Opinion ID: 856284
Heading Depth: 2
Heading Rank: 1

Heading: jury award

Text: On cross-appeal, Power Integrations asserts error in the district court’s determination that the jury’s original damages award was contrary to law. Accordingly, Power Integrations asks us to reinstate the jury’s original award as supported by both law and evidence. In response, Fairchild makes two separate argu- ments. First, Fairchild argues that the district court correctly determined that the jury’s damages award was based on worldwide sales and thus contrary to law. Second, Fairchild argues that in formulating its award the jury relied on inadmissible expert testimony. POWER INTEGRATIONS v. FAIRCHILD SEMI 36 We first consider whether the jury’s original award has a valid basis in law.
Power Integrations argues that the jury’s original award of worldwide damages was legally appropriate. Specifically, Power Integrations argues that it was foreseeable that Fairchild’s infringement in the United States would cause Power Integrations to lose sales in foreign markets. Thus, Power Integrations argues, the law supports an award of damages for the lost foreign sales which Power Integrations would have made but for Fairchild’s domestic infringement. As legal authority for its position, Power Integrations recites established law that once a patentee demonstrates an underlying act of domestic infringement, the patentee is entitled to receive full compensation for “any damages” suffered as a result of the infringement.5 Gen. Motors Corp. v. Devex Corp., 461 U.S. 648, 654–55 (1983). 5 Our patent damages statute mandates, “[u]pon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty.” 35 U.S.C. § 284 (emphasis added). “Congress sought [by the statute] to ensure that the patent owner would in fact receive full compensation for ‘any damages’ he suffered as a result of the infringement.” Gen. Motors Corp, 461 U.S. at 654–55. Thus, “when a wrong has been done, and the law gives a remedy, . . . [t]he injured party is to be placed, as near as may be, in the situation he would have occupied if the wrong had not been committed.” Albemarle Paper Co. v. Moody, 422 U.S. 405, 418–19 (1975) (quoting Wicker v. Hoppock, 73 U.S. (6 Wall.) 94, 99 (1867)). 37 POWER INTEGRATIONS v. FAIRCHILD SEMI According to Power Integrations, this principle of “full compensation” has no inherent, per se geographical limits. Power Integrations cites this court’s decision in Rite-Hite, where we explained that “[i]f a particular injury was or should have been reasonably foreseeable by an infringing competitor in the relevant market, broadly defined, that injury is generally compensable absent a persuasive reason to the contrary,” 56 F.3d at 1546, and urges us here to incorporate Fairchild’s foreign sales as part of “the relevant market.” Power Integrations’ argument that the broad principles of “full compensation,” extend to cover Fairchild’s worldwide sales is not persuasive. It is axiomatic that U.S. patent law does not operate extraterritorially to prohibit infringement abroad. Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518, 531 (1972), superseded by statute, Patent Law Amendments Acts of 1984, Pub. L. No. 98-622, 98 Stat. 3383 (codified at 35 U.S.C. § 271(f)), as recognized in Microsoft Corp. v. AT&T Corp., 550 U.S. 437 (2007); see also Brown v. Duchesne, 60 U.S. (19 How.) 183, 195 (1856) (“Our patent system makes no claim to extraterritorial effect; these acts of Congress do not, and were not intended to, operate beyond the limits of the United States . . . .” (internal quotation marks omitted)). Even indirect infringement, which can encompass conduct occurring elsewhere, see Merial Ltd. v. Cipla Ltd., 681 F.3d 1283, 1302–03 (Fed. Cir. 2012), requires underlying direct infringement in the United States, Deepsouth, 406 U.S. at 531. Our patent laws allow specifically “damages adequate to compensate for the infringement.” 35 U.S.C. § 284 (emphasis added). They do not thereby provide compensation for a defendant’s foreign exploitation of a patented invention, which is not infringement at all. Brown, 60 U.S. at 195 (“And the use of it outside of the jurisdiction of the United States is not an infringement of POWER INTEGRATIONS v. FAIRCHILD SEMI 38 his rights, and he has no claim to any compensation for the profit or advantage the party may derive from it.”). Power Integrations’ “foreseeability” theory of worldwide damages sets the presumption against extraterritoriality in interesting juxtaposition with the principle of full compensation. Nevertheless, Power Integrations’ argument is not novel, and in the end, it is not persuasive. Regardless of how the argument is framed under the facts of this case, the underlying question here remains whether Power Integrations is entitled to compensatory damages for injury caused by infringing activity that occurred outside the territory of the United States. The answer is no. Power Integrations is incorrect that, having established one or more acts of direct infringement in the United States, it may recover damages for Fairchild’s worldwide sales of the patented invention because those foreign sales were the direct, foreseeable result of Fairchild’s domestic infringement. Power Integrations has not cited any case law that supports an award of damages for sales consummated in foreign markets, regardless of any connection to infringing activity in the United States. To the contrary, the entirely extraterritorial production, use, or sale of an invention patented in the United States is an independent, intervening act that, under almost all circumstances, cuts off the chain of causation initiated by an act of domestic infringement. Cf. Morrison v. Nat’l Australia Bank Ltd., 130 S. Ct. 2869, 2884 (2010) (“But the presumption against extraterritorial application would be a craven watchdog indeed if it retreated to its kennel whenever some domestic activity is involved in the case.”). The district court determined that the jury had “clearly adopted the measure of damages posed by Power 39 POWER INTEGRATIONS v. FAIRCHILD SEMI Integrations expert, Dr. Troxel” in reaching the combined damages award of over $33 million. In view of this determination, the district court correctly concluded that there was “no legal basis that supports the jury award in the amount of $33 million” because Dr. Troxel’s estimate of $30 million in damages was not “rooted in Fairchild’s activity in the United States.” Indeed, Dr. Troxel testified on cross-examination that he did not quantify an amount of damages based on any offer for sale by Fairchild in the United States. We find neither compelling facts nor a reasonable justification for finding that Power Integrations is entitled to “full compensation” in the form of damages based on loss of sales in foreign markets which it claims were a foreseeable result of infringing conduct in the United States. See F. Hoffmann-La Roche Ltd. v. Empagran S.A., 542 U.S. 155, 166 (2004) (finding it unreasonable to apply the law at issue to conduct that is significantly foreign, “insofar as that conduct causes independent foreign harm and that foreign harm alone gives rise to the plaintiff's claim”). We thus reject Power Integrations’ argument that there exists a legal basis sufficient to uphold the jury’s original damages award, which was based on worldwide sales and hold that the district court correctly decided that the jury’s original damages award was contrary to law.
Fairchild additionally challenges the evidentiary basis of the jury’s award, which was based on a damages estimate provided at trial by Power Integrations’ damages expert Dr. Troxel. Dr. Troxel formulated his estimate based on a document describing worldwide shipments of mobile phones during the third quarters of 2004 and 2005. Although the document relates generally to worldPOWER INTEGRATIONS v. FAIRCHILD SEMI 40 wide sales of mobile phones from all vendors, it contains more detailed information for some vendors, including Samsung. Specifically, Dr. Troxel relied on a table in the document that indicates that during the third quarter of 2005, Samsung shipped 26.8 million phones worldwide, up from 22.7 million phones during the third quarter in 2004. Dr. Troxel used the worldwide sales data for Samsung’s mobile phones to estimate sales of the accused power circuits, which Samsung incorporated into its mobile phone chargers. On appeal, Fairchild argues that Dr. Troxel’s testimony was speculative and his data inadmissible. In Fairchild’s view, Dr. Troxel’s methodology suffered from layered assumptions and unwarranted speculation. Fairchild insists that Dr. Troxel made two speculative leaps in his analysis: First, he assumed that each Samsung mobile phone included a charger. Second, he assumed that each of these chargers incorporated an infringing power circuit. Fairchild further argues that the document on which Dr. Troxel relied for Samsung’s sales data was an unauthenticated hearsay “press release” retrieved from the Internet. In sum, Fairchild argues that Dr. Troxel’s testimony, in view of his methodology and data sources, was uniquely unreliable and legally inadmissible. Power Integrations responds that Dr. Troxel’s methodology was reasonable and his data source reliable. According to Power Integrations, Dr. Troxel’s methodology did not require any more speculation than is usually permitted in calculating compensatory damages. Power Integrations further argues that because the document on which Dr. Troxel relied in his expert analysis would be reasonably relied upon by experts in his field, the document need not be independently admissible. 41 POWER INTEGRATIONS v. FAIRCHILD SEMI In determining damages, a jury may rely on expert testimony. 35 U.S.C. § 284. District courts, as gatekeepers, must nevertheless ensure that all expert testimony is rooted in firm scientific or technical ground. Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 589–90 (1993); Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 148 (1999). To that end, the Federal Rules of Evidence require that an expert’s testimony be the product of reliable principles and methods applied to sufficient facts or data. Fed. R. Evid. 702(b),(c). The trial judge must ensure that the expert has “reliably applied the principles and methods to the facts of the case.” Id. at 702(d). Data relied on by the expert “need not be admissible for the opinion to be admitted” if experts in the field would reasonably rely on such data. Fed. R. Evid. 703. The trial judge must have considerable leeway in deciding how to determine whether the expert’s testimony is sufficiently reliable. Kumho Tire, 526 U.S. at 152. Here, Dr. Troxel’s damages testimony was unreliable in several respects. Initially, the source of the documents on which Dr. Troxel relied for his estimate of Samsung’s worldwide sales is unclear. When asked whether the provider of the documents “found [them] off the internet,” Dr. Troxel responded, “I can only assume so.” Power Integrations’ only response to the questionable source of Dr. Troxel’s sales documents is that Dr. Troxel “was a qualified expert, and he found the [documents] and other materials he considered, while researching the case.” We disagree with Power Integrations that the source and reliability of data relied upon by an expert is otherwise immaterial. Our rules of evidence require that an expert’s testimony be “the product of reliable principles and methods” applied to “sufficient facts or data.” Fed. R. Evid. 702(b),(c). Thus, while an expert’s data need not be admissible, the data cannot be derived from a manifestly unreliable source. See Montgomery County v. Microvote POWER INTEGRATIONS v. FAIRCHILD SEMI 42 Corp., 320 F.3d 440, 448 (3d Cir. 2003) (finding expert’s data source unreliable where “some of the things that were shown to [the expert] he didn't seem to know where they were from or what the source of them were”); cf. Emigh v. Consol. Rail Corp., 710 F. Supp. 608, 612 (W.D. Pa. 1989) (“[W]hen the underlying source is so unreliable as to render it more prejudicial than probative, . . . Rule 703 cannot be used as a backdoor to get the evidence before the jury.”). While Dr. Troxel’s data source was unreliable, so was his methodology. Here, Dr. Troxel made two speculative leaps. First, the document on which Dr. Troxel relied for his worldwide damages estimate indicated worldwide shipments of Samsung’s mobile phones. As Dr. Troxel testified, however, the infringing power circuits were found in mobile phone chargers, not in mobile phones. Dr. Troxel’s sales document does not mention chargers or otherwise indicate sales of chargers. His analysis assumed that each of Samsung’s phones shipped with a charger. While Power Integrations is quick to point out that Dr. Troxel’s assumption was not unreasonable, the document relied upon by Dr. Troxel does not specify the nature of the shipments, nor does it provide any reliable link which might indicate that the shipped phones included chargers. Without more, we cannot safely assume that all of these shipments must have included a charger. Dr. Troxel’s second speculative step was when he assumed from his document not only that each of Samsung’s shipments included a charger, but that each of these chargers incorporated an infringing power circuit. Dr. Troxel’s sales document lists no model numbers or other indicia from which he could reasonably infer that chargers assumed to be included incorporated Fairchild’s infringing power circuits. Power Integrations’ Vice President of Worldwide Sales testified at trial that several 43 POWER INTEGRATIONS v. FAIRCHILD SEMI other companies sold competing power circuits to Samsung. Further, Power Integrations retained more than 50% of Samsung’s business. Thus, the data indicate that at least some of Samsung’s chargers could have incorporated the competing power circuits or Power Integrations’ own circuits, which do not infringe. Dr. Troxel had no way to distinguish between infringing and noninfringing chargers, and his assumption that all chargers incorporated an infringing power circuit was speculation. In the end, we are left with an expert opinion derived from unreliable data and built on speculation. Without more, Dr. Troxel’s testimony and data regarding worldwide shipments of Samsung’s mobile phones are too far removed from the facts of this case, which involves Fairchild’s infringing power circuits. Dr. Troxel’s layered assumptions lack the hallmarks of genuinely useful expert testimony. Kumho Tire, 526 U.S. at 156. Such unreliable testimony frustrates a primary goal of expert testimony in any case, which is meant to place experience from professional specialization at the jury’s disposal, not muddle the jury’s fact-finding with unreliability and speculation. For these reasons, we find that the district court abused its discretion in admitting Dr. Troxel’s testimony, which was both unreliable and based on insufficient data. In view of our other holdings in this case, we do not find that the district court’s decision to admit Dr. Troxel’s testimony warrants a new trial.