Case 4:14-cv-00371-ALM Document 403 Filed 09/13/17 Page 1 of 8 PageID #: 21541
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`United States District Court
`EASTERN DISTRICT OF TEXAS
`SHERMAN DIVISION
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`Civil Action No. 4:14-CV-371
`Judge Mazzant
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`§§§§§§
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`IMPERIUM IP HOLDINGS (CAYMAN),
`LTD.
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`v.
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`SAMSUNG ELECTRONICS CO., LTD.,
`SAMSUNG ELECTRONICS AMERICA,
`INC., SAMSUNG
`TELECOMMUNICATIONS AMERICA,
`LLC, and SAMSUNG SEMICONDUCTOR,
`INC.
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`MEMORANDUM OPINION AND ORDER
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`Pending before the Court is Imperium IP Holdings (Cayman) Ltd.’s (“Imperium”)
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`Motion on the Appropriate Ongoing Royalty (Dkt. #380). After reviewing the relevant
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`pleadings, the Court grants in part and denies in part Imperium’s motion.
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`BACKGROUND
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`On June 9, 2014, Imperium filed the instant action against Defendants, alleging
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`infringement of United States Patent Nos. 6,271,884 (the “’884 Patent), 7,092,029 (the “’029
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`Patent”), and 6,836,290 (the “’290 Patent”). On February 8, 2016, the jury returned a verdict
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`finding the following: (1) Defendants infringed Claims 1, 5, 14, and 17 of the ’884 Patent; (2)
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`Defendants infringed Claims 1, 6, and 7 of the ’029 Patent; (3) Defendants willfully infringed the
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`patents-in-suit; and (4) Claim 10 of the ’290 Patent was invalid for obviousness (Dkt. #253).
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`The jury awarded $4,840,772 in damages for infringement of the ’884 Patent and $2,129,608.50
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`in damages for infringement of the ’029 Patent (Dkt. #253). The jury’s award represents an
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`implied royalty rate of four cents per product for the ’884 Patent and two cents per product for
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`the ’029 Patent. On August 24, 2016, the Court awarded enhanced damages for willful
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`Case 4:14-cv-00371-ALM Document 403 Filed 09/13/17 Page 2 of 8 PageID #: 21542
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`infringement and entered final judgment (Dkt. #329; Dkt. #330). The Court also imposed an
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`ongoing royalty in favor of Imperium and ordered the parties to negotiate the ongoing royalty
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`rate and the products covered by that rate. The parties’ discussions reached an impasse. Since
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`the parties were unable to resolve the issue of ongoing royalties themselves, the Court finds it
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`proper to address the issue now.
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`On June 2, 2017, Imperium filed the present motion (Dkt. #380). On June 9, 2017,
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`Defendants filed a response (Dkt. #385). On June 14, 2017, Imperium filed a reply (Dkt. #390).
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`On June 19, 2017, Defendants filed a sur-reply (Dkt. #392).
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`LEGAL STANDARD
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`Upon a finding of infringement for a patentee, courts have jurisdiction to “grant
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`injunctions in accordance with the principles of equity to prevent the violation of any right
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`secured by patent, on such terms as the court deems reasonable.” 35 U.S.C. § 283. The Federal
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`Circuit has clarified that in some cases, where an injunction is inappropriate, a court may decide
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`to award future royalties to be paid in light of post-judgment infringement. Paice LLC v. Toyota
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`Motor Corp., 504 F.3d 1293, 1314 (Fed. Cir. 2007); see Creative Internet Advert. Corp. v.
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`Yahoo! Inc., 674 F. Supp. 2d 847, 850 (E.D. Tex. 2009). The Federal Circuit has also given the
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`district court “broad discretion” in matters concerning an ongoing royalty rate. See Telcordia
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`Techs., Inc. v. Cisco Sys., Inc., 612 F.3d 1365, 1378 (Fed. Cir. 2010).
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`ANALYSIS
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`Imperium asserts it is entitled to an ongoing royalty rate for post-judgment infringement
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`at the trebled rates the Court imposed for any products found to infringe that were no more than
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`colorable variations of infringing products. Specifically, Imperium seeks an ongoing royalty rate
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`of twelve cents per product for the ’884 Patent and six cents per product for the ’029 Patent.
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`Case 4:14-cv-00371-ALM Document 403 Filed 09/13/17 Page 3 of 8 PageID #: 21543
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`Defendants contend the appropriate ongoing royalty rate should be 1.3 cents per product
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`for the ’884 Patent and 0.3 cents per product for the ’029 Patent. Defendants reduced the
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`implied jury rate for the ’884 Patent by 67% because the relevant claims of ’884 Patent are now
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`subject to reexamination by the Patent Office and may be found invalid. Defendants also
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`reduced the implied jury rate for the ’029 Patent by 85% because the Patent Trial and Appeal
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`Board (“PTAB”) found the relevant claims of the ’029 Patent to be invalid.
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`The starting point for the Court’s calculation of an appropriate ongoing royalty rate is the
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`rate determined by the jury for pre-verdict infringement.1 Here, the jury determined a reasonable
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`royalty rate of four cents per product for the ’884 Patent and two cents per product for the ’029
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`Patent. The Court will look mainly to any change in the bargaining positions of the parties and
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`other economic circumstances occurring between the jury’s hypothetical negotiation and a
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`negotiation conducted after the verdict. ActiveVideo Networks, Inc. v. Verizon Commc’ns, Inc.,
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`694 F.3d 1312, 1343 (Fed. Cir. 2012). The burden is on Imperium to show that it is entitled to a
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`royalty rate in excess of the rate initially determined by the jury. Creative Internet, 674 F. Supp.
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`2d at 855.
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`Imperium argues two changed circumstances warrant an upward adjustment of the jury-
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`determined royalty rate. First, Imperium argues in a post-verdict hypothetical negotiation, it
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`would be in a stronger position to negotiate with Defendants than at the time of the hypothetical
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`negotiation in 2007. Imperium points to $22.8 million it has received in licensing fees for its
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`patents in 2013. Imperium states these licensing fees prove that the patented technology is more
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`of a commercial success today than it was at the time of the hypothetical negotiation in 2007.
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`1 Some courts begin the analysis of an ongoing royalty rate by turning to the factors outlined in Georgia–Pac. Corp.
`v. United States Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970). Because the parties did not discuss those
`factors in the briefing, the Court will not analyze those factors. Instead, the Court will look mainly to the purported
`changes in bargaining position and economic circumstances to guide its analysis of the proper ongoing royalty rate.
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`Defendants argue the same 2013 licenses were already accounted for in the jury’s verdict and
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`thus cannot support an upward modification of the jury-determined royalty rate.
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`The Court agrees with Imperium’s characterization of the 2013 licensing fees. In
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`deciding the royalty rate for post-trial infringement, the Court can properly consider any new
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`evidence that was not before the jury and any changed circumstances between the hypothetical
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`negotiation occurring in 2007 and a hypothetical negotiation that would occur now after the
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`judgment. Mondis Tech. Ltd. v. Chimei InnoLux Corp., 822 F. Supp. 2d 639, 647 (E.D. Tex.
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`2011), affd sub nom. Mondis Tech. Ltd. v. Innolux Corp., 530 Fed. App’x. 959 (Fed. Cir. 2013).
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`Although the jury did consider the 2013 licensing fees during trial, this does not change the fact
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`the evidence may be weighed differently in a hypothetical negotiation occurring today than one
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`in 2007. For example, the patented technology today is more of a commercial success than in
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`the 2007, which is evidenced by the $22.8 million Imperium has received in licensing fees. This
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`would increase Imperium’s bargaining position in a 2017 hypothetical negotiation. However, the
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`Court must balance Imperium’s increased bargaining position with a December 1, 2016 PTAB
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`decision that invalidated every claim the jury found Defendants had infringed in the ’029 Patent.
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`Taking all of these circumstances together, Imperium would have a stronger bargaining position
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`with respect to the ’884 Patent2 but not with the ’029 Patent.
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`Second, Imperium urges the Court to enhance damages for Defendants continued willful
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`infringement based on several of the factors set out in Read Corp. v. Portec, Inc., 970 F.2d 816,
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`827 (Fed. Cir. 1992). Imperium argues the jury’s verdict did not include damages for
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`Defendants’ willful infringement. Thus, Imperium contends enhancement for Defendants’
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`2 Despite Defendants’ arguments to the contrary, the Court does not consider the Patent Office’s reexamination of
`the ’884 Patent to be compelling evidence of a changed circumstance.
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`continued willful infringement is proper in the ongoing royalty context when using the jury’s
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`non-willfulness rate as a starting point. The Court agrees.
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`A court may, in its discretion, enhance damages up to three times when there is a finding
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`of willful infringement or bad-faith on the part of the infringing party. 35 U.S.C. § 284; Halo
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`Elecs. Inc. v. Pulse Elecs. Inc., 136 S. Ct. 1923, 1934 (2016). Here, it is undisputed that, since
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`the jury verdict, Defendants have continued to infringe the patents-in-suit. “Following a jury
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`verdict and entry of judgment of infringement and no invalidity, a defendant’s continued
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`infringement will be willful absent very unusual circumstances.” Affinity Labs of Tex., LLC v.
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`BMW N. Am., LLC, 783 F. Supp. 2d 891, 899 (E.D. Tex. 2011). The Court must determine
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`whether the implied royalty rate should be enhanced to account for Defendants’ ongoing willful
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`infringement.
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`The Read factors provide guidance in determining whether and in what amount damages
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`should be enhanced. These factors include: (1) whether the infringer deliberately copied the
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`ideas or design of another; (2) whether the infringer, when he knew of the other’s patent
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`protection, investigated the scope of the patent and formed a good-faith belief that it was invalid
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`or that it was not infringed; (3) the infringer’s behavior as a party to the litigation; (4) the
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`infringer’s size and financial condition; (5) the closeness of the case; (6) the duration of the
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`infringer’s misconduct; (7) any remedial action taken by the infringer; (8) the infringer’s
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`motivation for harm; and (9) whether the infringer attempted to conceal its misconduct. Read,
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`970 F.2d at 827. Many of these factors, however, are not well-suited for analyzing future willful
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`infringement. Mondis Tech., 822 F. Supp. 2d at 652. Therefore, the Court will consider those
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`factors it finds applicable, and the Court will also consider the egregiousness of Defendants’
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`conduct based on all of the facts and circumstances. Read, 970 F.2d at 826.
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`Case 4:14-cv-00371-ALM Document 403 Filed 09/13/17 Page 6 of 8 PageID #: 21546
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`The Court has twice applied the Read factors to this case for Defendants’ egregious
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`conduct, resulting in a trebling of the royalty rate to twelve cents per product for the ’884 Patent
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`and six cents per product for the ’029 Patent. In this matter, the Court does not find that trebling
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`the jury-determined rate to be appropriate. Imperium has not addressed any circumstances that
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`would relate to the egregiousness of Defendants’ conduct after the jury’s verdict. See, e.g.,
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`Mondis Tech., 822 F. Supp. 2d at 653 (considering InnoLux’s corporate attitude, which was
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`reflected by a statement made by its CEO’s after trial that said in part: “[t]he issue of patent
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`infringement is taken too seriously sometimes,” was strong evidence that enhancement was
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`warranted). Nevertheless, after balancing the Read factors, the Court considers Defendants’
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`continued infringement to be unreasonable, deliberate and willful in nature. As such, the Court
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`enhances the jury-determined rate by 1.5 times. Enhancing the jury-determined rate by 1.5 times
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`creates an ongoing royalty rate of six cents per product for the ’884 Patent and three cents per
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`product for the ’029 Patent. The Court’s decision to enhance the ongoing royalty rate in this
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`manner is consistent with other courts in this district. See Mondis, 822 F. Supp. 2d at 653
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`(enhancing the ongoing royalty rate by two times); Internet Machs. LLC v. Alienware Corp., No.
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`6:10-CV-23, 2013 WL 4056282, at *21 (E.D. Tex. June 19, 2013) (enhancing the ongoing
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`royalty rate by1.5 times); Affinity Labs, 783 F. Supp. 2d at 905 (enhancing the ongoing royalty
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`rate by 1.33 times).
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`The Court next decides what products are covered by the ongoing royalty rate. The
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`burden remains with the patentee to demonstrate the newly accused product is not more than
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`colorably different from the product found to infringe and that the newly accused product
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`actually infringes. TiVo Inc. v. Echostar Corp., 646 F.3d 869, 882 (Fed. Cir. 2011). This can be
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`Case 4:14-cv-00371-ALM Document 403 Filed 09/13/17 Page 7 of 8 PageID #: 21547
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`achieved by making a comparison between the original product, the modified product, and the
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`claims. Id.
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`Imperium requests the ongoing royalty apply to Defendants’ products made, used,
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`offered for sale, or sold in the United States, including (1) any phone, laptop, or tablet with
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`flicker reduction functionality for the ’884 Patent; and (2) any phone or camera with camera
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`flash functionality for the ’029 Patent. Imperium argues Defendants update models of phones
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`and tablets throughout the year, and these updated models are no more than colorable variations
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`of infringing adjudicated products.
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`The Court finds Imperium has not met its burden of demonstrating it is entitled to an
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`ongoing royalty for additional, unadjudicated products. Imperium has not shown how additional,
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`unadjudicated products are no more than colorable variations of products already litigated in this
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`case. Besides a chart that identifies a number of Defendants’ products that are “reasonabl[y]
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`similar to” adjudicated products, Imperium provides no explanation how each of these products
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`contain potentially infringing features of the either the ’884 or ’029 Patents (Dkt. #380, Exhibit
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`3). Because Imperium has not met its burden, the Court cannot award an ongoing royalty for
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`unadjudicated products that may be no more than colorably different from products found to
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`infringe. Accordingly, Imperium is entitled to an ongoing royalty only for all adjudicated
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`products.
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`CONCLUSION
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`It is therefore ORDERED that Imperium IP Holdings (Cayman) Ltd.’s Motion on the
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`Appropriate Ongoing Royalty (Dkt. #380) is GRANTED IN PART and DENIED IN PART.
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`The Court awards to Imperium an ongoing royalty of six cents per adjudicated product for the
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`’884 Patent and three cents per adjudicated product for the ’029 Patent.
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