In an opinion handed down yesterday, Summit 6, LLC v. Samsung Electronics Co. (available here) the Federal Circuit affirmed a $15 million judgment against Samsung in a case involving a patent on a "web-based media submission tool" that allegedly is infringed by users of Samsung smartphones. The opinion is by Judge Reyna.
After affirming the district court's claim construction and the jury's determinations on infringement and validity, the court focuses on the admissibility of the plaintiff's expert's testimony:
To estimate a reasonable royalty rate in this case, Mr. Benoit started by estimating that the carriers pay Samsung $14.15 to include a camera component in Samsung’s phones. J.A. 6372. To arrive at this estimate, Mr. Benoit used Samsung’s annual reports, internal cost and revenue spreadsheets, and interrogatory responses to determine that the camera component accounted for 6.2% of the phone’s overall production cost. J.A. 6374. Accordingly, he attributed 6.2% of Samsung’s revenue from selling each phone—i.e., $14.15—to the camera’s functionality. J.A. 6374.
To apportion the camera-related revenue further, Mr. Benoit estimated the percentage of camera users who used the camera to perform the infringing methods rather than for other purposes. To do this, he relied on surveys commissioned by Samsung in the ordinary course of its business and on another survey he found on his own. J.A. 6374-75. The surveys were conducted by J.D. Power and Associates, Pugh Research, Forrester, and ComScore. J.A. 6375. Using the surveys, Mr. Benoit estimated that at least 65.3% of camera users used the camera regularly to capture only photos rather than video. J.A. 6377-79. He calculated that at least 77.3% of those users who captured only photos shared the photos, and that at least 41.2% of those users who shared the photos did so by MMS rather than by email or web storage. J.A. 6379-84. Lastly, Mr. Benoit observed that 100% of those photos shared by MMS were resized. J.A. 6384. Multiplying these percentages together, Mr. Benoit thus estimated that at least 20.8% of camera users utilized the camera for the infringing features rather than for other camera related features.
Based on these usage statistics, Mr. Benoit concluded that 20.8% of Samsung’s $14.15 revenue for including the camera component in each phone—i.e., $2.93—was due to the infringing features. J.A. 6386. Using Samsung’s annual reports to estimate its profit margins and capital asset contributions, Mr. Benoit concluded that $0.56 of the $2.93 revenue was profit attributable to the infringement. J.A. 6386-89.
Mr. Benoit testified that to determine a reasonable royalty at a hypothetical negotiation, the parties would focus on allocating the $0.56 benefit Samsung gained by utilizing the patented features. Mr. Benoit testified that the negotiation would concern the entire $0.56 benefit because Samsung had no non-infringing alternatives, and the entire benefit was therefore incremental profit from using the patent. J.A. 6390. Mr. Benoit testified that because neither party had a stronger negotiating position, the parties would have split the $0.56 evenly to derive a reasonable royalty of $0.28 per device. J.A. 6389-91, 6395. Mr. Benoit cited three academic articles and the Nash Bargaining Solution to support his theory of an even split./3 Based on the per-device royalty and on the number of infringing devices sold by Samsung, Mr. Benoit estimated that a hypothetical negotiation would have resulted in a reasonable royalty of $29 million. J.A. 6398. . . .
In this case, Mr. Benoit’s damages methodology was based on reliable principles and was sufficiently tied to the facts of the case. Mr. Benoit first estimated Samsung’s economic benefit from infringement by specifically focusing on the infringing features and by valuing those infringing features based on Samsung’s own data regarding use and on its own financial reports outlining production costs and profits. Mr. Benoit then envisioned a hypothetical negotiation in which the parties would have bargained for respective shares of the economic benefit, given their respective bargaining positions and alternatives to a negotiated agreement. Mr. Benoit’s methodology was structurally sound and tied to the facts of the case.
That Mr. Benoit’s methodology was not peer-reviewed or published does not necessitate its exclusion. . . .
Samsung argues that Mr. Benoit’s “premise . . . that a feature’s use is proportional to its value” was incorrect and contradicted by expert testimony. Defendant-Appellant’s Opening Br. at 6. But as we noted in Lucent, “an invention used more frequently is generally more valuable than a comparable invention used infrequently” and “frequency of expected use and predicted value are related.” 580 F.3d at 1333. There is no dispute that use of the claimed invention is relevant under Georgia-Pacific: Georgia-Pacific factor 11 looks at use of the invention and at evidence probative of the value of that use. . . .
To the extent Mr. Benoit’s credibility, data, or factual assumptions have flaws, these flaws go to the weight of the evidence, not to its admissibility. . . .
/3 On appeal, Samsung does not challenge Mr. Benoit’s use of Nash Bargaining.
Maybe I'm misunderstanding something here, but the court's characterization of $0.56 as the "benefit Samsung gained by utilizing the patented features" strikes me as a bit odd, because (at least the way the court discusses this matter) it sounds as if the expert simply said "Here's the profit attributable to this feature," without any consideration of possible noninfringing alternatives. From an economic perspective, the benefit must be judged in light of those alternatives, and only the incremental benefit is properly considered value derived from the use of the patented technology. But maybe the record discloses that there was no reasonable alternative, or there is some other reasonable explanation, so let's move on.
Next, the court considers whether it was error to consider two licenses the plaintiffs had entered into with Facebook and RIM, in settlement of litigation, as comparables. The court agrees that the Facebook license (the features of which the court does not discuss) was not comparable, but notes that Samsung did not argue for the inadmissibility of the RIM license, and finds (again without detailed discussion) that the license was relevant.
Finally, the court addresses Summit's cross-appeal that the jury-awarded reasonable royalty should not have been considered compensation for both past and future infringement:
. . . Summit also argues that its equitable claim for future damages is not an issue for the jury. Thus, Summit concludes that it is entitled to recover damages for future infringement. We disagree. This court has not directly addressed whether a jury can award lump-sum damages through the life of the patent. We have, however, permitted such relief. . . .
In this case, the district court properly denied Summit’s request for an ongoing royalty because the jury award compensated Summit for both past and future infringement through the life of the patent. Samsung’s expert, Mr. Martinez, testified that a lump-sum award was appropriate. J.A. 7089-90. He also testified regarding the weight the jury should give the license agreements introduced into evidence, all of which were lump-sum licenses. Moreover, Summit’s expert, Mr. Benoit, admitted that a lump-sum award would compensate Summit through the life of the patent. J.A. 6452, 6479-80. When the jury returned its verdict, it indicated on the verdict form that the award was a lump sum by writing “lump sum” on the verdict form. We see no basis to disturb the district court’s determination and hold that the district court did not abuse its discretion in denying Summit’s request for an ongoing royalty.
The issue of whether an ongoing royalty is equitable or legal relief nevertheless is a tricky one, in my view--see, e.g., my comment on Judge Moore's comment on this issue in the Apple v. Samsung oral argument earlier this year--though the court may be right that if the jury viewed the award as compensation for past and future infringement, there should be no problem.