Monday, January 6, 2014

Comparing U.K. and U.S. Law on "Springboard" Injunctions and the Burden of Proof of Non-Infringement

On December 12 Mr. Justice Birss of the Patents Court of England and Wales handed down an opinion in Smith & Nephew Plc v. Convatec Technologies Inc., [2013] EWHC 3955 (Pat), available hereIPKat posted a detailed discussion of this complex case last week, which I commend to readers' attention, but it's worth a mention here as well.  The facts are quite complex, but to cut to the remedies issue Smith & Nephew obtained regulatory approval to market a wound dressing product within the EU.  The court concluded that the product itself does not infringe Convatec's patent, but certain experiments Smith & Nephew conducted prior to seeking regulatory approval did infringe.  Smith & Nephew could have conducted the testing necessary for regulatory submission using a noninfringing process developed at a later date; it therefore obtained obtained regulatory approval somewhat earlier than if it had not conducted the infringing experiments.  To date, however, Smith & Nephew has not yet sold any of the approved, noninfringing product within the EU. The issues therefore are whether a court may enjoin lawful, noninfringing conduct that a defendant is able to engage in only because it engaged in earlier infringing activity; and if so, whether such a "springboard" injunction is appropriate here. 

Citing EU and UK law, Justice Birss concludes that the answer to the first question is yes, but that "the following factors are relevant in considering final springboard relief in a patent case:  
i) Caution is required before a final injunction is granted restraining an otherwise lawful activity. Nevertheless in a proper case it will be.
ii) The nature of any unwarranted advantage relied on should be identified. The precise relationship between the unlawful activity in the past and the later acts which are said to exploit that unwarranted advantage needs to be considered.
iii) If an injunction is to be granted it must be in an appropriate form and for a duration which is commensurate with the unwarranted advantage relied on.
iv) The court must be particularly careful not to put the claimant in a better position than it would be if there had been no infringement at all, especially if otherwise lawful competitive activity will be restrained.
v) In considering what relief to grant, the availability of other remedies apart from an injunction needs to be taken into account, not only damages but, as in Vestergaard, the availability of an account of profits should be considered too" (Para. 133).
On the facts, however, Justice Birss was not convinced that a springboard injunction would be appropriate here, because in his opinion even if Smith & Nephew had used the subsequently-developed noninfringing process to conduct the necessary testing it would have been able to apply for and obtain regulatory approval by now.  Therefore, "[t]o regard sales of non-infringing Durafiber Ag in the UK or EU from now on as being the product of an unwarranted advantage would be unfair.  To prevent those sales or award damages or an account in respect of them would overcompensate the patentee for the harm caused by the infringement in the past." (para. 167).  

Could a U.S. court award a springboard injunction in a patent case?  I wasn't sure, though a quick Westlaw search uncovered some cases involving other bodies of law in which U.S. courts have stated that in an appropriate case a court may enjoin otherwise lawful activity.  See, e.g., Russian Media Group, LLC v. Cable Am., Inc., 598 F.3d 302, 307 (7th Cir. 2010); Philip Morris USA, Inc. v. Otamedia Ltd., 331 F. Supp. 2d 228, 246 (S.D.N.Y. 2004). Still not sure about springboard injunctions in patent cases, I then contacted Professor John Golden at the University of Texas, who has written extensively on injunctions in patent cases, and he directed me to his article Injunctions as More (or Less) than “Off Switches”: Patent-Infringement Injunctions’ Scope, 90 Tex. L. Rev. 1399, 1424-25 (2012), which discusses "reparative" injunctions:
The Federal Circuit has held that district courts lack authority to issue purely reparative injunctions that appear to be directly concerned only with correcting for harm caused by past infringement. . . .
Although reparative injunctions are commonly available in other areas of U.S. law, the Federal Circuit has held that they are not available under the U.S. Patent Act. The basis for this holding is § 283 of the Act, which states, “The several courts having jurisdiction of cases under this title may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable.”
The Federal Circuit has held that § 283’s authorization of injunctions to “prevent the violation” of patent rights establishes an exclusive purpose for the permitted exercise of injunctive power. In the circuit’s words, “An injunction is only proper to prevent future infringement of a patent, not to remedy past infringement” [quoting Spine Solutions, Inc. v. Medtronic Sofamor Danek USA, Inc., 620 F.3d 1305, 1320 (Fed. Cir. 2010)].  Although the Federal Circuit’s conclusion that § 283 forbids purely reparative injunctions might be contestable, this Article will leave to another day potential debate over this issue. For present purposes, what matters is that purely reparative injunctions are . . . generally forbidden under existing law. . . .
In the case Golden quotes above (Spine Solutions), the defendant made infringing products in the U.S., exported some of them, and (apparently) retained ownership of the exported products; the patent owner wanted to enjoin the defendant from using or selling the exported products outside the United States, but because such conduct outside the United States would not violate U.S. patent law the Federal Circuit held that an injunction would be improper.  Golden further notes (at p.1449) that “district courts appear generally to heed Federal Circuit precedent holding that injunctions to enforce patent rights cannot be purely reparative.  Among the 143 orders in the 2010 dataset, I identified only one that contained a purely reparative injunction. Further, this purely reparative injunction had a relatively trivial form: it was a consented-to order commanding an infringer to ‘provide a written letter of apology . . . that recognizes [the] infringement of the patents-in-suit, and apologizes for it.’" (citing Batesville Servs., Inc. v. S. Rain Casket & Funeral Supply, No. 2:09-CV-257-PPS-APR, slip op. at 5 (N.D. Ind. July 15, 2010)). 

Based on Spine Solutions, it would appear that springboard injunctions are not a viable option in U.S. patent cases.  (Whether the Federal Circuit's interpretation of the law is correct or not is an interesting question that I may take up in some future post, however.)  Of course, even if the Federal Circuit's interpretation is wrong, the circumstances under which a springboard or reparative injunction might seem appropriate might not be very common (though I suppose they could occur again in a case like Spine Solutions).  For one thing, making or using a patented invention for purposes of developing or submitting information to the FDA might be covered by the statutory experimental use exception embodied in 35 U.S.C. section 271(e)(2) ("It shall not be an act of infringement to make, use, offer to sell, or sell within the United States or import into the United States a patented invention . . . solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs or veterinary biological products").  The Supreme Court and the Federal Circuit have both interpreted this provision broadly in recent years.  (EU nations also recognize some experimental uses as noninfringing.  For an explanation of why the defense didn't apply to the experimentation at issue in Smith & Nephew, see Darren Smyth's answer to my question on this point in the comments portion of the IPKat post noted above.  For general discussion of the defense, see this write-up by the British firm Mewburn Ellis.)  And of course if you are in lawful possession of a patented invention, you can lawfully use (but not make) it for whatever purpose you want, including figuring out how to design around it.  In other instances in which infringing experimentation leads to the development of a noninfringing product, perhaps U.S. courts post-eBay would opt for awarding damages rather than a springboard injunction, depending on the circumstances (something that Mr. Justice Birss specifically ruled out on the facts of Smith & Nephew, see para. 161).  On the other hand, injunctions against trade secret misappropriation frequently are crafted to last only so long as it would have taken the defendant to acquire the relevant information through lawful means (e.g., reverse engineering or independent discovery), which seems similar in principle.

One other thing that caught my attention in the IPKat post cited at the beginning of this post is the statement  "Smith & Nephew are stated to be the Claimant, so this looks like a declaration of non-infringement case. According to the recent Generics v Teva/Yeda decision, the burden of proof should therefore be on the alleged infringer, not the patentee. But perhaps there is some complexity here that Merpel has not seen, as the judgment never actually states whether the matter is an infringement action or a declaration of non-infringement."  The cited case, Generics (UK) Ltd. t/a Mylan v. Yeda Res. & Dev. Co. Ltd and Teva Pharm. Ind. Ltd [2013] EWCA Civ 925 (Ct. App. 2013), does indeed state "the burden of establishing non-infringement fell on Mylan" (para. 108).  This is the same conclusion the U.S. Federal Circuit came to in Medtronic Inc. v. Boston Scientific Corp., 695 F.3d 1266 (Fed. Cir. 2012), cert. granted, 133 S. Ct. 2393 (May 20, 2013) (No. 12-1128).  We await the Supreme Court's decision whether this is right or wrong under U.S. law; see my post on the oral argument, here.

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