In an August 14, 2013 ruling, Judge Jed S. Rakoff ordered a remittitur of the $30 million judgement obtained by Tomita Technologies USA, LLC in its patent infringement action against Nintendo co., Ltd. over its Nintendo 3DS gaming console. Nintendo argued that the damages award was excessive because it used the "entire market value" of the 3DS consoles as the royalty base rather than the "'smallest salable patent-practicing unit.'" Nintendo based its argument on "the rule that, in calculating damages for multi-component products accused of infringement, royalties must 'be based not on the entire product, but instead on the "smallest salable patent-practicing unit."'" The Court reasoned that "[w]hether the entire market value rule is implicated thus turns on the question of whether the 3DS constitutes the 'smallest salable patent-practicing unit.'" Judge Rakoff adhered to his ruling, made in response to Nintendo's in limine motion, that Tomita's expert "properly looked to the 3DS itself as the 'smallest salable patent-practicing unit,'" and did not rely on the entire market value rule. The Court thus declined to order a remittitur on that ground.
Judge Rakoff nevertheless did find that "the jury's $30.2 million damages award is 'intrinsically excessive' and unsupported by the evidence presented at trial." In particular, the Court found that although the reasonable royalty rate of 3% found by the jury is less than a comparable license to which Tomita is a party, "there are special circumstances relating to the 3DS that strongly suggest that such a royalty rate is excessive in this context." Those factors, according to Judge Rakoff, are that the 3DS consoles are not profitable for Nintendo, and that the infringed patent-in-suit was used in only two functions of the consoles that were "in some sense ancillary to the core functionality of the 3DS as a gaming system." Judge Rakoff thus gave Tomita a choice of accepting one-half of the damages awarded or facing a new trial.
The Court also stated its intention to award an on-going royalty for continued infringement, but declined to set the rate until Tomita makes its choice about the remittitur. Finding that royalty adequate to compensate Tomita, though, Judge Rakoff declined to order Nintendo to mark its products with the patent-in-suit.
