Enplas Display v. Seoul Semiconductor was decided on November 19, 2018 on appeal from the Northern District of California. Declaratory plaintiff Enplas filed an declaratory action against declaratory defendant Seoul Semiconductor on two patents. Seoul Semiconductor counterclaimed, asserting infringement and seeking damages. On summary judgment, the district court held that no reasonable juror could find on the patent claims anticipated. The jury found that Enplas induced infringement of both patents, that the asserted claims were not anticipated, and awarded $4 million in damages for a one-time-freedom-to-operate payment for one patent, and $70,000 for the other patent. “The jury verdict form specifically indicated that the one-time freedom to operate payment was for all Enplas products, including lenses that had not been accused of infringement.” The district court denied Enpla’s pre-trial motions to exclude Seoul Semiconductor’s damages expert evidence, and also denied Enplas’s post-trial motions for JMOL of anticipation, no inducement, and excessive damages. Enplas appealed.
The Federal Circuit affirmed the judgment of no anticipation, affirmed the judgment of inducement, vacated the $4 million freedom-to-operate award for one patent, and affirmed the $70,000 award for the other patent.
The district court erred in upholding the jury’s freedom-to-operate award. At trial, Seoul Semiconductor’s expert “opined that Enplas would have agreed to a lump sum royalty in a hypothetical negotiation for” the patents. The expert “went on to testify that [the parties] would not have limited the license to just the accused products if there were a risk of infringing the patent by manufacturing other products that are similar in nature.” For one of the patents, the expert testified that Enplas and Seoul Semiconductor would have agreed to pay $2 to 4 million depending on the ultimate “volume of sales of potentially infringing products beyond the ones in this case.”
“[A] reasonable royalty cannot include activities that do not constitute patent infringement, as patent damages are limited to those ‘adequate to compensate for the infringement.” Seoul Semiconductor’s expert testimony cannot support the jury $4 million award because the patent laws “proscribe awarding damages for non-infringing activity.” “[A] jury may award a lump-sum, paid-in-full royalty in lieu of a running royalty on future sales. But that lump-sum must be based on an estimate of the extent of future sales of accused products, not on past sales of non-accused products.” The Federal Circuit thus vacated the $4 million damages award, and remanded.
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Judge Newman concurred in sustaining the validity of the patents, and dissented from the reversal of the jury’s damages verdict. According to Judge Newman, the jury verdict is supported by substantial evidence, and the theory that “the payment was for non-infringing products was not presented at trial, and has no support in the record.”
Enplas Display Device Corp. v. Seoul Semiconductor Co., 909 F.3d 398 (Fed. Cir. 2018)