EDTX & NDTX Monthly Wrap-Up — April 2018

This post is our latest review of noteworthy case developments in the Eastern and Northern Districts of Texas for the month of April 2018. Two subjects stand out this month from the Eastern District: (1) testimony of damages experts and (2) awards of attorneys' fees.

Damages

Salazar v. HTC Corp., 2:16-cv-1096 (Apr. 13, 2018 E.D. Tex.)

In Salazar v. HTC Corporation, Judge Payne denied HTC's attempt to exclude the testimony of Salazar's damages expert. (Salazar at 1.) Salazar alleges patent infringement against four HTC smartphones equipped with infrared transceivers used to remotely control devices like DVRs via apps loaded on the accused smartphones. (Id.)

In its Daubert motion, HTC argued that Salazar's damages expert failed to apportion out the value of the non-patented features of the apps, including a program guide and channel list. (Id. at 2.) Salazar parried that its expert did perform the apportioning step, but determined the value of the non-patented features to be zero. (Id.) Judge Payne chalked the dispute up to a factual disagreement: HTC may point out purported flaws in the expert's "factual premises" at trial, but his methodology was otherwise correct. (Id. at 3.)

HTC also complained that the same expert improperly relied on opinions of Salazar's technical expert not included in the technical expert's report. (Id. at 5.) Recognizing that experts may rely on inadmissible facts or data to form an opinion, Judge Payne found no basis on which to exclude the testimony of Salazar's damages expert. (Id. at 6–7.)

Elbit Sys. Land & C4I Ltd. v. Hughes Network Sys. LLC, 2:15-cv-00037 (Apr. 23, 2018 E.D. Tex.)

Judge Schroeder presided over a six-day jury trial in Elbit Sys. Land & C4I Ltd. v. Hughes Network Sys. LLC on Elbit's claims of patent infringement related to satellite communication systems. (Elbit at 1–2.) Following a $21 million verdict against it, Hughes filed a variety of motions for post-trial relief.

Among its post-trial motions, Hughes urged several grounds for a new trial on damages. (Id. at 33.) Hughes argued on this point that Elbit's damages expert failed to demonstrate that the circumstances surrounding a license used to establish a reasonable royalty rate were comparable to the circumstances at the hypothetical negotiation. (Id. at 33.) Based on this purported failure, Hughes asserted that the royalty awarded by the jury lacked sufficient evidentiary support. (Id.)

Judge Schroeder recounted the testimony of Elbit's damages expert related to the comparability of the license agreement. (Id. at 34–35.) Based on this testimony, and because no other damages expert testified at trial, Judge Schroeder found substantial evidence to support the jury's verdict. (Id. at 35.)

In addition, Hughes asserted that references by Elbit's damages expert to Hughes's $2,500 total lifetime subscriber revenue value in comparison to Elbit's proposed $18 per unit royalty violated the entire market value rule. (Id. at 36.) Judge Schroeder disagreed, noting that the two references "[did] not amount to the significant prejudicial use described in Uniloc." (Id. at 37.) Judge Schroeder ultimately found no grounds to disturb the jury's damages award and denied Hughes' motion. (Id. at 1.)

Attorneys' Fees

Imperium IP Holdings (Cayman), Ltd. v. Samsung Elecs. Co., Ltd., 4:14-cv-00371 (Apr. 3, 2018 E.D. Tex.)

Following an almost $21 million verdict in its favor, Imperium sought its attorneys' fees of over $7 million. (Imperium at 5, 8-9.) Samsung argued that Imperium's fees should be reduced by at least 33% because Imperium succeeded on only two out of the three patents it asserted against Imperium. (Id. at 6.)

While Judge Mazzant acknowledged that fees generally may not be recovered for unsuccessful claims, he declined to reduce Imperium's attorneys' fee award on this basis as Imperium's hours on its successful and unsuccessful claims were "inextricably intertwined." (Id. at 9.) Indeed, "[t]he number of witnesses called at trial did not increase as a result of the unsuccessful claims." (Id. at 8.) Also relevant to Judge Mazzant's decision was evidence of Samsung's willful infringement warranting enhanced damages. (Id.)

Elbit Sys. Land & C4I Ltd. v. Hughes Network Sys. LLC, 2:15-cv-00037 (Apr. 23, 2018 E.D. Tex.)

Judge Schroeder ruled Elbit, discussed above, an exceptional case and granted Elbit's motion for attorneys' fees under § 285. (Elbit at 53.) The opinion chronicles Hughes' misconduct throughout the litigation that collectively rendered the case exceptional. (Id. at 48—53.) In particular, Hughes presented claim construction arguments to the jury in contravention of Judge Schroeder's instructions, ultimately requiring Judge Schroeder to issue a limiting instruction to the jury to disregard such arguments. (Id. at 50.) Hughes also "misrepresented the nature of evidence" originally labeled as "demonstratives," withdrew the videos, then submitted the same videos as substantive evidence during trial. (Id. at 51-52.)

Finally, Hughes "ignored the Court's orders in discovery." (Id. at 52.) For example, "its invalidity expert report contained not only numerous obviousness combinations and invalidity theories not disclosed in its invalidity contentions, but even combinations based on [prior art] which the Court had already excluded." (Id.) Similarly, Hughes' original invalidity contentions which it purported to "reserve" even after supplementing them—"presented an essentially limitless number of possible obviousness combinations in clear contravention of the Local Rules." (Id. at 52.)

These instances of misconduct together resulted in increased litigation costs for the parties and work for the court, which according to Judge Schroeder makes Elbit "stand[] out in comparison to the mine-run of cases." (Id. at 53.)