United States District Court, E.D. Texas, Marshall Division
MEMORANDUM OPINION AND ORDER
PAYNE UNITED STATES MAGISTRATE JUDGE.
four-day jury trial in this case was held in December of
2017. During trial, Ericsson presented evidence and argument
that TCL infringed claims 1 and 5 of U.S. Patent No. 7, 149,
510 by selling phones and devices that included the Google
Android operating system. The Android operating system allows
a user to grant or deny a third-party application's
request to access native phone functionality, a feature that
Ericsson contended was covered by the '510
patent. TCL presented evidence and argument that
it did not infringe, and both sides presented their
respective damages theories. The jury found that TCL
infringed claims 1 and 5, that TCL's infringement was
willful, and awarded $75 million as a lump sum royalty. TCL
has since moved for judgment as a matter of law on
infringement and damages, or alternatively for a new trial on
infringement and damages. TCL's motions with respect to
infringement will be denied, and an order will be
forthcoming. TCL's motion for a new trial on damages is
granted for the following reasons.
may order a new trial on any or all issues “for any
reason for which a new trial has heretofore been granted in
an action at law in federal court.” Fed.R.Civ.P. 59(a).
Regional circuit law applies when considering a motion for a
new trial. z4 Techs., Inc. v. Microsoft Corp., 507
F.3d 1340, 1347 (Fed. Cir. 2007). “A new trial may be
granted, for example, if the district court finds the verdict
is against the weight of the evidence, the damages awarded
are excessive, the trial was unfair, or prejudicial error was
committed in its course.” Smith v. Transworld
Drilling Co., 773 F.2d 610, 612-13 (5th Cir. 1985).
Damages Evidence Presented at Trial
Ericsson's Damages Theory
damages theory Ericsson presented at trial was based on the
opinions of Dr. William Wecker and Mr. Robert Mills. Dr.
Wecker provided analysis of a consumer survey that according
to Ericsson approximates the apportioned value of the
patented invention. Mr. Mills in turn used Dr. Wecker's
survey results to estimate a per phone royalty rate the
parties would have agreed to at the hypothetical negotiation.
Dr. Wecker's Survey
Wecker's survey was designed to determine how many
consumers that had purchased an Android-based smartphone
during the relevant time would have decided against
purchasing the phone if the phone lacked the accused security
and permissions feature, i.e., the ability to control whether
third-party applications can access native functionality on
the phone. See PTX 113 (survey questions); Trial Tr.
70:11-88:2, Dkt. No. 398 (Dr. Wecker direct examination).
After a series of preliminary questions concerning
demographic and other information, see PTX
113.0002-0016, survey respondents were asked whether they had
purchased a new smartphone during the relevant time period,
PTX 113.0017; Trial Tr. 75:21-76:16, Dkt. No. 398. About 67%
of survey respondents answered “yes” to this
question, Trial Tr. 76:17-22, Dkt. No. 398, and 54% of this
group of respondents had bought an Android-based phone, Trial
Tr. 76:23-77:12, Dkt. No. 398; PTX 113.0018.
next series of questions attempted to isolate the value of
the accused security and permissions feature for respondents
who had purchased an Android-based phone. Respondents were
first asked a series of questions designed to determine
whether purchasers of prepaid, low-cost TCL phones were
providing answers that were consistent with the answers
provided by purchasers of higher-end TCL phones. Trial Tr.
77:13-81:18, Dkt. No. 398. Dr. Wecker determined that these
two groups were answering questions consistently.
Id. Respondents were then asked whether they knew
about the security and permissions feature before they
purchased the phone; 67% of respondents indicated that they
did. Trial Tr. 84:19-85:7, Dkt. No. 398; PTX 113.0033.
Finally, these respondents were asked whether they would have
purchased the phone at the same price if the phone lacked the
accused security and permissions feature. Trial Tr.
85:8-86:19, Dkt. No. 398; PTX 113.0034. About 28% of
respondents said they would not have purchased the phone at
the same price. Trial Tr. 86:12-21, Dkt. No. 398.
Mr. Mills' Damages Opinion
Mills used Dr. Wecker's survey results to determine a per
phone royalty rate. According to Mr. Mills, Dr. Wecker's
survey results indicated that about 28% of consumers who
purchased accused TCL phones would not have made those
purchases if the phone lacked the allegedly infringing
feature. Trial Tr. 9:22-11:8, Dkt. No. 400. In other words,
TCL would have lost about 28% of its sales of accused
Android-based phones. Id. 11:4-8. Mr. Mills
estimated that TCL had sold about(XXXXX) accused devices during the relevant time.
Id. 13:1-10. The number of accused devices was then
multiplied by 28% to give about(XXXXX). Id. 13:11-14. According to Mr.
Mills, this number represents the at-risk devices, or the
number of devices that would not have been sold without the
allegedly infringing feature. See id.
Mills then arrived at a royalty rate. Mr. Mills multiplied
the(XXXXX) at-risk devices by
TCL's average profit per device, (XXXXX), to give about (XXXXX)of at-risk profit, or profit that TCL stood
to lose without the allegedly infringing feature.
Id. 14:17-23. The at-risk profit was then divided by
the total number of accused devices sold during the relevant
time ((XXXXX)) to give an at-risk
profit per phone of $3.42. Id. 14:24-15:3. Mr.
Mills' calculation was a roundabout way of multiplying
28% by TCL's average profit per device ((XXXXX)), which also yields the same $3.42 in
at-risk profit per phone. Id. 62:1-5.
Mills next determined how the parties would have split the
$3.42 of at-risk profit per phone at the hypothetical
negotiation. Id. 15:12-20. Based on eight of the
fifteen Georgia-Pacific factors, see 318
F.Supp. 1116, 1120 (S.D.N.Y. 1970), Mr. Mills concluded that
Ericsson would have been able to capture most of the $3.42,
specifically that Ericsson would have successfully negotiated
for $3.41 of the at-risk profit, Trial Tr. 17:3-44:20, Dkt.
No. 400. At the very least, Ericsson would have successfully
negotiated for half the at-risk profit, or $1.72 per phone.
Mr. Mills calculated a total damages award. The parties
agreed that Ericsson was not entitled to damages prior to
October 2014, the date Ericsson provided notice to TCL of the
alleged infringement. Id. 25:16-24. The hypothetical
negotiation, however, would have happened in 2010, just
before TCL's alleged infringement began. Id.
27:17-28:13. Although there was no dispute that the parties
would have negotiated a lump sum license, see Trial
Tr. 145:21-146:2, Dkt. No. 402, Mr. Mills nevertheless
provided calculations for both “pre-trial” and
“post-trial” damages. Id. 25:16-29:15
(pre-trial), 29:16-44:20 (post-trial), Dkt. No. 400. For the
pre-trial period from October 2014 through trial, damages
would range from $30.9 million (based on a $1.72 royalty
rate) to $61.2 million (based on a $3.41 royalty rate).
Id. 45:4-7. For the post-trial period from trial to
when the patent expires in June 2024, id. 29:16-25,
damages would range from $92.7 million to $183.8 million,
id. 45:4-7. Thus, Mr. Mills estimated total damages
to range from $123.6 million to $245 million. See
Id. Mr. Mills' final numbers were discounted to the
value as of October 2014, id. 26:22-27:10, the date
TCL would have paid for the lump-sum license negotiated in
2010, according to Mr. Mills. Id. 56:1-57:10.