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Jury royalty relying on previous related jury verdict is affirmed

Jury royalty relying on previous related jury verdict is affirmed

This opinion was superseded. 

 

Sprint v. Time Warner is a nonprecedential case decided on November 30, 2018 on appeal from the District of Kansas. At trial the district court permitted Sprint to introduce evidence of a jury verdict in a related case by Sprint against another defendant. The jury found that defendant Time Warner infringed plaintiff Sprint’s asserted patents, that the patents were not invalid, and awarded a royalty award of approximately $140 million, settling on the same royalty rate (5% of relevant revenue) as the other jury verdict. Time Warner appealed.

The Federal Circuit affirmed the finding that the patents are not invalid for lack of written description, affirmed the infringement finding under the doctrine of equivalents, and affirmed the jury royalty award.

The district court did not err in allowing the evidence of the related jury verdict. Introduction of evidence of a jury verdict from another case “can be admissible if it is relevant for some legitimate purpose.” “While such evidence can be prejudicial and must be treated with great care, it is admissible if it is relevant to a material issue in the case and its use is limited to the purpose for which it is relevant.” The district court ruled that the related jury award “was relevant to the jury’s assessment of reasonable royalty damages under a hypothetical negotiation theory.” “[T]he verdict would be a factor of which the parties would have been aware at the time of their hypothetical negotiation…, and a reasonable jury could well conclude that the verdict and the amount of damages awarded in a similar prior litigation would have influenced the outcome of a hypothetical negotiation in the case at bar.” Importantly, the district court “gave the jury an instruction limiting the use of that evidence to the jury’s consideration of the issues of damages and willfulness.”

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“While there are some differences between the two proceedings, the core allegations in both were the same.” And while there “were several patents raised in each case that were not raised in the other,” Time Warner did not show “any reason to believe that the technology asserted in the [earlier] case was materially different from the technology raised in this case.” Lastly, “[a]ny differences between the two proceedings… were available to Time Warner to argue to the jury.”

The jury verdict was supported by sufficient evidence. The Federal Circuit has held that the 25% rule of thumb (the methodology in which the infringer pays the patent owner 25% of the gross profit) is fundamentally flawed. Although the now-discarded 25 percent rule was referenced in the related jury verdict admitted at trial, Time Warner “failed to show that the references to the 25 percent rule in [that] case had such a demonstrable and substantial effect on that case’s verdict as to disqualify the [verdict] evidence from consideration by the jury in determining an appropriate damages award in this case.”

The jury royalty rate of 5% of relevant revenue was supported by the verdict in the related case, and by two other licenses from Sprint for the patented technology. “In light of the [other] verdict and the other two licenses, as well as testimony from Sprint’s expert as to the cost to Sprint and the benefit to Time Warner from Time Warner’s decision to operate the [infringing] system itself rather than contracting that work out to Sprint, the jury had an adequate basis from which to find that damages should be awarded in the amount [awarded].” This evidence “provides strong support for Sprint’s argument that the damages award in this case reflected the incremental value of the inventions and thus satisfied the requirement of apportionment.” Lastly, there was “evidence from which the jury could conclude that Time Warner did not have available to it any reasonable non-infringing alternatives to Sprint’s patented technology.” Such is relevant to a reasonable royalty, “as the absence of non-infringing alternatives would strengthen the patentee’s hand in” the hypothetical negotiation. The Federal Circuit thus affirmed the damages award.

Judge Mayer dissented, arguing that the asserted patents “are invalid as a matter of law because their specifications provide no written description  support for the full breadth of the asserted claims.”