Jury Orders Nintendo to Pay $208.3 Million in Patent Case
In what could prove a punishing courtroom defeat for a company renowned for using the legal system to its advantage, a federal jury Monday ordered Nintendo of America to pay $208.3 million to a bankrupt computer company for patent violation.
In an earlier phase of the trial in U.S. District Court in Manhattan, the jury found video game maker Nintendo guilty of “willful infringement” on the patents of Alpex Computer Corp., a Connecticut firm that went bankrupt in 1983. The firm’s trustees filed the lawsuit in 1986, and any award would go to Alpex’s creditors.
Redmond, Wash.-based Nintendo immediately denounced the judgment as “outrageous” and said it would ask U.S. District Judge Kimba Wood to throw out the damage award. If that doesn’t succeed, the company will appeal the verdict, Nintendo general counsel Lynn Hvalsoe said.
“We are confident we will once again prevail,” Hvalsoe said. “We have no intention of paying a dime. We won’t be held for ransom based on patents we have evaluated and determined are nonsense.”
Other video game makers, including Sega Enterprises and Atari, have already settled with Alpex. The patent, which expired in May, is for video game consoles with removable cartridges that attach to television sets and control moving figures on the screen.
Nintendo argued that the patent was outdated and could not be used to create the complex video games that are the key to its success.
The ruling may fuel fears in Japan that America’s jury system is incapable of handling tough technical issues and is often biased against large Japanese companies.
Two years ago, when an American jury ordered Minolta to pay Honeywell $96 million for infringing the company’s patents, Japanese analysts blamed the jury awards on anti-Japanese sentiment in America and predicted a surge in new court cases as Japanese-American competition in high-tech heated up.
Some Japanese executives urged their cohorts to fight lawsuits rather than boosting Japanese corporations’ reputation as litigation-shy companies that could always be persuaded to settle.
Hvalsoe of Nintendo said the jury came to its verdict in the Alpex case in just five hours, following a four-week trial and the receipt of complex instructions from the judge.
“This kind of outrageous verdict presents an image of bias against foreigners or large companies,” she said. “There is a serious issue of whether a jury trial is the appropriate way” of handling patent disputes.
Alpex, which is now in liquidation, sought $416 million in damages, or 12% of Nintendo’s revenues on systems and cartridges sold between 1985 and 1992 that infringed the patents. Nintendo itself has been the subject of criticism by competitors, which have argued that the company cleverly used American courts to enforce its near-monopoly control over the game business during the late 1980s and extract high license fees from game developers. Those fees helped drive game developers to create games for Nintendo’s rival Sega.
Nintendo’s court defeat comes just as its competitors are starting to gain the upper hand in the market. Sega now outsells Nintendo in the most critical segment of the game business, and Nintendo’s profit is plummeting.
Nintendo has launched a desperate marketing campaign in an effort to pull out of its slump. The company, which had previously taken a strong stance against the use of sex and violence in video games and poked fun at Sega for becoming a target of congressional hearings, recently reversed course to allow more violence in games used with its machines.