A Los Angeles jury found Friday that video game vendor Sega had deliberately infringed a patent held by an American inventor and ordered the Japanese company and its U.S. subsidiary to pay $33 million in damages.
The ruling is the latest in a string of victories for individual inventors seeking royalties from large corporations and also marks at least the second time in recent months that a jury has found a Japanese company to be illegally using American inventions.
Because the U.S. District Court jury ruled Sega's infringement to be intentional, the judge in the case could order the damages to be trebled, according to Fred Lorig, the attorney representing the inventor. Lorig said he would also seek an injunction barring the sale of Sega video games.
"Obviously we're going to appeal," said Tom Kalinske, president of Sega of America. "We believe the jury was in error. We don't believe they understood" the technical issues involved, he said.
Attorneys at Brown & Bain, the prestigious technology law firm that represented Sega, did not return calls seeking comment.
The invention, developed in 1969 and patented in 1975 by Jan R. Coyle and Robert W. Stevens--but now owned by Coyle--involves a technique for displaying simple color images on a video screen through the use of low-frequency audio signals rather than video signals.
According to Lorig, the technique is used for the creation of background scenes in nearly all video game systems. Atari and Nintendo both reached settlement agreements after Coyle filed patent infringement lawsuits, but Sega chose to fight it out in court.
Lorig said he had initially offered to settle for $2.5 million, and Sega proposed $100,000. Before the trial began, Lorig again offered to settle, this time for $5 million, but Sega did not respond.
"This illustrates the risk for big companies in not settling with these guys," said William Schwartz, an intellectual property attorney with Morrison & Foerster, which was not involved in the case. "(The individual inventor) gets the sympathy of the jury, and that has a lot of emotional appeal. And the fact that Sega is Japanese makes the emotional appeal that much stronger."
While it was once extremely rare for individual inventors to prevail in patent infringement actions against large companies, changes in the patent courts have made it easier for such claims to succeed. Recently, a lone La Palma inventor, Gilbert Hyatt, has begun to reap substantial royalties for a "computer-on-a-chip" patent.
In addition, Honeywell recently won a patent infringement lawsuit against Minolta. Many attorneys believe that the Honeywell verdict against the large Japanese camera maker in particular was at least partially the result of ill will toward Japanese firms.
The patent that Sega was found to have infringed expires in August. Still, a short-lived injunction against the sale of Sega games could have a dramatic impact on the company, which is closing in on Nintendo for leadership in the multibillion-dollar video game business.
The jury awarded almost $12 million in damages for the infringement, and another $21 million in damages for the advantages that Sega gained in the game business as a result of illegally using the invention.