Elbit Systems v. Hughes Network was decided on June 25, 2019 on appeal from the Eastern District of Texas. The jury found that defendant Hughes infringed, and awarded plaintiff Elbit $21,075,750 in reasonable royalty damages. The district court then denied Hughes post-trial motions for JMOL for non-infringement and for a new trial on damages, and granted Elbit’s motion for attorney fees. The district court found the case exceptional but did not quantify the award. Hughes appealed.
The Federal Circuit affirmed the infringement and damages findings, and dismissed the attorney fees appeal.
The district court did not abuse its discretion in denying Hughes’s motion for a new trial on damages. “Use of actual past licenses and negotiations to inform the hypothetical negotiation does not require identity of circumstances. Instead, the prior licenses or settlements need to be sufficiently comparable for evidentiary purposes and any differences in circumstances must be soundly accounted for.”
Elbit’s damages expert provided substantial evidence to support the jury award. Here, the expert “relied on a prior settlement and appropriately accounted for differences between the circumstances of that settlement and the present circumstances.” The relied-on settlement was one between Hughes and a third party, which resulted from a lawsuit filed by Hughes against the third party. The relied-on settlement occurred “only four months after the agreed-on date of the hypothetical negotiation.” The technologies were “related for purposes of determining market value.” And the expert “accounted for the fact that the [third-party] Agreement was a settlement prompted by litigation.”
The expert’s analysis could reasonably be found to incorporate the required apportionment. “When the accused technology does not make up the whole of the accused product, apportionment is required.” “Rather than parse out a value for each of the claims, [the expert] came up with a market, comparable royalty rate, and then he adjusted it as necessary for the hypothetical negotiation.” To reach his final figure, “he increased the royalty by 20% from the [third-party] Agreement, Hughes executives having made statements” indicating that the system incorporating the patented technology “provided a 20% increase in value over the old … system.” The expert’s testimony “allowed the jury to find that the components at issue, for purposes of apportionment to the value of a larger product or service, were comparable to the components at issue in the [third-party] agreement, and Hughes introduced no evidence that precluded such a finding.”
Hughes objected to the Elbit’s expert referring “to the revenue Hughes receives from service fees for an average customer over the course of that customer’s time buying the relevant service from Hughes.” The expert “determined that Hughes earns approximately $2500 of revenue per customer, on average, from [certain products],” and “that $18 was a reasonable royalty because $18 is a smaller portion of the $2500.” “[T]he transcript at those passages does not reveal, an objection by Hughes to that testimony.” The $2500 customer-specific reference is not the same as referring to a defendant’s “company-wide revenue,” which the Federal Circuit has disapproved of. There was no reversible error in the district court’s refusal to grant a new trial.
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The Federal Circuit held that it lacked jurisdiction to review the exceptionality finding where the attorney fee amount had not been quantified. 28 U.S.C. § 1292(c)(2) permits an appeal from “a judgment in a civil action for patent infringement which would otherwise be appealable to [this court] and is final except for an accounting.” The Federal Circuit “has held that the ‘accounting’ provision applies where the only remaining issues are issues of actual and enhanced damages under [§ 284],” Supreme Court precedent “makes clear” that attorney fees rulings “are not to be treated as merits issues.” “Indeed, fees arise under a provision, 35 U.S.C. § 285, that is separate from the provisions authorizing merits relief,” 35 U.S.C. §§ 283 and 284. Accordingly, because § 1292(c)(2) only “allow[s] review of a subset of merits rulings,” “§ 1292(c)(2) does not authorize appellate review of a pre-quantification fees-entitlement ruling.” Similarly, because 28 U.S.C. § 1295 “requires a final decision in the case being appealed,The Federal Circuit saw “no basis for § 1295 jurisdiction to review an exceptionality determination made under [§ 285] before fees have been quantified.
The Federal Circuit moreover saw “no sound basis for exercising pendent appellate jurisdiction over the fees-entitlement determination.” This narrow jurisdiction is limited “at most to issues that are inextricably intertwined with the final decision properly before the court of appeals.” The “demanding standard” was not met here. “Whether this case is exceptional because of Hughes’s litigation conduct (as the district court determined) is not inextricably intertwined with the infringement and damages issues presented on appeal of the merits judgment.” (parenthesis in original).
Elbit Sys. Land & C4I Ltd. v. Hughes Network Sys., LLC, 927 F.3d 1292 (Fed. Cir. 2019)