Thursday, September 25, 2014

Midweek Miscellany: Wrongful Enforcement Lawsuit in Canada, Accounting of Profits in the U.K., and More

1.  From time to time I have blogged about various claims that may be made in different countries for wrongful patent enforcement.  (See here, here, here, here, here, and here.)  Recently both Sufficient Description and PatLit have published posts on Low v. Pfizer Canada Inc., 2014 BCSC 1469, a case in which the Supreme Court of British Columbia (Canada) held that the complaint disclosed a cause of action sufficient to allow a class action, filed on behalf of a class of consumers who are demanding compensation for Pfizer's having charged an above-market price for Viagra prior to the eventual invalidation of Pfizer's Canadian patent on the drug, to go forward.  More specifically, the court denied a request to dismiss the complaint because it was not "plain and obvious" that the plaintiffs' claims for unjust enrichment and interference with economic relations were doomed to fail.  Whether the plaintiffs will succeed on the two claims remains to be seen; to prevail, the plaintiffs must prove, among other things, intent and bad faith.  Professor Siebrasse's discussion (on Sufficient Description) of the competing policy considerations in cases of this nature is worth reading.  

2.  John Fitzgerald and Alison Firth have published an article in the September issue of the Journal of Intellectual Property and Practice (JIPLP) titled Is Article 13 of the Enforcement Directive a redundancy notice for the account of profits remedy in the UK?  Here is a link to the journal's website, and here is the abstract of the article:
This article examines a consequence of Art 13 of Directive 2004/48 on the enforcement of intellectual property rights. 
The authors consider the extent to which at least in the UK,the remedy of damages has effectively usurped the role & function of the free standing remedy of account of profits.
It is argued that Art 13 has eliminated the need for electing between damages and account and a cascade is proposed, by which courts might approach the award of damages under Art 13.
The article makes two interesting points.  The first is that article 13 of EC Directive 2004/48 could be construed as meaning that an IP plaintiff "is entitled to recover both direct losses it has suffered and the unfair profits made by the defendant, provided always that there is no double counting," whereas UK law seems to  require an election between an award of lost profits and an award of the infringer's profits.  Second, however, the authors argue that UK law already permits courts to award both lost profits on lost sales and, in the very same cause of action, a reasonable royalty for those unauthorized uses which did not deprive the plaintiff of sales, so that extending this principle to include awards of both lost profits and (some portion of ) defendant's profits would not be a stretch (again, as long as there is no double counting).

(On a related note, a few weeks back a reader queried me on the topic of how different countries handle the question of election of remedies, i.e., whether a patentee may recover both lost profits and a reasonable royalty, as long as there is no double counting, or is the patentee limited to one choice of remedy?  I intend to published something on this topic in due time.)   

The journal also has a short article by Charles R. Macedo and Sandra A. Hudak titled Burden of proof to establish infringement remains with the patentee even in declaratory judgment action brought by licensee, about the U.S. Supreme Court's decision in Medtronic, Inc. v Mirowski Family Ventures, LLC, 134 S. Ct. 843 (2014).  For previous discussion of this case (and a comparison with German and U.K. practice) on this blog, see here.
3.  Patent Damages recently published an interesting post titled Allowing "Do-Overs" for damages experts, which briefly discusses how different U.S. District Courts operate when a damages expert whose opinion has been excluded under the Federal Rules of Evidence wants to file a subsequent report. On a related note, William Rooklidge and Matthew Silveira have published Hiding in Plain Sight: Analyzing Requests for Patent Damages Do-Overs Under Fed. R. Civ. P. 37(c)(1) in Bloomberg BNA Patent, Trademark & Copyright L. Daily, Sept. 16, 2014, available here (behind a paywall).  These authors argue that "Federal Rule of Civil Procedure 37(c)(1) has given rise to established standards for courts to resolve requests for patent damages do-overs. Application of those standards allows courts to prevent gamesmanship and undue prejudice, while ensuring that do-overs are available when a defect is curable and there is minimal disruption to trial. . . .  The four-factor test that courts have developed to aid in applying Rule 37(c)(1) can help judges avoid both knee-jerk denials and overly liberal grants of patent damages expert do-overs."

4. Anke Nestler has published an article titled Die Ableitung von angemessenen Lizenzsätzen aus öknomischer Perspektive ("The Derivation of Royalty Rates from an Economic Perspective") in the June 2014 issue of Mitteilungen der deutschen Patentanwälten (pp. 262-66).  Here is the abstract:
In third-party licensing practice the licensing parties often orient themselves towards the licensee's expected future profits and split this between themselves within the framework of license negotiations.  This policy is economically sensible.  The derivation of reasonable royalty rates should be based on business analysis.
(According to footnote *, the article is a slightly modified version of an article originally published in Betriebs Berater 2013, 2027-29.)  The author argues that a 25-33% division of expected profits from the use of a patent, converted into a running royalty based on a percentage of turnover, can be a useful guideline--not a hard and fast rule, as rejected in the Federal Circuit's 2011 Uniloc decision--taking into account all other relevant considerations such as the parties' preferences for risk-sharing, the expected contribution of other patents or trademarks to the product's profitability, and so on.  The author cites a 1972 work by Knoppe, Die Besteuerung der Lizenz- und Know-how-Verträge, throughout as approving such an approach.  

1 comment:

  1. Re the election between damages and an accounting, a similar point was raised in an IPKat post of 26 June 2014, discussing McCambridge Ltd v Joseph Brennan Bakeries [2014] IEHC 269. In the comments, Jeremy Philips stated that the IP Enforcement Directive “does not appear to require or even permit Member States to make a successful litigant choose between damages and an account of profits.” I responded as follows:

    I see your point about the directive. Nor do I see anything in common law principles of remedies that would preclude the split remedy in your example. As I understand it, the primary reason for requiring an election is indeed to avoid double-dipping: see eg Watson Laidlaw (1914), 31 RPC 104 (HL) at 119-20, stating that “although it be true that a patentee cannot have both remedies at the same time. . . this is true simply because it is in that way that overlapping is prevented.” A similar remedy split was granted in House of Spring Gardens Ltd v Point Blank Ltd [1983] FSR 489 (Ir HC) aff’d [1985] FSR 327 (Ir SC) with damages for breach of contract, and an accounting for breaches of confidence and infringement of copyright, with the accounting set off against the damages to avoid double-dipping. Tang Man Sit v Capacious Investments [1996] AC 514, [1995] UKPC 54 (PC) does speak strongly about the need to elect, but only when the remedies are “inconsistent” and in the sense of being awarded in respect of “the same loss.” On the facts, the trial judge had awarded both an accounting and damages in respect of the very same wrong. Tang Man Sit also makes it clear that the plaintiff will not be required to elect until it has sufficient information to know which remedy is more advantageous to it; on the unusual facts, an accounting had been taken and even paid by the defendant, and this was held not to amount to an election. So it seems to me that the requirement to elect is at most a mechanism for ensuring that costs are not incurred unnecessarily in assessing a remedy which would be redundant because it would have to be offset in any event to avoid double-dipping.