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Aylus v. Apple: District Court Orders Production of Revenue Documents

Aylus Networks, Inc. (“Aylus”) sought documents from Apple “relating to the revenue, costs and profits from (1) purchases or rentals of iTunes video content using the accused Apple TV and/or iOS products iPhone, iPad, and iPod Touch (‘Accused iOS Products’) [and] (2) purchases of video games on the App Store using the Accused iOS Products.” Apple declined to produce the documents and Aylus moved to compel claiming that the information was relevant to its damages claims.

The court began its analysis by noting that Georgia-Pacific factor six examines “[t]he effect of selling the patented specialty in promoting sales of other products of the licensee; that existing value of the invention to the licensor as a generator of sales of his non-patented items; and the extent of such derivative or convoyed sales.” Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970), modified and aff’d, 446 F.2d 295 (2d. Cir. 1971).

The district court then found that the sales information “Aylus seeks addresses the sixth Georgia-Pacific factor, even if some of the information relates to sales involving non-infringing products. See Micro Chemical, Inc. v. Lextron, Inc., 317 F.3d 1387, 1393 (Fed. Cir. 2003) (trial court did not abuse its discretion in allowing expert to testify on the effect sales of non-infringing products had on a reasonable royalty rate); Trans-World Mfg. Corp. v. Al Nyman & Sons, Inc., 750 F.2d 1552, 1566 (Fed. Cir. 1984) (district court incorrectly excluded evidence of profits where infringing use of displays could have increased eyeglass sales and thus could be relevant in determining the amount of a reasonable royalty). Apple’s description of the accused Airplay functionality as only a “small feature” of certain of its iOS devices does not mean that the information Aylus seeks is not relevant. See Haworth, Inc. v. Herman Miller, Inc., 162 F.R.D. 286, 288 (1995) (“It may well be that when all factors in the market for [the patented product] are considered, convoyed sales of freestanding [collateral products] will play a negligible role in calculating a reasonable royalty. But it is too soon to tell whether recovery for convoyed sales would over-compensate [plaintiff].”).”

The court also reasoned that “[t]o the extent that Airplay, no matter how small its role, draws more consumers to purchase video content/video games through the iTunes store so that they can, through their iPod Touch, iPad, or iPhone, direct that content to an accused AppleTV for display on a home television screen, those sales could shape the reasonable royalty analysis.

The court also found that Apple’s arguments to the contrary were not persuasive because its assertion that Aylus “seeks iTunes Store revenue that is not tied to the accused AirPlay functionality” ignored the allegations in the complaint, which alleged the tie between iTtunes Store revenue and AirPlay.

Finally, the court disagreed that “information concerning convoyed sales is not discoverable simply because a plaintiff may fail to prove that those sales are, in fact, convoyed sales. If Apple wishes to argue the convoyed sales issue at trial, to either challenge the admissibility of certain evidence or undermine Aylus’ theory of damages, it may do so. But the argument is unsuccessful insofar as Apple expects to resist discovery of the information Aylus seeks here.”

Accordingly, the court order Apple to produce the requested documents to Aylus.

Aylus Networks, Inc. v. Apple Inc., Case No. 13-cv-04700-EMC (KAW) (N.D. Cal. April 9, 2015)

The authors of are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. For more information about this case, contact Stan Gibson at 310.201.3548 or