award based on infringer’s profits was made for the entire
time, without accounting for the fact that from August 4, 2010 until the filing of
the relevant complaint, only a utility patent was infringed, and thus only an award
of a reasonable royalty or Apple’s lost profits was legally permissible.
The law
requires the jury to award some amount of damages for each infringing sale. See 35
U.S.C. § 284 (“Upon finding for the claimant the court shall award the claimant
damages adequate to compensate for the infringement, but in no event less than a
reasonable royalty for the use made of the invention by the infringer, together with
interest and costs as fixed by the court.”) (emphasis added). Thus, some of the
jury’s award of Samsung's profits had to compensate for sales between August 4, 2010
and April 15, 2011. However, as explained above, infringer's profits are not a
permissible remedy for utility patent infringement. Thus, for these 8 phones, there
is clearly a component of the award that is based on an impermissible legal theory,
exactly as there was in First Alliance Mortgage. The awards for these 8 phones,
accordingly, cannot stand. For all of these products, Apple alleged infringement of a
design patent in the April 15,
22
2011 original complaint or the June 16, 2011 amended complaint. An
award of infringer’s profits is thus authorized as of the time Samsung had notice of
the relevant design patent. It is only the award from August 4, 2010 to the time of
the filing of the relevant complaint that is excessive. However, the Court cannot
simply trim off the period of the award before notice of the design patents, because
the jury found that these 8 products infringed the ’381 Patent, for which there was
notice as of August 4, 2010. If the Court were to simply subtract all of the award
made for the period before notice of the design patents, Apple would not be
compensated for the sales made when Samsung had notice of the’381 Patent – a scenario
that would run afoul of § 284’s requirement that there be compensation for each
infringing sale. Thus, to determine an appropriate remittitur, the Court would first
have to subtract the award of Samsung’s profits for the period made before notice of
any design patent, and would then have to add an award to compensate for infringement
of the ’381 Patent for the period between August 4, 2010 and the appropriate notice
date for each product.
However, as with the Galaxy Prevail, the Court cannot
determine an appropriate award to replace the jury’s impermissible award of Samsung’s
profits for this time period. Using the maximum amount supported by the evidence for
one of the permissible forms of compensation (i.e. a reasonable royalty or Apple’s
lost profits) would be inconsistent with the jury’s awards of 40% of Mr. Musika’s
calculation of Samsung’s profits for these products, or for products for which a
reasonable royalty was awarded, 50% of Mr. Musika’s calculation of a reasonable
royalty. Indeed, using the maximum amount the evidence could have supported for
Apple’s lost profits or a reasonable royalty might even result in an award greater
than that made by the jury using the impermissible method – an outcome clearly
inconsistent with the Seventh Amendment.
Moreover, Mr. Musika did not testify as to
how the jury (or the Court) could calculate Apple’s lost profits for a shorter time
period. Although he did offer testimony as to how to calculate a reasonable royalty
for a shorter time period, see Tr. 2074:4-19, the sales data the parties provided is
broken down only by quarter, and is not sufficiently specific to allow the Court to
calculate the correct amount for sales in quarters where notice occurred in the
middle of the quarter. Thus, the Court cannot calculate the appropriate amount of
Apple’s lost profits or a
23
reasonable royalty for the ’381 Patent for the relevant time
period before notice of the other patents. Accordingly, there is no readily
identifiable amount that the Court could remit to remedy this problem.
Nor would it
be appropriate for the Court to leave the award intact despite the apparent error,
simply because there exists some theory on which the jury might have made such an
award. Such a ruling would entail precisely the type of “bending over backward”
forbidden by First Alliance Mortgage. As the Court can neither calculate an
appropriate remittitur nor leave the award intact, the only remaining possibility is
to conduct a new trial on damages for these 8 products.
Furthermore, it was Apple’s
strategic decision to submit an expert report using an aggressive notice date for all
of the patents. The need for a new trial could have been avoided had Apple chosen a
more circumspect strategy or provided more evidence to allow the jury or the Court to
determine the appropriate award for a shorter notice period. Accordingly, the Court
ORDERS that a new trial be conducted on the amount of damages for the Gem, Indulge,
Infuse 4G, Galaxy SII AT&T, Captivate, Continuum, Droid Charge, and Epic 4G, and
strikes $383,467,143 from the jury’s award.
c. Infringer’s Profits Permissible But
Damages Period Too
Long
For an additional 3 phones, the jury used Mr. Musika’s
calculations that assumed the August 4, 2010 notice dates for all patents, but none
of these phones infringed the ’381 Patent, the only Patent for which the August 4,
2010 date was supported. All three of these phones did, however, infringe the D’677
Patent, meaning that Samsung's profits are a permissible remedy beginning with the
filing of the original complaint. In other words, these phones are similar to the 8
phones discussed above, but they were not found to infringe the ’381 Patent, so there
is no need to determine an appropriate award for the gap between August 4, 2010 and
the filing of the relevant complaint, and the Court can simply subtract the damages
awarded for the extra days without the need to substitute an alternative award. These
3 phones are: Galaxy S II Skyrocket, Galaxy S II Epic 4G Touch, and Galaxy S II
T-Mobile.
24
Samsung had notice of the D’677 Patent by April 15, 2011 (the date of filing of
Apple’s original complaint, which included the D’677 Patent). Thus, to remedy any
overcompensation, the Court would need to subtract any amount awarded for the period
between August 4, 2010 and April 15, 2011. However, the numbers underlying Mr.
Musika’s calculations show that these products were not sold before April 15, 2011.
Specifically, JX1500, the table which the parties agreed showed sales and revenue per
quarter for each accused phone, shows that the Galaxy S II Epic 4G Touch was first
sold in the third quarter of 2011, and the Galaxy S II Skyrocket and Galaxy S II
T-Mobile were both first sold in the fourth quarter of 2011 – both after the original
complaint was filed, giving Samsung notice of the D’677 Patent. Thus, for products
for which there were no sales prior to June 15, 2011, there were no damages awarded
for the period prior to that date. Consequently, none of the sales that went into Mr.
Musika’s calculation of Samsung’s profits for these three phones was made before
Samsung had notice. Accordingly, there is no excess for these three phones, and the
jury’s award stands. Samsung’s motion for a new trial on damages or remittitur for
Galaxy S II Skyrocket, Galaxy S II Epic 4G Touch, and Galaxy S II T- Mobile is
DENIED. The jury’s award of $216,392,254 for these products stands.
d. Reasonable
Royalty Awarded But Damages Period Too Long
Finally, for five phones, (Exhibit 4G,
Galaxy Tab, Nexus S 4G, Replenish, and Transform), the jury awarded amounts that
represent exactly half of Mr. Musika's reasonable royalty calculations. However,
these numbers were, as described above, based on incorrect notice dates for several
of the patents.
For these phones, the Court could, in theory, adjust Mr. Musika’s
reasonable royalty amounts to account for the proper notice dates for each patent,
and then calculate half of that number for each of the five phones to arrive at an
amount consistent with the jury’s award, but adjusted for correct notice dates. Mr.
Musika provided the per-unit royalty rate for each patent, see PX25A1 at 16, and the
parties jointly provided the number of units of each product sold per quarter. See
JX1500.
However, the two later notice dates that apply for the design patents (April
15, 2011 and June 16, 2011) both fall somewhere in the middle of the second quarter
of 2011, and thus do not
25
correspond with the dates on which quarters begin or end. The
parties have presented no evidence of sales in more specific time frames, so as to
permit an accurate apportionment of Samsung’s sales throughout the second quarter of
2011. As the sales of these products may not have been evenly distributed throughout
the quarter, the evidence is not sufficient to support even a pro-rated award for the
sales in the second quarter of 2011, because such an award might include sales for
which Samsung had no notice. Moreover, calculating a reasonable royalty beginning
with the third quarter of 2011 would leave Apple uncompensated for some number of
sales occurring during the second quarter of that year. Thus, the Court can neither
calculate a pro-rated award for the second quarter of 2011 nor begin the award with
the third quarter of 2011.
Because the award is excessive but the Court cannot
accurately calculate the correct number of sales on which to base a remittitur, the
Court ORDERS a new trial for the Exhibit 4G, Galaxy Tab, Nexus S 4G, Replenish, and
Transform, and strikes $9,180,124 from the award.
CONCLUSION
Apple’s motion for an
increase in the jury’s damages award is DENIED. The Court declines to determine the
amount of prejudgment interest or supplemental damages until after the appeals in
this case are resolved.
Because the Court has identified an impermissible legal
theory on which the jury based its award, and cannot reasonably calculate the amount
of excess while effectuating the intent of the jury, the Court hereby ORDERS a new
trial on damages for the following products: Galaxy Prevail, Gem, Indulge, Infuse 4G,
Galaxy SII AT&T, Captivate, Continuum, Droid Charge, Epic 4G, Exhibit 4G, Galaxy Tab,
Nexus S 4G, Replenish, and Transform. This amounts to $450,514,650 being stricken
from the jury’s award. The parties are encouraged to seek appellate review of this
Order before any new trial.
The jury’s award stands for the Galaxy Ace, Galaxy S
(i9000), Galaxy S II i9100, Galaxy Tab 10.1 WiFi, Galaxy Tab 10.1 4G LTE, Intercept,
Fascinate, Galaxy S 4G, Galaxy S II Showcase, Mesmerize, Vibrant, Galaxy S II
Skyrocket, Galaxy S II Epic 4G Touch, and Galaxy S II T-Mobile. The total award for
these 14 products is $598,908,892.
IT IS SO ORDERED. 26
Dated: March 1, 2013, 2013
[signature]
LUCY H. KOH United States District Judge
_______________ 1 Apple also
suggests that the Court should ignore the product-by-product amounts provided by the
jury, and should consider only the aggregate total amount. However, Apple provides no
authority for the argument that the Court should not consider the jury’s specific
findings. The Court will thus consider the jury’s award for each product.
2 A reasonable royalty represents the
minimum amount of permissible damages for utility and design patent infringement. See
35 U.S.C. § 284. Plaintiffs are entitled to lost profits instead of a reasonable
royalty only if they can prove that but for the infringement, they would have earned
those profits. See Crystal Semiconductor, 246 F.3d at 1354 (“[A] patentee may obtain
lost profit damages for that portion of the infringer's sales for which the patentee
can demonstrate ‘but for’ causation and reasonable royalties for any remaining
infringing.”). In addition, for design patent infringement, 35 U.S.C. § 289 also
provides “an alternate remedy” of infringer’s profits, see Nike, 138 F.3d at 1439,
which a plaintiff may seek in lieu of lost profits or a reasonable royalty. Trade
dress damages may include infringer’s profits and actual damages, which often take
the form of lost profits. 15 U.S.C. § 1117.
In addition, the Federal Circuit has
explained that a plaintiff may be compensated only once for each sale, even if more
than one form of infringement has occurred. See Catalina Lighting, , 295 F.3d at 1277
(utility patents and design patents infringed); Aero Products, 466 F.3d 1000 (utility
patent and trademark infringed). However, as Mr. Musika explained to the jury, Tr.
2092:14-25, there are many sales of each product, and it is permissible to award
different forms of compensation for different sales. Thus, an award may be comprised
of, for instance, part infringer’s profits and part lost profits, as long as there is
only one award for each infringing product sold.
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