Just this afternoon, a Tyler, Texas jury decided that four different claims of US Patent 7,606,739 were infringed by Hyundai, and none of the claims were proven invalid by clear and convincing evidence. The jury awarded damages to patent owner Clear With Computers in excess of $11.5 MM. Marc Fenster of Russ August & Kabat, representing Clear With Computers, handily defeated a high-priced trial team from national firm Winston & Strawn, including Gene Schaerr and Pete McCabe. Fenster delivered what was described to me by a frequent court watcher as “the best closing I have ever heard,” which just shows that a successful patent owner needs the right lawyer, not the biggest lawfirm. The bell-ringing jury verdict form is embedded below, but there’s much more to this story than just the happy ending.
About a year ago, Winston & Strawn attorneys bragged about driving Hyundai to victory in an appeal over a patent case “controlled by well-known ‘patent troll’ Erich Spangenberg.” Then again, what can you expect from someone who creates a 56-page presentation to convince clients that paying for their expensive legal service is a better option than negotiating a fair and reasonable license fee? Winston’s advice includes such remarkable statements such as “Find Uncited Prior Art” and “Choose Witnesses That Will Appeal To Your Jury Pool” and concludes by instructing the audience “Don’t Feed the Troll!”
Of course, attorneys who resort to bush league name-calling tactics only do so because they’re incapable of making rational arguments. A lawyer that relies on biases over reason has no business litigating, and the results of this week’s trial between Hyundai and Clear With Computers show exactly that. Despite bragging about a 71% “success rate” against “trolls”, a client can easily stay away from the other 29% but still suffer consequences, as Hyundai has just experienced.
A safe bet?
The patent Hyundai was found to infringe today is a continuation of a patent that Hyundai was found not to infringe back in 2005. At the time, the investment in legal defense probably seemed wise, but only a license agreement presents certainty. Since 2005, not only did CWC obtain a new patent with broader claims, but Hyundai also introduced new infringing products not at issue during the original trial. Had Hyundai taken a license years ago, this week’s trial and its $11.5 MM verdict would never have happened.
Following their own advice?
Winston recommends choosing witnesses that appeal to your jury pool, yet according to a source, it paid retired Texas A&M professor Ray Mercer more than $400,000 to testify as an expert. Professor Mercer truthfully testified that he spent no less than 35 days in a conference room with Winston & Strawn lawyers in order to write his expert report. Meanwhile, CWC expert witness, Tom Rhyne wrote his own report (as he always does), and billed nearly 1/10th the amount paid to Mercer.
In addition to Rhyne, the jury heard from Dallas residents Audrey and Erich Spangenberg, who explained CWC’s business and their views on patent licensing. Also testifying for CWC was inventor Jerome Johnson, a Mankato, Minnesota resident (population 36,500).
How’s this for a “simple” jury theme?
Again, a source reveals that in addition to the $400,000 paid to Mercer, testimony revealed another $600,000 went to Winston’s retained “validity” expert, and $350,000 to its damages expert. Without considering what Winston’s lawyers were paid, well over a million dollars was spent on expert witnesses. Yet (with a straight face, presumably) Winston’s lawyers told the jury that an appropriate amount of a reasonable royalty was about $300,000.
So can Winston “appeal successfully” for its client?
Not for free, obviously. But consider how the defense handled the damages case. The evidence suggested that Hyundai had accumulated roughly 20 million “clicks” on the infringing web-based proposal functionality, and CWC argued that a fair royalty rate was between $0.30 and $0.50 per click. Yet the jury awarded CWC $0.56 per click to arrive at its $11.5 MM figure. Where in the world did they get $0.56 per click?
During deliberation, the jury asked for a copy of a demonstrative chart shown to it during one of the party’s damages presentations. There were two charts used that fit the bill: one showing the $0.30-$0.50 royalty range they were asking for. The other showed pay per click rates actually paid by CWC for advertising services ranging between $0.29 and $5 per click! A source confirms that Hyundai objected to the first demonstrative, but agreed to the one demonstrating the higher pay per click range. Evidently $0.56 was one of the cost per click rates on that particular slide, but Hyundai is very fortunate the jury didn’t select a number closer to the $5 rate.
Meanwhile, I’ll wait for the press release from the law firm that never hesitates to publicly pat itself on the back when it wins … as for Hyundai, if it plans to keep the same folks behind the driver’s seat, for their sake I hope they buckle up.