Prism Technologies LLC, et al. v. Sprint Spectrum et al.

Docket No. 2016-1456, -1457

March 6, 2017

Brief Summary: Jury finding of infringement and award of $30 million as a reasonable royalty upheld. Settlement agreement with AT&T was properly admitted as reasonable royalty evidence. Jury/DC properly relied on “hypothetical-negotiation approach” to calculate reasonable royalty. No error found with the DC’s determination that the award included “past, present, and ongoing infringement”.

Summary: Sprint appealed jury finding of infringement of US 8,127,345 and 8,387,155 relating to managing access to protected information over “untrusted” networks, and the award to Prism of $30 million in reasonable royalty damages under 35 USC § 284. Prism settled with AT&T regarding the same patents and that agreement was entered into evidence to Sprint’s objection. The FC panel concluded this was proper under Rule 403 as the DC “may exclude relevant evidence if its probative value is substantially outweighed by a danger of one or more of the following: unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence” and “the Rule commits the weighing to the [DC’s] ‘broad discretion’” (Sprint/United Mgmt., US 2008). The FC has “recognized that, depending on the circumstances, a license agreement” is “sometimes admissible…and sometimes not” as by “conducting the inquiry required by Rule 403, can find earlier patent-suit settlements admissible in valuing a patented technology” (AstraZeneca, FC 2015; Laser Dynamics, FC 2012;, FC 2010). The FC panel noted that “Sprint has not contested the long-accepted proposition that ‘a party may use the royalty rate from sufficiently comparable licenses” (Summit 6, FC 2015; Uniloc, FC 2011) and in fact “sought admission of a number of Prism licenses…that resulted from litigation settlements”. Sprint also argued that Rude (US, 1889) “categorically bars admission of litigation settlements on the issue of a reasonable (but not ‘established’) royalty” but the FC panel concluded Sprint did not present this argument to the DC (e.g., it only argued it was “irrelevant or simply less reliable and more prejudicial” and such an argument “would have been inconsistent with Sprint’s efforts to benefit from the introduction of other” licenses). Sprint also argued the “claims” in the AT&T dispute were different and entry of that agreement should be barred under Rule 408’s exclusion of evidence regarding negotiations. But the FC panel concluded the DC “had no occasion to consider a Rule 408 objection” since “Sprint invoked Rule 408 only after trial”. It therefore concluded the DC “had an adequate basis for admitting” the agreement.

Sprint argued the DC erred by “allowing Prism’s expert…to modify the court’s construction of ‘Internet Protocol network’” and his “testimony that Sprint’s backhaul networks constitute an ‘untrusted’ network” but the FC did not find an abuse of discretion in these determinations (e.g., “a question of fact, which the court properly reserved for the jury”, expert’s “context makes clear that he was referring to the path to access the network”). This argument was not convincing.

Sprint also argued “that Prism’s damages model was not sufficiently tied to the ‘footprint’ of the invention” but the FC panel concluded this “misapprehends the relevant legal principles” of “[t]he hypothetical-negotiation approach to calculating reasonable-damages” which “attempts to ascertain the royalty upon which the parties would have agreed had they successfully negotiated an agreement just before infringement began” (Lucent, FC 2009; Uniloc, FC 2011) with which “Prism’s damages evidence complied”. Unlike Riles (FC 2002) in which a reasonable royalty was found not to include the entire cost of defendant’s drilling platform because “the market would pay [the patentee] only for his product”, “[h]ere…Sprint would have chosen to build its own backhaul network in the absence of a license.” The FC panel also rejected Sprint’s arguments that “leasing costs are an unreliable basis for estimating cost savings”.

Prism cross-appealed DC denial of its request for additional monetary relief for time after the time covered by the jury verdict but the FC panel found no error with the DC’s determination that the award included “past, present, and ongoing infringement” (WhitServe, FC 2012).

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