Synqor, Inc. v. Delta Elec., Inc., Nos. 2011-1191, 1192, 1194; 2012-1070, 1072, (Fed. Cir. March 13, 2013).
Some days, nothing goes right. In Synqor, defendants had one of those days when the Federal Circuit apparently resuscitated lost-profit damages based on price erosion. Relying on authority more than a decade old, the court affirmed damages based on profits that would not have been lost “but for” price erosion caused by infringement. The Federal Circuit also agreed evidence of non-infringing alternatives was late and properly excluded, allowing the plaintiff to skirt the EMVR by putting in evidence of total sales, but not arguing that damages should be based on that amount. Finally, the court affirmed an award of supplemental damages for post-verdict infringement.
After a trial in the U.S. District Court for the Eastern District of Texas, the jury found all asserted claims infringed, not invalid, and awarded lost-profit damages of more than $95 million. Id. at 3. The district court also awarded enhanced damages for post-trial infringement, and an appeal followed. Id. at 3-4. The Federal Circuit affirmed the lower court’s decisions regarding damages. Id. at 31.
At trial, plaintiff’s damages expert put forth a damages model that included lost-profit and reasonable royalty components. Id. at 20. Awards for both components were based on the price plaintiff would have been able to charge “but for” price erosion caused by the infringement. Id. On appeal, defendants challenged the damages award, arguing:
- The evidence did not support plaintiff’s price erosion theory and royalty rates.
- The court erred in its jury instructions and exclusion of evidence relating to non-infringing alternatives.
- Plaintiff improperly introduced evidence of the EMVR of accused products containing patented technology. Id.
- Defendants also challenged the award of supplemental damages based on post-injunction sales. Id. at 25-26.
Considering the price erosion theory, the Federal Circuit:
- Recited the rules that (1) a patentee seeking price erosion must prove it would have sold its products at a higher price “but for” the infringement, (2) a credible analysis takes into account the effect of a higher price on demand, and (3) the analysis must consider the effect of acceptable non-infringing alternatives on the market as a whole. Id. at 20-21.
- After reviewing the evidence, the court concluded there was evidence to support the plaintiff’s “but for” price erosion theory. Id. at 22.
Considering issues regarding exclusion of evidence relating to non-infringing alternatives, the Federal Circuit found no abuse of discretion, concluding:
- The evidence was reasonably excluded under Rule 37, Fed. R. Civ. P. because it was produced too late. Id. at 22-23.
- The evidence demonstrated the non-infringing alternatives were not “available.” Id. at 23-24.
- The jury instruction was not erroneous in the context of the trial. Id. at 24.
Reviewing the EMVR issues, the Federal Circuit:
- Acknowledged defendant’s argument that plaintiff’s “revelation” of $20 Billion in customer end product sales might “skew” the damages horizon for the jury. Id. at 25. (See Uniloc).
- Held there was no error in admitting the evidence, since (1) plaintiff had not sought to justify damages based on the price of end products, but (2) only used those numbers to argue price elasticity of demand for the infringing technology would be high because they enable space savings and efficiency at a small fraction of the end price. Id.
Reviewing supplemental damages, the Federal Circuit:
- Declined defendant’s request to have a separate trial on supplemental damages. Id. at 26. (See Amado v. Microsoft).
- Determined post-verdict agreements led to defendants inducing infringement. Id. at 27-28.
- Affirmed the award of enhanced damages under 35 U.S.C. §284 for post-verdict conduct, even though such damages were not a subject of the trial. Id. at 28-29.