United States: Further Awards Of Interest, An Accounting, And Ongoing Royalties After A Jury Verdict May Depend On The Jury Instructions And The Court's Discretion

Abstract

A Nebraska court granted pre-judgment and post-judgment interest on a jury award for patent infringement but refused to order an accounting and ongoing royalties, finding the jury verdict already accounted for a reasonable royalty adequately compensating the plaintiff for past, present, and ongoing infringement of its patents.

After Prism received a jury award of $30 million for patent infringement by Sprint, it asked the court for prejudgment and post-judgment interest, and for an accounting and ongoing royalties, in an attempt to recover damages for present and future infringement, which it believed were excluded from the jury verdict.

The court in Prism Techs. v. Sprint Spectrum1 awarded prejudgment and post-judgment interest but found that an accounting and ongoing royalties was unnecessary because in light of the jury instructions, the jury's award of $30 million already compensated Prism for past, present, and ongoing infringement by Sprint.

Background

Prism sued Sprint for infringing two patents directed to methods and systems for controlling and managing access to protected computer resources. After a trial, the jury returned a verdict in favor of Prism, finding that Sprint infringed both patents. The jury awarded damages in the amount of $30 million to Prism. Prism filed two motions, one for prejudgment and post-judgment interest, and another for an accounting and ongoing royalties.

In its first motion to recover interest on the awarded damages, Prism requested prejudgment interest to be added to the damages award from the time that Sprint began infringing Prism's patents until the court entered its final judgement. Prism also requested post-judgment interest to compensate it from the time of the court's final judgment until Sprint paid the awarded amount.

In its second motion, Prism asked the court to calculate and add an award for ongoing and future infringement by Sprint and for damages derived from evidence unavailable at trial. Prism argued that Sprint should provide an accounting of its infringing sales from the close of discovery through the entry of judgment. Prism also moved the court for an award of ongoing royalties to remedy Sprint's continuing infringement following trial through the remaining life of the asserted patents.

In its motion for an award of prejudgment and post-judgment interest, Prism argued that a prime rate compounded quarterly was appropriate for calculating prejudgment interest. Sprint disagreed, arguing that the prejudgment interest, if awarded, should be based on the lower Treasury bond rate, and should only be compounded annually. Both parties agreed that post-judgment interest should be determined using the Treasury bond rate as required by statute.

In addition to the jury's $30 million damages award, Prism's motion for an accounting and ongoing royalties asked the court for an order requiring Sprint to provide an accounting for its sale of infringing products from the time of Sprint's last production of financial information through the court's final entry of judgment, and to set a royalty for ongoing infringement through the life of the asserted patents. Prism argued that because Sprint's financial documents didn't account for its infringing activity after its last production through the time of trial, this information was not part of the evidence presented to the jury at trial. Thus, the jury's award did not include damages for that time period. Prism argued that the court should evaluate and increase the damages award to account for Sprint's additional infringement. Prism also alleged that Sprint had continued to infringe the asserted patents following trial and should pay Prism an ongoing royalty to compensate Prism for doing so. Sprint disagreed again, arguing that the jury's damages award included compensation for past, present, and ongoing infringement.

The Decision

The court granted Prism's motion for prejudgment and post-judgment interest, finding that Prism was entitled to both, but calculated each type of interest according to different rates.

Citing Supreme Court and Federal Circuit case law, the court found that prejudgment interest was proper since Prism didn't unreasonably delay filing its lawsuit against Sprint. According to additional case law, the court found that it had discretion to determine an appropriate prejudgment interest rate. For reasons not explained in the opinion, the court held that prejudgment interest should be applied to the damages award at the prime rate of 3.25 percent compounded quarterly.

As to post-judgment interest, the court found that U.S. statutes mandated that district courts grant interest on money judgments in civil cases based on the Treasury bond rate. Accordingly, the court granted Prism's motion for post-judgment interest, using the weekly average 1-year constant maturity Treasury yield compounded annually.

Denying Prism's second motion, the court found the jury had clearly been instructed to provide Prism complete relief for past, present, and ongoing infringement, including a reasonable royalty for infringement after Sprint's last production of financial information through trial: "[T]he damages you award must be adequate to compensate Prism for the infringement . . . . Your damages award, if you reach this issue, should put Prism in approximately the same financial position that it would have been in had the infringement not occurred." As a result, it concluded the $30 million jury verdict was adequate, an ongoing royalty was not needed, and Sprint need not provide an accounting for its sales of infringing products during that time frame.

The court also found it had discretion to determine whether an ongoing royalty was appropriate and held that ongoing royalties for post-trial infringement were not warranted because the verdict form used by the jury stated that damages should be awarded in the amount of a reasonable royalty—the amount that Sprint would have paid Prism in a hypothetical negotiation for a license—and that the $30 million jury verdict included damages for both past and ongoing infringement.

Strategy and Conclusion

This decision illustrates the importance of obtaining clear jury instructions to avoid potential post-trial accounting disputes and the discretion courts can exercise in awarding damages.

Footnotes

1 The Prism Techs. v. Sprint Spectrum decision can be found at http://www.finnegan.com/files/upload/LES_Insights_Column/2016/PrismTechs_v_SprintSpectrumDNB_8-12-cv00123.pdf.

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