Case 1:19-cv-01410-MN Document 341 Filed 12/12/24 Page 1 of 9 PageID #: 13106
`
`VB ASSETS, LLC,
`
`
`
`
`
`AMAZON.COM SERVICES LLC,
`
`
`
`
`
`v.
`
`
`
`
`
`
`
`
`
`Plaintiff,
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
`
`)
`)
`)
`)
`)
`)
`)
`)
`)
`
`
`
`
`
`C.A. No. 19-1410 (MN)
`
`Defendant.
`
`
`MEMORANDUM OPINION
`
`
`
`Neal C. Belgam, Jason Z. Miller, SMITH, KATZENSTEIN & JENKINS LLP, Wilmington, DE; James
`C. Yoon, Ryan R. Smith, WILSON SONSINI GOODRICH & ROSATI P.C., Palo Alto, CA; Matthew A.
`Macdonald, Jamie Otto, Alexander J. Turner, WILSON SONSINI GOODRICH & ROSATI P.C., Los
`Angeles, CA; Bradley T. Tennis, WILSON SONSINI GOODRICH & ROSATI P.C., Washington, DC;
`Mikaela E. Evans-Aziz, WILSON SONSINI GOODRICH & ROSATI P.C., San Francisco, CA –
`Attorneys for Plaintiff.
`
`Steven J. Balick, Andrew C. Mayo, ASHBY & GEDDES, P.A., Wilmington, DE; J. David Hadden,
`Ravi R. Ranganath, Vigen Salmastlian, Saina S. Shamilov, FENWICK & WEST LLP, Mountain
`View, CA – Attorneys for Defendant.
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`December 12, 2024
`Wilmington, Delaware
`
`

`

`Case 1:19-cv-01410-MN Document 341 Filed 12/12/24 Page 2 of 9 PageID #: 13107
`
`NOREIKA, U.S. DISTRICT JUDGE:
`
`
`
`Presently before the Court is Plaintiff VB Assets, LLC’s post-trial motion for an ongoing
`
`royalty. (D.I. 300).1 For the reasons that follow, the Court will award Plaintiff an ongoing royalty
`
`of $0.25 for the ’176 and ’097 patents per net new Alexa shopping user, and $0.45 for the’681
`
`patent per net new Alexa user.
`
`I.
`
`BACKGROUND
`
`The Court presided over a five-day jury trial from November 2, 2023 to November 8, 2023.
`
`(See D.I. 303-307 (“Tr.”)). At trial, Plaintiff VB Assets, LLC (“Plaintiff” or “VB Assets”) alleged
`
`that Amazon.com Services LLC (“Defendant” or “Amazon”) infringes claim 13 of U.S. Patent No.
`
`8,073,681 (“the ’681 patent”), claim 25 of U.S. Patent No. 9,626,703 (“the ’703 patent”), claim 40
`
`of U.S. Patent No. 7,818,176 (“the ’176 patent”) and claim 23 of U.S. Patent 9,269,097 (“the ’097
`
`patent”) (collectively, “the asserted claims”). At the end, the jury found that Amazon willfully
`
`infringes all the asserted claims, and that Amazon failed to prove that the asserted claims are
`
`invalid. (D.I. 291). The jury also adopted the damages award calculated by Plaintiff’s damages
`
`expert, Mr. Reed, and awarded Plaintiff $46,700,000 in reasonable royalty damages. (Id. at 7;
`
`Tr. 511:23).
`
`On December 6, 2023, Amazon filed a renewed motion for judgment as a matter of law on
`
`infringement, willful infringement and validity of all the asserted claims. (D.I. 298). That same
`
`day, VB Assets filed a motion for an ongoing royalty, pre-judgment interest, post-judgment
`
`interest and enhanced damages. (D.I. 300). In that motion, VB Assets requested “an ongoing
`
`1
`
`
`Plaintiff filed its motion for an ongoing royalty, pre-judgment interest, post-judgment
`interest and enhanced damages on December 6, 2023 (D.I. 300). In the Court’s
`September 30, 2024 Memorandum Opinion (D.I. 325), the Court granted Plaintiff an
`ongoing royalty but required that the parties submit additional briefing to determine the
`amount of the ongoing royalty.
`
`1
`
`

`

`Case 1:19-cv-01410-MN Document 341 Filed 12/12/24 Page 3 of 9 PageID #: 13108
`
`
`
`royalty for Amazon’s continuing patent infringement at the same rate that the jury found at trial”
`
`– $0.40 per net new Alexa user for the ’681 patent and $0.22 per net new Alexa Shopping user for
`
`the ’176 and ’097 patents2 (“the jury-awarded rate(s)”). (D.I. 301 at 5).
`
`The Court decided both motions in its September 30, 2024 Memorandum Opinion
`
`(D.I. 325). In its opinion, the Court granted-in-part Amazon’s renewed motion for judgment as a
`
`matter of law with respect to infringement of claim 25 of the ’703 patent but denied the motion on
`
`all other grounds.3 (Id.). More relevant here, the Court determined that VB Assets was entitled to
`
`an ongoing royalty. The Court, however, found that Plaintiff “failed to present the Court with
`
`information on how circumstances have changed” and, thus, the Court was “ill-equipped to assess
`
`whether the jury’s awarded royalty rate would be an appropriate rate for the ongoing royalty.”
`
`(Id. at 54). Accordingly, the Court ordered the parties to submit further briefing on the issue.
`
`(D.I. 326 at 2).
`
`On October 10, 2024, VB Assets filed its supplemental brief regarding an ongoing royalty
`
`rate. (D.I. 327). VB Assets presently requests an ongoing royalty of $0.60 for the ’681 patent and
`
`$0.25 for the ’176 and ’097 patents. (D.I. 327 at 2). Amazon filed its answering brief on
`
`October 31, 2024. (D.I. 334). Amazon argues that both VB Assets’ requested rates and the jury-
`
`awarded rates lack merit and are overstated. Amazon requests the Court award Plaintiff an
`
`unspecified but lower royalty rate.
`
`
`Mr. Reed designated the ’176 and ’097 patents, together, as “the Voice Ad patents.” He
`determined that a reasonable royalty of $0.22 applies when the Voice Ad patents are
`infringed by Amazon. (Tr. 511:11-15). The Court’s award likewise reflects Mr. Reed’s
`collectivization of those patents.
`
`As a result of granting the motion with respect to claim 25 of the ’703 patent, the Court
`reduced the jury’s reasonable royalty award to $40,007,600. (D.I. 325 at 29).
`
`2
`
`
`
` 3
`
`2
`
`

`

`Case 1:19-cv-01410-MN Document 341 Filed 12/12/24 Page 4 of 9 PageID #: 13109
`
`
`
`For the reasons explained below, the Court awards VB Assets an ongoing royalty rate of
`
`$0.25 for the ’176 and ’097 patents, and $0.45 for the’681 patent.
`
`II.
`
`LEGAL STANDARD
`
`Following a determination that a patent is valid and infringed, the district court retains
`
`“equitable discretion to determine whether an ongoing royalty need be imposed.” ArcherDX, LLC
`
`v. Qiagen Sciences, LLC, C.A. No. 18-1019 (MN), 2022 WL 4597877, at *14 (D. Del. Sept. 30,
`
`2022). An ongoing royalty serves as an appropriate mechanism to compensate a prevailing
`
`patentee for any continuing infringement. See Purewick Corp. v. Sage Prods., LLC, 666 F. Supp.
`
`3d 419, 448-49 (D. Del. 2023). To calculate the ongoing royalty rate, “a jury’s verdict of a
`
`reasonable royalty rate is the ‘starting point.’” Cave Consulting Grp., LLC v. OptumInsight, Inc.,
`
`2017-1060, -1093, 2017 U.S. App. LEXIS 6089, at *5 (Fed. Cir. Mar. 31, 2017). Then, the district
`
`court “should consider the ‘change in the parties’ bargaining positionings, and the resulting change
`
`in economic circumstances, resulting from the determination of liability.’” XY, LLC v. Trans Ova
`
`Genetics, L.C., 890 F.3d 1282, 1297 (Fed. Cir. 2018) (quoting Amado v. Microsoft Corp., 517 F.3d
`
`1353, 1360 (Fed. Cir. 2008)). The Federal Circuit has “also instructed district courts to consider
`
`changed economic circumstances, such as changes related to the market for the patented products.”
`
`XY, LLC, 890 F.3d at 1297. The focus on “changed circumstances is particularly important when
`
`[ ] an ongoing royalty effectively serves as a replacement for whatever reasonable royalty a later
`
`jury would have calculated in a suit to compensate the patentee for future infringement.” Id. The
`
`burden of proving damages for an ongoing royalty remains with the patentee. See Creative Internet
`
`Adver. Corp. v. Yahoo! Inc., 674 F. Supp. 2d 847, 855 (E.D. Tex. 2009) (“When injunctive relief
`
`is denied . . . and the Court instead considers whether an infringer should pay an ongoing royalty,
`
`the Court finds that the burden of proving damages remains with the patentee.”).
`
`3
`
`

`

`Case 1:19-cv-01410-MN Document 341 Filed 12/12/24 Page 5 of 9 PageID #: 13110
`
`
`
`III. DISCUSSION
`
`VB Assets requests that the Court award it an ongoing royalty of $0.25 for the ’176 and
`
`’097 patents and $0.60 for the ’681 patent. This request reflects an increase from the jury-awarded
`
`royalties, which were $0.22 for the ’176 and ’097 patents and $0.40 for the ’681 patent. VB Assets
`
`argues that several changed circumstances justify an increase from the jury-awarded rates:
`
`“(1) Amazon’s reliance on the patented technology for growth and post-verdict product
`
`development; (2) Amazon’s increasing costs to attract and retain users as its market matures; and
`
`(3) Amazon’s post-verdict infringement.” (D.I. 327 at 3). Amazon, however, argues that “changed
`
`circumstances weigh strongly towards a much smaller rate” because the accused product
`
`transitioned to a new non-accused model, and it has experienced decreased losses on the accused
`
`products. (D.I. 334).
`
`A.
`
`The ’176 and ’097 Patents
`
`VB Assets requests an ongoing royalty of $0.25 for the ’176 and ’097 patents. VB Assets
`
`primarily argues this three-cent increase from the jury-awarded rate is warranted because
`
`“increased inflation in the 2021-2024 time period [drove] costs to a level approximately 12%
`
`above expectations.” (D.I. 327 at 5 (citing D.I. 328, Ex. 4)). Although Amazon generally opposes
`
`an increase in the jury-awarded rate, it fails to address this argument. The Court finds that in a
`
`post-verdict hypothetical negotiation, the parties would recognize and account for an increase in
`
`costs since the time of infringement. See Paice LLC v. Toyota Motor Corp., 609 F.Supp.2d 620,
`
`631 (E.D. Tex. 2009) (adjusting the ongoing royalty rate for inflation); see also Comcast IP
`
`Holdings I, LLC v. Sprint Communs. Co. L.P., No. 12-cv-0205-RGA, 2015 WL 4730899, at n.3
`
`(D. Del. Aug. 10, 2015) (observing that “sophisticated parties” “would negotiate some built-in
`
`adjustment to account for inflation.”). Accordingly, the Court awards VB Assets a $0.25 ongoing
`
`royalty for the ’176 and ’097 patents.
`
`4
`
`

`

`Case 1:19-cv-01410-MN Document 341 Filed 12/12/24 Page 6 of 9 PageID #: 13111
`
`
`
`B.
`
`The ’681 Patent
`
`VB Assets also requests an ongoing royalty of $0.60 for the ’681 patent. Previously, VB
`
`Assets requested an ongoing royalty of $0.40, which was the rate calculated by Mr. Reed and
`
`adopted by the jury. Mr. Reed calculated the $0.40 rate by multiplying 2% by $20. The first
`
`variable, 2%, reflects the “measure for the apportionment of the cost savings to the [advantages]
`
`of the patented technology.” (Tr. 506:10-14). The second variable, $20, represents the “value”
`
`Amazon ascribed to the patent through analyzing the amount of money Amazon lost when it sold
`
`the accused product (the Echo) to customers.4 (Tr. 503:17-504:6).
`
`VB Assets argues that an increase in the jury-awarded rate is justified because Amazon’s
`
`losses from selling the Echo devices have increased. Mr. Reed estimates that, following the
`
`verdict, Amazon’s losses were at least $30. (D.I. 328, Ex. 3). This $10 increase in losses would
`
`translate into a 50% increase in the ongoing royalty rate (i.e., from $0.40 to $0.60) using the
`
`methodology adopted by the jury. (D.I. 327 at 5). In response, Amazon argues that Mr. Reed’s
`
`loss estimate is flawed because his loss calculations rely on discounted, Prime Day prices for the
`
`Echo products. (D.I. 334 at 2). Upon analyzing Mr. Reed’s calculations, however, the Court finds
`
`that Mr. Reed did not use the discounted Prime Day prices to calculate the Echo losses.
`
`In his calculations, Mr. Reed observes that “current prices from Amazon.com” in
`
`October 2024 – immediately prior to Prime Day – were discounted, but Mr. Reed does not use
`
`those prices to calculate his $30 loss figure. (D.I. 328, Ex. 3 at 2). The $30 loss figure was
`
`calculated through using the average price of the Echo devices from 2020 until April 2022. (Id.
`
`4
`
`
`Rather than analyzing the profit from the accused product, Mr. Reed looked at the “benefit
`of the infringed technology to Amazon through [examining its] reduced need for
`discounting and promotion to grow or maintain its user base.” (D.I. 327 at 3 (referencing
`Tr. 492:17-493:3). Mr. Reed opined that the more money Amazon was willing to lose on
`a product, the more valuable that product must be to Amazon.
`
`5
`
`

`

`Case 1:19-cv-01410-MN Document 341 Filed 12/12/24 Page 7 of 9 PageID #: 13112
`
`
`
`(citing D.I. 328, Ex. 5) (chart of average prices for Echo devices from 2020 until
`
`2022)). Therefore, the Court rejects Amazon’s assertion that the loss calculation was based on
`
`skewed, Prime Day sale prices.
`
`Nevertheless, Amazon presents competing evidence that demonstrates Amazon losses
`
`were decreasing at the time of the hypothetical negotiation. For example, Amazon asserts that it
`
`increased Echo prices in October 2023, immediately prior to the hypothetical negotiation.
`
`(D.I. 336, Ex. A at 8-9). As a result, Amazon projected that Echo losses would “improve from
`
`almost $20-$25 losses per unit over the 2021-2023 time period to losses of $6.81 per unit by 2026.”
`
`(D.I. 335 ¶ 2 (e)(iii) (citing D.I. 336, Ex. A at 9)). Therefore, the parties at the hypothetical
`
`negotiation may have decreased Mr. Reed’s loss variable, resulting in a lower royalty rate.
`
`Additionally, Amazon argues that the ongoing royalty rate would be lower because it
`
`transitioned to a “new, non-accused large-language model architecture.” (D.I. 334 at 2).
`
`Immediately prior to the hypothetical negotiation, Amazon planned to shift away from the accused
`
`technology and invest in new, non-infringing alternatives. (See D.I. 336, Ex. A at 3 (Amazon
`
`internal document’s reflecting that the 2024 Operating Plan was to “radically redeploy” its
`
`resources to invest in Remarkable Alexa.)). This shift would have led to a decrease in Amazon’s
`
`demand for the claimed technology, and thus improved its bargaining position in a post-verdict
`
`hypothetical negotiation. Plaintiff, however, counters that “Amazon offers only speculation that
`
`it may, hypothetically, at some unknown date, redesign” and Amazon “unveils new models of
`
`these infringing products every year.” (D.I. 318 at 9 (citing D.I. 302, Ex. 4) (Amazon press
`
`announcement of new Amazon Echo products in 2023)).
`
`In light of the aforementioned competing evidence, the Court is not convinced that the
`
`parties would have agreed to a $0.60 ongoing royalty for the ’681 patent. Plaintiff has not
`
`6
`
`

`

`Case 1:19-cv-01410-MN Document 341 Filed 12/12/24 Page 8 of 9 PageID #: 13113
`
`
`
`persuaded the court that changed economic circumstances warrant a 50% increase in the jury-
`
`awarded rate, and, Defendant, has likewise not met its burden of proving that post-verdict
`
`economic favors have shifted so strongly in its favor as to discredit the jury’s original award. The
`
`Court, however, finds that “increased inflation in the 2021-2024 time period driving costs to a
`
`level approximately 12% above expectations would itself support a larger royalty rate of $0.45 for
`
`the ’681 patent.” (D.I. 327 at 5 (citing 328 ¶¶ 4-5 (Reed Declaration)); (see also D.I. 328, Ex. 4
`
`(Annual Inflation and Impact of Unexpected Increases 2021 to 2024 from the Federal Reserve
`
`Bank of Minneapolis)). As stated above, see supra Section III.A, this argument has not been
`
`rebutted by Amazon, and the Court believes that the parties would consider increased costs when
`
`hypothetically negotiating an ongoing royalty. Therefore, the Court will award VB Assets a $0.45
`
`ongoing royalty for any continuing infringement of the ’681 patent.
`
`C.
`
`Other Arguments
`
`In addition to the arguments above, Amazon argues the ongoing royalty rates should be
`
`less than the jury-awarded rates because “Plaintiff ignores VoiceBox’s $5-10 million offers to sell
`
`the asserted patents in 2017” and “Plaintiff’s proposed royalty bases improperly include
`
`predominately non-infringing activities.” (D.I. 334 at 4-5). The jury, however, previously heard,
`
`considered and rejected this evidence when adopting Mr. Reed’s proposed royalty rates.5 Further,
`
`the Court does not find that either of these arguments constitute a “changed circumstance,” which
`
`would impact the hypothetical negotiation post-verdict. See Saint Lawrence Communs. LLC v.
`
`Motorola Mobility LLC, Case No. 2:15-cv-351-JRG, 2017 WL 6268735, at *4-5 (E.D. Tex. Dec.
`
`8, 2017) (finding that arguments presented to the jury are not “changed circumstances” for
`
`5
`
`
`At trial, the jury heard that VoiceBox entertained $5-10 million offers to sell the asserted
`patents. (See Tr. 513-515 (Mr. Reed discussing the sale offers); Tr. 802-804 (Amazon’s
`expert, Dr. Ugone discussing the sale offers)). The jury likewise heard Mr. Reed discuss
`his calculations and methodology. (See Tr. 243-258, 419-420, 502-503, 511, 530-534).
`
`7
`
`

`

`Case 1:19-cv-01410-MN Document 341 Filed 12/12/24 Page 9 of 9 PageID #: 13114
`
`
`
`purposes of an ongoing royalty). Therefore, Amazon fails to persuade the Court that the ongoing
`
`royalty rates should be decreased for any other reason.
`
`IV. CONCLUSION
`
`For the reasons explained above, the Plaintiff is awarded an ongoing royalty of $0.25 for
`
`the ’176 and ’097 patents per net new Alexa shopping user, and $0.45 for the’681 patent per net
`
`new Alexa user. An appropriate order will follow.
`
`
`
`8
`
`