This morning the Federal Circuit published a modified nonprecedential opinion in Sprint Communications Co. v. Time Warner Cable, Inc., replacing the original panel opinion issued in November 2018. (I blogged about the original opinion, affirming a $140 million judgment in favor of Sprint, here.) The modifications seem slight, the only material differences being that the Federal Circuit added an additional cite to Ericsson v. D-Link, and a few additional sentences discussing Sprint's expert witness's testimony. I highlight these passages below:
Time Warner argues that Sprint’s damages case was flawed because Sprint did not apportion the damages award to the incremental value that the patented invention added to the end product. See Ericsson, Inc. v. D-Link Sys., Inc., 773 F.3d 1201, 1226 (Fed. Cir. 2014). That argument, however, ignores that the objective of apportionment can be achieved in different ways, one of which is through the jury’s determination of an appropriate royalty by applying the so-called Georgia-Pacific factors, under proper instructions embodying apportionment principles. See Exmark Mfg. Co. v. Briggs & Stratton Power Grp., LLC, 879 F.3d 1332, 1349 (Fed. Cir. 2018) (“[T]he standard Geor-gia-Pacific reasonable royalty analysis takes account of the importance of the inventive contribution in determining the royalty rate that would have emerged from the hypothetical negotiation.” (quoting AstraZeneca AB v. Apotex Corp., 782 F.3d 1324, 1338 (Fed. Cir. 2015))); Ericsson, 773 F.3d at 1228 n.5 (“While factors 9 and 13 of the Georgia-Pacific factors allude to apportionment concepts, we believe a separate instruction culled from Garretson [v. Clark, 111 U.S. 120 (1884)] would be preferable in future cases.”).
Such an analysis often considers rates from comparable licenses, and we have explained that “otherwise comparable licenses are not inadmissible solely because they express the royalty rate as a percentage of total revenues, rather than in terms of the smallest salable unit.” Commonwealth Sci. & Indus. Research Org. v. Cisco Sys., Inc., 809 F.3d 1295, 1303 (Fed. Cir. 2015). The fact that two other licenses were granted for the same technology, together with the Vonage verdict—all of which were for the same royalty rate as the rate utilized in the Vonage case to yield the $1.37 per VoIP subscriber per month damages assessment—provides strong support for Sprint’s argument that the damages award in this case reflected the incremental value of the inventions and thus satisfied the requirement of apportionment. See Ericsson, 773 F.3d at 1227–28 (damages testimony regarding real-world rele-vant licenses “takes into account the very types of appor-tionment principles contemplated in Garretson.”).
Contrary to Time Warner’s contention, the jury’s damages award was based on the value of what was taken from Sprint, not the value of unpatented features of Time Warner’s VoIP system. Sprint’s damages expert addressed apportionment at some length during his testimony, explaining that his damages calculations were designed to determine “the incremental profits that are attributable to the patents in suit.” And the jury was specifically instructed on apportionment. The court directed that the reasonable royalty “must be based on the incremental value that the patented invention adds to the end product. When the infringing products have both patented and unpatented features, measuring this value requires a determination of the value added by the patented features.” Time Warner did not propose alternative instructions on damages, so the issue is simply whether the evidence was sufficient to support the jury’s award. In light of the Vonage verdict and the other two licenses, as well as testimony from Sprint’s expert as to the cost to Sprint and the benefit to Time Warner from Time Warner’s decision to operate the VoIP system itself rather than contracting that work out to Sprint, the jury had an adequate basis from which to find that damages should be awarded in the amount of $1.37 per VoIP subscriber per month.
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