Apple situationIn this dispute Wilan's experts have tried to give some firmness to the numbers the company was seeking by employing the "hypothetical negotiation approach" (see page 16 of the decision).
At trial, Wi-LAN used the hypothetical negotiation approach
for calculating reasonable royalty damages under
35 U.S.C. 284. This approach attempts to calculate the
royalty rate the parties would have agreed upon had they
negotiated an agreement prior to the start of the infringement.
In determining a reasonable royalty, “parties frequently
rely on comparable license agreements.”
As it is, this didn't work well because, essentially, there were / are no comparable license agreements. It looks like they just don't exist. The experts tried to pitch a few Wilan post-2013 license agreements but they involved far more patents than just the two at stake here, the '145 and the '757. Then we got into the whole wheat-vs-chaff thing. The result? Not good.
It would have been nice if Wilan at some point had licensed ONLY the '145 and '757 in an agreement. But it never happened.
You know, not all cases will have the kind of concrete support for a number that Wilan was looking for. Often it just goes to the jury and the jury, after listening to the arguments, goes with what feels right to the jury. I'm going to call this the what-feels-right-to-the-jury approach ("WFRTTJA").
To some degree I think Wilan did use the WFRTTJA. I'm sure they explained to the jury how the iPhone wouldn't work well without Wilan's IP. Indeed, I recall lawyer Jeffrey Lamken arguing in this spirit in the hearing last October. It was something like:
"Well . . . 99% for Apple and 1% for Wilan . . . and the phone doesn't work without the IP . . . and . . . seems kind of reasonable; and it is, after all, Apple, etc., etc."
It was kind of funny. And rhetorically compelling.
But Wilan wanted to bolster this with something more concrete-seeming. Hence, the experts.
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Is Wilan toast if all they really have is the WFRTTJA in damages trial #3? Not necessarily. Remember, juries make these sort of what-feels-like-common-sense decisions all the time. Indeed, that's sort of why we use juries.
I would propose that the WFRTTJA will look a LOT better this time around because of the fact that Wilan has now emerged triumphant on claim construction. My guess is that in damages trials #1 and #2 merely guiding the juries to what may feel right would have been dangerous because the juries might have chosen to "feel" within the context of Apple's account of claim construction--which could have led to a tiny damages number (i.e., like the $10 million that Wilan had the option of accepting after damages trial #1).
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People should bear in mind that whenever damages trial #3 happens, whoever owns Wilan (Quarterhill or someone else) will be well paid for the wait. This will pull the pre-judgment interest up to the time of that DT #3. Recall that the pre-judgment rate of interest is very good. I think it was 7%? But the post-judgment rate of interest is almost nothing.
So, for example, damages trial #2 awarded Wilan $85 million but pre-judgment interest turned that into $110 million. If DT #3 is two years from now and leads to the same $85 million then pre-judgment interest at that time could turn the final number into something north of $130 million. (I think this is right. If not, I'm happy to be corrected.)