Case Cite

Fractus, S.A. v. Samsung Elec. Co., LTD, Nos. 6:09-CV-203; 6:12-CV-421, 2013 WL 1136964 (E.D. Tex. March 15, 2013).  

IPDQ Commentary

Fractus teaches that, even though a plaintiff may not be entitled to an injunction, a willful infringer should expect to pay more than the reasonable royalty awarded by the jury.  The Read factors will inform the trial court’s analysis of an appropriate ongoing royalty.  

Case Summary

A jury decided Defendant willfully infringed the patents in suit, awarding more than $23 million in damages.  Id. at *1.   The implied royalty rate was $.355 per phone, and the court enhanced the jury’s verdict by 1.65x based on the willfulness finding.  Id. at *2.

The court denied Plaintiff’s request for a permanent injunction, but gave the parties an opportunity to negotiate a license before settling on an ongoing royalty rate.  Id. When the parties were unable to agree, Plaintiff asked the court to set an ongoing royalty rate.

Relying on Paice LLC v. Toyota Motor Corp., 504 F.3d 1293, 1314 (Fed. Cir. 2007), the district court set about establishing the ongoing royalty rate in lieu of an injunction.  Id. at *1.

The court reviewed case law providing that, when evaluating an ongoing royalty, courts must consider changes in the legal relationship of the parties to avoid incentivizing defendants to fight to the bitter end.  Id. at *1 citing Paice LLC,  504 F.3d at 628.  Thus, an ongoing post-verdict royalty may be higher than a pre-verdict reasonable royalty.  Id. at *1.

Plaintiff argued increased sales prices and profits from Defendant’s accused products and the Read factors (relating to willfulness) warranted a rate higher than the implied rate found by the jury.  Id. at *2.  Defendant disagreed, arguing no change in the market after the Final Judgment.  Id.  Finding that the changed market conditions advanced by Plaintiff related only to unadjudicated phones, the court rejected that argument, without prejudice to Plaintiff filing a separate action on those phones.  Id.

The court next considered the Read factors.  Plaintiff argued Defendant continued to infringe, while Defendant argued  it had discontinued the adjudicated models and remained convinced of its view that the patent was invalid.  Id.  Concluding the jury’s verdict had not been reversed, and in light of the willfulness finding, the court awarded $.60 on all adjudicated models.