On April 17, 2024, a second Texas jury assessed damages of $142 million against Samsung, more than doubling a previous jury award of $67.5 in a protracted standard essential patent (SEP) litigation brought by G+ Communications. The outcome serves as a cautionary tale to implementers and useful guidance for SEP owners. For implementers, the nine-figure award underscores Judge Gilstrap’s pre-trial ruling that we covered in January of this year and offers a warning to implementers who may “hold out” or lack good faith in FRAND licensing negotiations. The present case confirms that an implementer’s bad faith negotiating tactics can allow a patent-holder to suspend its FRAND licensing obligations, and it demonstrates that an implementer’s decision not to take a license in a FRAND negotiation can be a costly strategy—evidenced by Samsung’s exposure to more than double the damages it previously faced. For SEP owners, Judge Gilstrap’s order of a new trial on damages, and accompanying commentary, should be heeded as an instructive reminder to clearly articulate to the jury the amount—and type—of damages being sought for infringement of SEPs. Failure to do so might warrant a retrial on damages.

Background

In January 2024, G+Communications, LLC (“G+”) tried its patent infringement claims on three of its SEPs related to the 5G telecommunications standard against Samsung to a jury in Marshall, Texas. Following a five-day trial, the jury found that Samsung infringed two of the asserted patents. The jury awarded G+ $67.5 million in damages, which potentially equated to a running royalty of $1.50 per unit. 

Later, though, Judge Gilstrap sua sponte ordered a retrial on damages alone. He concluded that the parties failed to educate the jury on the difference between “running royalty” and “lump sum” damages, making it impossible to determine what type of damages the jury awarded—it was, he wrote, a “guaranteed train wreck” to let the initial damages award stand. After a two-day retrial, and less than three hours of deliberation, the jury returned a verdict of $142 million in lump sum damages. 

Takeaway

While Samsung is sure to appeal, the retrial verdict on damages both cements Judge Gilstrap’s recognition that FRAND negotiations are a two-way street and represents a positive development for SEP-holders in the continually evolving FRAND landscape. Not only does it establish that implementers must negotiate in good faith, but it also shows that American juries are willing to award substantial damages for infringement of SEPs in the face of implementer recalcitrance. Regardless of whether the initial damages award was meant to be a “running royalty” or “lump sum,” the nine-figure retrial damages award is significant—especially since it serves as redress for infringement of only two patents. Further, Judge Gilstrap’s sua sponte order of a new trial on damages is a useful reminder for SEP-holders (and any patent plaintiff, for that matter) that they should carefully and clearly present their damages theories, and more explicitly ask the jury to answer specific damages questions, or risk retrial and/or the loss of a running royalty for infringement.

Interestingly, following the jury’s verdict this time, Judge Gilstrap (again sua sponte) ordered the parties back to mediation to “resolve their remaining disputes” and made clear that “[n]o party or representative shall leave the mediation session, once it begins, without the approval of the mediator.” This should signal to parties involved in SEP negotiations that, at least in Judge Gilstrap’s court, good-faith negotiating is mandatory and will be enforced. 

Broadly speaking, this outcome edifies that US District Courts are a viable path to large damages awards for SEP owners as redress for the unwillingness of implementers to negotiate—much less license—under FRAND terms. Further, the outcome demonstrates that implementers’ conduct in FRAND negotiations is open for scrutiny and may, if found to lack good faith, justify suspending the SEP owners’ own FRAND obligations. This all suggests that SEP owners would do well to strongly consider US District Courts as a strategic component to any global effort to address infringement by “hold-out” implementers.

For more insights on SEP licensing and litigation, including the issues of ‘hold out’ and ‘hold-up’, see Mintz’s previous articles: here and here.