Federal Judiciary

Breaking News on QPSX v. Nortel - Remittitur Granted From $28 million to $11.82 million.

By Michael Smith

    In April of last year, a Marshall jury in Judge Ward's court found for the plaintiff in QPSX Development 5 PTY LTD v. Nortel, et al., 2:05cv268.  Nortel was the only defendant remaining at trial, and the jury found infringement, willful, and no on invalidity.  Damages awarded were $28.1 million. 
    Today we got a post-mortem on this very interesting case when Judge Ward issued his ruling on Nortel?s Renewed Motion for Judgment as a Matter of Law, Motion for New Trial and Motion for Remittitur and Brief in Support.  He granted the motion for remittitur, reducing the award from $28 million to $11.82 million, enhanced the latter number by a factor of 1.7, and denied the motion in all other respects. 
    Judge Ward concluded that there was sufficient evidence of direct and indirect infringement, and similarly that there was sufficient evidence to support the jury's finding of willful infringement.  He noted that Nortel failed to request that the jury be instructed to apply a higher standard of proof. See In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007) (en banc). Moreover, Nortel did not raise any objections to the court?s proposed instructions on willfulness during the formal charge conference, therefore Judge Ward evaluated the sufficiency of the evidence in light of the instructions given to the jury.  (Ed.note - ouch!)  Next up was the issue of how much to enhance the damages.  Judge Ward wrote:

Though not all of these factors weight in favor of enhanced damages, a substantial number of them support increasing the jury?s damage award. Specifically, the duration of Nortel?s infringement and the lack of any evidence that it attempted to avoid infringement weigh heavily in favor of enhanced damaged. Furthermore, this case was not close on either the issues of infringement or invalidity. Therefore, the court finds that a multiplier of 1.7 should be applied to the jury?s award in light of Nortel?s willful infringement.

On invalidity, Judge Ward again found that there was sufficient evidence of the effective filing date.  But here as well Nortel had charge problems.  QPSX argued that Nortel waived any entitlement to JMOL on the issue of invalidity by failing to move for JMOL during trial. Judge Ward agreed with QPSX that Nortel waived entitlement to move for JMOL on invalidity, but addressed the merits of Nortel?s motion anyway.
    Finally, on damages, Nortel argued that there was legally insufficient evidence to support the jury?s damage award because (1) the lack of evidentiary support to support the $28 million award, (2) the royalty base was overly inclusive with respect to time, (3) the royalty base was overly inclusive with respect to products sold, and (4) the verdict was excessive and the product of passion and prejudice.
QPSX argued that the jury?s award was supported by industry licenses of record, but Judge Ward noted that the record was unclear as to any correlation between these industry licenses and the specific technology covered by the ?499 patent. "After considering the evidence as a whole," Judge Ward wrote, "the court agrees with Nortel that the jury?s award of $28 million was against the great weight of the evidence. The court remits the damage award to $11.82 million, the largest amount supported by the evidence. This court will allow the ?plaintiff the option of a new trial on damages or the remitted damages award.? (citation omitted) The plaintiff has seven (7) days from entry of this order to notify the court of its election. In light of the willfulness finding, discussed above, the court would multiply the remitted damages of $11.82 million by 1.7. The court rejects the remaining arguments raised by Nortel relating to damages."
    Nortel next argued that the court?s supplemental claim construction order during trial was extremely prejudicial, and pointed out that it did not have a non-infringement expert witness to examine on this ?new? construction. "As an initial matter," Judge Ward wrote, "it was the arguments made by Nortel at trial that necessitated a clarification to the court?s January 10, 2007 claim construction order. Moreover, Nortel made a litigation decision to not retain an expert to offer a non-infringement opinion, rather it chose to rely on the testimony of Lucent?s expert. Once Lucent settled the case, Nortel?s litigation strategy left it without a retained expert to testify on its behalf. Therefore, the court fails to see the prejudice to Nortel."  (Emphasis added).  Nortel next argued that the court improperly limited the testimony of Norman Kummer by precluding  Kummer from providing lay opinion and overly constricting his factual testimony. Judge Ward stood by his rulings during the course of the trial. "Lacking a retained expert to testify to non-infringement, Nortel attempted to elicit expert opinions from a lay witness. Kummer was not identified as an expert witness and did not file an expert report; therefore, the court properly precluded his opinion testimony." As to Kummer?s factual testimony, Nortel  ran into yet another preservation of error issue - it did not provide an offer of proof as to the evidence the court excluded. "Without such an offer, this court is unable to determine if the exclusion of Kummer?s testimony was in error or prejudicial." Judge Ward concluded.
    I added the emphasis on the latter to reinforce an important aspect of this trial that most observers would not have been aware of at the time - I knew about it because I was representing another defendant in the case and spoke with various lawyers during the case about how the evidence was coming in.  On the eve of trial, all the other defendants settled, and Nortel had not retained any experts to testify on its behalf - it tried to respond by eliciting expert testimony from a lay witness, which Judge Ward would not permit, since the witness had nowhere provided a disclosure of what opinions he was offering.  I did not know about the preservation of error issues Judge Ward refers to during trial, but obviously they raise some interesting issues as well.

Full post as published by Eastern District of Texas Federal Court Practice on March 18, 2008 (boomark / email).