(Bloomberg) -- A federal judge tossed a $506.2 million damages award against Apple Inc. after ruling the iPhone maker should have been able to argue that patent owner Optis Wireless Technology was making unfair royalty demands, though he refused to throw out the liability finding.
Optis and its partners in the case, PanOptis Patent Management and Unwired Planet LLC, claimed that Apple’s smartphones, watches, and tablets that operate over the LTE cellular standard were using its patented technology.
U.S. District Court Judge Rodney Gilstrap said the jury should have been allowed to consider whether the royalty demand was consistent with a requirement that standard-essential patents be licensed on “fair, reasonable and non-discriminatory,” or FRAND, terms.
The patent trial in August, one of the few held during the pandemic, was part of an unusual sweep of verdicts in Texas that collectively resulted in $3.7 billion in damages against tech companies like Apple and Intel Corp. Apple was also hit with damages awards of $502.8 million in a decade-long battle over security communications technology, and $308.5 million in a case over digital rights management.
The Optis case involves technology the company claims is critical to implementation of the 4G communications standard. Debates over how to value patents on so-called “standard-essential technology” have been roiling the tech industry for decades, and made even more imperative as wireless inventions are incorporated in new consumer products, like home appliances and automobiles.
Apple argued that the entire trial in the Optis case was tainted because the jury wasn’t told of the patent owner’s licensing obligations. The issue wasn’t brought before the jury because Optis asked that the judge, not the jury, to determine whether it was compliant with its FRAND requirements.
Companies that get together to ensure devices are interoperable get the advantage of ensuring that their inventions are included in the standard. As a result, they pledge to license any relevant patents on “fair, reasonable and non-discriminatory,” or FRAND, terms, a phrase that’s never clearly defined and has led to lawsuits and regulatory investigations around the world.
Gilstrap criticized both sides for “intentional decisions” before the trial. Optis sought to tell the jury that Apple was an unwilling licensee without putting its own actions before the jury, Gilstrap said. At the same time, he criticized Apple for failing to object and being “wholly mute” because it didn’t want the jury to hear “potentially harmful evidence” regarding its positions during licensing negotiations.
After hearing post-trial arguments, Gilstrap said he’s “persuaded that the FRAND-compliance of the damages awarded by the jury has legitimately been called into question.”
“In large part because of the conscious acts of both parties, the court now finds itself left with a very large damages award made as to SEPs where the jury never heard the acronym FRAND or heard evidence about how that concept impacted a fair damages award in this case,” Gilstrap said.
Gilstrap, however, said a trial on liability “is neither necessary nor warranted.”
Officials and lawyers for Apple and Optis didn’t immediately return queries seeking comment.
Apple shares rose about 1.8% in early trading on Thursday as part of a broad advance in U.S. stocks.
The case is Optis Wireless Technology v. Apple Inc., 19-66, U.S. District Court for the Eastern District of Texas (Marshall).
(Updates with details of judge’s ruling beginning in sixth paragraph.)
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