Tessera, Inc. v. Toshiba Corporation

Background

Tessera and Toshiba entered a 1999 agreement under which Tessera licensed technology covered by Tessera patents and Toshiba agreed to pay running royalties for covered products. A 2002 amendment clarified that certain F-µBGA Packages were covered, and a 2005 amendment addressed past-due royalties and capped the number of billable pins for some package types.

The court had previously ruled that the royalty obligations were triggered by patent infringement and that Toshiba owed royalties only when it practiced claims of an unexpired, valid, and enforceable licensed Tessera patent. Toshiba sent Tessera a termination letter on February 12, 2016, based on alleged non-use of relevant Tessera patents. Whether that termination was effective remained disputed.

The parties filed a second round of cross-motions for summary judgment, and Toshiba moved to strike two Tessera expert reports: the reports of Dr. John C. Bravman and Jeffrey H. Kinrich.

Tessera’s Motion for Partial Summary Judgment

Toshiba sought a refund of royalty payments it claimed were made after certain Tessera patents expired. The court granted Tessera’s motion for partial summary judgment on that refund request.

The court held that federal patent law barred Toshiba from recovering royalties paid before November 27, 2013, when Toshiba first notified Tessera that it would stop paying royalties because it believed no valid, unexpired Tessera patent covered its products. Before that date, Toshiba had not challenged the validity of any Tessera patent or claimed non-infringement. The court ruled that the same recovery bar applied to royalties paid for products later determined to be non-infringing.

The court rejected Toshiba’s argument that the entire 1999 agreement became unenforceable when the ‘977 and ‘326 patents expired on September 24, 2010. It reasoned that Toshiba continued paying based on its belief that other licensed Tessera patents remained unexpired, valid, and enforceable, and that Toshiba’s counterclaim sought a refund rather than payment of royalties after patent expiration. Because federal patent law resolved the refund issue, the court did not address Tessera’s alternative arguments concerning voluntary payments, timeliness, or the implied covenant of good faith and fair dealing.

Toshiba’s Motion for Summary Judgment

The court denied Toshiba’s second motion for summary judgment. The motion covered Tessera’s claims for unpaid royalties on F-µBGA Packages, consumer-price-index adjustments, amounts identified as due in audits, and alleged failures to cooperate with audits. It also covered Toshiba’s counterclaims seeking declarations concerning financial-audit disputes and the effectiveness of its termination.

The court denied summary judgment on Tessera’s claims for unpaid royalties on products meeting the F-µBGA Package definition. Tessera could rely on alleged admissions that certain products infringed the ‘977 and ‘326 patents, and it was not required in this limited circumstance to provide new infringement disclosures under the Patent Local Rules. The court emphasized that whether Toshiba agreed to pay royalties on other products meeting the definition, and whether infringement existed beyond those patents, remained factual disputes. Tessera’s proof on this portion of its claim would be limited to admissions because it chose not to present additional infringement evidence.

The court also denied summary judgment on Tessera’s claims for unpaid consumer-price-index adjustments. It found factual disputes about when Tessera discovered, or reasonably should have discovered, that the adjustments were unpaid. The court further denied summary judgment on the audit-related claims. The agreement said that audit results would be “final,” but did not define that term, making the contract provision ambiguous. A reasonable juror could therefore find either that the audits could be challenged or that their results were unchallengeable.

Regarding the 2015 KPMG report, the court found factual disputes about whether Toshiba provided the records required by the agreement and whether Toshiba’s refusal to cooperate prevented KPMG from conducting a conventional audit. A reasonable juror could find that KPMG’s use of publicly available and third-party information produced a reasonable audit under the circumstances. The court also denied Toshiba’s renewed request for summary judgment on whether its February 2016 termination was effective, explaining that the court had already denied summary judgment on that issue and would not entertain the same argument again.

Toshiba’s Motion to Strike

The court granted in part and denied in part Toshiba’s motion to strike the Bravman and Kinrich reports. It allowed evidence concerning Toshiba’s alleged admissions that products meeting the 2002 amendment’s F-µBGA Package definition infringed the ‘977 or ‘326 patents. It barred Dr. Bravman from offering opinions that those products infringed other patents covered by the 1999 agreement because Tessera had not complied with the Patent Local Rules for those theories.

The court also struck legal opinions and testimony about intent, motive, and state of mind from specified portions of the Bravman Report, along with portions of the Kinrich Report that relied on them. The court noted that portions of the identified Bravman paragraphs might not contain such improper testimony and were not stricken.

Disposition

The court granted Tessera’s motion for partial summary judgment on Toshiba’s request for a refund of royalty payments, denied Toshiba’s second motion for summary judgment, and granted in part and denied in part Toshiba’s motion to strike.