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In Case You Hadn’t Heard – Milestone Damages in Apple Case Revisited

July 23rd, 2015 by Associate

Apple, Inc.’s successful “i” products and services (iPhone, iPad, iTunes, etc.) have made it both the US’s most valuable company and likely one of its most sued companies. As my colleague Keith Hock detailed in his February blog post, patent litigation is a popular area of contention in today’s economy. In 2014 alone, Apple was sued for patent infringement 59 times and has already faced over 25 patent infringement suits in the first half of 2015.

In February of 2015, a federal jury in Texas ordered Apple to pay $532.9 million in damages for iTunes’ infringement of three patents owned by Smartflash, a Texas-based patent licensing company.

However, U.S. District Judge Rodney Gilstrap threw out the damages award against Apple and ordered a new damages trial.  Apple had filed a post-verdict motion for judgment on damages, claiming that the jury considered the entire market value of the infringing products rather than distinguishing between the products’ patented and unpatented features.  Judge Gilstrap said that his jury instructions on how to properly calculate royalties might have confused the jurors.  Judge Gilstrap also wrote, “The court finds that Smartflash did not attempt to apply the substantive legal rule known as the entire market value rule, and the court agrees with Apple’s argument that a new trial on damages is necessary in light of the instruction the court provided the jury.”

Thus, a new damages trial has been set for September 14 in Tyler, Texas.  You can be sure that the marketplace will be keeping an eye on how this case plays out, particularly with several patent reform initiatives being discussed in the Unites States Congress.  What do you think – do large patent infringement damage awards to non-practicing entities (like the original verdict in this case) indicate a need for patent reform?  Or do you think the patent system is working as it should?  Please share your thoughts in the comment box below. If you’re interested in reading the full damages order, please click here.

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