In an earlier post dated December 1, 2010 (http://patent-damages.com/2010/12/detailed-opinion-on-ongoing-royalties-from-arizona-court/), we addressed a case between Bard and W.L. Gore from the District of Arizona involving ongoing royalties (i.e., royalties awarded after post-judgment motions). The case presented an interesting and detailed study in the analysis of ongoing royalties, even including a license agreement at the end of the opinion.
On September 30, Judge Ward in the Eastern District of Texas entered an Order regarding supplemental damages following a jury verdict for Mondis against Innolux. At trial, the jury had awarded a 0.5% royalty for monitors and 0.75% royalty for televisions. For the ongoing royalty, however, the Court set the rate at 1.5% for monitors and 0.75% for televisions. The Court noted both Paice and Amado had stated that an ongoing royalty is within the discretion of the Court, and there is no agreed-upon methodology for determining the royalty. Judge Ward essentially followed what had been done in Affinity Labs, which was to perform a “new” Georgia-Pacific analysis, using the jury’s verdict as a starting point and then adjusting the GP factors up or down as appropriate to account for differences between the pre-trial hypothetical negotiation date and the post-trial hypothetical negotiation date. While most of the factors stayed the same, or close to the same, in the Court’s opinion, there was a substantial shift in the commercial success of the patented invention between the 2005 date relied upon by the jury and the 2011 date used by the Court – e.g., several licenses by the patentee, increase in the market for the infringing functionality, etc. Based on these findings, the Court bumped the 0.5% royalty for monitors up to 0.75%. Thereafter, the Court examined the import of willfulness to determine if – and by how much – to multiply the 0.75% rate. The Court held that any adjudged infringer, even if it planned to appeal, would meet the “reckless” standard, even if not the “intentional” or “knowing” standard. The Court noted it was in a difficult position to rate the strength of Innolux’s appeals, but that by definition it would have to believe that Innolux’s appeals would fail – otherwise, the Court would have granted Innolux’s post-trial motions. The Court was disturbed by what it believed to be a disrespectful comment to a Chinese newspaper about the patent process, and accounted for that as well. In the end, the Court doubled the 0.75% rate to come to a final ongoing royalty of 1.5%.
Cases concerning ongoing royalties have been issuing with increasing frequency. We have discussed other cases in prior posts, including our discussion of Presidio Components in a post dated October 29, 2010. The District of Arizona, in Bard Peripheral Vascular, Inc. v. W.L. Gore & Assoc., Inc., No. CV-03-597-PHX-MHM (D. Ariz. Sept. 8, 2010), issued a lengthy, detailed ongoing royalty opinion. The case is worth reading for its interesting analysis and because it includes at the end a license agreement that the court fashioned, presumably with the assistance of the attorneys from both sides.
Judge Mary Murgula issued the opinion in what proved to be “the most complicated case this Court has presided over.” The jury had fixed a 10% reasonable royalty rate, and the court was faced with the two sides’ competing proposals for a post-judgment royalty. Of course, the plaintiff was seeking a higher rate (35% on some products and 25% on others), while the defendant proposed something lower (5%).
The Court, based primary on public interest factors, denied a permanent injunction, and thereafter went about determining an appropriate ongoing royalty for direct competitors. The jury had awarded a 10% royalty for the damages period, but Bard argued that the ongoing royalty should be much higher because of the “markedly different” circumstances and legal status (citing Amado v. Microsoft). For the hypothetical negotiation date, the parties agreed that the appropriate date was the day after the Court denied a permanent injunction, and also agreed that a “modified Georgia-Pacific framework” was most appropriate.
Chief Judge Irma E. Gonzalez of the Southern District of California (San Diego) released an opinion on August 5, 2010 that set an ongoing (i.e., post-judgment ) royalty of 12% of the wholesale price of the infringing capacitors. Presidio Components Inc. v. American Technical Ceramics Corp., 08-CV-335-IEG (NLS). Judge Gonzalez also awarded "supplemental damages" to the plaintiff in the amount of $235,172.68. Ongoing royalties raises some interesting issues and has been the subject of numerous opinions over the past couple years. We'll discuss both issues below.