Illuminating Evidentiary Considerations for Reasonable Royalties

In Enplas Display Device Corp. v. Seoul Semiconductor Company, No. 16-2599 (Fed. Cir. Nov. 19, 2018), the Federal Circuit vacated and remanded the jury’s $4 million damages award to Seoul Semiconductor Company (SSC), because the majority disagreed with the method of calculating damages. The Court also affirmed the district court’s decision that certain claims of SSC’s patents were not anticipated and affirmed the judgment that Enplas induced infringement related to its lenses used in flat-screen televisions.

Citing AstraZeneca AB v. Apotex Corp., the Court noted that a reasonable royalty “cannot include activities that do not constitute patent infringement.”  SSC’s expert opined that Enplas and SSC would have agreed to a $2 to $4 million royalty based on a royalty base including sales of non-accused lenses. The Court determined that this was improper because it would award damages for non-infringing activity. The Court noted that a jury-awarded lump-sum royalty must be based on an estimate of future sales of accused products, not on past sales of non-accused products.

Judge Newman dissented in part regarding the court’s damages holding. Citing Lucent Techs., she noted that “we have never laid down any rigid requirement that damages in all circumstances be limited to specific instances of infringement proven with direct evidence.”  She argued that SSC’s expert’s testimony was uncontroverted and should constitute substantial evidence to support the jury’s damages award.