Friday, July 20, 2018

Two Upcoming Webinars on Patent Damages


1. On Tuesday, July 24, from 1-2 p.m. Eastern Time the Practicing Law Institute (PLI) will be hosting a one-hour webcast titled WesternGeco and Lost Profits: Fair Compensation for Domestic Infringement or Extraterritorial Extension of Patent Rights?  Here is a link, and here is the description:
On June 22, 2018 the Supreme Court handed down a 7-2 decision in WesternGeco v. ION Geophysical upholding a patent owner’s right to recover lost profits damages for infringement under 35 USC 271(f)(2). While the Court was careful to limit its holding, the reasoning applied by the Court may have implications beyond the narrow statutory provision at issue.
Please join Douglas R. Nemec of Skadden, Arps, Slate, Meagher & Flom LLP for a presentation that will:
  • Provide a detailed analysis of the WesternGeco decision;
  • Explore the potential ramifications of the WesternGeco decision for patent damages more generally; and
  • Examine how WesternGeco fits into the broader scheme of recent Supreme Court patent decisions, as practitioners seek signs of how the Court may handle upcoming patent cases.
2. The IP Chat Channel will be hosting a webinar next Thursday, July 26, from 2-3 p.m. Eastern Time titled What's Next for Design Patent Damages?  The DOJ Test on Trial.  Here is a link, and here is the description: 
For all its eye-popping size, the $533 million award that Apple won against Samsung in a design patent infringement case was seen by few as legally significant.  Now that the case has settled, it is an interesting time for our expert panel — an attorney who specializes in design patents, a damages expert, and in-house counsel at an automaker — to assess the current state of damages law for design patents.
The Supreme Court in 2016 held that the relevant “article of manufacture” could be either all or part of the infringing product.  One possible standard for determining the relevant “article of manufacture” for Section 289 purposes was proposed by the United States Department of Justice in an amicus brief it submitted to the Supreme Court.  And that test is taking on a vigorous life of its own.
This summer, Seirus will file a brief in its appeal at the Federal Circuit after it was required by a jury last year to pay $3 million in design patent damages to Columbia.  Columbia v. Seirus was the first case after Samsung v. Apple to charge a jury to use the DOJ’s test.  The outcome of this case is thus eagerly anticipated.
Our panelists will discuss the Federal Circuit’s options in addressing the DOJ standard.  They will also discuss:
  • Other legal uncertainties left by the Supreme court, including who bears the burden of proof in the DOJ test, and whether the identity of the article of manufacture is a matter of fact to be decided by the jury
  • Strategies for patent prosecution and litigation in light of uncertainty
  • Certain areas, such as graphical user interfaces, where both innovators and implementers must take special care
Speakers:  
  • Rick Bero, The Bero Group 
  • James Dottavio, Ford Global Technologies LLC
  • Elizabeth Ferrill, Finnegan, Henderson, Farabow, Garrett & Dunner, LLP

Thursday, July 19, 2018

Law360 Story on Global Patent Litigation

Titled Patent Owners Taking Global View in Enforcement Efforts, the article by Matthew Bultman is available here (though behind a paywall for now).  The tone is bit dismissive, for my taste, of changes to U.S. law over the past decade that have made things somewhat tougher for patent owners.  But overall the article makes some valid points about the growing importance of knowing where and how to litigate across the globe--a topic I have been covering on this blog and in my book Comparative Patent Remedies, for the past five years--and if you're new to the field, it's worth a look.  (And so is Comparative Patent Remedies and, for that matter, my new book Patent Wars . . . .)

Wednesday, July 18, 2018

Love, Richardson, Oliver, and Costa on Brokered Patents

Brian J. Love, Kent Richardson, Erik Oliver, and Michael Costa have published a paper titled An Empirical Look at the “Brokered” Market for Patents, 83 Mo. L. Rev. 359.  Here is the abstract: 
We studied five years of data on patents listed and sold in the quasi-public “brokered” market. Our data covers almost 39,000 assets, an estimated eighty percent of all patents and applications offered for sale by patent brokers between 2012 and 2016. We provide statistics on the size and composition of the brokered market, including the types of buyers and sellers who participate in the market, the types of patents listed and sold on the market, and how market conditions have changed over time. We conclude with an analysis of what our data can tell us about how to accurately value technology, the costs and benefits of patent monetization, and the brokered market’s ability to measure the impact of changes to patent law.
The following observations relevant to damages can be found in the paper's Part V:  Analysis, at p.404:
First, our data strongly suggests that the brokered market for patents is primarily, and perhaps almost exclusively, a market for the transfer of potential legal liability, not a market for the transfer of technology. . . .
One important consequence of this conclusion is that prevailing prices in the brokered market may be of limited use for purposes of calculating damages in patent suits. While courts and commentators alike have called for the increased use of evidence derived from the market for “real world” patent transactions, . . . we are not convinced that data from the brokered market is a panacea for concerns about damages calculations. If we are correct that prices in the brokered market largely reflect buyers’ and sellers’ estimates of the litigation value of available assets, then brokered market data falls prey to the same “circularity” concerns that a long list of commentators has raised against undue reliance on prior license agreements. . . . True technology transfer, it would appear, remains hidden from public view even more so than the brokered market for “bare” patent transactions.

Monday, July 16, 2018

The Indian Philips Case

On Friday I mentioned Divij Joshi's Spicy IP post on Koninklijke Philips Electronics N.V. vs. Rajesh Bansal And Ors., a case decided by the Delhi High Court last Thursday.  The court awarded Philips actual and punitive damages for the infringement of a patent that the court finds to be essential to the DVD Forum Standard, and that is one of many patents included in a patent pool.  Focusing exclusively on the damages issues, here are the principal takeaways as I see them:

1.  If I understand correctly, it doesn't appear that there is a FRAND commitment as such, but the court says that according to plaintiff's counsel the pool royalty is determined on FRAND principles (para. 12.1).  Further, according to para. 13.1:
Case of the plaintiff is that the license rates offered by the plaintiff vary according to the cooperation and conduct of the licensee. In case an entity procures the license of the plaintiff’s essential patent then it is required to pay as per the FRAND rate also referred to as compliant rate. However, if a party has chosen to infringe the patent of the other party then such licensees are required to pay a slightly higher royalty rate for the period  which it had not secured license for the plaintiff’s concerned essential patent which is referred to as standard rate. According to the plaintiff despite defendants having infringed the plaintiff’s patent, the plaintiff claims license fee only on FRAND terms i.e. at compliant rate. As per the evidence of PW-1 the running royalty rates upto 27th May, 2010 were 4.58 and 3.175 USD for standard rate and compliant rate respectively whereas after 28th May, 2010 it was 2.50 and 1.90 USD for standard rate and compliant rate respectively.
The defendant, however, argues that these proposed rates are not FRAND:
The main challenge of the defendants is that royalty rates are not in compliance with the FRAND terms. As noted in the options given by the plaintiff to the defendants vide its letter Ex.PW-1/7A the defendants had the option of either taking joint licenses or the PHILIPS ONLY licenses and despite infringement the plaintiff has sought royalty only at FRAND rates, that is, USD 3.175 upto 27th May, 2010 and thereafter USD 1.90 and for the PHILIPS ONLY option. Thus it is not a case where patents of the all other patentees were pooled with that of Philips which were used in DVD Video player (para. 13.7).
If I'm understanding this correctly, then, the plaintiff proposed global royalty rates based on what it charges for the entirety of its pooled patents (rather than royalties just for the patent in suit), and the court adopts these proposed rates.  Whether the pool itself amounts to an abuse of dominant position would be an issue for, if anyone, the Competition Commission of India.  See para. 12.5 (". . . whether creating of a patent pool by the bigwigs of the industry getting together amounts to an anticompetitive practice being misuse of the dominant position cannot be decided in the present suit.").  The court also provides an extended excerpt from the U.S. Court of Appeals for the Federal Circuit's opinion in CSIRO v. Cisco (see previous write-up on this blog here), I believe to show that it is permissible to use the entire market value of the end product as the base where this is consistent (as here) with the parties' own prior negotiations.  (Use of the entire market value as the base is common with patent pools, to my knowledge.)  See paras. 13.9-13.10.

On balance, I concur with Mr. Joshi's assessment that this leaves a number of issues unresolved (though as he notes, the defendant offered no countervailing methodology).

2.  On punitive damages, the court (para. 13.11) quotes at length from 207 (2014) DLT 713 Hindustan Unilever Ltd. vs. Reckitt Benckiser India Limited, as setting forth the principles to follow in deciding whether to award punitive damages.  (Neither Hindustran Unilever  nor the cited cases are themselves patent cases, however).  Here is a portion of the quoted material:
"66. Rookes v. Barnard, [1964] 1 All ER 367, is the seminal authority of the House of Lords, on the issue of when punitive or exemplary (or sometimes alluded to as "aggravated") damages can be granted. The House defined three categories of case in which such damages might be awarded. These are: 
a. Oppressive, arbitrary or unconstitutional action any the servants of the government;
b. Wrongful conduct by the defendant which has been calculated by him for himself which may well exceed the compensation payable to the claimant; and
c. Any case where exemplary damages are authorised by the statute.
The later decision in Cassell & Co. Ltd. v. Broome, 1972 AC 1027, upheld the categories for which exemplary damages could be awarded, but made important clarificatory observations. Those relevant for the present purpose are reproduced below:
"A judge should first rule whether evidence exists which entitles a jury to find facts bringing a case within the relevant categories, and, if it does not, the question of exemplary damages should be withdrawn from the jury's consideration. Even if it is not withdrawn from the jury, the judge's task is not complete. He should remind the jury: (i) that the burden of proof rests on the plaintiff to establish the facts necessary to bring the case within the categories, (ii) That the mere fact that the case falls within the categories does not of itself entitle the jury to award damages purely exemplary in character. They can and should award nothing unless (iii) they are satisfied that the punitive or exemplary element is not sufficiently met within the figure which they have arrived at for the plaintiff's solatium in the sense I have explained and (iv) that, in assessing the total sum which the defendant should pay, the total figure awarded should be in substitution for and not in addition to the smaller figure which would have been treated as adequate solatium, that is to say, should be a round sum larger than the latter and satisfying the jury's idea of what the defendant ought to pay. (v) I would also deprecate, as did Lord Atkin in Ley v. Hamilton, 153 L.T 384 the use of the word "fine" in connection with the punitive or exemplary element in damages, where it is appropriate. Damages remain a civil, not a criminal, remedy, even where an exemplary award is appropriate, and juries should not be encouraged to lose sight of the fact that in making such an award they are putting money into a plaintiff's pocket, and not contributing to the rates, or to the revenues of central government" (emphasis supplied) . . . .
68. . . .  To award punitive damages, the courts should follow the categorization indicated in Rookes (supra) and further grant such damages only after being satisfied that the damages  awarded for the wrongdoing is inadequate in the circumstances, having regard to the three categories in Rookes and also following the five principles in Cassel. . . .
The court then concludes, without further discussion, that an appropriate punitive damages award is ₹5 lakhs (para. 13.13), which as I mentioned on Friday comes to a little over $US 7,000.  I think Mr. Joshi may be right when he asserts in his post that "the Court reproduced at length the law on punitive damages, as established in Hindustan Unilever, and expounded on the importance of not being arbitrary in the award of damages, then immediately proceeded to award an arbitrary Rs. 5 Lakh in punitive damages without taking into account any of the principles reproduced by it."

3.  Finally, no injunction is granted because the patent has now expired.

Friday, July 13, 2018

Delhi High Court Awards Royalty, Punitive Damages for Infringement of DVD SEP

The opinion, handed down yesterday, is Koninklijke Philips Electronics N.V. vs. Rajesh Bansal And Ors., and Divij Joshi has an informative write-up about it on Spicy IP.  I will probably have more to say about it myself next week after I've had a chance to read it carefully.  The damages portion of the opinion begins at p.39 and takes up the last third of the opinion.  Awards of punitive or enhanced damages outside the U.S. are unusual, though not unheard of in Commonwealth countries, and very unusual in SEP cases (I can think of only one U.S. case where they have been awarded to date); but the amount here, 5 Lakh (500,000 rupees) is equal to only a little over US$7,000.  No injunction is awarded because the patent has expired.

Thursday, July 12, 2018

Federal Circuit Reverses Damages Award Based on Entire Market Value Rule

The decision is Power Integrations, Inc. v. Fairchild Semiconductor Int'l, Inc., handed down last Tuesday, July 3.  Judge Dyk authored the majority opinion, joined by Judges Clevenger and Chen.  This case involves a different set of patents than the ones that were in suit in the 2013 appeal involving these two parties, which involved a question of damages for extraterritorial losses.  (The status of the holding in that case is in question after WesternGeco.)  The court affirms the judgment of infringement, but vacates a $139.8 million award for violating the entire market value rule.  From the opinion:
Undertaking an apportionment analysis where reasonable royalties are sought generally requires a determination of the royalty base to which the royalty rate will be applied. We have articulated that, where multicomponent products are accused of infringement, the royalty base should not be larger than the smallest salable unit embodying the patented invention. We have cautioned against reliance on use of the entire market value of a multi-component product that includes a patented component because it “cannot help but skew the damages horizon for the jury, regardless of the contribution of the patented component to this revenue.” Uniloc, 632 F.3d at 1320. . . . Even when a damages theory relies on the smallest salable unit as the basis for calculating the royalty, the patentee must estimate what portion of that smallest salable unit is attributable to the patented technology when the smallest salable unit itself contains several non-infringing features. VirnetX, 767 F.3d at 1327.
The damages verdict here rests on Power Integrations’ reliance on a demanding alternative to our general rule of apportionment, the entire market value rule. Id. “The entire market value rule allows for the recovery of damages based on the value of an entire apparatus containing several features, when the feature patented constitutes the basis for consumer demand.” Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1336 (Fed. Cir. 2009) . . . .
If the product has other valuable features that also contribute to driving consumer demand—patented or unpatented—then the damages for patent infringement must be apportioned to reflect only the value of the patented feature. This is so whenever the claimed feature does not define the entirety of the commercial product. In some circumstances, for example, where the other features  are simply generic and/or conventional and hence of little distinguishing character, it may be appropriate to use the entire value of the product because the patented feature accounts for almost all of the value of the product as a whole. See AstraZeneca AB v. Apotex Corp., 782 F.3d 1324, 1338–40 (Fed. Cir. 2015).
Power Integrations’ royalty rate is premised on the ’079 patent’s frequency reduction feature as driving consumer demand for Fairchild’s controller chips. To support this contention, Power Integrations provided evidence that the ’079 patented frequency reduction feature was essential to many customers, as it allowed the products to meet the federal government’s Energy Star program. In addition, Power Integrations provided evidence that some customers asked for the ’079 feature, that products with the ’079 feature outsold other products, and that technical marketing materials promoted the ’079 feature. Both parties, however, agreed that the accused products contained other valuable features as well. Power Integrations presented no evidence about the effect of those features on consumer demand or the extent to which those features were responsible for the products’ value. Power Integrations did not seek a separate jury determination as to damages for infringement of the asserted claims of the ’908 patent, and it is clear that the jury calculated damages only for the ’079 patent. . . .
As LaserDynamics, Versata, and VirnetX held, the entire market value rule is appropriate only when the patented feature is the sole driver of customer demand or substantially creates the value of the component parts. LaserDynamics, 694 F.3d at 67; Versata, 717 F.3d at 1268; VirnetX, 767 F.3d at 1326. The burden of proof in this respect is on the patent holder. LaserDynamics, 694 F.3d at 67. The question is whether the accused product, compared to other products in the same field, has features that would cause consumers to purchase the products beyond the patented feature, i.e., valuable features. Where the accused infringer presents evidence that its accused product has other valuable features beyond the patented feature, the patent holder must establish that these features are not relevant to consumer choice. A patentee may do this by showing that the patented feature “alone motivates customers to purchase [the infringing product]” in the first place. See id. at 69. But when the product contains multiple valuable features, it is not enough to merely show that the patented feature is viewed as essential, that a product would not be commercially viable without the patented feature, or that consumers would not purchase the product without the patented feature. Id. at 68. When the product contains other valuable features, the patentee must prove that those other features did not influence purchasing decisions. 
Here, the power supply controllers had other valuable features, such as jittering. . . . There is no proof that these features, including jittering, did not affect consumer demand. Without such proof, Power Integrations did not meet its burden to show that the patented feature was the sole driver of consumer demand, i.e., that it alone motivated consumers to buy the accused products (pp. 19-23).
The result doesn't seem all that surprising to me.  (Whether it's right or wrong as a matter of policy is another matter.)  To be sure, the Federal Circuit has permitted some variations from the EMVR--for example, in CSIRO v. Cisco, where the court (in a bench trial) used the entire market value as the royalty base, because the parties themselves had done so during their own (unsuccessful) negotiations over a royalty; in Ericsson v. D-Link, where the court allowed the plaintiff's expert witness to base his opinion on comparables that used the entire market value as the base; and in Exmark, where the claim covered the end product as a whole (see discussion here).  But this case doesn't appear to have any of these distinguishing features, or at least there's no mention of any such features in the opinion.

Tuesday, July 10, 2018

Federal Circuit Affirms Finding of Willfulness, Remands on Enhancement

The decision, handed down this morning and authored by Judge Lourie (joined by Judges Dyk and Hughes) is Polara Engineering Inc v. Campbell Co.  The patent in suit, as described by the court, "relates to a two-wire control system for push-button crosswalk stations for a traffic-light controlled intersection with visual, audible, and tactile accessible signals" (p.3).  The court affirms a finding of liability, rejecting among other things Campbell's argument that the invention was in public use (rather than experimental use) more than one year prior to the filing date.  Since this blog focuses on the damages issues, however, I'll limit my discussion to the court's affirmance of the finding of willfulness and its decision to remand for further consideration on the question of a damages enhancement.

As for willfulness, the court concludes that there was substantial evidence that the defendant's pre-litigation conduct constituted willful infringement:
We agree with Polara that substantial evidence supports the jury’s finding of willful infringement. Based on the evidence adduced at trial, the jury reasonably could have found that Campbell intentionally copied the ’476 patent despite a significant known risk that its two-wire AAPS would infringe the ’476 patent. It is undisputed that Campbell was aware of the ’476 patent prior to developing its AAPS. Campbell’s president testified that Campbell developed its AAPS to compete with Polara’s Navigator-2, and that Campbell did not have a product that could compete with the Navigator-2 when Polara launched it in 2003. The jury also heard evidence that Campbell adopted a two-wire design for its AAPS despite being advised by University of Idaho counsel and its lead developer of “areas of potential conflict,” J.A. 2572–73, 2575, and “similarities,” J.A. 3362, with the ’476 patent. 
Campbell asserts that its reliance on competent opinion of counsel demonstrates its good faith belief that the ’476 patent was invalid or not infringed. Campbell has not pointed to any documentary or third-party evidence showing it received an opinion of counsel that the asserted claims of the ’476 patent are invalid and/or would not be infringed by its AAPS. To the extent Campbell relies on the testimony of its president that Campbell allegedly eventually received “a clean bill of health” from the University of Idaho and “got the go” from his own “IP attorneys,” J.A. 2574, the jury was entitled not to credit this testimony, see Harper, 533 F.3d at 1021 (“While the court must review the entire evidentiary record, it must . . . disregard all evidence favorable to the moving party that the jury is not required to believe.”).
The only written opinion of counsel Campbell received that it alleges shows its good faith only substantively discusses claim 11, which is not at issue in this case. . . . 
Moreover, Campbell’s contention that it “was not allowed to present its pre-litigation non-infringement defenses to the jury to refute willfulness,” Appellant Br. 53–54, is belied by the record. . . .
Additionally, Campbell waived its argument that the district court erred by presenting the jury with a verdict form that required a simple “yes” or “no” answer on the question of willfulness, rather than requiring the jury to specify the time period during which Campbell’s conduct was willful. While Campbell is correct that “culpability is generally measured against the knowledge of the actor at the time of the challenged conduct,” Halo, 136 S. Ct. at 1933, Campbell did not object to the district court’s proposed verdict form on this basis, see Post-trial Motions Opinion, 237 F. Supp. 3d at 979. By not timely informing the district court that failing to adopt Campbell’s proposed verdict form would be “an error of law or abuse of discretion,” Campbell waived its objection to the verdict form. United States v. Parson Corp., 1 F.3d 944, 945 (9th Cir. 1993).
Similarly, Campbell waived its Seagate-based argument that the district court should have considered that Polara did not seek a preliminary injunction in its analysis by failing to raise it to the district court. . . . Moreover, the relied-upon language does not even apply to this situation because the jury’s finding of willful infringement was not “based solely on the infringer’s post-filing conduct.” Seagate, 497 F.3d at 1374. . . (pp. 22-24).
(Editorial note:  on the question of whether the failure to seek a preliminary injunction retains any relevance, post-Halo, to the issue of willfulness--the answer to which is, probably not--I would commend readers' attention to the discussion of this issue in Magistrate Judge Burke's recent opinion in Välinge Innovation AB v. Halstead New England Corp., Civil Action No. 1601082-LPS-CJB, 2018 WL 2411218 (D. Del. May 29, 2018).  This opinion also provides a nice summary of the views of various district courts on the relevance of post-litigation conduct to willfulness and enhanced damages, post-Halo.) 

Moving on enhanced damages, the Federal Circuit appears to want more in the way of an explanation of why the district court enhanced damages two and a half times:
Although “the district court is not required to discuss the Read factors,” Presidio Components, Inc. v. Am. Tech. Ceramics Corp., 875 F.3d 1369, 1382 (Fed. Cir. 2017), it “is obligated to explain the basis for the [enhanced damages] award, particularly where the maximum amount is imposed,” Read, 970 F.2d at 828. . . . After Halo and under Read, the “closeness of the case” remains a relevant consideration for determining the appropriateness of enhancement. Here, the district court awarded almost the maximum amount of enhanced damages, but did not adequately explain its basis for doing so, and failed to even mention Campbell’s public use defense, which presented a close question in this case.
The district court referred to Campbell’s invalidity theories generally in the closeness of the case Read factor. In determining that this factor was “neutral,” the district court merely observed that “obviousness was a close call” and that the “other invalidity theories were weaker.” Post-trial Motions Opinion, 237 F. Supp. 3d at 993. This explanation is insufficient for us to determine why the court viewed this factor as “neutral.” The court’s use of the relative term “weaker” provides little insight because it did not explain its reasons for viewing the other defenses, especially public use, as comparatively “weaker.” We view the public use defense, which the court did not explicitly address, as a closer call than obviousness. Thus, to the extent the district court determined that the public use defense was weak in this case, the court clearly erred.
Accordingly, we vacate the award of enhanced damages and remand. . . . On remand, we instruct the district court to provide a more complete explanation, including a discussion of the public use defense, in exercising its discretion. We express no view on whether damages should be enhanced or, if so, by what amount (pp. 24-26).