Future Price Decrease of Infringing Product Warrants Royalty Rate as Percentage of Price, Not Flat Per Unit Rate

The court granted plaintiff's motion for an ongoing royalty, but applied a royalty rate based on the wholesale price instead of a flat per unit royalty. "Whether the ongoing royalty is expressed as a percentage of sales or on a per-unit basis would have no impact on [defendant's] payment to [plaintiff] so long as the price of the [accused video game systems] never changes. The rapid pace of technological advancement - and its effect on prices - counsels the Court that it is highly likely that the price [of the accused video game system] will drop with time. If, as [plaintiff] suggests, the ongoing royalty rate were expressed as a flat dollar amount per unit sold, [plaintiff] 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. This would result in an unearned windfall for [plaintiff], and, accordingly, the Court prefers an ongoing royalty rate expressed as a percentage of wholesale price."

Tomita Technologies USA, LLC, et al v. Nintendo Co., Ltd., et al, 1-11-cv-04256 (NYSD December 11, 2013, Order) (Rakoff, J.)