"Special Circumstances" SDNY Halves Verdict Based on Smallest Salable Unit

On August 14, 2013, Judge Rakoff of the Southern District of New York issued an opinion in Tomita Tech. USA, LLC v. Nintendo Co., 11 Civ. 4256 (JSR) (Doc. No. 166), addressing post-trial motions after a jury awarded over $30M in damages to Tomita. Nintendo moved for remittitur on the ground that Tomita's expert, Mr. Wayne Hoeberlein, erroneously used the EMVR to include all revenue from the accused Nintendo "3DS" gaming console in the damages analysis. The court rejected this argument because, according to the court, the 3DS constituted the smallest salable patent-practicing unit (SSU). The court stated:

The court did, however, find the "jury's $30.2 million damages award [to be] 'intrinsically excessive' and unsupported by the evidence presented at trial," because there were "special circumstances relating to the 3DS that strongly suggest that such a royalty rate is excessive in this context." Slip op. at 17-18. The court cited several factors:

1. The evidence showed that the 3DS gaming console was not profitable.
2. The games designed solely for the 3DS were profitable, but the evidence established that the vast majority of games did not use the patented technology. The court reasoned the "jury, in coming to such a substantial damages award, likely weighed too heavily the somewhat unrelated profit that Nintendo earns on games for the 3DS." Id. at 17.
3. The patented technology was "used only in two features" of the 3DS the 3D camera and AR games application and "thus was in some sense ancillary to the core functionality of the 3DS as a gaming system." Id. at 17-18.
4. The evidence showed that consumer reception for the patented features was mixed.

The court concluded the $30M damages award was at least two times greater than it should have been. The court gave Tomita the choice to accept remittitur to $15M or a new trial on damages.