Monday January 6, 2014, the news broke that a U.S. Federal Judge has ordered Nintendo to pay a royalty rate of 1.82% of the wholesale price for every 3DS and 3DS XL sold, to Tomita Technologies USA, LLC.
Nintendo is not one to shy away from taking legal action from those who violate their patent and design rights, most recently by shutting down HackYourConsole.com, for selling the tools and instructions used to play pirated games for the Nintendo Wii, DS and 3DS systems. Now, the video game giant finds themselves on the receiving end of a patent holder calling shenanigans, and the U.S. courts appear to agree.
Tomita Technologies USA first filed their lawsuit against Nintendo in 2011, citing that the house of Mario infringed on Tomita's patent for the glasses-free 3D screen technology. They also sighted that they showed their tech to Nintendo executives back in 2003. Tomita's patent was still pending at the time, but was finally awarded to the company in 2008.
In their lawsuit, Tomita sought moneys for patent infringement and a royalty of $10 for every 3DS and 3DS XL sold. The case rolled around in the courts for close to two years, when in February of 2013, a jury ruled in favor of Tomita. While the jury did not express that Tomita had successfully proven that the patent infringement was willfully executed, it was an infringement nevertheless. While the amount the Jury ruled in favor of was 30.2 million, the court awarded a remittitur for half the amount, finalizing the award at $15 million.
While this ruling in the amount of $15 million took care of the initial patent infringement, it did not cover ongoing royalties for each system sold. While Tomita sought a flat rate, Nintendo pushed for a percentage rate. The court agreed with Nintendo, sighting that a flat rate would only make sense if the price of the 3DS and 3DS XL never changed. Because console prices do change year over year, a percentage royalty would be more realistic.
When the Jury awarded 30.2 million in February 2013, at the time it equated to 2.73% of the total sales of the Nintendo 3DS and 3DS XL systems (at wholesale price). Since the court halved that amount in their remittitur, the Judge determined that the ongoing royalty should also be half the implied royalty percentage, coming in at a final ruling of 1.82% royalty to Tomita from the wholesale price of each and every 3DS and 3DS XL sold by Nintendo.
While many press outlets are seeing this as a big hit to Nintendo, in the long run of the system it will be negligible, as the real profits of a video game console and handheld system are in their software library. As the lawsuit and ruling of patent infringement is specific to the hardware, Tomita has no claim to royalties from any 3DS games.