Friday, November 22, 2019

Federal Circuit Vacates $503 Million Damages Award

This morning the Federal Circuit handed down its opinion in VirnetX Inc. v. Apple Inc. (opinion by Judge Taranto, joined by Judges Lourie and Mayer).  The court affirms that Apple is precluded from challenging the validity of the four patents in suit, and affirms a finding of infringement as to two of them, but reverses as to the other two.  In light of the partial reversal, the court vacates the damages award--"a reasonable royalty . . . equal to a rate of $1.20 for each device whose sale by Apple infringed" (p.2)--and remands for a possible new trial.  From the opinion (pp. 29-30):
The jury’s verdict provided that VirnetX was entitled to a damages award of $502,567,709.00 but did not indicate which portions of the award were allocated to which patents. We have affirmed the judgment of infringement by VPN on Demand but reversed the judgment of infringement by FaceTime. Those rulings raise the question of whether a new trial must or should be held because of the reduced basis of liability. We see no difficulty with limiting any such trial to damages, but there is a question whether a limited retrial need or should be held at all.
We will not decide that question. We have said that “where the jury rendered a single verdict on damages, without breaking down the damages attributable to each patent, the normal rule would require a new trial as to damages.” . . . We have not received full briefing on the issue of whether, despite the normal rule, this is a case in which a new trial on damages is unnecessary.
It appears to be undisputed that the jury used a per-unit royalty of $1.20 and adopted the calculation of VirnetX’s expert to reach its damages figure—$1.20 per unit, with over 384 million units having both FaceTime and VPN on Demand and over 34 million units having only FaceTime. . . . It appears, therefore, that the jury found that FaceTime by itself was worth $1.20 per unit. But because the jury found infringement by FaceTime as well as VPN on Demand, and Facetime was installed on all units, the jury did not have to decide whether the $1.20-per-unit figure would be correct if only VPN on Demand infringed. VirnetX’s expert did assert that the same figure would apply, J.A. 1854–55 (explaining calculation based on licensing), but the jury did not have to decide that issue. Apple’s expert, for his part, asserted that VPN on Demand was vastly more valuable than FaceTime, J.A. 2569–73 (testifying that VPN on Demand was worth about 6 cents per unit, FaceTime about 1 cent per unit), but neither Apple nor VirnetX has suggested to us that the jury accepted that testimony.
We do not go further in exploring the law, the facts, and any admissions that might be relevant to an inquiry into the need for a new damages trial. We remand for further proceedings in the district court. We leave it to the parties and the district court to consider in the first instance relevant aspects of whether to hold a limited damages-only re-trial given the reduced basis of liability, including what discretion there might be to hold such a retrial without conclusively determining whether one is needed, especially if doubt remains as to the application of the above-quoted standards to this case. We do not prejudge these issues.

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