Damage Award of $5 Million Upheld Where Plaintiff Submitted Expert Testimony of Running Royalty Rate and Jury Was Not Required to Adopt Either of the Parties Royalty Calculations

Plaintiff, Imaginal Systems, LLC ("Imaginal") filed a patent infringement action against Leggett & Platt, Inc. ("Leggett") and Simmons Bedding Company ("Simmons") over three patents, which pertain to automatic stapling machines and a method of manufacturing box spring mattresses. The district court ruled on summary judgment that Imaginal's patents were valid and that the defendants directly infringed the patents. The district court subsequently held a bench trial on issues of willfulness and equitable defenses. After the district court concluded that the infringement was not willful and rejected the equitable defenses, the district court conducted a jury trial on the issue of damages and the jury returned a $5 million verdict in plaintiff's favor.

As the district court explained, "[a]t trial, Plaintiff asked for a damages award based on a running royalty. According to Plaintiffs expert, a reasonable royalty in this case was $15,933,037 as of the end of 2011. Defendants, on the other hand, argued that a running royalty for an automatic stapling machine is not prevalent in the bedding industry and asked the jury to limit the damages award to $296,621. The jury returned a verdict of $5,000,000 in Plaintiff's favor."

After the jury verdict, Defendants filed a motion for a judgment as a matter of law and a motion for new trial. In making these motions, the defendants argued that Imaginal failed to sustain its burden of proving damages because its methodology was not supported by substantial evidence and because Imaginal improperly included cost savings in the royalty calculation to seek to recover multiple royalties. With respect to substantial evidence, the district court explained that: "During trial both parties offered expert testimony and presented extensive evidence in support of their respective damages theories. On multiple occasions during trial, the jury heard from Plaintiff, Defendants, and their experts about the prevalence and propriety of using a running royalty in the bedding industry for automatic stapling machines. The jury also learned that Plaintiff's expert applied the same increase in profitability rate to both Semi-Flex grids and Vertex staples sales without conducting separate experimentations. The jury then had a chance to weigh this evidence, assess the credibility of the parties' expert witnesses, and decide on a reasonably royalty."

Based on this evidence, the district court noted that it was acceptable for the jury to...