Recently, the U.S. Court of Appeals for the Federal Circuit issued an opinion in Apple Inc. v. Wi-LAN Inc., Nos. 2020-2011, -2094 (Feb. 4, 2022), inter alia vacating the Southern District of California’s denial of a third trial on damages and remanding the case for further proceedings.
The dispute centered on Apple’s alleged infringement of two patents owned by Wi-LAN. A jury found Apple infringed both patents and awarded Wi-LAN $145.1 million in damages based on the testimony of Wi-LAN’s damages expert, who applied a hypothetical-negotiation framework to compute a royalty of $0.85 per infringing phone. Apple moved for a new trial on damages, which the district court granted, finding that Wi-LAN’s damages expert relied on faulty factual testimony.
During the second damages trial, Wi-LAN’s expert relied on three allegedly comparable licenses to support a royalty of $0.45 per phone. The jury adopted this figure and awarded Wi-LAN $85.23 million. Apple again moved for a new trial on damages, arguing that the expert failed to properly apportion the allegedly comparable licenses to reflect the value of the infringed patents. The district court denied Apple’s motion. Apple appealed.
On appeal, the Federal Circuit concluded denial of the new trial motion was an abuse of discretion. Specifically, the Court agreed that Wi-LAN’s damages expert failed to properly apportion the royalty in the allegedly comparable licenses. Each of the comparable licenses included hundreds of patents. Despite this, the expert found that the patents infringed by Apple were “key” patents to the licenses and reduced the royalty from the licenses by only 25% in reaching his per-phone royalty calculation. The Court found the assertion that the infringed patents were key to the licenses was untethered from the facts. One of the infringed patents was not listed on two of the licenses at all and was listed in the third license only as one of hundreds of similarly situated patents. The other infringed patent was not included in one of the comparable licenses, included in a long list of patents in the second license, and treated as one of five “asserted patents” in the third license. In view of this, the expert’s decision to reduce the royalty rate prescribed by these patents by only 25% was not based on valid methodology and should have been excluded. The Court, therefore, vacated the district court’s denial of a new damages trial and remanded for further proceedings.