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Imperium IP Holdings (Cayman), Ltd. v. Samsung Electronics Co., Ltd.

United States District Court, E.D. Texas, Sherman Division

September 13, 2017

IMPERIUM IP HOLDINGS (CAYMAN), LTD.
v.
SAMSUNG ELECTRONICS CO., LTD., SAMSUNG ELECTRONICS AMERICA, INC., SAMSUNG TELECOMMUNICATIONS AMERICA, LLC, and SAMSUNG SEMICONDUCTOR, INC.

          MEMORANDUM OPINION AND ORDER

          AMOS L. MAZZANT UNITED STATES DISTRICT JUDGE

         Pending before the Court is Imperium IP Holdings (Cayman) Ltd.'s (“Imperium”) Motion on the Appropriate Ongoing Royalty (Dkt. #380). After reviewing the relevant pleadings, the Court grants in part and denies in part Imperium's motion.

         BACKGROUND

         On June 9, 2014, Imperium filed the instant action against Defendants, alleging infringement of United States Patent Nos. 6, 271, 884 (the “'884 Patent), 7, 092, 029 (the “'029 Patent”), and 6, 836, 290 (the “'290 Patent”). On February 8, 2016, the jury returned a verdict finding the following: (1) Defendants infringed Claims 1, 5, 14, and 17 of the '884 Patent; (2) Defendants infringed Claims 1, 6, and 7 of the '029 Patent; (3) Defendants willfully infringed the patents-in-suit; and (4) Claim 10 of the '290 Patent was invalid for obviousness (Dkt. #253). The jury awarded $4, 840, 772 in damages for infringement of the '884 Patent and $2, 129, 608.50 in damages for infringement of the '029 Patent (Dkt. #253). The jury's award represents an implied royalty rate of four cents per product for the '884 Patent and two cents per product for the '029 Patent. On August 24, 2016, the Court awarded enhanced damages for willful infringement and entered final judgment (Dkt. #329; Dkt. #330). The Court also imposed an ongoing royalty in favor of Imperium and ordered the parties to negotiate the ongoing royalty rate and the products covered by that rate. The parties' discussions reached an impasse. Since the parties were unable to resolve the issue of ongoing royalties themselves, the Court finds it proper to address the issue now.

         On June 2, 2017, Imperium filed the present motion (Dkt. #380). On June 9, 2017, Defendants filed a response (Dkt. #385). On June 14, 2017, Imperium filed a reply (Dkt. #390). On June 19, 2017, Defendants filed a sur-reply (Dkt. #392).

         LEGAL STANDARD

         Upon a finding of infringement for a patentee, courts have jurisdiction to “grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable.” 35 U.S.C. § 283. The Federal Circuit has clarified that in some cases, where an injunction is inappropriate, a court may decide to award future royalties to be paid in light of post-judgment infringement. Paice LLC v. Toyota Motor Corp., 504 F.3d 1293, 1314 (Fed. Cir. 2007); see Creative Internet Advert. Corp. v. Yahoo! Inc., 674 F.Supp.2d 847, 850 (E.D. Tex. 2009). The Federal Circuit has also given the district court “broad discretion” in matters concerning an ongoing royalty rate. See Telcordia Techs., Inc. v. Cisco Sys., Inc., 612 F.3d 1365, 1378 (Fed. Cir. 2010).

         ANALYSIS

         Imperium asserts it is entitled to an ongoing royalty rate for post-judgment infringement at the trebled rates the Court imposed for any products found to infringe that were no more than colorable variations of infringing products. Specifically, Imperium seeks an ongoing royalty rate of twelve cents per product for the '884 Patent and six cents per product for the '029 Patent.

         Defendants contend the appropriate ongoing royalty rate should be 1.3 cents per product for the '884 Patent and 0.3 cents per product for the '029 Patent. Defendants reduced the implied jury rate for the '884 Patent by 67% because the relevant claims of '884 Patent are now subject to reexamination by the Patent Office and may be found invalid. Defendants also reduced the implied jury rate for the '029 Patent by 85% because the Patent Trial and Appeal Board (“PTAB”) found the relevant claims of the '029 Patent to be invalid.

         The starting point for the Court's calculation of an appropriate ongoing royalty rate is the rate determined by the jury for pre-verdict infringement.[1] Here, the jury determined a reasonable royalty rate of four cents per product for the '884 Patent and two cents per product for the '029 Patent. The Court will look mainly to any change in the bargaining positions of the parties and other economic circumstances occurring between the jury's hypothetical negotiation and a negotiation conducted after the verdict. ActiveVideo Networks, Inc. v. Verizon Commc'ns, Inc., 694 F.3d 1312, 1343 (Fed. Cir. 2012). The burden is on Imperium to show that it is entitled to a royalty rate in excess of the rate initially determined by the jury. Creative Internet, 674 F.Supp.2d at 855.

         Imperium argues two changed circumstances warrant an upward adjustment of the jury-determined royalty rate. First, Imperium argues in a post-verdict hypothetical negotiation, it would be in a stronger position to negotiate with Defendants than at the time of the hypothetical negotiation in 2007. Imperium points to $22.8 million it has received in licensing fees for its patents in 2013. Imperium states these licensing fees prove that the patented technology is more of a commercial success today than it was at the time of the hypothetical negotiation in 2007. Defendants argue the same 2013 licenses were already accounted for in the jury's verdict and thus cannot support an upward modification of the jury-determined royalty rate.

         The Court agrees with Imperium's characterization of the 2013 licensing fees. In deciding the royalty rate for post-trial infringement, the Court can properly consider any new evidence that was not before the jury and any changed circumstances between the hypothetical negotiation occurring in 2007 and a hypothetical negotiation that would occur now after the judgment. Mondis Tech. Ltd. v. Chimei InnoLux Corp., 822 F.Supp.2d 639, 647 (E.D. Tex. 2011), affd sub nom. Mondis Tech. Ltd. v. Innolux Corp., 530 Fed.App'x. 959 (Fed. Cir. 2013). Although the jury did consider the 2013 licensing fees during trial, this does not change the fact the evidence may be weighed differently in a hypothetical negotiation occurring today than one in 2007. For example, the patented technology today is more of a commercial success than in the 2007, which is evidenced by the $22.8 million Imperium has received in licensing fees. This would increase Imperium's bargaining position in a 2017 hypothetical negotiation. However, the Court must balance Imperium's increased bargaining position with a December 1, 2016 PTAB decision that invalidated every claim the jury found Defendants had infringed in the '029 Patent. Taking all of these circumstances together, Imperium would have a stronger bargaining position with respect to the '884 Patent[2] but not with the '029 Patent.

         Second, Imperium urges the Court to enhance damages for Defendants continued willful infringement based on several of the factors set out in Read Corp. v. Portec, Inc., 970 F.2d 816, 827 (Fed. Cir. 1992). Imperium argues the jury's verdict did not include damages for Defendants' willful infringement. Thus, Imperium contends enhancement for Defendants' continued willful infringement is proper in ...


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