The US Court of Appeals for the Federal Circuit concluded that the district court did not abuse its discretion in denying defendants’ motion for a new trial on damages, finding that the jury verdict on damages was based on substantial evidence. Elbit Systems Land and C4I Ltd v. Hughes Network Systems, LLC, Case No. 18-1910 (Fed. Cir. June 25, 2019) (Taranto, J).

Elbit Systems sued Hughes Network, both satellite communication companies, for infringement of two patents related to the transmission of information using satellite communication. The jury found three claims of one asserted patent infringed and not invalid and awarded damages. The district court found the case exceptional and found that Elbit was entitled to attorneys’ fees, but had not yet quantified the fees award at the time of the appeal. Hughes appealed the infringement finding and damages award, as well as the exceptionality determination.

Focusing on the damages award, the Federal Circuit found that the district court did not abuse its discretion in denying Hughes’s motion for a new trial on damages because the jury’s damages verdict was supported by substantial evidence. The Court cited unrebutted expert testimony by Elbit’s damages expert, who provided testimony relying on a prior settlement between Hughes and another satellite internet company, Gilat, in support of the reasonable royalty award in the present case. The Court noted that Elbit’s damages expert properly accounted for differences between the circumstances of the prior settlement and the circumstances between the parties to the present case—an important step when using actual past licenses and negotiations to inform a hypothetical negotiation. The Gilat agreement occurred only four months after the agreed-on date of the hypothetical negotiation posited for determining the reasonable royalty in this matter, making the time periods for assessing value in the satellite-service marketplace very close. Additionally, the technologies were related for purposes of determining market value, as supported by testimony of Elbit’s technical expert. The Court noted that Elbit’s damages expert also accounted for the fact that the Gilat agreement was a settlement prompted by litigation and adjusted the royalty rate to account for updated technology covered by the hypothetical negotiation based on statements made by Hughes’s own executives indicating that the new technology provided a 20% increase in value over the old system.

The Federal Circuit rejected Hughes’s argument that the jury verdict failed to account for mandatory apportionment principles. The Court agreed that apportionment is required when the accused technology does not make up the “whole of the accused product,” citing Finjan. v. Blue Coat Sys. (IP Update, Vol. 21, No. 2). However, because the Gilat agreement concerned a comparable component of a larger product or service and the agreement was relied upon by Elbit’s expert to determine the reasonable royalty for the comparable components of the products at issue in this case, no further apportionment was required.

Finally, the Federal Circuit was not persuaded by Hughes’s argument that Elbit improperly presented testimony in violation of the principle that, where only a part of the value of the apparatus is attributable to the patented technology, a party’s reference to an infringer’s entire revenue earned from its sale of accused products can “skew the damages horizon for the jury” and is improper. Uniloc USA v. Microsoft (Fed. Cir. 2011). The Court rejected this argument, finding that Elbit’s reference to the amount of revenue per customer Hughes earns on average based on the infringing products is not the same as referencing company-wide revenue—the testimony found objectionable in Uniloc. Further, the Court found that Hughes failed to object to this testimony during the trial, and itself introduced a figure representing company-wide revenue, despite a pre-trial agreement reached by both parties excluding “total revenues” from the trial.