Thursday, July 2, 2015

Attorneys' Fees to Octane Fitness on Remand; Cert. Petitions Filed re Standard for Enhanced Damages

Hat tip to my colleague Prentiss Cox for bringing to my attention this July 1 opinion from Judge Ann Montgomery determining, on remand, that Octane Fitness is entitled to recover attorneys' fees under 35 U.S.C. section 285.  The amount of the award is yet to be determined.  For my blog post on the Supreme Court decision from last year, see here.

In other news, both Halo and Stryker have filed cert. petitions (Numbers 14-1513 and 14-1520, respectively) asking the Supreme Court to eliminate willfulness as a precondition for an award of enhanced damages, and also to eliminate the Seagate requirement of a showing of objective and subjective recklessness, which is simialr to the standard for exceptional case that the Court discarded last year.  (Hat tip to BNA Bloomberg's Patent, Trademark, and Copyright Journal.)  Here is Halo's question presented (there is a second question relating to the definition of "sale" or "offer to sell" under section 271(a), which I will skip):
1. Whether the Federal Circuit erred by applying a rigid, two-part test for enhancing patent infringement damages under 35 U.S.C. § 284, that is the same as the rigid, two-part test this Court rejected last term in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014) for imposing attorney fees under the similarly-worded 35 U.S.C. § 285.
And here are Stryker's:
1. Has the Federal Circuit improperly abrogated the plain meaning of 35 U.S.C. § 284 by forbidding any award of enhanced damages unless there is a finding of willfulness under a rigid, two-part test, when this Court recently rejected an analogous framework imposed on 35 U.S.C. § 285, the statute providing for attorneys’ fee awards in exceptional cases?
2. Does a district court have discretion under 35 U.S.C. § 284 to award enhanced damages where an infringer intentionally copied a direct competitor’s patented invention, knew the invention was covered by multiple patents, and made no attempt to avoid infringing the patents on that invention?
While there is certainly an arguable case for both petitioners' positions, in my opinion the policy arguments for awarding attorneys' fees are much stronger than the arguments for awarding enhanced damages (as suggested by the fact that in many countries attorneys' fees are routinely awarded, while enhanced or punitive damages almost never are).  A return to something like the pre-Seagate standard for enhanced damages would in my view be a colossal mistake.  But we'll see what happens.  So far the Supreme Court has no IP cases yet on its docket for 2015-16.  For previous blog posts on Halo and Stryker, see here and here.

This is a busy day.  The Federal Circuit also decided an interesting damages case today, Westerngeco L.L.C. v. ION Geophysical Corp.  I'll be back either tomorrow or Monday with a write-up.

CJEU to Decide Huawei v ZTE on July 16

As reported on the EPLaw Blog today, the Court of Justice for the European Union will be releasing its judgment in Case No. C-170/13 (Huawei v. ZTE) on July 16 at 2:30 p.m. (which will be 9:30 a.m. in the U.S. Central Time Zone.)   This will be big news, whichever way it turns out.

For my blog posts from last November on AG Wathelet's opinion, see here and here.

Samsung Seeks En Banc Review of Federal Circuit Panel Decision on Design Patent Damages

Florian Mueller has already covered this on FOSS Patents, but if you haven't seen it yet, here's a copy of Samsung's petition for rehearing en banc in the Apple v. Samsung case.  (The panel opinion, which I blogged about here, came down in May.)   The petition takes issue with the panel decision both on the substantive law of design patents and on damages.  In addition, here is a copy of an amicus brief in support of Samsung's petition filed by Professor Mark Lemley.  

As you may recall, the panel read 35 U.S.C. § 289 as requiring the defendant to disgorge its entire profit earned as a result of the infringement of a design patent, without any apportionment--a result that is impossible to square with any rational principle of damages.  I would be delighted to see the court grant en banc review, though admittedly the Supreme Court's recent decision in Kimble  doesn't say much for the courts' receptiveness to arguments based on economic rationality alone.   The petition and the brief make some interesting arguments based on legislative history, text, and precedent, though, so there may be hope that the court will see fit to reconsider.  We'll see.

Tuesday, June 30, 2015

U.S. ITC to Review FRAND Issues

I'm still catching up on things after returning from Japan, and only today came across this post from Friday's Essential Patents Blog titled "ITC grants partial review of ALJ Essex’s decision concerning FRAND issues (337-TA-613)."  I don't have anything to add at this point, other than to concur in blogger David Long's statement that "These questions and the ITC’s ultimate resolution of the issues promises to result in one of the most important ITC decisions in litigating SEPs in the ITC, and perhaps elsewhere."

For previous mention of this case on this blog, see here and here.

Monday, June 29, 2015

A Chinese Case on Preliminary Injunctions

Judge Ma Yunpeng (Judge of the Beijing Intellectual Property Court) recently published an article in China Patents & Trademarks No. 2, 2015, pp. 42-47, titled Analysis of Substantive Factors in Pre-trial Act Preservation against Patent Infringement, discussing a case in which Shanghai Novartis Trading Co. (Novartis Co.) sought a preliminary injunction (a/k/a "act preservation") against Jiangsu Haosen Pharmaceutical Co. (Haosen) and Beijing Jewim Pharmaceutical Science and Technology Co. (Jewim).  According to the article, the patent in suit "is directed to a method for preparing a medicament defined by use, namely a second medical use patent," specifically the use of a compound known as imatinib (which is marketed under the brand name GLEEVEC) "or a pharmaceutically acceptable sale thereof for the manufacture of pharmaceutical compositions for use in the treatment of gastrointestinal stromal tumours," or GIST.  The respondent Haosen makes and sells a generic drug called XINWEI, which Jewim resells.  According to Novartis, the instructions for the use of XINWEI would induce doctors or patients to infringe the patent in suit.  

The Beijing No. 2. Intermediate Court court granted the injunction, concluding first that Novartis Co. had a right to file the application, based on evidence showing that Novatis AG (the Swiss drug company that is a coowner of the patent in suit) had "signed a Patent Exploitation License Agreement with the other three patent co-owners acting as assignors to allow its Chinese subsidiary to solely exploit and maintain the patent right," thus satisfying the requirements under Chinese law that the applicant be an interested party (p.43).  Second, according to the article, "the applicant is required to prove that the patent in suit is legitimate and valid and in a stable state" (p.44).  If I understand correctly, this means that, for a patent for a new invention (as here) "the applicant is required to provide prosecution history of the patent and relevant materials in patent invalidation proceedings (if any) before application," whereas for utility models and design patents (the patents the author refers to as "less stable") "the applicant is required to provide an evaluation report, and references provided by both parties and defences made by the respondent using prior art (design) shall be carefully scrutinized" (id.)  The author also notes, however, that because China bifurcates infringement and validity determinations, "[t]he court's opinions on status of the patent in suit only serve as a reference for decision making," and "[i]n principle a court for hearing infringement cases can presume a patent valid before the patent in suit is determined invalid by an effective administrative decision" (p.44).  I would note that the same is true in Germany, where infringement and validity are bifurcated but courts hearing applications for preliminary injunctions normally will consider whether the patent is likely to be valid (see, e.g., this post from this past February).

Third, the court concluded that the respondents' conduct likely constituted an act of infringement.  According to the author, on an application for a preliminary injunction courts "should not be over-strict" in demanding proof of infringement, and "[i]t is unnecessary to reach an extent to which 'infringement certainly exists', and a high likelihood thereof would suffice" (p.44).  Here, the evidence indicated that the active ingredient of XINWEI is a pharmaceutically acceptable salt of imatinib, that that ingredient is used for the manufacture of the pharmaceutical composition XINWEI, and that the instructions inform how use XINWEI to treat GIST.  Thus, "it is highly likely that the information included in the instructions . . . falls within the protection scope of the patent in suit" (p.45).

Fourth, the court concluded that the conduct threatened Novartis Co. with irreparable harm.  According to the author, irreparable harm means harm that "can hardly be converted into money" and "involves property loss, as well as loss in competitive advantage, market share of a product and potential commercial reputation" (p.45).  Here, irreparable harm was present because XINWEI was sold "at a sharp price advantage," the "current medicare medication list in some areas usually records only generic names of active substances of medications," "imatinib can be found in the medicare medication list in some areas," XINWEI "is in fact in the circulation process," and its sales have "greatly influenced the sales of" GLEEVEC.

Fifth, the court considered the balance of rights and interests including the public interest.  The court concluded that the requested injunction would not prevent the respondents from marketing XINWEI for its first medical use, and thus would not drive them out of business, and also would not be detrimental to the public interest, despite the price differential.

Finally, Novartis provided a guaranty of 10 million RMB, which the court concluded would cover the respondents' loss from a wrongly issued injunction (and could be supplemented if necessary).

For previous discussion on this blog of preliminary injunctions in China, see here, here, here, here, and here, as well as my book (pp. 351-52).      

Friday, June 26, 2015

Layne-Farrar et al. on Royalties, FRAND-Committed Patent Bundling

1.  Anne Layne-Farrar, Gerard Llobet and Jorge Padilla have published a paper titled Patent Licensing in Vertically Disaggregated Industries: The Royalty Allocation Neutrality Principle in Communications & Strategies, no. 95, 3d quarter 2014, pp. 61-84.  Here is a link to the paper, and here is the abstract:
This paper investigates patent licensing in vertically disaggregated industries, where patent holders may license to upstream producers only, downstream producers only, or to both upstream and downstream producers. We consider whether consumer welfare will be greater if the patent holder's ability to license multiple parties along a production chain is restricted. We also analyse whether a policy that restricts licensing to upstream manufacturers constitutes appropriate public policy. These questions have significant policy implications. Under the legal doctrine of first sale, or patent exhaustion, a patent holder's ability to license multiple parties along a production chain is restricted. How and when such restrictions should be applied is a controversial issue, as evidenced by the US Supreme Court's granting certiorari in the Quanta case. Some commentators have even argued that refusing to license to upstream component manufacturers may constitute an abuse of dominance and thus infringe the competition laws. We find that under ideal circumstances how royalty rates are split along the production chain has no real consequence for social welfare. Even when we depart from ideal conditions, however, we still find no economic justification for restrictions of the patent holders' ability to license multiple parties or to license to downstream producers only. 
2.  Anne Layne-Farrar and Michael A. Salinger have posted a paper on ssrn titled Bundling of Rand-Committed PatentsHere is a link to the paper, and here is the abstract:
We assess the implications of the literatures on bundling and tying and on patent bundling in particular for whether a company that makes a RAND (reasonable and non-discriminatory) commitment on a patent may license that patent only in a bundle with patents on which it has not made a RAND-commitment. Patent bundling/tying is a common practice that often has sound efficiency justifications, but forcing a licensee to accept a license on a patent it does not want to obtain a RAND-committed patent that it does want can be a way of circumventing the RAND-commitment. Mixed bundling, where the licensor offers licensees the option of taking a license to RAND-committed patents only or taking a license to the full portfolio, is the most straightforward solution. However, we argue that a licensor can nonetheless offer a RAND-committed patent only in a bundle with patents on which it has not made a RAND-commitment, provided that the royalty would be RAND for the RAND-committed patents alone. The patent owner cannot deduct the value of non-RAND-committed patents from the license fee from the bundle and argue that it has honored its RAND-commitment as long as the difference is RAND for the RAND-committed patents.

Wednesday, June 24, 2015

Patent Remedies: Recommendations for International Best Practices

I returned from Japan last week following the speaking engagements in Tokyo, Kyoto, and Fukuoka that I mentioned here.  I wish to express my heartfelt thanks to everyone whose hard work made these events possible, especially Professors Reiko Aoki, Ryoko Iseki, Sadao Nagaoka, and Masabumi Suzuki.  I certainly learned a great deal and was honored to participate.

In Tokyo and Fukuoka, I presented a work in progress that I am coauthoring with Norman Siebrasse titled The Value of the Standard.  We hope to finalize the paper sometime later this summer, and I will note when it is up on ssrn.

In Kyoto, I presented a lecture titled "Patent Remedies:  Recommendations for International Best Practices."  In case it may be of interest, here is a link to the text I prepared, and here are the slides.  Comments and criticism are always welcome.