In August 2021, an Eastern District of Texas jury returned a $300M verdict for several subsidiaries of PanOptis Holdings, LLC (collectively, "PanOptis") in a damages retrial against Apple. That jury awarded damages based on an earlier infringement verdict (damages from which had been overturned) in which District Judge Rodney Gilstrap asked the jury whether "ANY" of the five tried patents were infringed—despite the parties' request for a verdict form that would have addressed infringement for each patent separately. The Federal Circuit has now ruled that that use of a general verdict violated Apple's Seventh Amendment right to a unanimous jury verdict, reversing and remanding for a new trial. That reversal appears in a sweeping precedential decision issued on June 16 that also upends the denial of two invalidity challenges from Apple and holds that Judge Gilstrap abused his discretion by admitting a settlement agreement and related testimony that together, per the appeals court, prejudiced Apple.
PanOptis filed its East Texas suit against Apple in late February 2019, soon after the NPE's acquisition by private equity firm Brevet Capital was announced, alleging the infringement of six patents declared essential to the LTE standard through the provision of various models of iPhone, iPad, and Apple Watch. Claims of infringement, invalidity, and damages as to five of those patents (8,019,332; 8,102,833; 8,385,284; 8,411,557; 9,001,774) were tried to a first jury, which in August 2020 returned a verdict for the plaintiffs on all issues. Notably, while both parties had requested that the verdict form include separate questions on infringement for each patent, Judge Gilstrap instead opted for a single infringement question asking the jury to determine whether "Apple infringed ANY of the Asserted Claims" (emphasis in original), as mentioned above. The jury awarded roughly $506M in damages (characterized by the jury as a "royalty for past sales") and found infringement to be willful, though the court's resulting final judgment declined to enhance damages as a result of that willfulness determination.
Prior to that first trial, PanOptis asked the court to decide issues related to its FRAND obligations instead of the jury, without objection from Apple. For that reason, Judge Gilstrap kept PanOptis's FRAND obligations away from the jury by refusing the plaintiff's "attempt[] to leverage its willfulness claim to introduce evidence before the jury of bad faith and bad acts by Apple during pre-suit licensing negotiations". However, this meant that PanOptis did not have to explain its own FRAND licensing obligations to the jury. As a result, Apple later filed a motion for a new trial, arguing that the verdict was not FRAND-compliant because the jury had not been presented with evidence addressing PanOptis's FRAND obligations.
Judge Gilstrap granted that motion in April 2021 but only as to damages, finding that the verdict was "unacceptably ambiguous" because the jury had set its damage awards without hearing any mention of FRAND principles. The court faulted both parties for their behavior leading up to that first trial, concluding that "[w]ith the benefit of hindsight, it is apparent to the Court that both sides played fast and loose with the FRAND issue before the jury for their own strategic reasons".
That same August, a second jury then returned a damages-only verdict of $300M, doing so based on the first jury's infringement finding, which as noted above was not broken down by patent—Judge Gilstrap instructing the second jury that the first jury had found all five patents to be infringed.
On appeal, Apple argued that the entire judgment should be vacated, asserting in part that the damage award should fall as a result of the single-question infringement verdict because it was "impossible" for the second jury, presented with the first jury's sole infringement finding, to "know which, if any, patents were found infringed". Moreover, Apple asserted that Judge Gilstrap "erred in instructing the retrial jury that all patents were infringed, which the first jury never found". PanOptis countered, in part, that Apple had not sought a claim-by-claim breakdown when objecting to the single-question format before the first trial, noted that the first jury had been instructed to address infringement claim-by-claim and make a unanimous decision, and argued that general verdicts are "well accepted". Apple also raised various appealable issues for the tried patents: infringement and patent eligibility for the '332 patent; claim construction and infringement for the '833 and '284 patents; indefiniteness, infringement, and territoriality for the '557 patent; and infringement for the '774 patent.
The Federal Circuit's Decision on Appeal
The Federal Circuit began its June 16 precedential decision with Apple's challenge to the verdict form and Judge Gilstrap's related instructions. The court agreed with Apple that asking the jury whether the company "infringed any of the asserted claims would erroneously require an affirmative answer even in a situation where all jurors did not agree that the same patent was being infringed" (emphasis in original). The issue with that "single infringement question is that it deprived Apple of its right to a unanimous verdict on each legal claim against it related to infringement" as required by the Seventh Amendment to the US Constitution and Federal Rule of Civil Procedure (FRCP) 48(b), the Federal Circuit held. Additionally, the court cited its 1996 decision in Kearns v. General Motors as providing that "[e]ach patent asserted raises an independent and distinct cause of action", as a result of which "infringement must be separately proved as to each patent". In the present case, in which five patents were at issue, the court underscored that those patents each presented a distinct cause of action rather than representing "five alternative theories for a single common legal claim". As a result, the court ruled that the verdict form should have included at least five separate infringement questions, one for each patent. That said, the Federal Circuit clarified in a footnote that it was not addressing whether a claim-by-claim breakdown is required, as that issue was not presented in this case.
The Federal Circuit also rejected PanOptis's argument that the jury instruction cured the issue. Rather, the court found that the jury could have abided by the court's instructions that the verdict had to be unanimous, and that infringement must be assessed claim by claim, while believing only that it had to be unanimous as to "ANY" asserted claim and "not whether Apple infringed the same patent (emphases in original). Nor was the court convinced by PanOptis's contention that it was clear the verdict was unanimous because the original $506.2M award was the precise sum of the amounts suggested for each of the five patents by its damages expert: This could merely mean that the jury thought it should add valuations for each patent found infringed by at least one juror, the Federal Circuit found instead.
Given the above, issues, the Federal Circuit vacated the judgment of infringement—though it clarified in a footnote that "[t]here may be cases in which an issue of infringement is identical across more than one asserted patent such that a single infringement question does not run afoul [of] the Seventh Amendment and Rule 48(b)", a circumstance not presented here.
As a result, the Federal Circuit also overturned the $300M damages verdict, as there was no longer an infringement verdict upon which damages could be awarded.
Relatedly, the court additionally held that Judge Gilstrap erred by instructing the second jury, tasked with awarding damages based on the first infringement verdict, that it should assume all five patents had been infringed: "As discussed above, the infringement verdict form did not specify which asserted patent(s) were found to be infringed, and thus there was no finding that any particular asserted patent was infringed". Since PanOptis had thus "been awarded damages for a scope of infringement that it has not proven and that the jury had not unanimously found", the court held that the second damages judgment must be vacated.
Although the Federal Circuit's rulings on infringement and damages disposed of the appeal, the court proceeded to address some of Apple's other arguments on liability that could affect the case on remand. For one, it held that Judge Gilstrap was wrong to deny Apple's motion for summary judgment that claims 6 and 7 of the '322 patent is ineligibly directed to the abstract idea of "calculating a value, which they do by using an indisputably well-known mathematical equation". While Judge Gilstrap had held for step one of the Alice inquiry that the claims were "not directed merely to an equation", but rather to "applying the equation in a way that offers a technological improvement", the Federal Circuit instead ruled that similar to Apple's argument, the claims were instead directed to the abstract idea of a "mathematical formula". Since the lower court did not reach the second step of Alice, contemplating whether the claims are saved by the inclusion of an inventive concept, the Federal Circuit remanded for Judge Gilstrap to conduct that analysis at the first instance.
Though the Federal Circuit next declined to accept Apple's argument that Judge Gilstrap had misconstrued claim 8 of the '833 patent, the court then proceeded to agree with the defendant that the term "selecting unit" in claim 1 of the '557 patent requires means-plus-function treatment under 35 U.S.C. § 112 ¶ 6. The appellate court ruled that "the word 'unit' does not sufficiently connote structure and is similar to other terms that we have held to be nonce terms similar to 'means' and invoke § 112 ¶ 6", such that the claim is invalid as indefinite on that basis.
By so ruling, the court rejected a contrary decision by Judge Gilstrap, who cited a parallel claim construction order in a PanOptis case against ZTE in determining that the "selecting unit" does not invoke § 112 ¶ 6 because it is connected to a "transmitting unit" in a manner that "enable[s] the transmitting unit to transmit the sequence selected by the 'selecting unit'". Rather, the Federal Circuit found that the district court failed to specify a structure for how the "selecting unit" operates; that the claim language did not "describe how 'selecting unit' 'interacts with other components . . . in a way that might inform the structural character of the limitation-in-question or otherwise impart structure to [selecting unit]'"; that the "'connect[ion]' between the 'selecting unit' and 'transmitting unit' identified in the ZTE Opinion also does not impart any particular structure"; and that while the ZTE court found that the "fundamental structure" in the claimed unit was an electronic circuit, PanOptis contradicted that structure here by arguing that the "'selecting unit' 'may be implemented in either hardware or software'".
Lastly, the Federal Circuit addressed Apple's challenge to the admissibility of a settlement agreement between it and Qualcomm, as well as testimony based on that agreement from PanOptis damages expert David Kennedy (whose testimony was recently at the center of another notable Federal Circuit decision on the admissibility of expert testimony). The district court had denied Apple's motion to exclude that testimony because the agreement, on financial terms that are sealed but characterized here by the Federal Circuit as involving Apple's payment of "a large figure to settle worldwide litigation", did not include the asserted patents. Apple argued on appeal that Kennedy's testimony was "irrelevant and unreliable" because he had "'admitted the agreement[ was] not economically comparable to the hypothetical negotiation's determination of a FRAND license' and his 'emphasis on the agreement['s] large noncomparable figures unfairly prejudiced Apple'". PanOptis argued in response that the agreements were technically comparable and that Kennedy used the same methodology as Apple's damages expert to assess the license rate Apple paid for the Qualcomm patents. As the Federal Circuit noted, however, PanOptis did not address the issue of prejudice to Apple.
The Federal Circuit agreed with Apple, determining that the agreement was "not the most reliable license in the record" and that its probative value was thus "minimal" for several reasons:
The scope of the patent rights under the settlement agreement was far greater than the hypothetical license to the five asserted patents in this case, and the agreement settled global litigation between Apple and Qualcomm, including matters spanning patent, antitrust, tortious-interference, and trade-secret claims. Mr. Kennedy failed to meaningfully account for these differences in scope. Moreover, Mr. Kennedy opined that the settlement agreement is "informative and would be a consideration for [Optis] in the [h]ypothetical [n]egotiation," but that "[n]one of the Apple licenses here are sufficiently comparable to the [h]ypothetical [l]icense for use as a direct indication of a reasonable royalty rate."
Given that the probative value of that settlement was "dubious", the Federal Circuit ruled that as a result it had been "highly prejudicial to Apple for [PanOptis] (and Mr. Kennedy) to repeatedly recite the large settlement figure". The court thus found that the repeated references to that figure during the trial, notwithstanding the purported use of the agreement only as a "check or 'ballpark'", "unfairly skewed the jury's damages horizon"—determining that the settlement should be excluded from the proceedings on remand.
After lastly declining to reach PanOptis's cross-appeal as to the reversal of the first damages verdict, which the Federal Circuit found "presented the same verdict form issue" as the verdict reversed here, the court concluded by vacating the infringement and second damages judgments and remanded for a new trial on both issues.
UK Litigation: Federal Circuit's Decision Could Shift the "Floor" for FRAND License
The impact of the Federal Circuit's decision will also likely be felt in the UK leg of the PanOptis campaign as the result of a significant appellate ruling there last month. On May 3, the UK Court of Appeal issued a long-awaited judgment that overturned a May 2023 decision from High Court Justice Marcus Smith that had set a global FRAND rate of $56.43M, holding that he had had erred by rejecting the parties' expert evidence and rate-setting arguments in favor of a rate-setting approach not proposed by either party. The Court of Appeal instead decided that the proper FRAND rate was $502M plus interest.
Of particular relevance here is the manner in which that court approached how to account for potential double recovery between the license rate from the UK action and the now-overturned $300M damage award from the Eastern District of Texas, a point of some dispute between the parties. The Court of Appeal decided against merely amending the UK judgment to account for the Texas judgment, dismissing that option as as impractical due to the valuation methodology at issue in the UK litigation. Rather, the Court of Appeal instead held that the final amount of the Texas judgment should serve as a floor, and that to the extent the global FRAND rate determined by the UK court exceeded that amount, Apple would pay the balance to PanOptis.
With the questions of both infringement and damages now potentially headed for resolution by yet another US jury, that floor could shift yet again—perhaps significantly. Stay tuned for more. In the meantime, further background on the Federal Circuit's decision—and another appeal contesting Judge Gilstrap's similar use of a general verdict form—see "Questions Surrounding General Verdict Forms Bubble Up to Federal Circuit" (May 2025). For details on the UK appellate decision, see "UK Court of Appeal Issues $502M FRAND Judgment in Optis Case" (May 2025).
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