Bianco v. Globus Medical, Inc.

53 F. Supp. 3d 929, 2014 WL 2980740, 2014 U.S. Dist. LEXIS 89777
District Court, E.D. Texas·Decided July 2, 2014·No. Case No. 2:12-CV-00147-WCB·Published·Cited by 5 cases

Opinion

MEMORANDUM OPINION AND ORDER

WILLIAM C. BRYSON, UNITED STATES CIRCUIT JUDGE

Following the trial in this case, the jury found that defendant Globus Medical, Inc., had misappropriated trade secrets belonging to the plaintiff, Sabatino Bianco, M.D. The trade secrets in question consisted of ideas for the design of a medical device known as an adjustable intervertebral spacer or implant. Intervertebral spacers are used in spinal surgery to replace damaged discs in patients’ spines. In assessing damages, the jury rejected Dr. Bianco’s request for disgorgement of Globus’s profits on the devices that allegedly embodied the misappropriated trade secrets, but. awarded him reasonable royalty damages in the amount of $4,295,760. That sum constituted 5% of the total “net sales” that Globus had earned prior to trial on the three intervertebral spacers that were the subjects of the litigation, the Caliber, Caliber-L, and Rise devices.1

[932]*932In response to post-trial motions, the Court denied Dr. Bianco’s request for a permanent injunction but granted his request that the Court consider an ongoing royalty on the Caliber, Caliber-L, and Rise products in lieu of an injunction (Dkt. No. 269). The Court gave the parties 30 days within which to attempt to agree on an appropriate ongoing royalty rate. When that 30-day period expired, the parties notified the Court that they had reached impasse. The Court then held an eviden-tiary hearing on the issue of the ongoing royalty sought by Dr. Bianco. After analyzing the evidence at trial and at the evidentiary hearing, and after reviewing post-hearing briefs submitted by the parties, the Court now grants Dr. Bianco an ongoing royalty of 5% on Globus’s future sales of its Caliber, Caliber-L, and Rise products for a maximum period of 15 years from July 1, 2007.

I

In patent cases in which a permanent injunction is sought, the Federal Circuit has held that a district court may impose a reasonable royalty on the defendant for future use of the patented invention in lieu of an injunction. Paice LLC v. Toyota Motor Corp., 504 F.3d 1293, 1315 (Fed.Cir.2007); see also Telcordia Techs., Inc. v. Cisco Sys., Inc., 612 F.3d 1365, 1378-79 (Fed.Cir.2010). Before setting an ongoing royalty rate for future infringement, however, the district courts have been instructed to allow the parties time to negotiate an ongoing royalty amongst themselves. See Paice, 504 F.3d at 1315 & n. 15; id. at 1316-17 (Rader, J., concurring); see also Telcordia, 612 F.3d at 1379. If those negotiations fail, the district court is permitted, in the exercise of its discretion and in light of its equitable powers, to assess a reasonable royalty in lieu of an injunction. Paice, 504 F.3d at 1315; see also Presidio Components, Inc. v. Am. Technical Ceramics Corp., 702 F.3d 1351, 1363 (Fed.Cir.2012); Whitserve, LLC v. Computer Packages, Inc., 694 F.3d 10, 35 (Fed.Cir.2012). Although this case involves trade secret misappropriation rather than patent infringement, the two torts are sufficiently analogous that the Federal Circuit’s decision in Paice, as supplemented by cases from the Federal Circuit and from this district that have applied Paice, provide an appropriate starting point for this Court in deciding whether to grant an ongoing royalty and what the amount of . that royalty should be.

The Federal Circuit in Paice stated that calculating a reasonable royalty would be a matter for the sound discretion of the district court, but the circuit court has not had occasion to address in detail how a district court should go about exercising that discretion in setting an ongoing royalty. In Amado v. Microsoft Corp., 517 F.3d 1353 (Fed.Cir.2008), the district court had set a reasonable royalty to be paid by an adjudged infringer during the period that a permanent injunction was stayed pending appeal. The district court in Amado had trebled the royalty found by the jury because, in the district count’s view, any postjudgment infringing conduct would be willful. The Federal Circuit rejected that’ analysis, however, holding that “willfulness ... is not the inquiry when the infringement is permitted by a court-ordered stay.” Id. at 1362. The court of appeals also rejected the defendant’s argument that the royalty rate set for the period of the stay should be the same royalty rate that the jury found for past damages. Id. at 1361-62. Citing Judge Rader’s concurrence in Paice, the court stated that “[tjhere is a fundamental difference ... between a reasonable royalty for pre-verdict infringement and damages for post-verdict infringement.” Id. at 1361. The court noted that once a judg[933]*933ment of patent validity and infringement has been entered against a defendant, the nature of the hypothetical negotiation between the parties is different because much of the uncertainty regarding infringement and patent validity has been resolved. See id. at 1362.

Amado was an unusual case, as it involved an injunction that was issued but was stayed pending appeal. However, in ActiveVideo Networks, Inc. v. Verizon Communications, Inc., 694 F.3d 1312 (Fed.Cir.2012), the court of appeals applied the principles discussed in Amado in a more conventional setting. In that case, the court ruled that Amado’s holding “that an assessment of prospective damages for ongoing infringement should take into account the change in the parties’ bargaining positions, and the resulting change in economic circumstances, resulting from the determination of liability .... applies with equal force in the ongoing royalty context.” Id. at 1343 (internal quotation marks omitted). The ActiveVi-deo court, however, did not offer guidance as to the factors a district court should consider when setting an ongoing royalty or the factors that should lead a district court to depart from the ongoing royalty set by a jury for past damages.

Courts in the Eastern District of Texas have applied the Pa,ice approach to setting ongoing royalty rates in several patent cases. They have consistently looked to the jury’s verdict as the “starting point” for determining postjudgment damages. See, e.g., VirnetX Inc. v. Apple Inc., No. 6:13-cv-211, slip op. at 5 (E.D.Tex. Feb. 25, 2014), ECF No. 53; Internet Machs. LLC v. Alienware Corp., No. 6:10-cv-23, 2013 WL 4056282, at *19 (June 19, 2013); Mondis Tech. Ltd. v. Chimei InnoLux Corp., 822 F.Supp.2d 639, 645-46 (E.D.Tex.2011); Affinity Labs of Texas, LLC v. BMW N. Am., 783 F.Supp.2d 891, 900 (E.D.Tex.2011). They have then addressed how the changed circumstances would affect the royalty rate selected for purposes of calculating future damages. In so doing, the courts have often used the so-called Georgia-Pacific

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Bianco v. Globus Medical, Inc., 53 F. Supp. 3d 929, 2014 WL 2980740, 2014 U.S. Dist. LEXIS 89777 (E.D. Tex. 2014).

53 F. Supp. 3d 929 (Bianco v. Globus Medical, Inc.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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