United States District Court, E.D. Texas, Marshall Division
MEMORANDUM OPINION AND ORDER
PAYNE UNITED STATES MAGISTRATE JUDGE.
four-day trial, the jury unanimously found that TCL willfully
infringed claims 1 and 5 of United States Patent No. 7, 149,
510 by selling phones and devices equipped with the Google
Android operating system, and the jury awarded $75 million as
a lump sum royalty. The court previously ordered a new trial
on damages after finding Ericsson's damages theory
unreliable, see ECF No. 456, but the court now
reconsiders that order, reinstates the jury's verdict in
full, and resolves all other remaining disputes.
motions for judgment as a matter of law and for a new trial
raise procedural issues not unique to patent law and are
therefore evaluated under regional circuit law. Promega
Corp. v. Life Techs. Corp., 875 F.3d 651, 659 (Fed. Cir.
2017). The Fifth Circuit is “especially
deferential” to a jury verdict. Olibas v.
Barclay, 838 F.3d 442, 448 (5th Cir. 2016) (quoting
Evans v. Ford Motor Co., 484 F.3d 329, 334 (5th Cir.
2007)) (internal quotation marks omitted). A party is only
entitled to judgment as a matter of law on an issue where no
reasonable jury would have had a legally sufficient
evidentiary basis to find otherwise. Fed.R.Civ.P. 50(a);
Bear Ranch, L.L.C. v. Heartbrand Beef, Inc., 885
F.3d 794, 801 (5th Cir. 2018). The evidence must be reviewed
“in the light most favorable to the non-movant.”
Id. (quoting Omnitech Int'l, Inc. v. Clorox
Co., 11 F.3d 1316, 1323 (5th Cir. 1994)). The Fifth
Circuit will reverse the denial of a motion for judgment as a
matter of law “only if the jury's factual findings
are not supported by substantial evidence or if the legal
conclusions implied from the jury's verdict cannot in law
be supported by those findings.” MM Steel, L.P. v.
JSW Steel (USA) Inc., 806 F.3d 835, 843 (5th Cir. 2015)
decision to grant a new trial must also overcome significant
deference to the jury's verdict. “A trial court
should not grant a new trial on evidentiary grounds unless
the verdict is against the great weight of the
evidence.” Seibert v. Jackson Cty.,
Mississippi, 851 F.3d 430, 439 (5th Cir. 2017) (quoting
Whitehead v. Food Max of Miss., Inc., 163 F.3d 265,
269 (5th Cir. 1998)). This requires the movant to show
“an absolute absence of evidence to support the
jury's verdict.” Id. (quoting
Whitehead, 163 F.3d at 269).
makes two arguments in support of judgment as a matter of law
that TCL has not infringed. ECF No. 427 at 3-8. Both
arguments relate to the phrase “interception module,
” which appears in claim 1 of the '510 patent:
A system for controlling access to a platform, the system
a platform having a software services component and an
interface component, the interface component having at least
one interface for providing access to the software services
component for enabling application domain software to be
installed, loaded, and run in the platform; an access
controller for controlling access to the software services
component by a requesting application domain software via the
at least one interface, the access controller comprising:
an interception module for
receiving a request from the requesting application domain
software to access the software services component;
and a decision entity for determining if the request should
be granted wherein the decision entity is a security access
manager, the security access manager holding access and
permission policies; and
wherein the requesting application domain software is granted
access to the software services component via the at one
least interface if the request is granted.
'510 Patent col.11 ll.1-23 (emphasis added). TCL's
first argument is that the Android operating system does not
include an “interception module” because the
segments of code responsible for interception are not in the
same place. ECF No. 427 at 3-6. TCL's second argument, as
best as the court can understand it, is that the claims
require the “interception module” to be separate
from the “software services component, ” yet
there was no evidence for the jury to conclude that these two
components are separate in the Android operating system.
Id. at 6-8. Neither argument is persuasive.
first argument was raised in a pretrial motion-TCL asked the
court to construe “interception module” as a
self-contained segment of source code, as opposed to code
that is dispersed throughout an operating system.
See ECF No. 359 at 19-20. TCL did not timely raise
this claim construction argument, however, and the court
found the argument waived. Id. Nevertheless, because
it was not clear that TCL's argument was a matter for
claim construction, the court permitted TCL's expert, Dr.
Malek, to explain his understanding of the plain and ordinary
meaning of the term “module” at trial.
Id. (citing Verizon Servs. Corp. v. Cox Fibernet
Va., Inc., 602 F.3d 1325, 1330-41 (Fed. Cir. 2010)
(distinguishing infringement from claim construction));
see also Nobelbiz, Inc. v. Glob. Connect, LLC, 876
F.3d 1326, 1330 (Fed. Cir. 2017) (O'Malley, J.,
dissenting from denial of petition for rehearing en banc)
(“The fact that parties' experts might proffer
differing definitions of a term's plain and ordinary
meaning to a jury should not be enough to justify removing
that question from the jury's consideration.”).
expert, Dr. Jones, offered a competing understanding,
explaining that the Android operating system included an
interception “module” because it had code that is
“a logically separable part of the program that has an
identifiable functionality.” Trial Tr. vol. 2
(afternoon), 56:12-57:7, Dec. 6, 2017, ECF No. 404. In other
words, Dr. Jones's opinion was that regardless of where
in the operating system the source code resided, segments of
source code could work together in the Android operating
system to perform the interception function, and such
segments would be considered a “module” because
they are logically distinct (in terms of function) from other
portions of source code. See id.
Jones discredited Dr. Malek's testimony by highlighting
that Dr. Malek's understanding of the term has not been
consistent. In a claim construction declaration, Dr. Malek
explained that “interception module” would be
understood as software responsible for receiving a request to
access the software services component from the application
domain software and passing the request to the decision
entity. Id. 58:3-8. Dr. Jones explained that this
definition is consistent with his understanding, i.e., a
segment of code that performs the interception function.
Id. 58:4-24. Dr. Malek repeated essentially the same
definition during his deposition. Id. 59:4-7. Yet at
trial, Dr. Malek defined the term as a “program unit
that is discrete and identifiable with respect to compiling,
combining with other units, and loading.” Id.
60:6-8. Dr. Jones not only highlighted the inconsistency, but
also explained how the Android operating system would satisfy
each one of Dr. Malek's definitions. Id.
real difference between the experts, according to Dr. Jones,
had to do with the fact that the portions of code alleged by
Ericsson to satisfy the “interception module”
limitation were scattered in different places and in
different files. Id. 60:25-61:9. Dr. Jones explained
that in terms of computer science, it did not matter where
the source code was located as long as the code segments were
linked together in a way that made them logically discrete.
Id. 61:10-25. Thus, “from the phone's
perspective, they're executed right in a row.”
surprisingly, the jury discredited Dr. Malek's testimony,
and substantial evidence supports this finding. First, the
jury could have credited Dr. Jones's understanding that
the Android system has an “interception module”
because it includes logically distinct segments of code that
interact together to perform the interception function.
TCL's argument to the contrary, that “[t]he only
clear definition of the term ‘module' was presented
by TCL, ” ECF No. 427 at 3, is meritless. Dr.
Jones's understanding of the term was not only clear, but
it made sense in terms of computer science. Second, the jury
could have credited Dr. Malek's own prior definitions of
the phrase, which were consistent with Dr. Jones's
definition. Third, the jury could have concluded that the
Android system satisfies the definition Dr. Malek offered at
trial inasmuch as the Android code segments are
logically discrete and identifiable with respect to
compiling and loading.
second argument appears to be that Ericsson unwittingly
limited the scope of the claims during trial by stating that
the claims require a “layered” architecture.
See ECF No. 427 at 6-7. According to TCL, this means
that the “interception module” and
“software services component” must be in separate
places, yet there is no evidence to support that finding.
Id. at 7. The testimony TCL cites as supporting a
disclaimer of claim scope, however, has nothing to do with
the claim requirements. The testimony related to the fact
that the Android system contains the interception module and
software services component in the same file. Trial Tr. vol.
1 (morning), 37:25-38:9, Dec. 5, 2017, ECF No. 399. Even so,
according to Dr. Jones, the interception module and software
services component are logically “separate and distinct
things, ” and indeed, in “[d]ifferent
layers.” Id. 38:4-9. Thus, even if the claims
require the interception module to be in a different
“layer” than the software services component, the
jury heard substantial evidence to support the finding that
this requirement is satisfied.
clear, TCL's infringement arguments are not about the
jury improperly deciding a claim construction issue. This
court has commented on the so-called “O2 Micro
trap, ” which can doom a jury verdict on appeal.
See Huawei Techs. Co. v. T-Mobile US, Inc., No.
2:16-cv-00052-JRG-RSP, 2017 WL 4070592, at *1 (E.D. Tex. Aug.
29, 2017), adopted, 2017 WL 4049251 (E.D. Tex. Sept.
13, 2017); see also Nobelbiz, 876 F.3d at 1330
(O'Malley, J., dissenting from denial of petition for
rehearing en banc). There has not been a post-trial argument
from TCL that it was improper to let the jury evaluate the
experts' competing understandings of the plain and
ordinary meaning of the phrase “interception
module.” Any such argument has been waived. See
Sage Products, Inc. v. Devon Indus., Inc., 126 F.3d
1420, 1426 (Fed. Cir. 1997). Furthermore, Dr. Malek did not
claim to be relying on a special meaning of the term
“module” arising from the intrinsic record of the
'510 patent. The dispute simply related to the ordinary
understanding of the term within the art.
parties' damages theories have been discussed in a prior
opinion. See ECF No. 456; ECF No. 460 (redacted).
Briefly, Ericsson contended on the basis of a consumer survey
that about 28% of consumers would not have purchased an
accused TCL device without the ability to grant or deny
access to native functionality. See ECF No. 456 at
3-5. This 28% number was then applied directly to TCL's
at-risk profit to arrive at a $3.41 royalty rate, which was
factored into Ericsson's lump sum royalty analysis,
providing for a total damages estimate of $245 million.
See Id. TCL contended, on the basis of
Ericsson's past licensing practices, that damages should
be no more than $2, 465, 000. See Id. at 5-9. The
jury credited Ericsson's theory and awarded $75 million,
which reflects a deduction attributable at least in part to
unaccused products, as discussed more below. See ECF
No. 390 at 1.
court vacated the jury's damages verdict, concluding that
(1) Ericsson's damages theory was unreliable; and (2)
Ericsson's pursuit of unaccused products made a new trial
on damages necessary. See ECF No. 456 at 9-15. As
for Ericsson's damages theory, the court concluded that
Mr. Mills' opinion was unreliable because it failed to
account for patented features on a device that a consumer
would consider just as essential as the accused security
feature. See Id. at 10-12. Extrapolating
Ericsson's theory, in other words, would quickly result
in the erosion of all of TCL's profit. See id.
asks the court to reconsider this decision. See ECF
No. 464. First, Ericsson contends that the court's
decision conflicts with other courts' approval of damages
theories such as the one Mr. Mills presented at trial.
See Id. at 1. Second, Ericsson contends that the
court's order raises a flavor of a “royalty
stacking” concern, but Ericsson emphasizes that an
accused infringer's profit is not a cap on damages and
that TCL never presented evidence regarding patents that
covered other features a consumer would find essential.
See Id. at 7-9. The court agrees.
principles are at the heart of the court's
reconsideration of the damages issue. First, “[a]
jury's decision with respect to an award of damages
‘must be upheld unless the amount is grossly excessive
or monstrous, clearly not supported by the evidence, or based
only on speculation or guesswork.” Lucent Techs.,
Inc. v. Gateway, Inc., 580 F.3d 1301, 1310 (Fed. Cir.
2009) (quotation and citations omitted). Second,
“[e]stimating a reasonable royalty is not an exact
science, ” and “the question of whether the
expert is credible or the opinion is correct is generally a
question for the fact finder, not the court.”
Summit 6, LLC v. Samsung Elecs. Co., 802 F.3d 1283,
1296 (Fed. Cir. 2015).
often difficult to draw the line between a credibility issue
and a Daubert issue in patent cases, but the flaw in
Ericsson's damages theory should have gone to the weight
of the evidence, not its admissibility. “The primary
purpose of the Daubert filter is to protect juries
from being bamboozled by technical evidence of dubious merit,
as is implicit in the courts' insistence that the
Daubert inquiry performs a ‘gatekeeper'
function.” SmithKline Beecham Corp. v. Apotex
Corp., 247 F.Supp.2d 1011, 1042 (N.D. Ill. 2003),
vacated on other grounds, 403 F.3d 1331 (Fed. Cir.
2005) (Posner, J., sitting by designation). Effective
cross-examination and the presentation of contrary evidence
should have been adequate to prevent the jury from being
misled by Ericsson's damages theory. Daubert v.
Merrell Dow Pharm., Inc., 509 U.S. 579, 596 (1993)
(“Vigorous cross-examination, presentation of contrary
evidence, and careful instruction on the burden of proof are
the traditional and appropriate means of attacking shaky but
admissible evidence.”). Indeed, any juror can
understand that if one infringing feature on a device demands
nearly a third of the device's profit, it may become
impossible to sell a profitable device. TCL made this point
to the jury, but much less effectively than the court
expected, and the point was clouded by other unpersuasive
arguments. Thus, to the extent Mr. Mills overlooked that
consumers considered other features essential, and that these
features would demand additional royalties, the flaw went to
the weight of Mr. Mills' testimony.
courts have come to the same conclusion. See ECF No.
464 at 4-7. Mr. Mills presented his damages theory in
Sentius International, LLC v. Microsoft Corporation,
and the court declined to find it inadmissible under
Daubert. See No. 5:13-CV-00825-PSG, 2015 WL
451950, at *9 (N.D. Cal. Jan. 27, 2015). Specifically,
“Mills used Wecker's survey to calculate the
revenue and profit that Microsoft would have allegedly lost
if it had not included the accused spell and grammar check
features in its accused products.” Id.
Rejecting the same argument TCL made in its post-trial
motion, the court concluded that “Mills' income
approach theory is not a hidden attempt to avoid the entire
market value rule because Mills did not derive damages using
Microsoft's revenue and profit from all sales of the
accused products.” Id. at *11. Two other
decisions are consistent with the result in Sentius.
See Lucent Techs., Inc. v. Microsoft Corp., 837
F.Supp.2d 1107, 1117 (S.D. Cal. 2011); Apple, Inc. v.
Samsung Elecs. Co., No. 12-CV-00630-LHK, 2014 WL 794328,
at *15 (N.D. Cal. Feb. 25, 2014).
review of these cases also reveals that the court's
previous order gave more credit to TCL's post-trial
damages motion than was due. TCL made arguments identical to
the ones rejected in Sentius, namely that Dr.
Wecker's survey was unreliable and that
“Ericsson's damages model violates the entire
market value rule.” ECF No. 427 at 13-14. The survey
itself was not unreliable, however, as the court has already
explained, see ECF No. 456 at 11-12, and TCL's
entire market value argument did not clearly highlight the
flaw in Mr. Mills' opinion, see Id. at 12. The
problem identified by the court-that Mr. Mills directly
applied the 28% survey result to the at-risk profit- is at
best another way of framing TCL's more convoluted
argument, but a common sense articulation of the court's
point is nowhere to be found in TCL's motion,
see ECF No. 427, and was therefore not squarely
addressed by Ericsson until its motion for reconsideration.
TCL preserved the essence of the court's point about Mr.
Mills overlooking facts of the case, namely other features a
consumer might consider essential, Ericsson is correct that
TCL fell short of producing evidence to establish these
facts. See ECF No. 464 at 7-9. The lack of evidence
highlighting the flaw in Mr. Mills' opinion is an
important reason why the flaw should have gone to the weight
of the evidence, not its admissibility. First, the jury did
not hear evidence about Mr. Mills' opinion regarding the
other patents-in-suit, which the court relied on to
illustrate how TCL's profit would quickly vanish.
See ECF No. 456 at 10. Second, while there was
evidence that consumers would consider a few other features
essential to their purchase, including ability to make a
call, text messaging, and Wi-Fi, see Trial Tr. vol.
1 (morning), 90:3-9:98:17, Dec. 5, 2017, ECF No. 398, the
jury was not presented evidence that any one of these
features was covered by another patent. At most, the jury
heard evidence that the '510 patent was “one of
many thousands of patents potentially that read on
that phone.” Trial Tr. vol. 2 (afternoon), 9:1-4, Dec.
6, 2017, ECF No. 404 (emphasis added). Although there are
many patents that likely read on the accused devices, as far
as the jury was concerned, this was only a possibility.
persuasively argues that the evidence presented at trial
would not have been enough to warrant an instruction on
royalty stacking. See ECF No. 464 at 8-9. The
Federal Circuit has explained that “[t]he district
court need not instruct the jury on hold-up or stacking
unless the accused infringer presents actual evidence of
hold-up or stacking.” Ericsson, Inc. v. D-Link
Sys., Inc., 773 F.3d 1201, 1234 (Fed. Cir. 2014).
“The mere fact that thousands of patents are declared
to be essential to a standard does not mean that a
standard-compliant company will necessarily have to pay a
royalty to each SEP holder.” Id. Though this
case did not deal with a patent declared essential to an
industry standard, the Federal Circuit's point applies
equally to testimony about unidentified patents that
potentially cover the accused devices and the royalties those
patents might demand. Indeed, Federal Circuit precedent
suggests that TCL's theory about features covered by
other unidentified patents would be unreliable opinion
without actual evidence of royalty stacking. See
Commonwealth Sci. & Indus. Research Organisation v. Cisco
Sys., Inc., 809 F.3d 1295, 1302 (Fed. Cir. 2015)
(“[A]bstract recitations of royalty stacking theory . .
. are insufficiently reliable.”).
concern that Ericsson's theory would erode all of
TCL's profit should also have gone to the weight of the
evidence. The law is clear that an accused infringer's
profit is not a cap on a reasonable royalty. See Powell
v. Home Depot USA Inc., 663 F.3d 1221, 1238 (Fed. Cir.
2011) (“[I]t is settled law that an infringer's net
profit margin is not the ceiling by which a reasonable
royalty is capped.”). More important, while an accused
infringer's profit is relevant to the analysis, see
id., TCL opened the door to evidence that TCL
underestimated its profit. See Trial Tr. vol. 2
(afternoon), 63:1-3, Dec. 5, 2017, ECF No. 400 (Q. “Do
you have any reason to doubt that [profit] figure?” A.
“Yes.” Q. “What's that?”). The
profit figure the parties referenced at trial, according to
Mr. Mills, was the figure used in TCL's “financial
reporting accounting, ” which did not correlate to
TCL's actual profit. See Id. 63:5-25. Mr. Mills
explained, for example, that TCL kept a war chest for patent
royalties that were included in the financial reporting
accounting as “costs, ” even though royalties
were never paid. See Id. 64:1-19. These unpaid
royalties, according to Mr. Mills, inflated costs “to
the tune of more than $50 million for some years.”
also persuasively argues that references to unaccused
products should not have necessitated a new trial on damages.
Cf. ECF No. 456 at 12-15. TCL argues otherwise, but
not because the discussion of unaccused products was
prejudicial under Rule 403. See ECF No. 427 at 13.
Rather, TCL's complaint is that the damages model
“is flawed” and “contrary to law”
inasmuch as a patentee “can only receive infringement
damages on those devices that actually performed the patented
method during the relevant infringement period.”
Id. (quoting Cardiac Pacemakers, Inc. v. St.
Jude Med., Inc., 576 F.3d 1348, 1358-59 (Fed. Cir.
2009). Yet TCL was not assessed damages on unaccused products
because the jury was instructed that lump sum damages are
available only for ...