The case is Amgen Inc. v. Hospira, Inc. (precedential opinion authored by Judge Moore, joined by Judges Bryson and Chen). As explained in the damages portion of the opinion, the $70 million award reflects a reasonable royalty that Hospira might have agreed to ex ante, before manufacturing fourteen infringing batches of recombinant erythropoietin (EPO), even though to date Hospira has not received FDA approval to actually sell its biosimilar products.
The two patents in suit relate to EPO isoforms. Hospira submitted a Biologics License Application (BLA) to the FDA in 2014, in which it sought approval for a biosimilar to Epogen, the product Amgen makes and sells. Amgen filed suit, and the jury found the patents in suit valid and infringed. (Hospira succeeded in proving that seven batches of product were covered by the § 271(e)(1) safe harbor, but not the other fourteen batches.) The Federal Circuit affirms on liability and validity for reasons I will skip, and then considers the evidence and arguments on damages. To wit:
According to Hospira, the jury’s damages award does not reflect a “reasonable royalty.” Hospira takes issue both with the amount of the award and its lump-sum structure. Dr. Heeb’s opinions, argues Hospira, are erroneously based on the “value of delay” to Hospira, i.e., the profit Hospira could earn if it were in a place to launch its EPO as soon as the patents expired. Hospira contends that this methodology is flawed because it requires Hospira to accept all the risk of the transaction and considers only the benefit to Hospira, not the harm to Amgen. Further, Hospira argues, a lump-sum payment that cannot be clawed back gives Amgen a windfall because at the time of trial, Hospira still had not received FDA approval or sold any EPO. And, Hospira argues, Dr. Heeb did not account for the reality that Amgen does not use the ’298 patent to produce Epogen or any other product. According to Hospira, the “book of wisdom” doctrine allows parties to consider after-the-fact events, like Hospira’s lack of FDA approval, Amgen not practicing the ’298 patent, and the claw-back provision in the only other lump-sum agreement in the evidence.
Amgen contends that the district court did not abuse its discretion by allowing the jury to hear Dr. Heeb’s opinions. According to Amgen, Dr. Heeb determined what Hospira would have expected to gain from obtaining a license to manufacture the volume of batches needed to meet its expected product launch date in 2015, before expiration of the ’298 patent, and appropriately concluded that the hypothetical negotiators would have been incentivized to obtain the license needed for Hospira’s pre-launch manufacture. Amgen also argues that Dr. Heeb’s reliance on a lump-sum royalty structure is supported by the evidence in the record in the context of a method of the sales of the product. And, Amgen contends, Hospira was permitted to present testimony to the jury that Amgen did not use the ’298 patent’s inventions. According to Amgen, although Hospira appeals the district court’s denial of JMOL, Hospira’s damages argument is entirely about its Daubert challenges to Dr. Heeb’s methodology.
We see no reversible error. The district court permitted Hospira to cross-examine Dr. Heeb and to present the testimony of its own damages expert, Dr. Bell. Hospira was permitted to argue at trial that it had not yet received FDA approval, and that the amount of damages should be based on “replacement cost” because Hospira could simply re-make the product. J.A. 1881–82; see also J.A. 148–51 (instruction stating that the jury “may consider events and facts that occurred after the hypothetical negotiation took place.”). Dr. Heeb testified that he considered the appropriate factors in determining a reasonable royalty and placed the timing of the hypothetical negotiation in late 2013, before the act of first infringement. See J.A. 778–79; see also Georgia-Pacific Corp. v. United Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970). He also explained that he considered the gain to Hospira from obtaining a license to manufacture batches to meet its expected 2015 launch date, and the harm to Amgen if it entered a license. J.A. 779–85. Finally, Dr. Heeb explained his reasoning for proposing a lump-sum structure for the royalties, including the fact that in this case, infringement is tied to manufacture and not directly to the sales of the product. J.A. 786. Accordingly, the district court did not abuse its discretion in permitting Dr. Heeb to testify.
In view of Dr. Heeb’s testimony, we also find that substantial evidence supports the jury’s damages award and see no reason to vacate it. The jury heard Dr. Heeb testify at length and propose a reasonable royalty in the range of between $154 and $170 million. J.A. 788. It also heard the testimony of Hospira’s expert, Dr. Bell, who proposed a batch. J.A. 1465. In addition, Dr. Heeb explained his reasoning for proposing a lump-sum structure. J.A. 786. As to his proposal of a lump-sum damages amount without a claw-back provision, Dr. Heeb distinguished the claw-back provision in the only other lump-sum agreement in the evidence as a “mutually profitable arrangement” instead of a license from one competitor to another. J.A. 792 at 664:10–665:13. Dr. Heeb further testified that Amgen would not be incentivized to “refund [any] royalty” to Hospira because it would not want to offer license terms that would encourage other competitors to infringe its patent. J.A. 792–93 at 665:15–666:3. It was not unreasonable for the jury to choose a damages award within the amounts proposed by each expert. Accordingly, we affirm the district court’s denial of Hospira’s JMOL motion regarding the jury’s damages award (pp. 19-21).
The question of whether a reasonable royalty should be based primarily or exclusively on ex ante information, or alternatively should take into account the defendant's ex post success or failure in benefiting from the infringement, is an interesting one. Norman Siebrasse and I have argued in favor of broader use of such ex post information in A New Framework for Determining Reasonable Royalties in Patent Litigation, 68 Fla. L. Rev. 929 (2016), and I plan to publish a post later this week on the general topic of "damages for infringement without use or sale," which addresses some other contexts in which this type of fact pattern can arise.
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In other news, the Federal Circuit also affirmed an award of $363,243.80 in attorneys' fees and expenses in Blackbird Tech LLC v. Health in Motion LLC (precedential opinion authored by Judge Wallach, joined by Chief Judge Prost and Judge Hughes). The court notes, among other matters, that the district court found (1) that the plaintiff's litigation position was "meritless" and "frivolous"; (2) that the plaintiff made what the Court of Appeals characterized as multiple "nuisance value settlement offers"; and (3) that granting a fee award would "deter future abusive litigation."
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