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Doubling of Ongoing Royalty Rate Justified by Taiwan Company’s CEO’s Comments to the Press

Plaintiff Mondis Technology LTD. (“Mondis”) filed a patent infringement action against Chimei Innolux Corp. (“Chimei”). The case proceeded to trial before a jury and the jury found a number of claims valid and infringed by Chimei. The jury also found several claims invalid and not infringed by Chimei. With respect to three of the patents, the jury found that the infringement was willful and awarded damages in the amount of $15 million. The district court then determined whether ongoing royalties and supplemental damages for 2011 sales should be awarded.

The district court began by noting that the jury did not have all of the sales data for the first and second quarters when it rendered its damage award. Because a patentee is entitled to damages for the entire period of infringement, the district court determined that Mondis was entitled to an award of supplementary damages. After determining the appropriate amount of sales, including non-U.S. sales that eventually wind up in the United State, the district court applied the royalty rate determined by the jury (which was .5% for monitors and .75% for televisions) and awarded an additional $1.97 million in supplementary damages.

The district court then turned to the analysis of an ongoing royalty rate. After reviewing the current case law analyzing ongoing royalty rates and stating that the law in the Federal Circuit is still unsettled but noted that it is more common for plaintiffs, such as Mondis, who cannot obtain an injunction, to seek an ongoing royalty. But the district court also stated that the law remains unsettled in the Federal Circuit: “other than noting that the determination of an ongoing royalty rate is up to the district court’s discretion, the Federal Circuit has not announced a particular standard to be used in calculating an ongoing royalty rate.”

The district court next analyzed two of the cases in the Eastern District of Texas that awarded an ongoing royalty rate, finding that “[i]n light of this case law, the Court will proceed by first determining a post-judgment reasonable (ongoing) royalty rate under Georgia-Pacific and will use the jury’s verdict in this case as a starting point and determine how the circumstances may have changed. Then the Court will consider whether the ongoing infringement will be willful. If so, the Court will consider how much to enhance the damages in light of this willful infringement.”

After weighing the Georgia-Pacific factors, the district court determined that the royalty rate for monitors should be increased from 0.5% to 0.75% because certain of the factors, including the commercial success of the patent after the date of the hypothetical negotiation, justified a higher royalty rate. The district court then addressed whether that rate should increased because of willful infringement.

The district court found that the ongoing infringement was willful. In reaching this conclusion, the district court disregarded the fact that the jury verdict was on appeal as that would require the district court to accept the merits of the appeal which it was not in a position to do and, in any event, in its view the appeal did not have merit.
The district court also analyzed whether there should be an enhancement for ongoing willful infringement and found that it should for two reasons. First, the district court found that the defendant did not have a good faith belief of invalidity or non-infringement “and that the case is not close.”

Second, the district court found the defendant’s corporate attitude after the jury’s decision justified an increase in the royalty amount: “the Court considers InnoLux’s corporate attitude, which is reflected by its CEO’s statement to a Chinese newspaper after the verdict in this case, which reads in part: ‘The issue of patent infringement is being taken too seriously sometimes.’ . . . The Court finds that this statement by InnoLux’s CEO shows InnoLux’s lack of respect for this Court and the jury’s verdict. It is also an affront to the United States patent system–a system of Constitutional origin. The Court, therefore, finds that this also warrants a strong enhancement because it further reflects the egregiousness of InnoLux’s conduct.”

Accordingly, the district court doubled the royalty rate from .75% to 1.50%.

Mondis Technology LTD v. Chimei Innolux Corp., Case No. 2:11-cv-378-TJW-CE (E.D. Tex. Sept. 30, 2011)

The authors of are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. We represent inventors, patent owners and technology companies in patent licensing and litigation. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Stan Gibson at 310.201.3548 or