Damages Award May Not Be Based on Sales of Non-Accused Products
Enplas Display Device Corp. v. Seoul Semiconductor Co., __ F.3d __, 2018 WL 6033533 (Fed. Cir. Nov. 19, 2018) (Newman (CIP/DIP), Hughes, STOLL) (N.D. Cal.: Cousins) (3 of 5 stars)
Fed Cir part-affirms, part-vacates verdict that Enplas induced infringement of two SSC patents. The appealed issues related to Enplas’s anticipation attack, its defenses against inducement, and the amount of the damages award. SSC’s patents related to display panel backlights, e.g., for LED displays.
Anticipation: The district court did not err in entering SJ against Enplas as to one patent, and denying JMOL as to the other after the jury rejected Enplas’s arguments. SJ was appropriate for the first patent because Enplas’s expert had urged that, at most, a reference “could have been modified” to practice SSC’s claim, which was insufficient for anticipation. JMOL was not warranted for the second patent because the parties’ presented conflicting expert testimony on anticipation, and the jury could have reasonably credited SSC’s expert.
Inducement: The district court did not err in denying Enplas’s motion for JMOL of no inducement. The opinion calls this a “close case” because there was no direct evidence that Enplas actually knew that certain lenses it was selling would be incorporated into U.S. televisions. Per Water Technologies, 850 F.2d 660 (Fed. Cir. 1988), however, circumstantial evidence of specific intent to infringe may suffice, and the record here was sufficient for a jury to find for SSC.
Damages: The district court erred, however, in its computation of a lump sum royalty as a remedy for the infringement. The opinion describes how SSC’s expert had included in the royalty base “the volume of sales of all non-accused lenses made [in the past] by Enplas.” Op. at *8. Her rationale was that, in negotiating a freedom-to-operate license, the parties would have used a broad base so as to make it easier to bring future products to market, “to avoid the need to test and negotiate licenses for additional or future potentially infringing lenses that Enplas might sell.” This testimony was the only evidence in the record that could have supported the jury’s award of $4 million for one of the SSC patents. Per AstraZeneca, 782 F.3d 1324 (Fed. Cir. 2015), however, a reasonable royalty may not include activities that do not constitute patent infringement. The opinion rejects SSC’s attempt to characterize the expert’s methodology as merely applying a premium that would “ease an administrative burden [i.e., the parties’ future burden in determining which products infringed, and which didn’t].” While lump-sum, paid-in-full royalties may be awarded in patent cases, “that lump-sum must be based on an estimate of the extent of future sales of accused products, not on past sales of non-accused products.” Op. at *10.
Dissent: Judge Newman would have affirmed the damages verdict as supported by substantial evidence, emphasizing that Ninth Circuit law, not Federal Circuit law, should control the inquiry. She notes that Enplas did not appeal the district court’s Daubert and MIL rulings, which approved the general approach to computing a lump-sum royalty, and finds that the admissible evidence was sufficient to support the verdict. Judge Newman accuses the majority of misapplying AstraZeneca; in her view nothing in that case bars a patentee from presenting evidence that “a potential infringer would reasonably include all potentially infringing products in a paid-up license, in order to avoid the uncertainty of possible infringement and future litigation.” Dissent at *17.
KEYWORDS: ANTICIPATION (NO); INDUCEMENT (YES); DAMAGES; REASONABLE ROYALTY