Intellectual Property

3 Takeaways From The Sonos Verdict Against Google

For now, we can consider three takeaways from the verdict that can help us place this long-running patent saga in perspective.

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Logo_Google_2013_Official.svgA few weeks ago, I previewed the hotly anticipated patent trial between Sonos and Google on these pages. In that column, I noted that the trial’s staggered schedule meant that the case may not go to “the jury for verdict until the end of May.” My prediction was off, but only by a few days, as the jury returned a split verdict after what looks to have been a quick deliberation this past Friday. In sum, the jury found that neither of the two asserted Sonos patents were invalid, but only one was infringed. As recompense for that infringement, the jury awarded a per unit royalty of $2.30, resulting in a total award of $32.5 million. That number, of course, helped lead the headlines and reporting of Sonos’ trial victory, which will now face scrutiny from the NDCA’s Judge William Alsup on post-trial motions. It is still unclear how long that process will take, but it would not be shocking to see Alsup move things toward the inevitable Federal Circuit appeal with some dispatch.

For now, we can consider three takeaways from the verdict that can help us place this long-running patent saga in perspective. First, the importance to Sonos of having at least one of its patents achieve the exalted status of “valid and infringed” can’t be overstated. While naysayers could focus on Sonos’ failure to win on both of its asserted patents, or the challenges it faced in even making its damages case to the jury, there is also no doubt that a negative trial result would have been disastrous – not only with respect to Sonos’ prospects against Google, but also with respect to the company’s broader patent monetization ambitions. With disaster averted as a result of the at least partially favorable jury verdict, it would not be a surprise to see Sonos redouble its patent licensing efforts across as wide a range of potential targets as possible. Helping the cause will be the fact that Sonos’ jury win occurred in what is considered one of — if not the — most defendant-friendly jurisdictions in the country.

Second, it is not a stretch to say that the damages award itself can be considered a bit funky, to say the least. Going into trial, there were reports that the trial would be a $3 billion blockbuster, before that was amended to a more modest, but still sizable, $90 million trial demand by Sonos. That $90 million was apportioned by Sonos’ damages expert in a $13 million/$77 million proposed split between the two asserted Sonos patents. In his charge to the jury, however, Alsup struck the opinions of Sonos’ damages expert, while reminding the jury that they could rely on other evidence in terms of crafting a damages award. Based on the verdict, that is what they did, awarding over $30 million in damages for the same patent that Sonos’ expert had argued was entitled to $13 million. One thing to watch for, therefore, is whether that twist forms the basis of a winning post-trial argument by Google that the jury got things wrong in its damages award. It will also be interesting to see just how grounded in the evidence the jury’s award of a per-unit royalty was, considering the broad scope of accused products at issue in the trial.

Third, there is always the question after every major event in a long-running dispute, namely, is the most recent result something that will drive the parties to settlement? Or does the result doom the combatants to even more time in the ring together? That question is of particular interest to Sonos investors, who have not been shy on online financial message boards about their hopes for a big win against Google. One commenter’s post on the eve of trial is indicative of the sentiment around the stakes for Sonos, including the expectation that failure would result in some good ol’ executive head rolling. For his part, Sonos’ CEO has never been shy about taking on Google publicly, with a May 24 tweet skewering Google’s “don’t be evil” motto. Not everyone is a fan of such posturing, but there is also little to suggest that if a settlement made sense for Google it would pursue one, despite the barbs from the Sonos side. At this point, however, it is most likely that Google will take its chances before Alsup and the Federal Circuit, before cutting Sonos a check — or offering some other consideration of value in the form of business cooperation or the like — just because of Sonos’ incremental wins in the ITC and at trial.

Ultimately, while trial results make for great headlines in the technology press and in the mass media, the actual value they generate isn’t in terms of pushing parties to resolve their disputes. Instead, trial results, whether they be one-sided or split verdicts, as in this case, are often just a prelude to even more battling both at the trial court level and on appeal. For a skilled patent defendant like Google, having a case lifted out of the hands of a lay jury and back into the capable clutches of a respected jurist like Alsup presents a comfortable transition to the next phase of litigation. Buttressing Google’s confidence will be its fantastic Federal Circuit win percentage, as well as the fact that time is its ally with respect to investor pressure building on Sonos to generate a winning resolution that validates the value of its patent portfolio. The jury has spoken, but it is a near certainty that they won’t have the last word.

Please feel free to send comments or questions to me at gkroub@kskiplaw.com or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.

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Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at gkroub@kskiplaw.com or follow him on Twitter: @gkroub.

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