Patent Damages
28Feb/11Off

Ohio Court Refuses to Throw out Verdict That Exceeded a Reasonable Royalty Rate to Which the Parties Had Stipulated

On January 3, 2011, Judge Nugent of the Northern District of Ohio issued an opinion upholding a jury’s damages verdict in which the jury’s royalty rate exceeded the rate to which the plaintiff and defendant had stipulated was a reasonable rate.  Bendix Commercial Vehicle, Systems, LLC v. Haldex Brake Products Corp., Case No. 1:09 CV 176 (N.D. Ohio, Jan. 3, 2011).  The parties had stipulated that a reasonable royalty rate would be 4%.  At trial, the jury found compensatory damages of $100,000, which was apparently greater than the amount the jury would have awarded had they used the agreed-on 4% royalty rate (though the opinion is not clear as to whether the jury used a different rate or simply awarded a $100,000 lump sum for damages).  The defendant filed a JMOL motion asking the court to set aside the verdict because the jury should have been bound by the 4% rate.  The court denied the motion.  Its reasoning is interesting.

First, the court recited the relevant jury instructions:

  • “A reasonable royalty is not necessarily the actual measure of damages”
  • A reasonable royalty “is merely the floor below which damages should not fall”
  • “[T]he parties agree that a reasonable royalty is equal to 4 percent of the revenue Haldex received from any infringing sales”

Based on these instructions, the court concluded that “they jury was not limited to the stipulated 4% reasonable royalty when it considered what damages to award.”

The court’s analysis that followed worthwhile quoting in full:

When supported by the evidence, a jury may rightfully award damages in excess of any amount discussed by either side’s experts, or in excess of any amount advocated by either party.  See Am Trim, L.L.C. v. Oracle Corp., 383 F.3d 462, 475 (6th Cir. 2004); Fuji Photo Film Co. v. Jazz Photo Corp., 394 F.3d 1368, 1378 (Fed. Cir. 2005); SmithKline Diagnostics, Inc. v. Helena Labs. Corp., 926 F.2d 1161, 1168 (Fed. Cir. 1991); Datascope Corp. v SMEC, Inc., 879 F.2d 820 (Fed. Cir. 1989).

There was ample evidence at trial to support the jury’s award. Plaintiff’s expert, Dr. Gering explained that the 4% reasonable royalty rate was calculated on the basis of a hypothetical licensing negotiation between two willing participants, but that Knorr-Bremse was not a willing participant to a licensing agreement in this case. (Tr. at 416:18-21, 418:6-22, 432:19-23). When the licensor is not anxious to grant a license, a negotiated royalty rate may well be higher than a rate that is reasonable under the Georgia Pacific factors, between two willing parties.

The jury was presented with evidence that the Plaintiffs would not have willingly granted a license to Haldex at a 4% rate in 2005, and that there was a long standing contention between the parties because Haldex had previously infringed Knorr-Bremse’s patents. Further, there was evidence that Haldex was a direct competitor with the Plaintiffs in the United States market for air disc brakes, and that Plaintiff, Bendix-Spicer lost sales to Haldex’s infringing product. Tr. At 49:6-12, 66:1-9; 333:18-334:22, 363:2-14, 364:8-367:14, 366:12-16, 369:7-370:10, 375:1-12, 393:17-25, 403:22-406:2; PTX 25. This evidence allowed the jury to find that a 4% royalty rate would not have been enough to adequately compensate Plaintiffs for the use of their patented ideas, or the damages derived from lost customers and the corresponding profits from lost sales.  See, e.g., Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1554 n. 13 (Fed. Cir. 1995) (noting that the hypothetical negotiation “is an inaccurate, and even absurd, characterization when ... the patentee does not wish to grant a license.”).

As set forth above, there is ample evidence upon which the jury reasonably could have based its finding of $100,000 in compensatory damages resulting from Haldex’s willful infringement of the ‘874 Reissue Patent. The award was supported by a legally sufficient amount of evidence; and, Haldex has made no showing that it was out of line with awards from other similar cases, was so excessive as to shock the conscience of the Court, or was the result of any bias, prejudice, passion, or mistake.

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