NDTX affirms damages verdict; cites most favored licensee clause; limited infringement did not warrant a lower award

The Northern District of Texas, in Jean Melchior v. Hilite International, Inc., Case No. 3:11-CV-3094-M (Judge Barbara M. Lynn) (July 15, 2015), ruled on post-trial motions, including denying defendants motion for a new trial on damages. The court held that the damages award was not excessive or against the great weight of the evidence.

Hilite's arguments were effectively two-fold: (1) that Melchior's expert, Dr. Poindexter, had relied too heavily on Georgia-Pacific factor 1 and in particular on a license agreement between Melchior and Borg Warner; and (2) that Dr. Poindexter's testimony failed to account for limited use of the patented invention in the infringing devices, in which the devices are only in the patented position for a fraction of a second.

On the first issue, Melchior responded that he had received royalties from Borg Warner for the same 90 cents per unit that was awarded by the jury. Melchior further relied on a "most favored licensee clause," which required Melchior to lower the Borg Warner rate if he awarded a lower rate to another licensee such as Hilite. According to Melchior, it was reasonable Dr. Poindexter to conclude that Melchior would not have granted a rate lower than 90 cents per unit so as not to disturb the Borg Warner rate. Melchior also contended that it was acceptable to focus more heavily on factor 1 beause the Federal Circuit does not require that all factors be considered (citing Whitserve, LLC v. Computer Packages, Inc., 694 F.3d 10, 31 (Fed. Cir. 2012)).

The court sided with Melchior on the first issue. The court effectively agreed with Melchior that the most favored licensee clause, and the evidence introduced on that point, was sufficient to sustain the jury's 90 cents per unit royalty rate. The rate was not against the great weight of the evidence. Slip op. at 23 (citing Apple v. Motorola, 757 F.3d at 1325-26).

On the second point, Melchior pointed out that the infringing devices could not operate without infringing, and that it was proper for the jury to consider this fact in its deliberations on a proper rate. The court agreed that it was not "necessary for the jury to reduce the royalty rate based on Hilite's argument that the [infringing devices] mostly operate in a non-infringing mode." Slip op. at 23 (citing Apple, 757 F.3d at 1325 ("Nor is there a requirement that a patentee value every potential non-infringing alternative in order for its damages testimony to be admissible.")). The court reasoned it was within the jury's province to take into account that the infringing devices were required to operate in the infringing mode when arriving at a royalty rate, "along with any evidence that Hilite could have employed a non-infringing alternative to the Melchior method." Slip op. at 23.