During a jury trial, Ericsson asserted that TCL infringed claims 1 and 5 of U.S. Patent No. 7,149,510 (the “‘510 Patent”) by selling phones and devices that included the Google Android operating system. The jury found that TCL infringed claims 1 and 5, that TCL’s infringement was willful, and awarded $75 million as a lump sum royalty. TCL moved for a new trial on infringement and damages. The district court decided the motion for new trial on damages should be granted for the reasons explained below.

The damage theory Ericsson presented at trial was based on the opinions of Dr. William Wecker and Mr. Robert Mills. Dr. Wecker provided analysis of a consumer survey that, according to Ericsson, approximated the apportioned value of the patented invention. Mr. Mills in turn used Dr. Wecker’s survey results to estimate a per phone royalty rate the parties would have agreed to at the hypothetical negotiation. Dr. Wecker’s survey was designed to determine how many consumers that had purchased an Android-based smartphone during the relevant time would have decided against purchasing the phone if the phone lacked the accused security and permissions feature, i.e.: the ability to control whether third-party applications can access native functionality on the phone. Mr. Mills used Dr. Wecker’s survey results to determine a per phone royalty rate. According to Mr. Mills, Dr. Wecker’s survey results indicated that about 28% of consumers who purchased accused TCL phones would not have made those purchases if the phone lacked the allegedly infringing feature.

The district court concluded that there were at least two independent reasons why a new trial on damages was necessary. “The first and most important is that the manner in which Mr. Mills used Dr. Wecker’s survey results is not based on sufficient facts or data, not the product of reliable principles, and not reliably based on the facts of the case. See Fed. R. Evid. 702; Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579(1993). Namely, Mr. Mills directly translated the roughly 28% of survey respondents who allegedly would not have bought a TCL phone without the infringing feature to TCL’s profit in an effort to determine the potential “at-risk” profit. This step in Mr. Mills’ analysis was unreliable.”

The district court further explained that “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 [and that] 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. 90:39-98:17, 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.”

The second reason that the district court concluded a new trial on damages was necessary is “because Ericsson presented extensive evidence at trial regarding products that were not accused in the case. Mr. Mills’ damages opinion, particularly his projected 111.2 million allegedly infringing devices that would be sold in the future, included products that have never been sold nor even named as accused products in the case. . . . As Mr. Mills himself testified, some products included in his opinion “don’t exist” and are “not named as accused products, but – but they’re part of the forecast.”

The district court further explained that “[t]he obvious problem with such an opinion is that it would allow a jury to award damages for devices that the jury did not find to be infringing.”

Accordingly, the district court granted the motion for a new trial on the issue of damages.

Ericsson Inc. v. TCL Communication Technology Holdings, LTD., Case No. 2:15-cv-00011-RSP (E.D. Tex. March 2018)