Federal Circuit Affirms $140M Reasonable Royalty for Sprint in Nonprecedential Decision

Federal Circuit Affirms $140M Reasonable Royalty for SprintOn Friday, November 30th, the Court of Appeals for the Federal Circuit issued a nonprecedential decision in Sprint Communications Company v. Time Warner Cable in which the panel majority of Circuit Judges Raymond Chen and William Bryson upheld the district court’s damages award of approximately $140 million for Sprint after Time Warner was found to infringe claims of five patents covering technologies related to methods for linking circuit-switched and packet-switched networks within a telecommunications system. Despite the nonprecedential designation, Circuit Judge Haldane Mayer issued a dissenting opinion reflecting his views that the damages award should be vacated and the asserted patent claims found invalid for failing the written description requirement.

At oral argument in early October, counsel representing Time Warner argued that the entire jury verdict should be vacated because of the district court’s error in allowing the jury to consider a patent infringement damages award entered in 2007 against Vonage and for Sprint as evidence for determining the damages award against Time Warner. That verdict determined a royalty rate for damages using a 25 percent rule of thumb, which was later determined by the Federal Circuit to be improper in Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292 (2011).

The Federal Circuit majority first addressed Time Warner’s contention that it should be granted a new trial because the introduction of evidence of a jury verdict from another case is invariably improper. The court found that such evidence has been admissible in the past if it is relevant for a legitimate purpose, citing to its own 2006 decision in Applied Medical Resources Corp. v. United States Surgical Corp. to support this finding. In this case, the 2007 Vonage verdict would have been a factor that both Sprint and Time Warner would have considered at the time of the hypothetical negotiation period in 2010. The Federal Circuit majority also found it important that the district court twice gave the jury limiting instructions on the use of the Vonage verdict at Time Warner’s request and while an even more restricting instruction might have been applied, no request for such a limitation was given.

The Federal Circuit majority also disagreed with Time Warner that the references to the 25 percent rule of thumb in the 2007 Vonage verdict made it inadmissible as evidence to the jury in district court. The appellate majority found that Time Warner had ample opportunity at district court to challenge the reliability of the verdict on that ground but didn’t take such opportunity. The Federal Circuit also disagreed with Time Warner’s contention that the damages awarded by the jury’s verdict, which totaled the same $1.37 per voice-over-IP (VoIP) subscriber per month award as was in the 2007 Vonage verdict, didn’t determine which portion of the revenues was attributable to patented technology and not unpatentable features. The appellate court determined that the jury’s award was supported by sufficient evidence, including two licenses for the patented technology which were submitted by Sprint and reflected the royalty rate awarded in the Vonage case.

Next, the Federal Circuit majority found that Time Warner didn’t meet the burden of showing by clear and convincing evidence that the specifications of the patents-in-suit lacked an adequate written description, thus the asserted claims remained valid. Regarding the call control patents, with claims covering methods of telecommunication control of calls to and from a packet-switched communication network, Time Warner had argued that the common specification of those patents only covered asynchronous transfer mode (ATM) technology but the claims cover both ATM and Internet protocol (IP) technology. The Federal Circuit majority found that IP technology was not expressly excluded by the common specification and that testimony from Sprint’s technical expert established that a person of ordinary skill would have understood references to “broadband” to include both ATM and IP technologies. Regarding the broadband patents, which cover the interface between circuit-switched “narrowband” networks and packet-switched “broadband” networks, Time Warner argued that the district court’s construction of the claim term “interworking unit” to mean an “ATM interworking multiplexer” rendered the broadband patent claims to be invalid because other claim elements were broad enough to encompass technologies that were incongruous with the multiplexer. However, Sprint’s technical expert had proved at district court that it was technically possible to run IP over an ATM network, allowing a reasonable jury to reject Time Warner’s argument that such a configuration was “nonsensical.”

While the Federal Circuit’s majority affirmed the district court’s verdict, Circuit Judge Mayer diverged from the majority on the question of validity of the asserted claims, finding that the specifications provided “no written description support for the full breadth of the asserted claims.” Judge Mayer took issue with the specifications’ lack of any mention of IP networks and found that there was no suggestion “that methods of establishing interconnections between IP networks and the [Public Switched Telephone Network] are within the scope of the claimed invention.” As we’ve mentioned recently, it seems odd to see a decision including a dissent to be designated as nonprecedential given the fact that a dissent must necessarily mean that there was a difference of opinion among the Circuit Judges, which would seem to make nonprecedential designation inappropriate. 


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Copyright: Christopher Titze


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One comment so far.

  • [Avatar for Damien]
    December 12, 2018 05:04 pm

    IMO, There isnt a problem with a nonprecedential designation so long as the dissent is not addressing a difference of interpretation of law…

    Here, it seems, the difference is an interpretation of fact (ie whether or not the Spec in this case contains the required sufficient disclosure). Since this difference is more about a fact difference than a law difference, that isnt considered a significant change to the body of law.

    Now of course, there may be arguments that it is actually a change of law in this case… but I dont see the problem with designating nonprecedential simply because there exists a dissent. It depends on the context of the dissent.