Evidence of Extensive Licensing Is Relevant and Admissible in a Patent Infringement Suit

Abstract

A Virginia court declined to exclude evidence that the patents asserted in a patent infringement action had been previously licensed to over 1000 licensees because such evidence was relevant to commercial success and validity, reasonable royalty damages, willful infringement by the accused infringer, and good conduct by the patent owner.

Generally, litigants may only present evidence that makes an outcome-determinative fact more or less likely to have happened and that is not needlessly prejudicial or a waste of time. A Virginia court recently considered whether evidence in the patent infringement suit that the asserted patents had been licensed over 1000 times was relevant and admissible.

Background

Audio MPEG sued Dell for infringing patents on MP3 audio compression. 

Dell attempted to prevent Audio MPEG from offering evidence that the patents had been licensed by over 1000 companies, arguing that such evidence would confuse a jury and was not relevant to the issues in the patent litigation.  Audio MPEG countered that the number of licenses was relevant, and that it only wished to present evidence about the most analogous 43 licensees.

The Audio MPEG Decision

The court found the number of licensees relevant, ruling that evidence is relevant if "it has any tendency to make a fact more or less probable than it would be without the evidence; and the fact is of consequence in determining the action."

First, the number of licenses was relevant to establishing a proper damage award of "a reasonable royalty for the use made of the invention by the infringer" so the number of licenses was relevant to an established royalty for the patented technology.

Second, the number of licenses was relevant to showing commercial success—objective evidence that the patented technology was not obvious.

Third, an extensive patent licensing program may show awareness of the patents and be relevant to proving that the infringement was willful and that punitive damages should be awarded.

Finally, the number of licenses was relevant to establishing that Audio MPEG was a good corporate citizen.  Audio MPEG contended that Dell would paint it as especially litigious.  To rebut this assertion, Audio MPEG wanted to show that its extensive licensing program generally avoided litigation. 

The court dismissed Dell’s argument that each license required a mini-trial to determine comparability to a hypothetical license at-issue in the suit, finding that such analysis is not required where the patents are covered under an established licensing program. It also held that the comparability of the licenses in the program to the hypothetical license in the case was a matter of weight, not admissibility.

However, the court did rule that licenses resulting from litigation settlement would not be admitted into evidence because of the many unique considerations surrounding individual litigations. And while the court agreed that evidence showing the number of licenses was relevant, it limited how Audio MPEG could use this evidence in its case, noting that evidence may only be shown to the finder of fact if its probative value is not substantially outweighed by such considerations as unfair prejudice, undue delay, or the needless presentation of cumulative evidence.  Accordingly, the court limited Audio MPEG to using two witnesses to testify about the 1000 licenses and to only introduce exhibits relating to licenses from the 43 licensees most analogous to the case against Dell.

Strategy and Conclusion

Where a patent owner has an established licensing program, courts may allow it to present evidence regarding the program in suits against accused infringers without individually analyzing how analogous each license in the program is to the case being litigated.

The Audio MPEG opinion can be found here.