NDCA rules Defendant free to advocate fully paid-up agreement for life of patents

On January 28, in Open Text S.A. v Box, Inc., Case No. 13-cv-04910-JD,Judge Donato of the NDCA denied a motion-in-limine that would have prevented Defendant Box from putting forth a fully paid-up, lump sum form of damages at trial. Plaintiff Open Text moved to prevent Box from arguing a fully paid-up lump sum covering the life of the patents, arguing that such an outcome "would preclude Open Text from seeking an injunction or post-verdict ongoing royalties." The Court cited numerous cases holding that a fully paid-up lump sum award is an allowable form of damages.

Separately, Open Text argued that by taking away ongoing royalties or an injunction via a fully paid-up lump sum, the Court was effectively giving the jury an equitable issue. The Court stated this argument "is not well-taken," since the determination of a reasonable royalty is a question of fact. "Consequently, in deciding whether to award a fully paid-up royalty for the life of the patents or a running royalty short of that, the jury will decide a factual issue and not an equitable one. The possibility that the jury's decision may affect Open Text's claim for equitable or injunctive relief is no basis for taking that decision out of the jury's hands." The Court stated that if Open Box was concerned about this possibility, "[t]he solution to Open Text's concern is not to bar Box from seeking a lawful lump sum royalty rate but to prove to the jury that the proper measure of damages in this case is a running royalty."

Finally, the Court noted that if "the jury awards a fully paid-up lump sum for the life of the patents, it will be precluded from seeking injunctive relief. See Trans-World Mfg. Corp. v. Al Nyman & Sons, Inc., 750 F.2d 1552, 1565 (Fed. Cir. 1984)."

This is likely to be an oft-cited case going forward, as many Defendants advocate for lump sums, generally through the time of trial. Many Defendants may advocate for lump sums through expiration, figuring that a one-time payment may prove less costly than an ongoing royalty or injunction