Prism Technologies LLC v. Sprint Spectrum L.P.
849 F.3d 1360
| Fed. Cir. | 2017Background
- Prism sued Sprint for infringement of U.S. Patent Nos. 8,127,345 and 8,387,155, patents covering methods/systems for authenticating and authorizing access over an “untrusted” Internet Protocol network; claims require an access server, authentication server, and client.
- The district court construed “Internet Protocol network” to mean an untrusted network (e.g., the Internet) with “no controlling organization” and an undefined path to access the network.
- Prism tried multiple suits against wireless carriers; an AT&T trial settled on the last day, producing a settlement agreement later introduced at the Sprint trial.
- At trial against Sprint the jury found infringement and awarded $30 million in reasonable-royalty damages; Sprint moved for JMOL/new trial and Prism sought additional ongoing royalties for post-2014 infringement; the district court denied both motions.
- On appeal, Sprint challenged: (1) allowance of Prism expert testimony construing the claim term, (2) admission of the AT&T settlement, (3) the district court’s legal standard for a new trial, and (4) Prism’s cost-savings damages model. Prism cross-appealed the denial of an accounting/ongoing royalty for post-verdict infringement.
- The Federal Circuit affirmed: expert testimony was consistent with claim construction and properly left factual questions to the jury; the AT&T settlement was admissible under Rule 403 given its probative value and context; the cost-savings damages evidence was legally sufficient; and the jury award could reasonably be read to cover future/ongoing infringement.
Issues
| Issue | Prism's Argument | Sprint's Argument | Held |
|---|---|---|---|
| Admissibility of expert testimony modifying claim construction | Expert testimony that Sprint’s aggregated backhaul networks are an “untrusted” IP network fits the court’s construction and patent disclosure. | Testimony improperly modified court’s claim construction (no single controlling org; path through network vs path to access). | Affirmed: testimony consistent with construction and the factual question of whether Sprint’s networks fit that construction was for the jury. |
| Admission of AT&T settlement into damages evidence | Settlement probative of patent value; admitted with supporting evidence attributing value among patents and comparability to Sprint. | Settlement prejudicial/misleading under Fed. R. Evid. 403 and categorically inadmissible (Rude/Rule 408). | Affirmed: district court did not abuse discretion under Rule 403; Sprint forfeited categorical Rule 408/Rude arguments by not timely raising them and by seeking admission of other settlement licenses. |
| Sufficiency/legal standard applied in motion for new trial | District court properly reviewed alleged errors and weighed evidence; no reversible legal error shown. | Court applied wrong legal standard or ignored legal-error arguments. | Affirmed: no showing of harmful legal error; opinion adequately reflected consideration. |
| Admissibility/weight of cost-savings damages model (reasonable royalty) | Damages based on Sprint’s avoided costs (building private backhaul) are tied to the patented technology and hypothetical negotiation; leasing costs were a reasonable proxy for cost savings. | Model not tied to invention’s footprint; leasing costs unreliable measure of savings. | Affirmed: cost-savings approach is a recognized method; experts’ bases (experience, industry studies, Sprint testimony) supported jury verdict. |
| Prism’s request for accounting/ongoing royalties post-verdict | Jury award did not cover ongoing infringement; district court erred in denying additional relief. | Jury award reasonably could cover past, present, and ongoing infringement (e.g., one-time fully paid license). | Affirmed: district court reasonably interpreted the verdict as including compensation for future/ongoing infringement; no basis to disturb that characterization. |
Key Cases Cited
- Gen. Elec. Co. v. Joiner, 522 U.S. 136 (expert-evidence rulings reviewed for abuse of discretion)
- Daubert v. Merrell Dow Pharm., 509 U.S. 579 (1993) (federal evidentiary-law framework for expert testimony)
- Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999) (expert testimony may be based on specialized experience)
- O2 Micro Int’l Ltd. v. Beyond Innovation Tech. Co., 521 F.3d 1351 (Fed. Cir.) (judge’s duty in claim construction v. jury questions)
- AstraZeneca AB v. Apotex Corp., 782 F.3d 1324 (Fed. Cir.) (admissibility of licenses/settlements in valuing patents)
- LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51 (Fed. Cir.) (use of settlement licenses in damages analysis)
- Rude v. Westcott, 130 U.S. 152 (1889) (early caution on using litigation-induced licenses as an "established royalty")
- Paice LLC v. Toyota Motor Corp., 504 F.3d 1293 (Fed. Cir.) (ongoing royalty in lieu of injunction)
- Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301 (Fed. Cir.) (hypothetical negotiation and reasonable-royalty principles)
- Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292 (Fed. Cir.) (need to tie damages to the footprint of the invention)
- Telcordia Techs., Inc. v. Cisco Sys., Inc., 612 F.3d 1365 (Fed. Cir.) (district court’s discretion to interpret ambiguous verdict forms)