throbber
Case 2:13-cv-00103-JRG-RSP Document 307 Filed 09/12/17 Page 1 of 20 PageID #: 21903
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`MARSHALL DIVISION
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`Civil Action No. 2:13-cv-103
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`§ § § § § § § § §
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`CIOFFI et al.,
`Plaintiffs,
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`v.
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`GOOGLE, INC.,
`Defendant.
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`MEMORANDUM OPINION AND ORDER REGARDING ONGOING ROYALTY
`AND SUPPLEMENTAL DAMAGES
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`Before the Court is the Motion for Ongoing Royalty (Dkt. No. 277) filed by Plaintiffs
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`Alfonso Cioffi, Melanie Rozman, Megan Rozman, and Morgan Rozman (collectively,
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`“Plaintiffs”). Plaintiffs seek imposition of an ongoing royalty for any continued infringement by
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`Defendant Google, Inc. (“Google”), as well as a corresponding reporting requirement. Having
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`considered the Motion, the Parties’ briefing, and the relevant authorities, the Court is of the opinion
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`that the Motion should be GRANTED AS MODIFIED. The Court hereby sets the ongoing
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`royalty rate at $0.002601 per Chrome user per month—the implied royalty rate determined by the
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`jury.
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`I. BACKGROUND
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`A jury trial commenced in this case on February 6, 2017. On February 10, 2017, the jury
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`returned a unanimous verdict (Dkt. No. 259) finding infringement and also finding the asserted
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`claims not invalid. The jury awarded damages of $20 million in the form of a running royalty.
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`(Dkt. No. 259.)
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`Plaintiffs concede that a permanent injunction is not appropriate in this case and instead
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`seek an ongoing royalty to compensate them for future infringement that may occur during the
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`remaining nine years of the infringed patents. (Dkt. No. 277 at 6, 17.) Although Plaintiffs initially
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`indicated in a footnote their intent to seek supplemental damages by a separate motion, at the
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`hearing on this Motion, the Parties agreed instead to apply the ongoing royalty rate determined by
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`the Court to any supplemental damages, thus eliminating the need for an additional motion. (Tr.
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`of Mot. Hr’g, July 6, 2017, Dkt. No. 30 (“Hr’g Tr.”) at 45:20–47:12.)
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`II. ONGOING ROYALTY
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`a. Procedure
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`At the outset, Google argues that a determination of any ongoing royalty in this case should
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`be deferred until after the Court addresses the Parties’ pending JMOL motions. (Dkt. No. 285 at
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`5.) Google suggests that this Court should instead sever the issue of ongoing royalties from this
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`case and then stay consideration of that issue. (Dkt. No. 285 at 5.)
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`In this Court’s view, it is prudent in this case to address the issue of ongoing royalties now
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`rather than unduly delay the entry of final judgment. See Warsaw Orthopedic, Inc. v. NuVasive,
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`Inc., 515 F. App’x 882 (Fed. Cir. 2012) (“[T]he case is not ‘final’ because the district court has
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`not yet determined ongoing royalties. An ongoing royalty is not the same as an accounting for
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`damages [under 28 U.S.C. § 1292(c)(2)].”). In Warsaw Orthopedic, the Federal Circuit dismissed
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`an appeal because the district court had not yet addressed ongoing royalties. Id. Although Warsaw
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`Orthopedic is a non-precedential decision, it nonetheless provides some level of guidance as to
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`what issues should be included in a final judgment. Moreover, the Circuit’s reasoning in that case
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`is consistent with Supreme Court precedent regarding finality of judgments. See Catlin v. United
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`2
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`Case 2:13-cv-00103-JRG-RSP Document 307 Filed 09/12/17 Page 3 of 20 PageID #: 21905
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`States, 324 U.S. 229, 233 (1945) (“A ‘final decision’ generally is one which ends the litigation on
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`the merits and leaves nothing for the court to do but execute the judgment.”). Other district courts
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`have agreed, holding that staying the ongoing royalty issue would preclude entry of final judgment,
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`thus preventing the parties from appealing other issues in the case. See, e.g., Apple, Inc. v. Samsung
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`Elecs. Co., No. 12-cv-00630-LHK, 2014 WL 6687122, at *7 (N.D. Cal. Nov. 25, 2014). The
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`Warsaw Orthopedic reasoning also promotes the policy underlying final judgments—that all
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`issues be addressed through a single appeal rather than through piecemeal appellate practice. As
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`such, the Court is persuaded that it is prudent under the circumstances in this case to address
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`ongoing royalties before entering final judgment.
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`As to Google’s suggestion to sever the issue of ongoing royalties, Google has not presented
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`any case law to suggest that this Court must sever and stay the ongoing royalty determination. The
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`Court sees no particular reason to sever this issue in this case.
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`b. Legal Standard
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`A court’s authority to award an ongoing royalty for continued patent infringement finds its
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`origin in 35 U.S.C. § 283. Prism Techs. LLC v. Sprint Spectrum L.P., 849 F.3d 1360, 1377 (Fed.
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`Cir. 2017) (“We have interpreted that provision [Section 283] to permit a court to award ‘an
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`ongoing royalty for patent infringement in lieu of an injunction’ barring the infringing conduct.”
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`(quoting Paice LLC v. Toyota Motor Corp., 504 F.3d 1293, 1314 (Fed. Cir. 2007)). The award of
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`an ongoing royalty is equitable in nature. Fresenius USA, Inc. v. Baxter Int’l, Inc., 733 F.3d 1369,
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`1379 (Fed. Cir. 2013) (“Fresenius II”) (“While we may at times improperly use the term ‘damages’
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`as a shorthand term to encompass the concept of the right to some prospective monetary relief,
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`that cannot change the equitable character of that relief.”).
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`3
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`Case 2:13-cv-00103-JRG-RSP Document 307 Filed 09/12/17 Page 4 of 20 PageID #: 21906
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`i. Whether an Ongoing Royalty is Appropriate
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`The Federal Circuit has recognized that “[u]nder some circumstances, awarding an ongoing
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`royalty for patent infringement in lieu of an injunction may be appropriate.” Paice, 504 F.3d at
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`1314. More recently, the Circuit has stated that “absent egregious circumstances, when injunctive
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`relief is inappropriate, the patentee remains entitled to an ongoing royalty.” SCA Hygiene Prod.
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`Aktiebolag v. First Quality Baby Prod., LLC, 807 F.3d 1311, 1332–33 (Fed. Cir. 2015), vacated
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`in part on other grounds, 137 S. Ct. 954 (2017). However, a court is not required to grant a
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`patentee’s request for an ongoing royalty, even where a permanent injunction does not issue.
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`Whitserve, LLC v. Computer Packages, Inc., 694 F.3d 10, 35–36 (Fed. Cir. 2012); Paice, 504 F.3d
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`at 1315. Instead, whether to grant an ongoing royalty is a matter within the district court’s
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`discretion, and a court may decide that a forward-looking royalty is not appropriate in a particular
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`case. See Whitserve, 694 F.3d at 35.
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`The question of whether to award an ongoing royalty is guided at least in part by the form
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`and scope of relief awarded by the jury. For example, in Summit 6, LLC v. Samsung Elecs. Co.,
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`the jury’s damages award took the form of a lump sum royalty. 802 F.3d 1283, 1301 (Fed. Cir.
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`2015). There, the Federal Circuit held that “the district court properly denied [the plaintiff’s]
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`request for an ongoing royalty because the jury award compensated [the plaintiff] for both past
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`and future infringement through the life of the patent.” Id. at 1300–01. See also Telcordia Techs.,
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`Inc. v. Cisco Sys., Inc., 612 F.3d 1365, 1379 (Fed. Cir. 2010) (“An award of an ongoing royalty is
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`appropriate because the record supports the district court’s finding that [the plaintiff] has not been
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`compensated for [the defendant’s] continuing infringement.”); Fresenius USA, Inc. v. Baxter Int’l,
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`Inc., 582 F.3d 1288, 1303 (Fed. Cir. 2009) (“Fresenius I”) (“A damages award for pre-verdict
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`4
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`Case 2:13-cv-00103-JRG-RSP Document 307 Filed 09/12/17 Page 5 of 20 PageID #: 21907
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`sales of the infringing product does not fully compensate the patentee because it fails to account
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`for post-verdict sales of repair parts. . . . The district court was within its discretion to impose a
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`royalty on those sales of disposable products in order to fully compensate [the patentee] for the
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`infringement.”); Erfindergemeinschaft UroPep GbR v. Eli Lilly & Co., No. 2:15-cv-1202-WCB,
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`2017 WL 3034655, at *2 (E.D. Tex. July 18, 2017) (Bryson, J.) (“UroPep”) (“[I]t would be
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`improper for the Court first to conclude that the damages awarded by the jury do not cover the
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`post-verdict period, but then to rule that [the plaintiff] is not entitled to any relief for that period.”).
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`Accordingly, whether the jury award compensates the patentee for future infringement is important
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`because without some form of prospective relief, the patent owner is effectively forced to “resort
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`to serial litigation” to receive compensation for future infringement. UroPep, 2017 WL 3034655,
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`at *2 (quoting Whitserve, 694 F.3d at 35).
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`Where the jury has not expressly indicated the form of its reasonable royalty award, the
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`form of the award may be inferred based on the arguments and evidence presented to the jury
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`during trial, the district court’s instructions to the jury, and the verdict form itself. See Whitserve,
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`694 F.3d at 35 (analyzing the evidence at trial and rejecting the argument that the jury awarded a
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`paid-up license). Here the jury’s verdict expressly indicates the reasonable royalty was a running
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`royalty as opposed to a lump sum award.
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`ii. Setting the Royalty Rate
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` If a district court finds it appropriate to award an ongoing royalty, the proper royalty rate
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`is “a matter committed to the sound discretion of the district court.” Amado v. Microsoft Corp.,
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`517 F.3d 1353, 1362 n.2 (Fed. Cir. 2008). See also Paice, 504 F.3d at 1315. Courts routinely use
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`the royalty rate implied by the jury’s verdict as the starting point in determining a forward-looking
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`5
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`Case 2:13-cv-00103-JRG-RSP Document 307 Filed 09/12/17 Page 6 of 20 PageID #: 21908
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`royalty. UroPep, 2017 WL 3034655, at *7 (“Recognizing the importance of the jury’s verdict,
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`courts have uniformly held that the starting point for the Amado analysis of the ongoing royalty
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`rate is the royalty rate found by the jury for the pre-verdict infringement period.”). However, a
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`court has discretion to impose an ongoing royalty rate higher than the rate implied by the jury. See
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`Amado, 517 F.3d at 1361–62 (rejecting the argument that the post-verdict royalty rate should
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`necessarily be equivalent to the implied rate determined by the jury). The patent owner seeking a
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`higher rate bears the burden to show that enhancement of the jury’s rate is appropriate in a given
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`case. UroPep, 2017 WL 3034655 at *7.
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`Using the jury’s implied royalty rate as a starting point, courts conduct a renewed analysis
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`of a reasonable royalty based on a post-verdict hypothetical negotiation. UroPep, 2017 WL
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`3034655 at *8; Apple, Inc. v. Samsung Elecs. Co., No. 12-cv-00630-LHK, 2014 WL 6687122, at
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`*13 (N.D. Cal. Nov. 25, 2014). In this analysis, “courts have often used the so-called Georgia-
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`Pacific factors in assessing how the changed circumstances would produce a royalty rate in a
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`hypothetical post-verdict licensing negotiation that was different from the royalty rate the jury
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`selected based on a hypothetical licensing negotiation at the outset of infringement.” Bianco v.
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`Globus Med., Inc., 53 F. Supp. 3d 929, 933 (E.D. Tex. 2014) (Bryson, J.). See Fresenius I, 582
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`F.3d at 1303 (reversing the district court’s JMOL ruling and, in light of such reversal, remanding
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`for an analysis of the ongoing royalty rate that would result from a hypothetical negotiation—an
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`analysis that is “influenced by the Georgia Pacific factors”). See generally Georgia-Pacific Corp.
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`v. U.S. Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970) (outlining the relevant factors). In this
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`post-verdict analysis, courts “focus[] on any new evidence that was not before the jury and
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`additionally any changed circumstances (other than willfulness) between a hypothetical
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`6
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`Case 2:13-cv-00103-JRG-RSP Document 307 Filed 09/12/17 Page 7 of 20 PageID #: 21909
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`negotiation that occurred [at the time infringement began] (which the jury determined) and a
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`hypothetical negotiation that would occur [] after the judgment (which this Court is determining).”
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`Mondis Tech. Ltd. v. Chimei InnoLux Corp., 822 F. Supp. 2d 639, 647 (E.D. Tex. 2011), aff’d sub
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`nom. Mondis Tech. Ltd. v. Innolux Corp., 530 F. App’x 959 (Fed. Cir. 2013).
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`A jury’s calculation of a reasonable royalty based on the hypothetical negotiation model
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`involves “ascertain[ing] the royalty upon which the parties would have agreed had they
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`successfully negotiated an agreement just before infringement began.” Lucent Techs., Inc. v.
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`Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir. 2009). This approach analyzes the rate a willing
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`licensor and willing licensee would have agreed to before infringement began, with both parties
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`assuming that the patents were valid and infringed. Lucent Techs., 580 F.3d at 1325 (“The
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`hypothetical negotiation also assumes that the asserted patent claims are valid and infringed.”).
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`Where it is clear that the jury’s award was based upon an assumption that the patent was
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`infringed and valid, there is a “strong reason for following the jury’s lead” in determining the
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`appropriate ongoing royalty rate. UroPep, 2017 WL 3034655 at *7. Said another way, the fact that
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`the jury has determined that the patents are actually valid and infringed does not necessarily change
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`the analysis. Although the new hypothetical negotiation occurs on the date of the jury verdict, this
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`underlying assumption—that the patents are valid and infringed—has not changed since the date
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`of the hypothetical negotiation considered by the jury. As Judge Byson aptly explained in UroPep:
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`“To the extent that the jury can be discerned to have made a decision based on the assumption that
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`the patent was infringed and valid, and to the extent that other considerations do not compel a
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`departure from the jury’s assessment of the proper royalty rate, the Court should defer to the jury’s
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`decision as the finder of fact . . . .” UroPep, 2017 WL 3034655 at *7.
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`7
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`Although the underlying assumptions of validity and infringement have not changed pre-
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`verdict versus post-verdict, the Federal Circuit has nonetheless stated that “[t]here is a fundamental
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`difference [] between a reasonable royalty for pre-verdict infringement and damages for post-
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`verdict infringement.” Amado, 517 F.3d at 1361 (quoting Paice, 504 F.3d at 1317 (“[P]re-suit and
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`post-judgment acts of infringement are distinct, and may warrant different royalty rates given the
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`change in the parties’ legal relationship and other factors.” (Rader, J., concurring))). As the Amado
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`Court explained: “[p]rior to judgment, liability for infringement, as well as the validity of the
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`patent, is uncertain, and damages are determined in the context of that uncertainty. Once a
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`judgment of validity and infringement has been entered, however, the calculus is markedly
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`different because different economic factors are involved.” Amado, 517 F.3d at 1362. The posture
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`in Amado, however, was unique. See ActiveVideo Networks, Inc. v. Verizon Commc’ns, Inc., 694
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`F.3d 1312, 1343 (Fed. Cir. 2012) (referring to Amado as a “sunset royalty analysis”). There, the
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`district court granted a permanent injunction, then stayed implementation of that injunction until
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`seven days after the resolution of any appeal. Amado, 517 F.3d at 1356. After the appeal concluded,
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`the district court dissolved the injunction1 and awarded the plaintiff a per-unit royalty rate for
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`infringing sales made during the sunset royalty period (the period that the stay of the injunction
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`had been in effect). Id. As other courts have reasoned, the analysis in Amado may not apply to
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`every case. UroPep, 2017 WL 3034655 at *5; EMC Corp. v. Zerto, Inc., No. CV 12-956 (GMS),
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`2017 WL 3434212, at *3 (D. Del. Aug. 10, 2017). Instead, Amado may be limited to cases where
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`a permanent injunction was found to be appropriate. UroPep, 2017 WL 3034655 at *5; EMC
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`1 The district court in Amado dissolved the permanent injunction in light of eBay Inc. v. MercExchange, L.L.C., 547
`U.S. 388 (2006). However, this aspect of Amado is not relevant to the ongoing royalty analysis.
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`8
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`Case 2:13-cv-00103-JRG-RSP Document 307 Filed 09/12/17 Page 9 of 20 PageID #: 21911
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`Corp., 2017 WL 3434212, at *3 (distinguishing Amado based on Amado’s unique posture
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`involving a stay of a permanent injunction).
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`c. Analysis
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`i. Whether an Ongoing Royalty is Appropriate
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`At the outset, a court should first determine whether imposition of an ongoing royalty is
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`appropriate in a particular case. As Google correctly notes, ongoing royalties are a form of
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`equitable relief, and a court may “exercise its discretion to conclude that no forward-looking relief
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`is appropriate in the circumstances.” WhitServe, 694 F.3d at 35. In this case, the verdict form
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`indicates that the jury’s damages award was intended to compensate Plaintiffs only for past
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`infringement. (See Dkt. No. 259 at 4 (showing the jury’s indication that its award took the form of
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`a running royalty rather than a lump sum).) Moreover, neither party has pointed to evidence or
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`arguments presented at trial that would support an argument that the jury award included future
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`infringement. From this, the Court finds it fitting to award an ongoing royalty in this case, as the
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`jury’s award fails to compensate Plaintiffs for future infringement. See Summit 6, LLC v. Samsung
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`Elecs. Co., 802 F.3d 1283, 1301 (Fed. Cir. 2015) (affirming denial of ongoing royalty because “the
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`jury award compensated [the plaintiff] for both past and future infringement through the life of the
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`patent”); Telcordia Techs., Inc. v. Cisco Sys., Inc., 612 F.3d 1365, 1379 (Fed. Cir. 2010) (“An
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`award of an ongoing royalty is appropriate because the record supports the district court’s finding
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`that [the plaintiff] has not been compensated for [the defendant’s] continuing infringement.”);
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`UroPep, 2017 WL 3034655 at *2 (“[I]t would be improper for the Court first to conclude that the
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`damages awarded by the jury do not cover the post-verdict period, but then to rule that [the
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`plaintiff] is not entitled to any relief for that period.”).
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`9
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`Having determined that the circumstances of this case warrant an ongoing royalty, the
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`Court next turns to the issue of what royalty rate is appropriate.
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`ii. Implied Royalty Rate
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`In this case, the Parties agree that the royalty rate implied by the jury’s verdict is $0.002601
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`per Chrome user per month. (Hr’g Tr. at 23:18–22, 24:11–16.) This rate is supported by the
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`evidence presented at trial. During trial, Plaintiffs’ damages expert, Dr. Bratic, opined that a
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`reasonable royalty for past infringement would be $26,275,887, which was calculated based on a
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`running royalty rate of $0.0034 per Chrome user per month, multiplied by about 7.7 billion
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`monthly users.2 (Bratic Decl. ¶ 5; Dkt. No. 277 at 4–5, 9 & n.1; Trial Tr. Feb. 7, 2017 p.m., Dkt.
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`No. 266 at 74:21–75:13, 94:16–95:24; Sealed Trial Tr. Feb. 7, 2017, Dkt. No. 265 at 38:18–40:2.)
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`The user base included users from December 2012 to January 2017. (Bratic Decl. ¶ 5; Dkt. No.
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`277 at 4–5; Dkt. No. 285 at 14; Trial Tr., Feb. 7, 2017 p.m., Dkt. No. 266 at 75:1–4.)
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`Although the jury did not expressly provide a royalty rate, the implied royalty rate may be
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`calculated based on the total damages award and the user base. Plaintiffs calculate this implied rate
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`by noting that the total damages award ($20 million) is about 76.12% of the total damages award
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`they suggested to the jury ($26,275,887), which was based on a suggested rate of $0.0034. (Bratic
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`Decl. ¶¶ 5–6; Dkt. No. 277 at 5.) Multiplying the rate Plaintiffs suggested to the jury ($0.0034) by
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`this same percentage (76.12%) results in an implied rate of $0.002601 per Chrome user device per
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`month. (Bratic Decl. ¶ 6.) The Court finds this undisputed calculation to be reasonable based on
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`the evidence. Thus, the Court adopts $0.002601 as the implied royalty rate.
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`2 Google produced its financial data using “monthly active user totals.” (Bratic Decl. ¶ 5; Dkt. No. 277 at 5 n.1.)
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`10
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`Case 2:13-cv-00103-JRG-RSP Document 307 Filed 09/12/17 Page 11 of 20 PageID #:
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`iii. Proper Royalty Rate
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`In this case, the Parties attempted to negotiate a rate amenable to both parties. However,
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`such negotiations have failed. (Hr’g Tr. at 5:15–7:13; Dkt. No. 289 at 2; Decl. of Eric W. Benisek
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`in Support of Plaintiffs’ Motion for Ongoing Royalty, Dkt. No. 277-1 ¶ 2.) In fact, the Parties
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`could not even agree as to whether their discussion of ongoing royalties was premature. (Dkt. No.
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`285 at 8; Dkt. No. 290 at 3.) At the hearing, the Parties indicated that further negotiations would
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`result in an impasse. (Hr’g Tr. 6:18–21.) Having given the Parties an opportunity to negotiate an
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`appropriate rate, and finding that it would be futile to order additional negotiation efforts, this
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`Court now exercises its discretion to impose an ongoing royalty rate for post-verdict infringement.
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`As discussed in further detail below, Plaintiffs request a royalty rate that falls between
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`$0.0052 and $0.0078 per Chrome user per month, which amounts to 2–3 times the implied jury
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`rate. (Dkt. No. 277 at 17.) Defendant argues for a rate equal to the jury’s implied rate.3 For the
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`reasons discussed below, the Court agrees with Google.
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`1. Post-Verdict Hypothetical Negotiation
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`Plaintiffs first argue that a higher royalty rate is warranted due to changes in the Parties’
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`bargaining power. (Dkt. No. 277 at 9.) Specifically, Plaintiffs argue that they would not willingly
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`accept the implied royalty rate for post-verdict infringement, given the Parties’ changed legal
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`status, with Google now being an adjudicated infringer with weakened bargaining power. (Dkt.
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`3 Although Defendant initially argued in its briefing that certain Georgia-Pacific factors actually favor a rate lower
`than the implied jury rate, during the ongoing royalty hearing, Defendant’s counsel argued in favor of simply using
`the implied jury rate. (Hr’g Tr. at 29:11–15.) Moreover, as Plaintiffs note, when the jury set its royalty rate, it had
`already considered the evidence cited by Defendant in support of its arguments for a lower rate. (Dkt. No. 289 at 5.)
`For example, the jury heard evidence that Plaintiffs have never licensed the asserted patents. (Dkt. No. 289 at 5.) As
`such, without an explanation as to how such evidence should alter the post-verdict rate as compared to the pre-verdict
`rate, the Court need not reconsider the same evidence that has already been incorporated into the jury’s verdict.
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`11
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`Case 2:13-cv-00103-JRG-RSP Document 307 Filed 09/12/17 Page 12 of 20 PageID #:
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`No. 277 at 10–11.) However, the Court is not persuaded, as the circumstances that would give
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`Plaintiffs strengthened bargaining power (that the patents are infringed and not invalid) were
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`already assumed and in place when the jury set its implied royalty rate.
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`It is clear that the jury assumed that the patents were valid and infringed when it analyzed
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`the hypothetical negotiation that would have occurred just before infringement began. (Trial Tr.
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`Feb. 7, 2017 p.m., Dkt. No. 266 at 78:25–79:4 (testimony of Plaintiff’s damages expert); Feb. 9,
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`2017 a.m., Dkt. No. 270 at 49:4–9 (testimony of Defendant’s damages expert); Feb. 10, 2017 a.m.,
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`Dkt. No. 272 at 49:13–16 (jury instructions, instructing the jury to assume validity and
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`infringement).) Thus, the jury’s implied royalty rate already encompasses the result that has now
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`been formally reached through a verdict—that the patents are valid and infringed—and the Court
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`need not alter the post-verdict hypothetical negotiation in light of these now confirmed
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`assumptions. See UroPep, 2017 WL 3034655 at *6–7; EMC Corp., 2017 WL 3434212, at *3
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`(“When the court considers a hypothetical negotiation that occurs post-trial, that approximation
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`and uncertainty are absent. The question is really whether removing such uncertainty materially
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`affects the royalty rate calculation. The court does not believe it does.”).
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`Plaintiffs next contend that the ongoing royalty rate should be enhanced because the
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`patented invention covers the “flagship feature” of the Chrome web browser: a per-process
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`sandbox that has been “fundamental” to the Chrome brand since 2008. (Dkt. No. 277 at 11 (citing
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`Trial Tr. Feb. 8, 2017 a.m., Dkt. No. 267 at 71:23–73:20; 40:25–42:12; PTX-039; PTX-017).)
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`Plaintiffs point to evidence presented at trial which, according to Plaintiffs, indicates that Google
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`would rather pay a higher figure in this revised hypothetical negotiation than lose this “flagship
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`feature” of Chrome. (Dkt. No. 277 at 11 (citing Trial Tr. Feb. 8, 2017 a.m., Dkt. No. 267 at 71:23–
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`12
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`Case 2:13-cv-00103-JRG-RSP Document 307 Filed 09/12/17 Page 13 of 20 PageID #:
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`73:20; 40:25–42:12; PTX-039; PTX-017).) Google responds, however, that Chrome has many
`
`features and that even with respect to the various security features of Chrome, the “auto-update”
`
`feature was the most important. (Dkt. No. 285 at 13 (citing Trial. Tr. Feb. 8, 2017 a.m., Dkt. No.
`
`267 at 44:1–45:22).) Google also points to evidence that speed is the most important overall feature
`
`to users. (Dkt. No. 285 at 13 (citing Trial Tr. Feb. 8, 2017 a.m., Dkt. No. 267 at 13:6–17).) Based
`
`on this evidence, Google argues that the sandboxing feature is simply not as important as Plaintiffs
`
`make it out to be and that Plaintiffs’ request for ongoing royalties at a rate 2–3 times the implied
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`jury rate is therefore disproportionate to the relative value of the infringing feature. (Dkt. No. 285
`
`at 13.)
`
`
`
`The relative importance of the patented technology, both from Google’s perspective and
`
`from its users’ perspective, has already been considered by the jury and has been incorporated into
`
`the jury’s implied rate. As such, without evidence that post-verdict circumstances will alter the
`
`importance of the patented feature, the Court finds no reason to reconsider this evidence. See
`
`Internet Machines LLC v. Alienware Corp., No. 6:10-cv-23, 2013 WL 4056282, at *19 (E.D. Tex.
`
`June 19, 2013), aff’d sub nom. Internet Machines LLC v. Cyclone Microsystems, Inc., 575 F.
`
`App’x 895 (Fed. Cir. 2014) (“[Plaintiff] points to numerous documents and testimony from trial
`
`in arguing that a number of the factors strongly suggest an increase is warranted in the royalty rate.
`
`But all of the evidence [the plaintiff] points out was previously before the jury and considered at
`
`the time the jury addressed damages. This evidence provides no insight into the parties’ subsequent
`
`changed circumstances.”).
`
`
`
`Turning to the Parties’ specific arguments under the Georgia-Pacific factors, Plaintiffs
`
`indicate that factors 1–7 have not changed. (Dkt. No. 277 at 11.) However, Plaintiffs argue that
`
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`13
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`Case 2:13-cv-00103-JRG-RSP Document 307 Filed 09/12/17 Page 14 of 20 PageID #:
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`factors 8–10, pertaining to profitability, commercial success, and benefits of the infringing
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`product, favor a higher royalty. (Dkt. No. 277 at 11.) Plaintiffs first point to evidence that the
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`number of regular users of Chrome increased 20% between 2015 and 2016. (Dkt. No. 277 at 11;
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`Bratic Decl. ¶ 8 (citing Bratic Decl., Ex. A).) Google responds by noting that Plaintiffs did not
`
`provide any evidence to suggest that the 20% increase in Chrome users was caused by or
`
`attributable to the patented technology. (Bakewell Decl. ¶ 5.) In further support of this point,
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`Google notes that the number of users for the non-accused version of Chrome increased by about
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`24.1% during the same period of time—a higher percentage increase than was experienced by the
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`infringing version of Chrome. (Bakewell Decl. ¶ 6.) According to Google, this demonstrates that
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`the increase in Chrome users was caused by something other than the patented technology.
`
`(Bakewell Decl. ¶ 6.) To some extent, the Court agrees. Although increased commercial success
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`between the two hypothetical negotiation dates could theoretically favor a higher ongoing royalty
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`rate, the evidence of causation is insufficient to warrant a higher royalty rate.
`
`
`
`Plaintiffs also contend that Google’s refusal to switch to what Google believes to be a
`
`suitable non-infringing alternative “in the face of significant legal exposure demonstrates the
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`continued utility and advantage of the patented technology over old security methods.” (Dkt. No.
`
`277 at 11 (citing Trial Tr. Feb. 9, 2017 a.m., Dkt. No. 270 at 55:2–18; 78:12–79:24).) However, at
`
`least one district court has found that the ability for a defendant to switch to a non-infringing
`
`alternative actually weighs against a higher royalty rate because a defendant, post-verdict, is able
`
`to use an alternative rather than continue its infringing conduct. See ActiveVideo Networks, Inc. v.
`
`Verizon Commc’ns, Inc., 827 F. Supp. 2d 641, 658 (E.D. Va. 2011), aff’d in part, rev’d in part on
`
`other grounds, 694 F.3d 1312 (Fed. Cir. 2012) (noting that the defendant’s ability to create a non-
`
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`14
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`Case 2:13-cv-00103-JRG-RSP Document 307 Filed 09/12/17 Page 15 of 20 PageID #:
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`infringing alternative lessens any increase in a plaintiff’s bargaining power). Thus, the Court is not
`
`persuaded by Plaintiffs’ argument on this point.
`
`
`
`2. Willfulness
`
`
`
`Irrespective of the Georgia-Pacific factors, Plaintiffs argue that the implied royalty rate
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`should be enhanced because any continued infringement is inherently willful. Plaintiffs
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`particularly point to testimony indicating that Google could switch to a non-infringing version of
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`Chrome in a short amount of time and at little cost. (Dkt. No. 277 at 12 (citing Trial Tr., Feb. 9,
`
`2017 a.m., Dkt. No. 270 at 55:2–18, 78:12–79:24).) This, Plaintiffs argue, shows that any
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`continued infringement is necessarily willful. In response, Google argues that willfulness
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`enhancement is per se improper, as willfulness is a means for enhancing damages, and damages
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`“by definition cover[] only past harm.” (Dkt. No. 285 at 8 (quoting WhitServe, 694 F.3d at 35
`
`(stating this principle in the context of evaluating whether the jury awarded a paid-up license))).
`
`
`
`Plaintiffs did not assert willful infringement at trial and instead dropped all allegations of
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`willful infringement up through the jury verdict. (Dkt. No. 200 at 7.) In doing so, Plaintiffs stated
`
`that they were “retain[ing] the right to seek willful infringement in any post-trial proceedings such
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`as seeking an ongoing royalty under Paice LLC v. Toyota Motor Corp.” (Dkt. No. 200 at 7.) As
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`this Court noted during trial, willful infringement is essentially a claim for non-compensatory
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`punitive damages. (Trial Tr. Feb. 6, 2017 p.m., Dkt. No. 263 at 78:10–79:21.) See Halo Elecs.,
`
`Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923, 1932 (2016) (noting that “[a]wards of enhanced damages
`
`under the Patent Act over the past 180 years establish that they are not to be meted out in a typical
`
`infringement case, but are instead designed as a ‘punitive’ or ‘vindictive’ sanction for egregious
`
`infringement behavior”). Meanwhile, the purpose of an ongoing royalty, an equitable form of
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`Case 2:13-cv-00103-JRG-RSP Document 307 Filed 09/12/17 Page 16 of 20 PageID #:
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`relief, is to help fully compensate the patent owner for infringement of its patent rights. As such,
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`it is unclear whether enhancing an ongoing royalty based on future willfulness is appropriate.
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`Regardless, considering the totality of the circumstances developed throughout the trial, the Court
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`is not persuaded that an enhancement based on willfulness would be appropriate in this case.
`
`
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`Both Parties spend much of their briefing analyzing the various Read factors, which are
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`used by courts, even after Halo, when determining whether to enhance damages after a jury finding
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`of willful infringement. See Dominion Res. Inc.

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