Escrowed Damages During Appeal May be Greater than Jury Award

In Amado v. Microsoft Corp. (February 26, 2008), a jury had awarded Amado damages for infringing sales equivalent to a $0.04 reasonably royalty. The district court also granted Amado’s request for a permanent injunction, but then stayed the injunction until seven days after the resolution or abandonment of any appeal. As a condition of the stay, the district court required that Microsoft make escrow deposits of $2.00 per copy of the infringing software sold during the stay.

Both parties contended that the district court erred in assessing a $0.12 royalty for the infringing units sold during the stay. Amado contended the proper award is $2.00 per unit, the amount escrowed, while Microsoft contends the proper amount is $0.04, the amount found by the jury to be a reasonable royalty.

According to the opinion by Circuit Judge Linn

When a district court concludes that an injunction is warranted, but is persuaded to stay the injunction pending an appeal, the assessment of damages for infringements taking place after the injunction should take into account the change in the parties’ bargaining positions, and the resulting change in economic circumstances, resulting from the determination of liability—for example, the infringer’s likelihood of success on appeal, the infringer’s ability to immediately comply with the injunction, the parties’ reasonable expectations if the stay was entered by consent or stipulation, etc.—as well as the evidence and arguments found material to the granting of the injunction and the stay.

Because we are unable to determine whether the district court’s award of $0.12 was a reasonable exercise of its discretion, id. ("It is important for the district court to provide a concise but clear explanation of its reasons for the fee award." (internal punctuation modified) (citing Hensley v. Eckerhart, 461 U.S. 424, 437 (1983))), we vacate the district court’s escrow award and remand the matter to the district court for reconsideration. [FOOTNOTE 2: We take no position on the proper amount of the eventual award. That, of course, is a matter committed to the sound discretion of the district court. We observe only that, logically, the eventual award should fall somewhere between the $0.04 amount the jury found to be an appropriate pre-verdict reasonably royalty and the $2.00 amount Amado was willing to accept in exchange for a license.]