Two Recent Japanese Decisions on Damages

These are both discussed in an article by Yasufumi Shiroyama in volume 43, No. 3 of A.I.P.P.I.:  Bimonthly Journal of International Association for the Protection of Intellectual Property of Japan (AIPPI-JAPAN), titled The Overview of IP-Related Judgments Handed down by Japanese Courts in the Second Half of 2017.  English translations of the decisions themselves do not appear to be available yet on the IP High Court's website, but I will continue to check from time to time to see if any such translations are posted (or if anyone is aware of any other source for a translation, please let me know).  For now, I will rely on Mr. Shiroyama's description.

1.  The first of the two cases is the Judgment of the Tokyo District Court of July 27, 2017, 2015 (Wa) 22491.  The defendant was found liable for infringing the plaintiff's patent by making and selling a generic drug.  The court awarded damages consisting of (1) the number of infringing products multiplied by the plaintiff's profit margin, pursuant to article 102(1) of the Japanese Patent Act; and (2) damages for price erosion, that is, the loss the plaintiff suffered as a result of having to lower its price to compete with the generic drug prior to the entry of judgment.  Mr. Shiroyama concludes his description of this case by stating that the court also imposed a "consumption tax" on the damages for the patent infringement, which (if I understand correctly) is intended to compensate the plaintiff for a tax it will have to pay on the damages.

2.  The other case is the Judgment of the Tokyo District Court of Dec. 25, 2017, 2016 (Wa) 13003.  A little background here--as I mention in my 2013 book (p.301):

Under the Japanese Utility Model Act, “[a] creator of a device that relates to the shape or structure of an article or combination of articles and is industrially applicable may be entitled to obtain a utility model registration,” as long as the device is novel and “a person ordinarily skilled in the art of the device would have been exceedingly easy [sic] to create the device” based on the prior art. As in Germany, there is no substantive examination prior to registration, but before exercising his rights, the owner of a utility model registration must obtain an opinion from the Commissioner of the Patent Office on whether the utility model registration complies with the statutory requirements. Moreover, any third party may request such an opinion, may file an action to invalidate a utility model registration, or may assert invalidity in an action for infringement. The term of protection is ten years.

In this case, the plaintiff had obtained a utility model right, informed the defendant that the latter was infringing that right, and then obtained the requisite opinion (referred to in Shiroyama's article as a Technical Evaluation Report).  The court found that the defendant had infringed, and awarded (1) an injunction, (2) damages, and (3) unjust enrichment damages for the period of time preceding the presentation of the Technical Evaluation Report, "equivalent to the royalties for the suspected infringer's act of using the utility model prior to" that date, holding that the lack of such a report "does not mean that the utility model right did not exist in substance until a request for the issuance of a Technical Evaluation Report is filed."  The article does not specify the amount of the award

Two Recent Damages Decisions from Australia

These have both been covered by John Collins on the Kluwer Patent Blog (here and here), so I'll be fairly brief.  In the first decision, Bayer Aktiengesellschaft v. Generic Health Py Ltd [2017] FCA 250, the Federal (trial) Court awarded Bayer Aus$25 million in lost profits against a generic drug manufacturer that had introduced an infringing oral contraceptive product (marketed under the brand name "Isabelle").  Bayer started selling its patented contraceptive under the brand name "Yasmin" in 2002.  (In 2008, it began to reduce production of Yasmin in favor of a product marketed under the name "Yaz," which has a lower dosage of ethinylestradiol.)  In 2012, Generic Health began selling the bioequivalent generic version of "Yasmin," under the brand name "Isabelle."  Bayer sued for infringement, but it also applied for permission to amend its patent.  Later in 2012, the court allowed the amendments (which related to, among other things, dosage and composition).  In 2014, the court ordered Generic Health to cease selling "Isabelle," and a week later Bayer began selling its own generic version of Yasmin under the brand name "Petibelle."  Bayer sought damages for lost profits on lost sales of Yasmin due to (1) sales lost to Generic Health's Isabelle from 2012-14, and (2) Bayer's own sales of Petibelle, which sold for a lower price than Yasmin but which Bayer claimed it would not have introduced but for the introduction of Generic Health's product.  The defendant argued, first, that under section 115(1) of the Australian Patent Act Bayer couldn't recover damages for the period of time preceding its amendment of the patent, which states that "Where a complete specification is amended after becoming open to public inspection, damages shall not be awarded, and an order shall not be made for an account of profits, in respect of any infringement of the patent before the date of the decision or order allowing or directing the amendment: (a)  unless the court is satisfied that the specification without the amendment was framed in good faith and with reasonable skill and knowledge; or (b)  if the claim of the specification that was infringed is a claim mentioned under subsection 114(1)."  Upon reviewing the evidence, the court concluded that "Bayer has discharged its onus of proving that the unamended claims and specification as a whole were framed in good faith and reasonable skill and knowledge" (para. 186).  Second, Generic Health argued that Bayer hadn't lost one sale for every sale of Isabelle, but upon review of the evidence the court concluded that Bayer had proven that it had.  Third, Generic Health argued that Bayer couldn't recover the losses caused by its own introduction of a generic version of Yasmin, but the court disagreed, concluding that "but for the infringement, Bayer would not have introduced the lower priced Petibelle" (para. 310).  "Bayer's concern was that Isabelle had disrupted the market possibly introducing a price sensitivity that would not have existed but for Isabelle" (para. 300).  Finally, the court agreed with Bayer's expert on the issue of the deductible costs ("costings"), and held that Bayer was entitled to prejudgment interest based on its pre-, not post-, tax damages.

The other case is Coretell Pty Ltd v Australian Mud Company Pty Ltd [2017] FCAFC 54.  The principal remedies issue of interest is whether the owner of an "innovation patent"--Australia's version of a utility model--can recover damages for the period of time prior to the innovation patent being "certified."  As I mentioned in another recent post, in countries that offer utility model protection applications are examined for compliance with formalities, after which the utility model is granted; but if the applicant seeks to enforce the utility model in court, she will either first have to submit it to a full-blown substantive examination or at the very least its validity will be subject to third-party challenge.  For discussion in my book, see pp. 16-17, 172, 237-38, 301, 338-41, 363-64.  Anyway, under the Australian system (which was amended in 2001, prior to which Australian utility models were called "petty patents") the innovation patent is granted after a formal examination but is not enforceable unless and until it is "certified" by the Commissioner of Patents, following a substantive examination.  The ultimate holding of the court in Coretell (in another opinion by Justice Jagot) is that there is no remedy for the infringement of an innovation patent prior to grant (and subject to certification), even though, as in many countries, the owner of a standard patent can sometimes recover damages for unauthorized pre-grant use, as in the Canadian Dow v. Nova case (see here and here).

Wenzel on Preliminary Injunctions in Germany

Stephan Wenzel has published an article in the November 2016 issue of Mitteilungen der deutschen Patentanwälten (pp. 481-85) titled Olanzapin macht aus dem Patent ein Gebrauchsmuster:  Ein Kommentar zue aktuellen Rechtslage bei einstweiligen Verfügungen aus einem erteilten Patent ("Olanzapin turns patents into utility models:  A commentary on the current state of the law concerning preliminary injunctions for issued patents").  Here is the abstract (my translation):

Since the Olanzapin and Harnkatheterset decisions of the Düsseldorf Court of Appeals, there has been an increase in denials of motions for preliminary injunctions on the ground that the validity of the patent in suit is uncertain.  Not all infringement courts follow this opinion, however.  An analysis.

To put the title in perspective, "utility model" (or sometimes "petty patent") is the term most commonly used in English for an intellectual property right in an invention that may not qualify for a patent (perhaps because it wouldn't satisfy patent law's nonobviousness criterion).  What I just said can be a bit misleading, though, because the law of utility models (in countries, unlike the U.S., that recognize them at all) can vary quite a bit from one place to another.  Indeed, since 2006 under German law utility models (Gebrauchsmuster) must satisfy the same "inventive step" criterion that applies to patents. They are generally easier to obtain, however, because there is only a cursory examination up front, and once obtained a German utility model can be converted into a patent (and thus provides a measure of temporary protection).  Another difference between patents and utility models is that in Germany patent validity and infringement decisions are bifurcated.  The German Patent Office's Bundespatentgericht, not the courts hearing infringement matters, resolve patent validity challenges, although in the end the Patent Office's determination can be appealed to the Federal Supreme Court.  With regard to utility models, on the other hand, validity is resolved in the context of infringement litigation, not in a proceeding before the Bundespatengericht.  For fuller discussion, see my book pp. 237-38. 

Anyway, this brief introduction to utility models illuminates the author's meaning above, where he suggests that, in deciding whether or not to grant a preliminary injunction in a patent infringement case, the Düsseldorf courts are too willing to substitute their own opinions on patent validity, and do not give sufficient weight to fact that the German or European Patent Office has granted a patent in the first place.  To be sure, this lack of deference can work in both directions.  In the Olanzapin case the author refers to, the court reversed a denial of a preliminary injunction, despite the fact that the patent had been found invalid by the Patent Office, on the ground that that decision was clearly erroneous (evident unrichtig).  (For discussion of Olanzapin, see my book pp. 243-44.)  But both Olanzapin and the subsequent decision in Harnkatheterset contain language suggesting that validity can be adequately ascertained only if the patent has already withstood a validity challenge, and it's this part that Dr. Wenzel finds most troubling.  (For a previous blog post on Harnkatheterset, see here.)  Dr. Wenzel cites work by other scholars and decisions from other courts in Germany that do not appear to make it quite so difficult for patent owners to obtain preliminary injunctions, though they differ somewhat in their verbal formulations.  (They may require a high probability of validity, for example, but not necessarily a Bundespatentgericht decision upholding validity.) He concludes by suggesting that courts are more willing to grant preliminary injunctions in favor of drug companies against generic drug makers, and that this favoritism violates the principle of equality.

From Around the Blogs: Patent Remedies in Canada, the U.K., and Denmark

1.  Norman Siebrasse has published a couple of damages-related posts on Sufficient Description.  The first, from January 27, is titled Inequitable Conduct by Patentee:  Defence v Reduction of Damages, and discusses a recent Canadian federal court decision in which the court concluded that some forms of inequitable conduct on the part of the patentee do not bar recovery entirely but rather may reduce the patentee's damages.  I'm inclined to think that is a sensible result, as I discussed here at pp. 750-51; one problem with the U.S. version of the doctrine, by contrast, is that is an all-or-nothing proposition.  A gradation of possible sanctions might be proportionate to the offense.  The second post, from February 5 and titled $2.9 Million Award is 30% of Actual Legal Fees, discusses a recent case in which the judge exercised his discretion and made an upward departure from the standard attorneys' fee that would have been awardable in the type of case at issue (which would have amounted to only 11% of actual fees incurred) and awarded an amount equal to 30%, which at least is closer to full compensation.

2.  The IPKat Blog on January 27 published a post titled Storm in a C Cup:  Mr Justice Carr Refuses Injunction and Account of Profits in Stretchline v. H&M Spat.  The parties had previously settled patent infringement litigation, but the plaintiff later sued the defendant for breaching that agreement by selling allegedly infringing fabric.  The court agreed that there was a breach but denied an injunction on the ground that the defendant had stopped infringing and the infringement was unlikely to recur, and also denied a request for an accounting of profits.  More recently, on February 2 the blog published a post (authored by Brian Whitehead of Kempner & Partners, which represented the plaintiff) titled Inquiry as to Damages:  No Longer a Rara Avis?, discussing a case in which the IP Enterprise Court (which handles relatively small-stakes patent disputes in England & Wales) awarded £0.5 million in lost profits just a few weeks after a December 2015 hearing.  The author concludes that "[t]his represents another means by which the IPEC improves access to justice for litigants, particularly for small and medium enterprises."  Another post on this case, authored by Emma Muncey and Rachel Mumby of Bristows LLP and titled AP Racing v. Alcon Compone, was published on EPLaw Blog on February 10, and also links to the decision itself.  

3.  Anders Valentin recently published a post on the Kluwer Patent Blog titled A Matter of Urgency--PI Application Turned Down for Lack of Urgency.  The post discusses a Danish case in which the court denied the patent owner, Minkpapir, a preliminary injunction which it applied for in 2015 despite its presumed knowledge that the defendant had been marketing an allegedly infringing product since 2011.  As I have mentioned several times before (more recently here), urgency is an important consideration for obtaining a preliminary injunction in Germany too.

German Court Grants Preliminary Injunction for Alleged Infringement of a Utility Model

Many countries (not including the U.S., the U.K., or Canada) grant a form of intellectual property protection commonly referred to in English as a "utility model" or "petty patent."  As I discuss in my book (pp. 16-17):

. . . traditionally a major substantive difference between utility patent and utility model protection is that the latter is available for inventions that demonstrate a lesser inventive step than would be required for the former.  In addition, in many countries applications for utility models are not subjected to any substantive examination prior to grant, although some systems require the owner of a registered utility model to request a substantive examination prior to filing suit for infringement; and utility models can be invalidated if an interested third party or infringement defendant succeeds in demonstrating that one or more of the statutory preconditions for protection are lacking.  Like a patent, a valid utility model prohibits the unauthorized manufacture, use, or sale of the protected subject matter, though for a shorter term.

Germany has long been one of the leading countries for granting utility models (known in German as Gebrauchsmuster), and the German law on Gebrauchsmuster has some interesting features.  First, Gebrauchsmuster are available for any type of invention other than a process or a biotechnological invention.  Second, "[f]or purposes of determining novelty and inventive step . . . the relevant state of the art is limited to written descriptions and public uses within Germany, and thus is narrower than the state of the art relevant to determining patentability. In addition, the inventor is accorded a six-month grace period within which she may disclose or use the invention without forfeiting the right to obtain Gebrauchsmuster protection."  Third, in 2006 the German Federal Supreme Court held that the inventive step requirement for Gebrauchsmuster and for patents is the same.  Inventors nevertheless continue to obtain them for a variety of reasons.  For example, an inventor can "branch off" her utility patent application and apply for a Gebrauchsmuster on the identical invention.  The Gebrauchsmuster will typically issue first, since it is not examined, and the inventor can then attempt to enforce it while her utility patent application remains pending (see my book pp. 237-38).

Because Gebrauchsmusters are registered without any substantive examination, you might expect that it would be very difficult to obtain a preliminary injunction for the alleged infringement of one; and you would be right.  But difficult is not impossible; and in one recent case (Judgment of Nov. 27, 2014, 327 O 559/14--Hydraulikschlauchgriffteil, reported at GRUR RR 4.2015 pp. 137-40) the Hamburg District Court granted a preliminary injunction for  the alleged literal infringement of a Gebrauchsmuster covering a grip for a hydraulic hose.  The moving party argued that the Gebrauchsmuster was valid, based on a research report prepared by the German Patent & Trademark Office that disclosed a relevant but nonidentical prior art device; and that the need for an injunction was urgent, because the defendant was exhibiting its model at trade fairs and offering them at significantly lower prices.  The court granted the injunction, stating that while it is a precondition for the granting of a preliminary injunction that there be a high probability of validity, it is not necessary that the patent already have undergone a further examination in an opposition or invalidation proceeding--though when this is not the case, an injunction is appropriate only if, after careful examination, validity can be adequately established.  With respect to Gebrauchsmusters in particular, the court must always engage in its own analysis of validity and permit the opposing party to participate in proceedings.  Here, these conditions were met, as the court could examine the subject matter, which was neither highly complex nor unusual, on the basis of its own expertise.  Based on its analysis, the court concluded that the Gebrauchsmuster was valid and infringed, and granted the injunction.