Monday, April 9, 2018

The Other TCL v. Ericsson Case

Or I suppose I should say, Ericsson v. TCL.  Hat tip to Christine Yun Sauer for forwarding this opinion to me, from Magistrate Judge Roy Payne of the Eastern District of Texas, ordering a new trial on damages, in a case that (in contrast to the TCL v. Ericsson FRAND case) involved the alleged infringement of a single Ericsson non-SEP, and resulted in a jury award of $75 million.  The judge concludes, among other things, that a survey used by Ericsson's witness to show that 28% of TCL customers wouldn't have bought a phone without the infringing feature doesn't lead to the conclusion that 28% of TCL's profit is attributable to that feature.  The judge's reasoning seems correct to me:
It is not difficult to see how this lost profit number quickly becomes unrealistic. Subtracting just three features covered by a mere three implementation patents would have allegedly cut TCL’s profit by more than half. The evidence from both sides suggested that there were at least a thousand implementation patents that might cover a TCL phone. See Trial. Tr. 8:22-9:4, Dkt. No. 404; Trial Tr. 90:3-95:17. Regardless of the number, there is no dispute that a phone with an Android-operating system has many patented features, and that, according to Dr. Wecker’s survey results, consumers would likely find numerous features essential. See, e.g., Trial Tr. 90:3-95:17. According to Mr. Mills, any one of these allegedly essential features could independently be worth more than a quarter of TCL’s profit on the phone. See id. By removing even three additional features covered by an implementation patent, on top of the features allegedly covered by the ’510, ’931, and ’310 patents, TCL would have lost all its profit (conservatively), according to Mr. Mills’ theory.
Mr. Mills’ conclusion is unreliable for at least two reasons. First, Mr. Mills did not consider the numerous patented features on the accused phones, many of which a consumer would consider essential, assuming Dr. Wecker’s survey results were extrapolated. Second, Mr. Mills did not account for how his theory would result in the erosion of all of TCL’s profit. Realistically, there are many features on a phone that would likely yield survey results similar to those obtained for the ’510 patent, e.g., ability to make a call, text messaging, Wi-Fi connection. See Trial Tr. 90:3-9-98:17, Dkt. No. 398. To conclude that any one of these features—simply because it is considered essential to a consumer—could account for as much as a quarter of TCL’s total profit is unreliable and does not consider the facts of the case, particularly the nature of smartphones and the number of patents that cover smartphone features (pp. 10-11).
On a different issue--one that not enough people write about, given how much money can sometimes be at stake--the judge also announces that in the district, standard practice is to award prejudgment interest at the prime rate, compounded quarterly (p.16).

Finally, I'd like to pass along this article by Ms. Yun Sauer and two other Robins Kaplan attorneys, Aaron Fahrenkrog and Danielle Rosenthal, titled A Back-To-Basics Approach to Patent Damages Law, which I think makes some valid critiques about the Federal Circuit's insistence (in some cases, at any rate) on apportioning the royalty base.

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