United States: Confusion Can Occur As To Whether An Award Of Enhanced Future Royalties Apply To Sales Occurring After A Jury Verdict Or After A Subsequent Award Of Final Judgment By The Court

Abstract

In determining whether an award of enhanced future royalties applies to sales occurring after a jury verdict or after a subsequent award of final judgment by the court, a Wisconsin Court found that an enhanced royalty rate should apply at the midpoint between the jury verdict and the final judgment after trial. In many cases, the jury verdict and the final judgment occur nearly at the same time such that the difference in the royalty award if enhanced damages began at the time of the jury verdict or the entry of a final judgment would be nominal. In this case, however, the jury verdict and final judgment were nine months apart. Thus, the enhanced royalty award would differ substantially depending on its starting point. The court attempted to reach an equitable outcome by splitting the difference, holding that an enhanced royalty rate should apply to sales occurring after the midpoint in time between the jury verdict and the final judgment due to a prolonged amount of time between these events.

Background

ST sued ABS for infringing patents covering straws. On September 11, 2019, a jury found ABS infringed  the patents and awarded damages, and the Court entered a final judgment on June 8, 2020 resolving the parties' remaining disputes regarding the amount of damages.

The Decision

The Court focus was on whether an enhanced royalty rate should apply to straws sold after the jury rendered its verdict or after the court rendered its final judgment.

While the Court's initial order stated that ABS should pay the enhanced royalty on sales of infringing product "manufactured after the judgment entered in this case," the Court acknowledged it did not consider whether the enhanced royalty rate should apply to sales after the jury verdict or after its final judgment because the distinction may typically not be an important one. However, in this case, the significant amount of time between the verdict and entry of judgment created a significant difference in the amount of damages owed.

ST argued the enhanced royalty rate should apply to all sales occurring after the jury verdict. Evaluating Federal Circuit precedent, the Court noted that at times earlier court decisions describe on-going royalty rates as applying to sales after the jury verdict, and at other times as applying to only to sales after final judgment. The Court reasoned the lack of distinction in the earlier cases occurred because usually only a short amount of time passes between the jury's verdict and the final judgment, making the impact negligible. Without definitive guidance from earlier court decisions to rely on to resolve the issue, the Court took an equitable approach, splitting the difference and holding that the enhanced royalty would apply to sales that occurred after the mid-point between the date of the jury verdict and the final judgment.  Thus, the Court awarded an enhanced royalty rate for sales of the infringing straws, where the infringing computer chip that produced the straw was manufactured in or imported into the United States on or after the January 22, 2020, the mid-point between the date of the jury verdict and the date of the final judgment.

Strategy and Conclusion

To avoid confusion, it is helpful to address in advance whether an enhanced royalty rate for future sales following a litigation applies to sales after the jury verdict or to sales after final judgment by the court, particularly when the time between those events could result in a substantial difference in royalties due.

Further Information

The ABS Global decision can be found here.

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