IP Law Daily, PATENT—Del. Sup. Ct.: LG secures partial appellate victory as damages cap reinstated, remand ordered in patent license dispute, (Apr 10, 2026)

By Saurabh Kashyap, B.A., M.A., LL.B., LL.M.

Late-stage reinterpretation of damages cap rejected after court found prejudice and affirmed licensed product coverage.

The Delaware Supreme Court partly affirmed and partly reversed a judgment in a breach-of-contract action arising from a patent license agreement, reinstating a higher contractual damages cap in favor of LG Electronics Inc. while remanding for recalculation of prejudgment interest and reconsideration of costs. The suit, filed by LG against patent licensing entities, challenged infringement actions brought against its customers and the resulting indemnification exposure. The court held that the accused telematics products were covered under the license agreement, that LG proved its damages with sufficient certainty through indemnification obligations triggered by those suits, and that the licensors’ late-stage attempt to reinterpret the damages cap unfairly prejudiced LG (LG Electronics Inc. v. Invention Investment Fund I, L.P., No. 243, 2025 (Del. Sup. Ct. Apr. 7, 2026)).

Background. LG Electronics Inc., the appellant and cross-appellee, is a multinational electronics company engaged in the manufacture of consumer electronics and automotive components, including telematics systems used in vehicles. The appellees and cross-appellants, Invention Investment Fund I, L.P., and its associates, are patent acquisition and licensing entities.

The dispute arose from a patent license agreement executed in 2016–2017 between LG and entities affiliated with Intellectual Ventures. Under the agreement, LG paid a total license fee of $12.8 million in exchange for rights covering certain products defined as “Licensed Offerings.” These offerings included LG’s current and future products made or used by it, or provided to it and sold under its branding. The agreement carved out an exclusion for “Foundry Products,” defined as products manufactured solely according to a third party’s proprietary design specifications and sold under that third party’s branding. The agreement also contained a limitation-of-liability clause, which provided that aggregate liability for claims arising under the agreement would not exceed the “License Fee received by a Party.”

The licensors filed infringement actions in Texas federal courts against LG’s automotive customers, including General Motors LLC and Toyota Motor Corporation. The licensors alleged that customers’ use of LG’s telematics units infringed their patents. Although LG was not named as a defendant in those suits, the actions triggered indemnification obligations LG owed to its customers. General Motors and Toyota subsequently issued demand letters seeking reimbursement of litigation costs and settlement payments.

In response, LG filed a breach-of-contract action in the Delaware Superior Court, asserting that the licensors’ infringement suits violated the patent license agreement by targeting products covered by the license. LG sought damages corresponding to its indemnification obligations. After discovery and pretrial motions, the case proceeded to trial, where a jury found in LG’s favor and awarded $17.23 million in damages. The trial court subsequently applied a contractual damages cap and further reduced the award under a revised interpretation of the agreement, prompting appeals by both parties.

Licensed offerings versus foundry products. A central issue on appeal was whether LG’s telematics units fell within the definition of “Licensed Offerings” or were excluded as “Foundry Products.”

The Supreme Court approached this issue as a matter of contract interpretation, reviewing the agreement de novo. Applying the objective theory of contracts and relying on BitGo Holdings, Inc. v. Galaxy Digital Holdings, Ltd., 319 A.3d 310 (Del. 2024), the court emphasized that unambiguous contractual language must be given its plain meaning.

The court focused on the term “solely” in the definition of “Foundry Products,” interpreting it to mean “to the exclusion of all else.” On that basis, it held that the exclusion applied only where a product was manufactured entirely according to third-party specifications, without any independent design input from LG. The evidence demonstrated that LG engineers were deeply involved in the design process, including drafting internal technical documents and exercising control over key development aspects. The court therefore affirmed the lower court’s conclusion that the telematics units were not “Foundry Products” but instead constituted “Licensed Offerings” covered by the agreement.

Proof and sufficiency of damages. The licensors challenged the jury’s damages award on multiple grounds, arguing that LG failed to establish damages with reasonable certainty and that the evidence presented was insufficient and improperly admitted. The Supreme Court rejected these arguments. It held that the demand letters by GM and Toyota were properly admitted under the business-records exception to the hearsay rule and were not limited to demonstrating notice. The letters were introduced as evidence of the amounts claimed by LG’s customers and were supported by testimony from LG’s corporate representative regarding the company’s indemnification obligations and historical course of dealing.

Relying on Mercedes-Benz of North America Inc. v. Norman Gershman’s Things to Wear, Inc., 596 A.2d 1358 (Del. 1991), the court emphasized that a jury’s damages verdict must be upheld if supported by any competent evidence upon which a reasonable jury could rely. The court also rejected the argument that LG’s damages were speculative and explained that LG’s damages were directly tied to identifiable indemnification obligations arising from specific litigation.

Ripeness and indemnification obligations. The licensors further argued that LG’s claims were not ripe because LG had not yet paid the amounts demanded by its customers and because the indemnification obligations were contingent. However, citing XL Specialty Insurance Co. v. WMI Liquidating Trust, 93 A.3d 1208 (Del. 2014), the court held that the dispute was ripe because the licensors’ infringement suits had already triggered LG’s indemnification obligations, creating a concrete and unavoidable controversy. The court also upheld the jury’s finding that LG had binding indemnification obligations to GM and Toyota.

Contractual damages cap. The trial court initially held that LG’s recovery was capped at $12.8 million, corresponding to the total license fee. However, shortly before trial, the licensors advanced a new argument that liability should be limited to approximately $4.9 million, representing only the portion of the license fee received by one affiliated entity.

The Supreme Court agreed that the damages cap applied and rejected LG’s argument that it constituted an unpled affirmative defense. Citing In re Sterten, 546 F.3d 278 (3d Cir. 2008), the court concluded that the assertion of a damages limitation at the summary judgment stage did not prejudice LG.

However, the court reached a different conclusion regarding the licensors’ late-stage reinterpretation of the cap. By introducing a new theory days before trial, the licensors raised factual issues concerning the allocation of the license fee and the identity of the relevant “party” under the agreement. These issues would have required discovery and potentially the joinder of additional parties.

The court held that this last-minute shift prejudiced LG by depriving it of the opportunity to develop evidence and adjust its litigation strategy. It emphasized that both parties’ interpretations of the contractual provision were reasonable, rendering the provision ambiguous and necessitating factual development. Allowing the new interpretation at such a late stage, therefore, constituted an abuse of discretion.

Accordingly, the court reversed the trial court’s reduction of the damages cap to $4.9 million and reinstated the $12.8 million limitation.

Prejudgment interest. The Supreme Court also addressed the trial court’s denial of prejudgment interest and explained that prejudgment interest is awarded as a matter of right under Delaware law. The court clarified that damages were incurred when LG’s indemnification obligations arose, not when payments were actually made. It therefore reversed the denial of prejudgment interest and remanded for its calculation.

Costs. Finally, the court considered whether the contractual exclusion of “incidental damages” barred an award of litigation costs. The trial court had concluded that costs fell within the scope of incidental damages and were therefore excluded.

The Supreme Court disagreed and explained that damages compensate for losses caused by a breach, whereas costs are procedural entitlements awarded to prevailing parties. The court held that costs are not “incidental damages” within the meaning of the contract and are therefore not subject to its limitation-of-liability provision.

Thus, the court reversed the denial of costs and remanded for reconsideration of LG’s request.

The Case is No. 243, 2025.

Judge: Traynor, G.

Attorneys: Jeremy D. Anderson (Baker & Hostetler LLP) for LG Electronics Inc. Brian E. Farnan (Farnan LLP) for Invention Investment Fund I, L.P.

Companies: LG Electronics Inc.; Invention Investment Fund I, L.P.

Cases: Patent DelawareNews