Yesterday a jury returned a verdict finding that Apple does not infringe Golden Bridge’s patent alleged to be essential to the WCDMA standard. The verdict thus did not reach the royalty-rate issue that was interesting for a few reasons.
Excluded FRAND Expert Testimony. As discussed in our May 30, 2014 post, Magistrate Judge Grewal had excluded patent owner Golden Bridge’s damages expert testimony because it represented a flawed methodology for computing a fair, reasonable and non-discriminatory (FRAND) royalty rate. He gave Golden Bridge a week to submit a revised damages report. But during trial he excluded that revised testimony as well.
The damages expert had abandoned his first entire market value theory and tried to focus on Apple’s license agreements with Ericsson and Nokia to support a per-unit royalty of $0.0869. But Judge Grewal found this new theory was flawed as well, because the damages expert improperly “allocated the entire value of Apple’s portfolio licenses with Ericsson and Nokia to a tiny subset of a subset of a subset of a subset of the patents and standards in those portfolios.” The licenses considered cover “all standard essential patents” to include technologies beyond WCDMA, such as Wi-Fi, GSM and LTE. But the expert attributed no value to patents covering other standards and he did not address — as the patentee’s attorney tried to explained later — that WCDMA was the focus of the alleged comparable licenses because that’s what the Apple products practiced at the time. The expert’s testimony was thus excluded for not accounting for differences between the alleged comparable licensed technology and the patents-in-suit:
Under established Federal Circuit law, an expert may not rely on broad licenses that cover technologies far beyond the patents-in-suit without accounting for the differences in his calculations. That is precisely what [the patent owner's damages expert] did not do here, resulting in a fundamentally unsound calculation. That the entire dollar value of the Apple-Ericsson and Apple-Nokia agreements stemmed entirely from the actually-essential (not just declared essential) WCDMA patents (not those related to other active standards) relating to terminal devices is an implausible assumption to begin with, and [the expert] does not even attempt to justify this assumption.
Jury Instructions. Another interesting aspect of this case is that one may miss that this is a standard essential patent case when simply reading the Final Jury Instructions. The damages instructions (Instruction Nos. 17-21) read like a typical instruction for determining a Georgia-Pacificreasonable royalty without any modification (such as the modified Georgia-Pacific analysis applied to determine a RAND-rate by Judge Robart in Microsoft v. Motorola or by Judge Holderman in Innovatio, or the RAND-specific instructions given by Judge Whyte in Realtek v. LSI). The only hint of a standard-setting issue in the jury instructions is found in one phrase of the last sentence of Instruction No. 20 “Damages–Noninfringing Alternatives”:
You may also consider the impact of any available noninfringing alternatives to the asserted claim on the royalty negotiated in the hypothetical negotiation. In doing so, you may consider the value of any differences in benefits and costs between the noninfringing alternatives and the asserted claim. You may also consider any alternatives that were available to a standard-setting body or to a third-party component supplier, whether the alternatives are marketed or not. [emphasis added]
Thus, the jury instructions basically left it to the parties to argue any standard-setting obligation’s impact on the reasonable royalty analysis.