By Dennis Crouch
Apple v. Motorola (Fed. Cir. 2014)
Sitting by designation in the smart-device battle between Apple and Google’s proxy Motorola, famed 7th Circuit jurist Richard Posner offered the bold summary judgment conclusion that neither party had offered adequate proof of damages or ongoing harm to support injunctive relief. Here, each party had asserted infringement of three patents. However, without any remedy, the case became moot and Judge Posner dismissed the case with prejudice. The foundation for this decision was built when Judge Posner considered the lack of credibility of both sets of damages expert reports and excluded almost all of that testimony under Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993).
On appeal, the Federal Circuit has – as expected – has reversed. The majority decision has several sections, but portions regarding damages are of most interest. First, the court provides a detailed analysis of damages expert analysis and finds a number of faults with Judge Posner’s exclusionary rules. However, the court goes on to hold that, even if the damages expert testimony were properly excluded, the proper calculation for damages on summary judgment is not zero.
Once a court has found that a patent is infringed and enforceable then it has a duty to award damages “in no event less than a reasonable royalty.” Here, the Federal Circuit appears to place the burden of identifying that minimum royalty on the fact finder:
Because no less than a reasonable royalty is required, the fact finder must determine what royalty is supported by the record. . . . If a patentee’s evidence fails to support its specific royalty estimate, the fact finder is still required to determine what royalty is supported by the record. . . . Indeed, if the record evidence does not fully support either party’s royalty estimate, the fact finder must still determine what constitutes a reasonable royalty from the record evidence. . . . Certainly, if the patentee’s proof is weak, the court is free to award a low, perhaps nominal, royalty, as long as that royalty is supported by the record.
Thus, a fact finder may award no damages only when the record supports a zero royalty award. For example, in a case completely lacking any evidence on which to base a damages award, the record may well support a zero royalty award. Also, a record could demonstrate that, at the time of infringement, the defendant considered the patent valueless and the patentee would have accepted no payment for the defendant’s infringement. Of course, it seems unlikely that a willing licensor and willing licensee would agree to a zero royalty payment in a hypothetical negotiation, where both infringement and validity are assumed.
The court goes on to note that it has been unable to find any case in history where the record properly supported an infringement award of zero.
The majority was penned by Judge Reyna and joined by Chief Judge Rader. However, these two Judges disagreed on one particular point – whether Motorola’s FRAND commitment for its patent removes all possibility of injunctive relief for unlicensed infringement. Judge Reyna says yes, Judge Rader says no – and that Apple’s bad behavior as an unwilling licensee should open the door for injunctive relief.
The majority opinion also vacated Judge Posner’s SJ determination that Apple was not entitled to an injunction seemingly because of a change in claim construction that now potentially creates a causal nexus between infringement and a market harm. Writing in dissent from that portion of the opinion, Judge Prost disagreed.