Thursday, May 28, 2015

2015 PwC Patent Litigation Study Is Out

Every year PricewaterhouseCoopers publishes a U.S. patent litigation study, and it just came to my attention (hat tip to PatLit) that 2015 Patent Litigation Study is now available (link here).  Key findings:  (1)  the "number of patent lawsuits filed in 2014 dropped by 13%," to 5,700; (2) 2014 annual median damages awards attained their "second-lowest point in 20 years," at $2.0 million; (3) there were "no 'mega' verdicts in 2014"; (4) the "median jury award is 31x greater than median bench award in last 5 years," that is, $9.4 million versus $0.3 million (though I would imagine some of this is due to selection bias--in a low-stakes case, the parties may prefer to forgo a jury); (5) the "gulf between practicing and nonpracticing entities (NPEs)" grew, as "damages awards for NPEs are 4.5x greater than those for practicing entities over the last five years" ($8.9 million versus $2.0 million); (6) at the same time, "NPEs are 10% less successful overall," (35% versus 26% from 1995-2014), though success rates in cases that go to trial are about equal (67% versus 65%); (7) not surprisingly, there is now a "higher likelihood of the losing plaintiff having to reimburse defendant’s costs, following two 2014 Supreme Court decisions" (though I don't see any statistics in the report itself; for more information on the impact of the attorneys' fee decisions, see the recent posts on Patently-O by Hannah Jiam and by Shubha Ghosh); (8) reasonable royalties are awarded in 81% of cases in which damages are awarded, versus lost profits in 31% (in some cases, you can get both types of awards, lost profits as compensation for profits that would have been on sales lost to the infringer and reasonable royalties for the remainder); and (9) the median damages award was highest in the biotech/pharma sector ($21.4 million, based on 25 cases).  There are also statistics on district courts, individual judges, median time to trial, appeals, and so on.

Update:  Jason Rantanen called to my attention this post on the PatentDocs Blog that questions some of PwC's assertions regarding case filings.
 

Wednesday, May 27, 2015

New Book on Patent Litigation in Germany, Japan and the United States

My university's library just received a copy of a newly published book by Johann Pitz, Atsushi Kawada, and Jeffrey A. Schwab titled Patent Litigation in Germany, Japan and the United States:  A Practitioner's Guide (C.H. Beck/Hart/Nomos 2015).  Here is a link to further information, and here is the book description:
This book gives a systematic comparative overview of the characteristic principles of patent enforcement proceedings in the US, Japan, and Germany, i.e. the major jurisdictions where patent holders might seek for legal remedies in parallel proceedings. The book examines topics such as: survey matter of infringement, claims of the patent holder and objections of the infringer, pre-procedural measures, infringement proceedings, and procedural principles. It will be of interest to practitioners working in the field of copyright, patent, and trademark law. 
From my very quick perusal, I'd say this looks like it could be a useful resource.  Part 4 (pages 51-67) discusses injunctions and damages in the three countries, and Part 5 (pages 110-21) discusses "pre-procedural measures" such as preliminary injunctions and declaratory judgments.

Monday, May 25, 2015

Hilty on Enforcement of IP Rights

Reto Hilty, the Director of the Max Planck Institute for Innovation and Competition, has posted a new paper on ssrn titled The Role of Enforcement in Delineating the Scope of IP RightsHere is a link to the paper, and here is the abstract:
According to an unbroken paradigm innovation and creation accrue from strong IP protection – the more the better. Increasing doubts from academic research are continuously ignored. Under-protection is the great concern. Over-exclusivity, however, is not a minor relevance. Lacking competitive pressure due to legally over-protected market positions eliminate incentives to invest as well. Hence, not a maximum, but the right degree of IP protection is required.
The current IP system tends to over-exclusivity; never in history was the level of protection reduced with a view to legitimate interests of third parties. As long as enforcement measures were of limited vigour, such overshooting tendencies of IP protection had little impact. With increased attention on enforcement measures, however, the over-protective legal design becomes visible. Such concerns, however, did not yet reach the policy makers, notably not on the EU level.
The lack of a balance IP policy in the EU is mirrored by the Directive 48/2004. By limiting the focus on the right, it mistakes that enforcement without limits risks not fostering, but impairing innovation and creation. The current evaluation of the Directive 48/2004 does not give cause for hope that such imbalances would be eliminated. Improvement opportunities, however, exist. Member States first of all should be obliged to establish remedies against dysfunctional enforcement; notably the denial of injunctive relief must become a common procedural instrument. Beyond that, over-exclusivity should be eliminated by dismantling certain property mechanism and replacing them through liability tools (such as extended grounds to claim for compulsory licensing).
Dr. Hilty argues, among other things, that the Directive should be amended (1) to require that member states of the EU make injunctive relief discretionary, perhaps along the lines set out in the U.S. eBay decision; and (2) to require member states to better provide for the redress of wrongful enforcement ("an obviously arbitrary law suit without reasonable likelihood of an actual infringement of an IP right and without legitimate interests of the right holder in prohibiting certain business activities of a third party").  I agree that such steps would be welcome, particularly the former, in order to make the availability of injunctive relief better align with the economic rationale for choosing injunctions (property rules) or damages (liability rules) in a given case.  Relying, as at present, on competition law's abuse of dominant position doctrine, or the civil law's abuse of right doctrine, to avoid what is otherwise mandatory injunctive relief in countries such as Germany is at most a second-best solution, in part because the conditions under which these doctrines would preclude injunctions are unlikely to coincide with all of the situations in which injunctive relief is socially suboptimal.

 This is a very interesting paper, and I hope it will find a wide audience.

Sunday, May 24, 2015

RIP John Nash

I just heard about the death of John Nash, one of the great figures in mathematics and recipient of the 1994 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.  BBC News story here.

Update:  More on the life and death of John and Alicia Nash from the New York Times, Washington Post, Wall Street Journal, The Guardian, Le Monde, and Die Zeit.

Friday, May 22, 2015

EWCA Affirms Record £27 Million Award for Wrongly Issued Interim Injunction

The judgment of the England and Wales Court of Appeal (EWCA) in AstaZeneca AB v. KRKA came down yesterday and is available here (hat tip to Norman Siebrasse for calling it to my attention).  Last year I mentioned the Patents Court decision from which this appeal arose (see here).  The issue is one of damages for a wrongly issued preliminary injunction.  As I noted in this 2013 blog post, in many countries (including all the member states of the E.U., who are bound by the 9(7) of the Enforcement Directive), when a preliminary injunction is granted but subsequently is revoked, or the defendant is found not to have infringed the IP right in suit, the defendant is entitled to compensation for the losses it suffers while the injunction is in place.  (By way of contrast, in the U.S. the defendant's damages are capped by the amount of the bond the plaintiff was required to post in order to obtain the injunction.)  Anyway, as I wrote last year, in January 2014 Patents Court Justice Sales     
went through a very careful analysis to determine the framework for awarding damages to KRKA from having its generic drug excluded from the market as a result of a preliminary injunction involving a patent that was later held not to infringe another generic manufacturer's drug.  As a result of the decision in this other case, the preliminary injunction against KRKA was lifted in July 2011; but it was still a couple of months before KRKA was able to enter the market, by which time (or shortly thereafter) there were other generic copies of the same drug on the market.  The court concluded that in the but-for world in which the preliminary injunction had not issued, KRKA would have enjoyed a first-mover advantage which is now lost, and should be compensated accordingly.  The court directed the two parties' experts to reach an agreement on the amount owed, following the court's discussion of the appropriate framework.
Ultimately the judge awarded damages in excess of £27 million, based on his conclusion that the defendants would have been able to establish a foothold by convincing national health service authorities in the U.K. to approve the switch to the generic version of the drug and to convince doctors to prescribe it, and thus would have enjoyed a temporary 80% market share (discounted by an 20% probability that this might not have happened).  Yesterday's opinion goes through Justice Sales's factual determinations and, ultimately, rejects all of AstraZeneca's challenges to them (including the challenge to the 20% discount, which AstraZeneca argued was arbitrary, see paras. 79-84).  According to the court, this "is said to be the largest award ever made by the Patents Court upon an inquiry of this kind" (para. 1).

There is also a write-up of the case on today's PatLit Blog.

Update:  A write-up is also available on IPKat here.

Wednesday, May 20, 2015

New Translations of Japanese Apple v. Samsung Judgments

Japan's IP High Court has had English-language summaries and translations of its May 2014 judgments in the Samsung-Apple FRAND dispute up for some time now (see my post here for links).  In addition, Christopher Heath recently published a translation of key portions of the judgments in the February 2015 issue of IIC (the Max Planck Institute's International Review of Intellectual Property and Competition Law), available here and here.  In addition, the February 2015 issue of the German journal GRUR-Int. has translations into German by Atsuhiro Furuta (pages 142-47).

Monday, May 18, 2015

Federal Circuit Affirms Damages Awards for Design & Utility Patent Infringement in Apple v. Samsung

Here is a link to the Federal Circuit's opinion, and links to my previous blog posts may be found here, here, and here

The bottom line is that the court (1) reverses the finding that Apple's trade dress was nonfunctional and thus protectable (an important topic in trademark law which, however, I will not address here); (2) affirms the findings that Samsung infringed Apple's design and utility patents; and (3) affirms the damages awards predicated on the design and utility patent infringement, but not on the trade dress dilution (thus remanding "for immediate entry of final judgment on all damages awards not predicated on Apple's trade dress claims").  I'm not sure off the top of my head what portion of the nearly $1 billion this entails, though I would expect most of the damages award will remain in place for reasons which follow.


The main damages issues of interest relates to the award for design patent infringement.  Section 289 of the U.S. Patent Act reads as follows:
Whoever during the term of a patent for a design, without license of the owner, (1) applies the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale, or (2) sells or exposes for sale any article of manufacture to which such design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit, but not less than $250, recoverable in any United States district court having jurisdiction of the parties.
Nothing in this section shall prevent, lessen, or impeach any other remedy which an owner of an infringed patent has under the provisions of this title, but he shall not twice recover the profit made from the infringement.
As I have written before, according to the Federal Circuit Congress included the words “total profit” when it revised the statute over one hundred years ago, expressly to overrule a Supreme Court case, Dobson v. Dornan, 118 U.S. 10 (1886), in which the Court had required the plaintiff to apportion the profit the defendant earned from the use of an infringing carpet design as opposed to the rest of the carpet (resulting, in that case, in only nominal damages).  See Trans-World Mfg. Corp. v. Al Nyman & Sons, Inc., 750 F.2d 1552, 1567 (Fed. Cir. 1984).  If this understanding is correct, it means that a court may award the defendant’s entire profit from the sale of design patent-infringing goods, even if the design patent in suit accounts for only a small portion of that profit.  Such a rule is indefensible as a matter of policy, and is not followed in trademark or copyright cases (or in other countries, where awards of infringers’ profits for utility patent infringement remains a viable remedy).   

As one who joined a law professor’s amicus brief arguing against applying § 289 in this fashion, I was hoping that the court might find a way out, based either on a causation rationale or by interpreting the words “article of manufacture” narrowly.  But it was not to be (though I wonder whether Samsung will find it worthwhile to try a cert. petition to the U.S. Supreme Court?).  Here is what the court says, in the opinion by Chief Judge Prost:
In reciting that an infringer “shall be liable to the owner to the extent of [the infringer’s] total profit,” Section 289 explicitly authorizes the award of total profit from the article of manufacture bearing the patented design.1 Several other courts also concluded that Section 289 authorizes such award of total profit. See Schnadig Corp. v. Gaines Mfg. Co., 620 F.2d 1166, 1171 (6th Cir. 1980); Henry Hanger & Display Fixture Corp. of Am. v. Sel-O-Rak Corp., 270 F.2d 635, 643-44 (5th Cir. 1959); Bergstrom v. Sears, Roebuck & Co., 496 F. Supp. 476, 495 (D. Minn. 1980). The clear statutory language prevents us from adopting a “causation” rule as Samsung urges.
Samsung continues its quest for apportionment by arguing, alternatively, that the profits awarded should have been limited to the infringing “article of manufacture,” not the entire infringing product. Samsung argues for limiting the profits awarded to “the portion of the product as sold that incorporates or embodies the subject matter of the patent.” Appellants’ Br. 38. Samsung contends that the Second Circuit had “allowed an award of infringer’s profits from the patented design of a piano case but not from the sale of the entire piano . . . .” Id. These Second Circuit opinions, however, addressed a factual situation where “[a] purchaser desiring a piano of a particular manufacturer may have the piano placed in any one of several cases dealt in by the maker.” Bush & Lane Piano Co. v. Becker Bros., 222 F. 902, 903 (2d Cir. 1915). That factual situation occurred in the context of the commercial practice in 1915 in which ordinary purchasers regarded a piano and a piano case as distinct articles of manufacture. The facts at hand are different. The innards of Samsung’s smartphones were not sold separately from their shells as distinct articles of manufacture to ordinary purchasers. We thus do not agree with Samsung that these Second Circuit cases required the district court to limit the damages for design patent infringement in this case.
We agree with the district court that there was no legal error in the jury instruction on the design patent damages. Samsung does not argue a lack of substantial evidence to support the damages awards under the district court’s jury instruction. We therefore affirm the damages awarded for design patent infringements.
1/ Amici 27 Law Professors argues that an award of a defendant’s entire profits for design patent infringement makes no sense in the modern world. Those are policy arguments that should be directed to Congress. We are bound by what the statute says, irrespective of policy arguments that may be made against it.
I can’t say I’m greatly surprised that the court adhered to the district court’s interpretation of § 289, but I am disappointed.  As design patents become more important in U.S. law, I would hope that Congress, if not the courts, consider revising this rogue statute.