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Finisar Corp. employs dozens of Ph.D.-level scientists to create technology for its high-speed data communication components and testing business, but one of the company’s most lucrative inventions may be a patent outside of its core business that generated a court victory worth $117.3 million last year. In June 2006, the Sunnyvale, Calif.-based Finisar won a $78.9 million jury verdict in a patent infringement case against broadcast satellite company The DirecTV Group Inc. of El Segundo, Calif. Although appeals are in the works, fines are racking up, including a judge’s $25 million enhancement for willful infringement and $13.4 million for prejudgment interest, post-judgment interest and a compulsory license. Finisar Corp. v. DirecTV Group Inc., No. 05-00264 (E.D. Texas). Amid a worldwide market expansion for technology products, the Finisar case is one of a burgeoning number of blockbuster verdicts in intellectual property cases. These verdicts exceeded $1.3 billion in 2006, according to VerdictSearch, an affiliate of the NLJ, and our own research. There’s a direct correlation between intellectual property jury verdicts and the importance of the technology protected by the patent, said Eric Maschoff, a shareholder at Workman Nydegger of Salt Lake City, who served as Finisar’s lead patent prosecution counsel on the case. “Companies are looking more and more towards their intellectual property portfolio as an asset, and they’re exploiting that asset,” Maschoff said. Lawyers report that the sheer market size of high-technology products based on the patents in those portfolios can lead to massive infringement verdicts. Companies’ rising inclination to bring such cases to trial, and the emergence of high-tech courtrooms that enable the use of animation and other visual aids, also boost the possibility of gargantuan verdicts. The verdict in Finisar was much lower than Finisar’s requested $1.7 billion, an amount representing 3% of its gross revenue during the alleged infringement period of about six years, said DirecTV’s lead trial lawyer, Victor Savikas, a partner in Jones Day’s Los Angeles office. Savikas also noted the link between a company’s sales and a jury verdict in a patent infringement case. “Successful businesses generate lots of money and become big targets,” he said. “DirecTV has millions of subscribers and the damage period is a six-year time span. Creative plaintiffs get a chance to put lots of numbers in front of the jury.” Similarly, annual sales of tens of millions of dollars in the dynamic random access memory (DRAM) computer memory chip market was a factor in Rambus Inc.’s $306.9 million jury verdict against Hynix Semiconductor Inc., said Rambus lawyer Gregory Stone, of Los Angeles-based Munger, Tolles & Olson. The Los Altos, Calif.-based Rambus develops and licenses DRAM while Hynix, of Icheon, Korea, makes DRAM chips. Hynix Semiconductor Inc. v. Rambus Inc., No. 00-20905 (N.D. Calif.). Even after the judgment was reduced on remittitur, Hynix still owes $133.6 million. Another phase of the trial is under way, so it’s too soon for an appeal. “My case reflects a very large industry being involved in a series of problems, from price-fixing to patent infringement,” Stone said. As of December, the U.S. Department of Justice had fined companies in the DRAM industry more than $732 million for price-fixing. Hynix lawyer Daniel Furniss of the Palo Alto, Calif., office of San Francisco-based Townsend and Townsend and Crew agreed that DRAM’s “huge royalty base” played a role in the numbers. “There’s DRAM in every computer in the world,” Furniss said. “Every computer has at least five and more likely 15 or 20. You have a large base.” A global market and colossal sales of technology products are part of the story. A willingness to take disputes all the way through a trial is another factor, said Larry Laycock, a Workman Nydegger partner who led Finisar’s trial team. Earlier in his career, Laycock saw many cases like Finisar settle before trial. “The rise in the number of large verdicts is due to the number of cases wending their way to trial,” he said. Finisar, for example, decided several years ago to develop its patent portfolio to protect its technology development, and a court case is the next step in that process, said Maschoff. “The [case against] DirecTV is an example of seeing some advantage come out of Finisar’s effort,” he said. “They’re able to use the court system as a means to do that.” Litigation goes through cycles, said Ernie Brooks, president of Southfield, Mich.-based intellectual property boutique Brooks Kushman. Antitrust verdicts were common in the 1960s and 1970s, but today they’re rarely seen. These days, the culture is receptive to intellectual property litigation. “It’s a question of cultural or societal set of conditions and what legal barriers are in sync and supported by the culture,” he said. Brooks’ team won a $115 million verdict against Microsoft Corp. of Redmond, Wash., and $18 million against San Rafael, Calif.-based software company Autodesk Inc. for z4 Technologies Inc., an anti-piracy technology company. Microsoft’s verdict has since been enhanced by $25 million for willful infringement, and the Commerce Township, Mich.-based z4 reached a confidential settlement with Autodesk. z4 Technologies Inc. v. Microsoft Corp., No. 06-00142 (E.D. Texas). Although verdicts of more than $10 million are increasingly common, Professor Paul Janicke at the University of Houston Law Center, who has tracked jury verdicts in the Eastern District of Texas, concluded that tales of runaway patent juries are “strictly anecdotal.” Janicke has seen plenty of verdicts below $3 million, including some below $1 million. Janicke is studying intellectual property verdicts at such top jurisdictions as the Central and Northern districts of California and the Eastern District of Texas, along with Delaware, a lower-ranked but popular East Coast venue. “My feeling is that [verdict averages are] a lot lower than the financial press has been suggesting,” Janicke said. Because ending the infringement is often the chief objective, many companies file patent infringement cases soon after a violation begins. Quick filings produce small accumulated damages, he said. “For ongoing business entities, the injunction is what is mainly moving them,” Janicke said. In Finisar’s case, the patent covering data transmission via satellite was invented during the company’s startup days, but the company never commercialized the technology. Finisar offered licenses to DirecTV’s predecessor company and then DirecTV when it learned of the infringement, Laycock said. Finisar has grown into a public company with $364.3 million in annual sales, and enforcing the patent through the courts was “the right thing to do for its shareholders,” Laycock said. Using plain, everyday language is key, said one of Texas Instruments Inc.’s trial lawyers, Liza Walsh of Roseland, N.J.-based Connell Foley. In a case against GlobespanVirata Inc., the team for Dallas-based Texas Instruments used visuals that depicted digital subscriber line (DSL) signals, which are used for high-speed Internet service, as trucks and cars passing each other in lanes. The visuals helped Texas Instruments seal a $112 million infringement verdict against GlobespanVirata, which was acquired by Newport Beach, Calif.-based Conexant Systems Inc. before the trial, said Walsh, who served as co-counsel on the case with Heller Ehrman attorneys. GlobespanVirata Inc. v. Texas Instruments, No. 03-02854 (D.N.J.). “If I had any advice it would be make it simple, through plain speaking, plain language, and reduce the technology to something everyday men and women understand,” Walsh said.

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