Laserdynamics, Inc. v. Quanta Computer, Inc.
694 F.3d 51
| Fed. Cir. | 2012Background
- LaserDynamics owns U.S. Patent No. 5,587,981 directed to automatic optical disc discrimination identifying disc type (e.g., CD vs DVD) in optical disk drives; claim 3 is representative.
- The accused devices are Quanta Computer, Inc. (QCI) and Quanta Storage, Inc. (QSI) whose laptops and drives allegedly infringe the method in claim 3.
- Industry context: by the early 2000s, automatic disc discrimination became standard in ODDs and laptops, making the patented function valuable.
- LaserDynamics relied on a damages theory using a running royalty based on the entire laptop sale, supported by a large licensing history with numerous lump-sum licenses; BenQ’s 2006 settlement license of $6 million was admitted.
- Two trials occurred: first damages verdict of about $52 million was remittitur/retrial ordered due to improper use of the entire-market-value rule; second trial awarded $8.5 million, leading to remand for damages with a 2003 hypothetical negotiation date and other fixes.
- LaserDynamics later pursued damages not covered by an implied license, leading to a remand on damages for those ODDs not licensed through Philips/Sony-NEC/Optiarc, with BenQ excluded on remand and caps on the 6% running-royalty theory.
- Note: The opinion affirms-in-part, reverses-in-part, and remands on multiple patent-law and damages issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Hypothetical negotiation date for damages | LaserDynamics argues date should reflect first infringement (2003) for active inducement. | QCI argues August 2006 as the correct date based on patent knowledge. | The court remands with a 2003 date for damages analysis. |
| Entire market value rule appropriateness | LaserDynamics maintains 2% of laptop revenues is proper under EMVR. | QCI contends EMVR not satisfied and apportionment unreliable. | EMVR improperly applied; remand for damages on the 2003 date with correct apportionment. |
| Implied license to assemble laptops via Philips/Sony licenses | LaserDynamics licenses through Philips/Sony grant implied license to assemble ODDs. | QCI contends no implied license for drives manufactured by QSI; urges patent exhaustion issues. | Court holds there is an implied license; otherwise, patent exhaustion arguments need not be reached. |
| District court jury instruction at trial | Instruction about witness inconsistency prejudiced QCI. | Instruction was within trial court’s discretion to address credibility. | Not plain error; remand does not hinge on this alone, but keep watch for consistency on remand. |
| Admission of BenQ settlement into evidence | BenQ license is probative of reasonable royalty. | Settlement licenses are highly prejudicial and potentially unreliable for damages. | District court abused its discretion admitting BenQ license; exclude on remand. |
Key Cases Cited
- Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538 (Fed. Cir. 1995) (entire-market-value rule limits damages to patented feature impact on multi-component products)
- Lucent Technologies, Inc. v. Gateway, Inc., 580 F.3d 1301 (Fed. Cir. 2009) (scope of EMVR; tiny features do not drive demand for entire product)
- Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292 (Fed. Cir. 2011) (limits of using low royalty rates with EMVR; need proper comparability)
- ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860 (Fed. Cir. 2010) (limits on using unrelated licenses to inflate royalty rates)
- Wordtech Sys., Inc. v. Integrated Networks Sols., Inc., 609 F.3d 1308 (Fed. Cir. 2010) (requires tying damages to the patent’s market footprint; avoid arbitrary licenses)
- Cyrix Corp. v. Intel Corp., 77 F.3d 1381 (Fed. Cir. 1996) (Have-made/sell rights analyzed to avoid shams; legitimate transfer arrangements)