Frequency of Use Relevant to Value of Infringing Feature: Federal Circuit | Practical Law

Frequency of Use Relevant to Value of Infringing Feature: Federal Circuit | Practical Law

In Summit 6, LLC v. Samsung Electronics Co., the US Court of Appeals for the Federal Circuit affirmed the district court's rulings that the patent owner's expert can use an apportionment methodology to calculate reasonable royalty damages and that the jury's lump sum damages award could compensate the patent owner for infringement through the life of the patent.

Frequency of Use Relevant to Value of Infringing Feature: Federal Circuit

Practical Law Legal Update 1-618-9108 (Approx. 4 pages)

Frequency of Use Relevant to Value of Infringing Feature: Federal Circuit

by Practical Law Intellectual Property & Technology
Published on 22 Sep 2015 • USA (National/Federal)
In Summit 6, LLC v. Samsung Electronics Co., the US Court of Appeals for the Federal Circuit affirmed the district court's rulings that the patent owner's expert can use an apportionment methodology to calculate reasonable royalty damages and that the jury's lump sum damages award could compensate the patent owner for infringement through the life of the patent.
On September 21, 2015, in Summit 6, LLC v. Samsung Electronics Co., the US Court of Appeals for the Federal Circuit affirmed a decision from the US District Court for the Northern District of Texas, rejecting the accused infringer's challenges to the patent owner's reasonable royalty analysis and the resulting damages award (Nos. 2013-1648, -1651, (Fed. Cir. 2015)). The Federal Circuit held that:
  • The district court did not abuse its discretion in allowing the apportionment methodology used by Summit 6, LLC's damages expert to calculate a reasonable royalty.
  • The jury's lump sum award compensated the patent owner for both past and future infringement through the life of the asserted patent.
This case involves Summit's US Patent No. 7,765,482 (the '482 patent), which relates to the processing of digital content such as digital photos. In February 2011, Summit brought a lawsuit against Samsung Electronics Co., alleging that the process of sending photographs via the multimedia message service used in Samsung's smartphones and tablets infringes the '482 patent. At trial, the jury found that the five asserted claims of the '482 patent were not invalid and infringed.
At trial, Summit's damages expert testified concerning how he estimated a reasonable royalty, explaining that:
  • Carriers pay Samsung $14.15 to include a camera component in the accused phones.
  • Surveys commissioned by Samsung indicate that 20.8% of Samsung's customers use the camera for the infringing features rather than for non-infringing features.
  • $2.93 of Samsung's revenue (20.8% of $14.15) was due to the infringing features.
  • Using Samsung's annual reports and estimated profit margins, $0.56 of the $2.93 revenue was profit attributable to the infringement.
  • The parties would evenly split the $0.56 profit because:
    • Samsung had no non-infringing alternatives; and
    • neither party had a stronger negotiating position.
At the conclusion of the trial, the jury awarded Summit $15 million in damages, indicating that it was a lump sum award. Subsequently, the parties filed post-trial motions and the district court denied all but one, granting Samsung judgment as a matter of law of no direct infringement.
On appeal:
  • Samsung challenged the qualifications and methodology of Summit's damages expert, arguing, among other things, that the expert incorrectly assumed that the accused feature's use is proportional to its value.
  • Summit argued that the jury award could not be a lump sum through the life of the patent because all the relevant evidence, arguments, jury instructions and verdict form were limited to damages for past infringement. Summit further argued that it was entitled to recover an ongoing royalty for future infringement.
The Federal Circuit affirmed the district court's decisions on all damages issues, stating that:
  • Summit's damages' expert's methodology was sound because:
  • The apportionment methodology of Summit's damages expert and the comparable license agreement introduced into evidence sufficiently support the jury's damages award.
  • The jury award compensated Summit for both past and future infringement through the life of the patent and a lump sum award was appropriate because:
    • the license agreements introduced into evidence were lump-sum licenses;
    • Summit's damages expert admitted that a lump-sum award would compensate Summit through the life of the patent; and
    • the jury made its intentions clear by indicating on its verdict form that the award was a lump sum.
The Federal Circuit also affirmed the district court's holdings on claim construction, infringement, invalidity and expert testimony.