"[U]pon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer." 35 U.S.C. § 284. Section 284 establishes a floor below which damage awards may not fall. See Del Mar Avionics, Inc. v. Quinton Instrument Co., 836 F.2d 1320, 1326 (Fed. Cir. 1987). The "reasonable royalty" analysis may be measured by "[w]hat a willing licensor and a willing licensee would have agreed upon in a suppositious negotiation for a reasonable royalty." Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1121 (S.D.N.Y. 1970); see also Hanson v. Alpine Valley Ski Area, Inc., 718 F.2d 1075, 1078 (Fed. Cir. 1983) (describing the hypothetical negotiation as one "resulting from arm's length negotiations between a willing licensor and a willing licensee").

The reduction in damages stems from revised court analysis of determining reasonable royalty. A major factor was Judge Whyte's reconsidering Rambus' expert testimony on the subject from Professor David Teece. Teece had testified that appropriate royalty rates were 0.75% for Hynix's infringing SDRAM, and 3.5% for its DDR SDRAM. Both parties had agreed to that rate, but then the jury used a higher rate to determine damages.

"[T]he use of remittitur enables parties to avoid the delay and expense of a new trial when a jury's verdict is excessive in relation to the evidence of record." Unisplay, 69 F.3d at 519 (citing 11 Charles A. Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice & Procedure: Civil 2d § 2815 (2d ed. 1995)). In the Federal Circuit, the "maximum recovery rule" applies in calculating excessive damages to remit. Id. This rule "requires that the determination be based on the highest amount of damages that the jury could properly have awarded based on the relevant evidence." Id. Applying the maximum recovery rule here, the evidentiary record as a whole could support only one basis for quantifying an upward adjustment to Teece's proposed royalty rates. As was presented to the jury, the rates in the Hitachi license agreement were 1% for SDRAM and 4.25% for DDR. Teece explained to the jury that the rates for Hitachi may have been higher because the negotiations were made after patent infringement litigation between the parties had commenced. In comparison, the other DRAM manufacturers negotiated the lower rates of 0.75% for SDRAM and 3.50% for DDR outside of litigation. Teece also explained that a negotiating patentee and licensee generally agree to a lower royalty rate if there is uncertainty as to whether the patents are actually valid and infringed. The jury could have reasonably concluded that because the patents are assumed valid and infringed, Teece's proposed reasonable royalty rates might be adjusted upward to the rates in the Hitachi agreement to reflect the effect of uncertainty about the patents-in-suit.

Judge Whyte pared the rates to those used in Rambus' license agreement with Hitachi. These rates were higher than Teece's baseline, which were based on negotiated agreement outside of litigation, as Hitachi paid something of a premium owing to the fact that Rambus had asserted infringement, thus Hitachi felt under the gun. But, in due consideration of assuming validity and infringement, these were the highest rates Judge Whyte could find within the evidentiary record.

The problem was that Teece had provided no substantive basis to justify the higher jury award.

The explanations provided by Teece do support a conclusion that his suggested royalty rates were conservative, but he provided no meaningful guidelines to quantify any adjustment to his suggested rates. In fact, one could reasonably infer that if he could have quantified an adjustment without merely speculating, he would have done so.

The question, then, is whether there is sufficient evidence regarding these factors to provide the jury with a basis to make a reasonable upward adjustment to Teece's royalty rates, as opposed to leaving the jury to make such an estimate by mere speculation and conjecture. "[A] trier of fact must have some factual basis for a determination of a reasonable royalty." Unisplay S.A. v. Am. Elec. Sign Co., 69 F.3d 512, 517 (Fed. Cir. 1995). Testimony by an expert must be "more than belief or unsupported speculation." Daubert v. Merrill Dow Pharm., Inc., 509 U.S. 579, 590 (1993). A jury's award of infringement damages cannot be upheld if the amount is "clearly not supported by the evidence, or based only on speculation or guesswork." Union Carbide Chems. & Plastics Tech. Corp. v. Shell Oil Co., 425 F.3d 1366, 1373 (Fed. Cir. 2005) (internal quotation and citations omitted).

Rambus now faces a dilemma: accept the reduced award or gamble with a new trail.

This trial is just part of a legal circus going on about the computer memory market, including antitrust and price fixing. The U.S. Justice Department won guilty pleas in early March from four former Hynix executives as part of its inquiry into alleged price-fixing. Rambus has an antitrust suit going against Hynix and other competitors.