If You Don't Ask, You Don't Get

Submitted by patentadmin on Wed, 04/06/2011 - 12:08

We have repeatedly preached against the sin of greed. Well, we now have a case where the plaintiff clearly did not demand enough. (Affinity Labs of Texas, LLC v. BMW North America, LLC et al.)

Affinity is a small – two person – firm which owns two patents directed to “a system and method for connecting and integrating a portable electronic device, such as an MP3 player, with a second electronic device such as a car’s sound system.” It does not practice the patented inventions.

Affinity sued a number of auto manufacturers for infringement of these patents. At trial, a jury found the patents valid and infringed by Hyundai and its affiliate Kia, two of the defendants in the lawsuit, and awarded damages totaling $2,836,537. This worked out to about $11.00 per infringing automobile.

Given its status as an non-practicing entity (N.P.E.), Affinity didn’t even bother to ask for a permanent injunction barring future infringements, instead focusing its efforts on securing an enhanced royalty for the infringements yet to come.

Hyundai and Kia clearly needed, at least for some time, to continue infringing. Affinity had no source of income other than patent royalties. Obviously a license was in the best interest of both parties. However, despite the urging of the Court, they were unable to reach an agreement as to a post-judgment royalty rate. This put the issue into the hands of the judge, who began with the pre-judgment rate set by the jury.

The defendants asserted that a 25% increase over the pre-judgment rate would be “reasonable and appropriate.” Pointing out that the two patents-in-suit were being re-examined by the Patent Office, and that all of the asserted claims stood rejected, they argued that any future infringement should not be considered “willful” (read “subject to an increased royalty rate”). They further noted that the evidence at trial had established that they had obtained and relied upon an opinion of counsel that both of the said patents were invalid and not infringed.

Not relevant ruled the judge. “Unless and until the jury’s verdict is nullified by a reversal of this court’s judgment on appeal, or the reexamination rejections have become final, the [defendants] are adjudged infringers” and while the opinion of counsel “would be relevant to the [defendants’] culpability with respect to pre-verdict infringement, it carries little to no weight with respect to ongoing post-judgment infringement now that a jury has found the [defendants] do infringe and has failed to find that any of the asserted claims are invalid.”

Affinity, on its part, noted that “other courts in this district have commonly awarded post-trial premiums in the range of 33% to 50% of the royalty rate for past damages found by the jury …” and asserted that a 33% increase would be “appropriate.”

The Court awarded an increase of 33%. “Not being inclined to award more than requested,” the Court found this to be “reasonable.” The post-judgment royalty rate was set at $14.50 per unit.

THE LESSON TO BE LEARNED: Greed is bad, but excessive moderation isn’t good either.

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