Law360, Los Angeles (December 11, 2013, 7:49 PM ET) -- U.S. District Judge Jed Rakoff on Wednesday set the royalty percentage Nintendo Co. Ltd. owes Tomita Technologies International Ltd. for using Tomita’s patented camera technology in its 3DS gaming system, ruling a flat amount per device would be an “unearned windfall” for Tomita as prices decline.
The New York federal judge found that it was highly likely that prices of the 3DS handheld console would fall over time as the technology behind the device becomes cheaper. The decision follows Judge Rakoff’s August ruling that a jury awarding Tomita $30.2 million for the infringement had gone overboard and taken improper factors into account, cutting the award in half to $15.1 million.
“If, as Tomita suggests, the ongoing royalty rate were expressed as a flat dollar amount per unit sold, Tomita would capture an increasingly large proportion of each sale as the price falls, even as the technology's reliance on the infringed patent remains constant,” Judge Rakoff wrote. “This would result in an unearned windfall for Tomita, and, accordingly, the court prefers an ongoing royalty rate expressed as a percentage of wholesale price.”
Nintendo must pay Tomita 1.82 percent of the wholesale price of each 3DS sold, according to the ruling. That percentage is one-third more than the implied royalty rate of the jury’s halved award. The increase over the jury’s implied rate was justified, Judge Rakoff said, because the result of hypothetical negotiations between parties is changed after findings of infringement.
Nintendo had requested to pay the implied royalty rate of the jury’s halved award, or 1.36 percent of the wholesale price, while Tomita had asked to use the implied rate of the jury’s initial award expressed as a dollar figure, or $4.45 per device.
The decision also ordered Nintendo to pay $241,231 in supplemental damages and prejudgment interest.