Wednesday, March 16, 2022

Remedies Issues in BASF v. CSIRO

Yesterday the Federal Circuit handed down its decision in BASF Plant Science, LP v. Commonwealth Scientific and Industrial Research Organisation (majority opinion by Judge Taranto, with Judge Newman filing a partial dissent).  The six patents in suit "concern the engineering of plants, particularly canola, to produce specified oils not native to the plants" (p.3), and the principal issues on appeal relate to venue, written description, and patent ownership under a materials transfer agreement.  Long story short, the majority finds that the species, but not the genus, claims of four of the patents in suit satisfy the written description requirement, and that BASF is not a co-owner of any of the patents.  The remedies issues are less significant, but for what it's worth the majority concludes, first, that the district court was correct not to submit the issue of willfulness to the jury, stating:


To establish willfulness, a patentee must show that the accused infringer had a specific intent to infringe at the time of the challenged conduct. . . . In this court, CSIRO identifies only two facts as creating a triable issue of willfulness: that certain BASF witnesses were aware and kept track of CSIRO patents and that BASF did not assert its co-ownership defense until after infringement and litigation had begun. . . . But the second fact cannot be significant given that the patents now at issue did not even issue to CSIRO until after BASF initiated litigation by bringing its declaratory-judgment action in Delaware. And the first fact, even if joined to the second, without additional facts could not establish more than “[k]nowledge of the asserted patent and evidence of infringement”—which “is necessary, but not sufficient, for a finding of willfulness.” Bayer Healthcare, 989 F.3d at 987–88; see also Arctic Cat Inc. v. Bombardier Recreational Prods. Inc., 876 F.3d 1350, 1371 (Fed. Cir. 2017) (relying on facts beyond knowledge of infringement to support a willfulness finding). CSIRO has not shown reversible error in the district court’s willfulness ruling (pp.45-46).

Second, the court affirms "the district court's decision to preclude jury determination of a royalty for past infringement" for lack of an adequate foundation (p.46):

CSIRO contends that the district court, as a matter of patent law, precluded CSIRO from presenting any evidence of a reasonable royalty for past damages on the mistaken premise that projections of future costs, sales, and profits are per se irrelevant to what the patentee could have insisted on as compensation for licensing its patents before sales began. . . . Such a ruling might well be error, as CSIRO suggests. See Aqua Shield v. Inter Pool Cover Team, 774 F.3d 766, 771–72 (Fed. Cir. 2014) (stressing centrality of expectations of profits in past-damages calculation using hypothetical-negotiation framework). But the district court here ultimately did not so rule, see J.A. 10568–89, despite making some statements suggesting the irrelevance of future projections to past damages, see, e.g., J.A. 10581, as BASF itself urged, see, e.g., J.A. 10568–69; J.A. 10574.  


The district court never had to so rule because it ruled only on a threshold evidentiary question of whether CSIRO laid the proper foundation for the royalty rate grounded in future projections before CSIRO withdrew its past-damages claim (pp. 46-47). 

Specifically, CSIRO apparently had not responded adequately to questions, posed by the district court, such as "How much does their alleged infringement affect  your research costs? When did the infringement start? . . . Did it start when they first planted the product which produced allegedly infringing oil? . . . Did it start when you first notified them that you were claiming they were infringing? . . . [Y]ou have to lay your foundation before you hit the jury with any percentage royalty that you’re requesting" (p.47).

Third, the court "finds no reversible error in the denial of an infringement-stopping injunction in the circumstances presented," noting among other things that "CSIRO and its partners had not yet entered the commercial market" and "the potential harm done to the public by not allowing both Cargill and CSIRO to enter the underserved fish-food market" (p.48).  (But see below for further developments.)

Fourth, the court remands for reconsideration of the amount of the ongoing royalty, concluding that the district court had applied inconsistent reasoning in excluding two of CSIRO's five proposed comparables:

Although the first two licenses covered what appears to be the closest technology at issue, see LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 79–81 (Fed. Cir. 2012); Commonwealth Sci. & Indus. Rsch. Organisation v. Cisco Sys., Inc., 809 F.3d 1295, 1306–07 (Fed. Cir. 2015), the district court determined that those licenses were not sufficiently comparable to merit use for the royalty baseline because they were profit-sharing arrangements for research and development—not agreements between competitors. . . .


But that reasoning creates a problem of internal inconsistency because the agreements that the court instead used for its baseline (i.e., the Hamburg, Amatheon, and Bioriginal agreements) were also not competitor agreements. . . . The district court did not adequately explain why not being a competitor licensing agreement was an outright bar for consideration of two licensing agreements but only a surmountable obstacle for the other three (pp. 49-50).

Finally, moreover, on remand the district court will need to reconsider both the injunction and the amount of the ongoing royalty in view of, inter alia, the majority's conclusion that the lower court erred in entering judgment that one of the patents in suit was co-owned by BASF:

On the remand, the ’792 patent, which has a longer term than the Group A patents, will be part of an altered record for the prospective remedy (while the broader genus claims will not)—both for the ongoing royalty and for the infringement-stopping injunction. Besides noting the need to include the ’792 patent in the remedy and exclude the genus claims, we do not prejudge whether the altered basis of liability requires other changes in the remedy. . . .


We also are told that new facts will exist, namely that CSIRO and its partners have entered the commercial market, changing a fact on which the district court relied in denying an infringement-stopping injunction. On remand, the district court should therefore consider whether there are such new facts, whether governing law permits them to be considered as a basis for now granting an infringement-stopping injunction, and whether, if so, they warrant changes in the remedy (pp. 50-51).

Judge Newman dissents on the co-ownership issue.

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