Thursday, September 23, 2021

Some Recent Articles on Patent Remedies from the European Intellectual Property Review

I am slowly making my way through a backlog of European I.P. journals.  Today's post highlights three articles that I had not previously mentioned, which appeared in the European Intellectual Property Review (EIPR) in 2020.  The July 2021 issue of EIPR has a couple of additional articles I will mention in a forthcoming post.

1. Joshua Marshall published Unjustified Threats as a Cause of Action, 42 EIPR 150-55 (2020). Here is the abstract:

This article seeks to categorise unjustified threats as a cause of action. Hitherto, unjustified threats have been treated as tortious and the threat-maker deemed a legal wrongdoer. This article argues that orthodox principles of tort law cut against the unjustified threats regime. It is suggested that it is more analytically attractive to treat the regime as a form of estoppel or as a sui generis cause of action.

I found this article very helpful, as I think through some ideas for a pending project on the various ways in which the law regulate wrongful patent assertion.

2.  In the same issue, Victor Henum and Anders Valentin published Decision from the Eastern High Court Changes Danish Practice Regarding Assessment of Recoverable Legal Costs in Patent and IP Cases, 42 EIPR 196-201 (2020).  Here is the abstract:

With its decision of 29 August 2019, the Eastern High Court of Denmark brings the Danish practice on assessing legal costs in patent and IP cases into conformity with EU law in the area. The decision is expected to substantially change the court’s former conservative practice of awarding costs in patent and IP cases.

Compare the outcome here with the outcome of a Belgian decision noted recently on the IPKat Blog, which I linked to here, indicating that Belgian practice remains out of synch with the CJEU's United Video Properties decision on recovery of costs (previously discussed on this blog here). 

3. Enrico Bonadio and Luke McDonagh published Sisvel v Xiaomi:  A SEP Dispute in the Netherlands Highlights the Global Challenge of FRAND Licensing, 42 EIPR 618-20 (2020).  Here is the abstract:

 

This comment examines the patent litigation battle over standard-essential patents (SEPs) that took place between Sisvel and Xiaomi at The Hague Court of Appeal in the Netherlands in early 2020. The case is an indicator that courts in different European jurisdictions will continue to go their own way when it comes the crucial decision of whether to grant injunctions on SEPs. The UK, which a decade ago was viewed as a jurisdiction better known for revoking patents than for issuing injunctions, appears to have become more "patentee-friendly" (at least in the case of SEP-owners). The Netherlands, meanwhile, applies an approach that appears more critical of the activities of NPEs, taking their lack of manufacturing productivity into account when determining the balance between whether to grant an injunction or not. This approach could well prove influential on other courts, and perhaps even the CJEU, if the rate of NPE litigation of SEPs increases in Europe in the years to come.

As noted elsewhere, the parties recently settled their SEP disputes.  

4. Tanguy de Haan published The CJEU Sides with IP Right Holders:  The Bayer Pharma Judgment (C-688/17) and the Consequences of the Europeanisation of Provisional and Precautionary Measures Relating to IP Rights, 42 EIPR 767-73 (2020).  Here is the abstract:

 

With its interpretation in the Bayer Pharma judgment of the concept of "appropriate compensation" under the Enforcement Directive, the CJEU did not only grant a significant protection to intellectual property right holders, but also confirmed that, as far as civil law liability is applied to intellectual property, national courts in the EU can only apply their national law provided that the latter is in line with EU law.

For previous discussion of the Bayer Pharma decision on this blog, see here.  

Monday, September 20, 2021

From Around the Blogs

1. On Bloomberg Law, Matthew Bultman published an article titled Doubts Deepen if 'Exceptional' Patent Case Fees Include PTAB Work.  The article notes a division of authority on this issue among the district courts, and quotes Professor Megan La Belle's as opining that the word "cases" in Patent Act § 285 doesn't include administrative proceedings, even if Congress assumed that fees would be recoverable for at least some IPRs when it passed the AIA. 

2. On EPLaw, Giulia Pasqualetto and Federica Franchetti published a short post, with a link to a longer summary and to the decision under consideration, titled IT – Cappellotto v. Farid / Reasonable Royalties / Supreme Court.  According to the authors, the Supreme Court of Italy has held that the patent owner has the option of recovering damages measured by the value of the infringer's revenue from sales of infringing products multiplied by the patentee's profit margin (which may be higher than the infringer's profit margin).  If I remember correctly, Japanese courts on some occasions have employed a similar measure, but it has never made a lot of sense to me:  in my view, the correct measure would be either the plaintiff's actual lost profits (i.e., the revenue the plaintiff would have earned on sales it lost to the defendant, multiplied by the plaintiff's profit margin on those sales), or the infringer's actual profits, but not a combination of the two.  

3. On IPKat,  Annesley Merelle Ward published a post titled No "German injunction gap" expedition in Abbott v Dexcom global diabetes battle, as Mr Justice Mellor expresses "some regret".  The post discusses a recent decision of the Patents Court of England and Wales, denying a motion to expedite an infringement action between Abbott and Dexcom--notwithstanding the risk that parallel litigation in Germany could result in Abbott being enjoined from distributing products from Germany to other countries, before a final decision is reached on the validity of Dexcom's patents in suit in the German infringement actions.    

4. On the Kluwer Patent Blog, Enrico Bonadio and Giovanni Trabucco published Standard Essential patents in Italy: a review of the existing case law (Part II), a follow-up to this earlier published post.  The authors have uncovered a few more Italian SEP decisions, most of them addressing substantive rather than remedial questions, but state in their conclusion that "The Sisvel v. ZTE decisions issued by the Court of Turin held that to satisfy the Huawei requirements set by the CJEU, SEP owners need to inform the defendant about the alleged infringement, providing the necessary technical information," and that "[c]ustoms and criminal seizures have been increasingly and successfully used by SEP patent holders and non-practicing entities in Italy," but that "it remains doubtful whether resorting to criminal law to scare implementers can be accepted as a fair competition tool."

Also on Kluwer, Matthieu Dhenne published , discussing a recent paper by Pierre Véron.  I too noted the paper recently, here; the Dhenne post includes some of M. Véron's graphics.

5. On Law360, there is a short write-up by Caleb Drickey titled Gilstrap Won't Triple $300M 4G Patent Verdict Against Apple, noting a recent (very brief) order by the judge denying an enhancement in this large-verdict case (previously noted here).   

6. On Patently-O, Jorge Contreras published a post titled HTC v. Ericsson – Ladies and Gentlemen, The Fifth Circuit Doesn’t Know What FRAND Means Either, critiquing the Fifth Circuit's August 31 decision in this case (previously noted here, with links to other commentary).  For another recent commentary on the case, see Curtis Dodd & Chris Dubuc, Patent Damages Laws Regarding Apportionment are Inapplicable to Breach of Contract (FRAND) Claims, on IP Watchdog.

7. On Sufficient Description, Norman Siebrasse published a short post titled No Strict Rule that an NPE Cannot Elect an Accounting.  The post notes a recent decision of Canada's Federal Court of Appeal stating, in dicta, that non-practicing entities are not categorically precluded from obtaining an award of the infringer's profit, although "a patentee’s decision to license its invention may be a factor for a court to weigh when considering whether to permit a patentee to elect an accounting of profits."

I will be mentioning another recent post on Sufficient Description, dealing with antisuit injunctions, in a future post. 

8. On Spicy IP, Praharsh Gour published a post titled Division Bench Stays the Interim Injunction Granted to Kibow Biotech, calls Methodology of the Single Judge Bench for Establishing Prima Facie case "Flawed."  The author discusses a recent decision staying an interim injunction previously granted by a single judge, on the grounds that the plaintiff had not made out a prima facie case, or adequately considered the balance of conveniences.

Friday, September 17, 2021

Golden on Judicial Policing of Damages Experts

John Golden has published a paper titled Judicial Policing of Patent Damages Experts, 98 Texas Law Review 1307 (2020).  Here is a link, and here is the abstract:

The calculation of patent damages such as a reasonable royalty presents significant challenges for which the use of expert testimony is predictable, if not unavoidably vital. Struggles to employ and at the same time guide and restrain expert testimony on reasonable royalty damages have become prominent in the last two decades, in substantial part because of the rise of patent assertion entities (PAEs) that have intensified stresses on the United States patent system. Patent law’s peculiarly centralized court of appeals, the United States Court of Appeals for the Federal Circuit, has responded to such stresses by limiting the admissibility or cognizable sufficiency of expert evidence on reasonable royalties for patent infringement. Although seemingly more aggressive than the general appellate norm, this appellate-level activity has so far appeared in line with general understandings of the proper judicial role in regulating expert testimony and reliance on it. A strict understanding of the Federal Circuit’s rule of apportionment based on the smallest salable patent-practicing unit (SSPPU) might lead to an undue downward distortion of reasonable royalty awards under certain circumstances, but there currently seems enough flex in the articulation of the rule to accommodate corrective adjustments. Although imperfect, the current approach to regulating expert testimony on patent damages seems to embody at least a plausibly satisfactory form of “muddling through,” approximating the demands for reasoned analysis that courts commonly impose on the work of expert administrative agencies.

Wednesday, September 15, 2021

Split Federal Circuit Vacates Damages Award for Failure to Apportion

The case is Omega Patents LLC v. Calamp Corp., decided yesterday, with a majority opinion by Judge Prost, joined by Judge Dyk, and a dissenting-in-part opinion by Judge Hughes.  The patents in suit "generally relate to multi-vehicle-compatible systems that can remotely control various vehicle functions (for example, remote vehicle starting) . . . and read the status of various vehicle devices (for example, battery health)," and "can also be used to notify the driver, or the driver’s employer, if certain conditions occur (for example, speeding)" (pp. 2-3).  A first trial resulted in findings of direct and indirect liability, but was partially reversed on appeal (p.4).  On remand, the jury found, inter alia, that the defendant directly infringed "each asserted claim of the ’278 patent," and awarded a reasonable royalty equal to $5 per location messaging unit (LMU) sold by the defendant (pp. 4-5).  I'll focus on the damages issues on appeal.  The outcome is very fact-specific, so for present purposes I will emphasize what I see as the relevant legal principles.

First, the majority concludes that the district court erred by excluding the defendant's expert (whom it had previously excluded from testifying on direct) from testifying in rebuttal.  According to the majority, the district court misread the Court of Appeals' mandate from the first appeal as affirmatively precluding the defendant from offering the expert's testimony in rebuttal, and that in any event it was an abuse of discretion to preclude the rebuttal testimony (pp. 16-21).

Second, the majority concludes that the damages award "does not reflect apportionment" or show that the patented feature drove demand for the LMUs (p.21).  Plaintiff argued that the comparable licenses on which its proposed royalty was based properly reflected apportionment, but the majority disagrees:

 

We have, however, explained that “when a sufficiently comparable license is used as the basis for determining the appropriate royalty, further apportionment may not necessarily be required.” Vectura Ltd. v. Glaxosmithkline LLC, 981 F.3d 1030, 1040 (Fed. Cir. 2020). “That is because a damages theory that is dependent on a comparable license (or a comparable negotiation) may in some cases have ‘built-in apportionment.’” Id. “Built-in apportionment effectively assumes that the negotiators of a comparable license settled on a royalty rate and royalty base combination embodying the value of the asserted patent.” Id. at 1041. For built-in apportionment to apply the license must be “sufficiently comparable” in that “principles of apportionment were effectively baked into” the purportedly comparable license. Id.; see Commonwealth Sci. & Indus. Rsch. Organisation v. Cisco Sys., Inc., 809 F.3d 1295, 1303 (Fed. Cir. 2015). . . . 

 

Here, Omega first contends that it did not need to show apportionment at all because “[t]he jury heard [that] the infringing LMUs have no component parts outside what is found in the ’278 patent” and that “[e]ach of these LMU components [is] found in the infringed claims of the ’278 patent.” Cross-Appellant’s Br. 35–36. We disagree with Omega as a matter of law. See Exmark Mfg. Co. v. Briggs & Stratton Power Prods. Grp., LLC, 879 F.3d 1332, 1348 (Fed. Cir. 2018). In Exmark, the asserted claim was directed to a lawn mower as a whole and covered the entire infringing lawn-mower product. Id. We held that the patent owner was still required to “apportion or separate the damages between the patented improvement and the conventional components of the multicomponent product” to ensure that the patent owner was “compensated for the patented improvement (i.e., the improved flow control baffle) rather than the entire mower.” Id. Accordingly, here, even if the LMUs have the same components as those set forth in the asserted claims, Omega still must “adequately and reliably apportion[] between the improved and conventional features of the accused [product]” when using the LMUs “as a royalty base.” Id.; see Commonwealth, 809 F.3d at 1301. . . . 

Turning to the merits of apportionment, we conclude that Omega did not present sufficient evidence to the jury to sustain its damages award for infringement of the asserted claims of the ’278 patent. First, Omega failed to show that its patented improvement drove demand for the entire LMU product. Second, in the alternative . . . Omega failed to show the incremental value that its patented improvement added to the LMU product as apportioned from the value of any conventional features. . . . (pp. 22-24).

On then, to the comparable licenses theory, which the majority also rejects.  In particular, Omega relied on testimony of its president, who "testified that under Omega’s licensing program the licensing fee was “five dollars [per unit] whether it’s one patent or 50 patents” (p.26).  The majority does not view this as a sufficient basis for inferring that a reasonable royalty for the one patent at issue would have been $5:

 

. . . Omega’s theory would permit it to obtain a particular royalty rate merely by relying on its internal “policy” without regard to comparability—under the proffered licensing arrangement, Omega sought the same licensing fee regardless of what patents were included or what technology was covered. Put differently, Mr. Flick’s testimony does not sufficiently speak to “built-in apportionment” between the patented improvement added to the LMUs and the conventional features of the LMUs. . . .

 

Although a closer call, we likewise conclude that Omega failed to show built-in apportionment based on the license agreements presented to the jury. At trial, Omega introduced eighteen license agreements. Omega argues that “the licenses reveal devices that connect to the data bus with the multi-vehicle functionality found in the ’278 patent [and] generally carry a royalty at a rate of at least $5.00 per unit.” Cross-Appellant’s Br. 45. Omega’s fundamental problem is that it failed to show that these agreements attributed a $5.00-per-unit royalty to the value of the ’278 patent. . . .

 

. . . Most glaringly, each of the eighteen proffered licenses involves numerous patents, in contrast to a hypothetical negotiation for a single-patent license. . . (pp. 26-29).

Dissenting in part, Judge Hughes would have affirmed the exclusion of the expert's rebuttal testimony, and he disagrees with the majority's apportionment analysis, stating "First, to the extent CalAmp contests the testimony of Omega’s expert, Christian Tregillis, and the licenses introduced as comparable, both of these arguments more properly should have been made via Daubert motion or objection at trial. Second, to the extent the majority requires further accounting for the incremental value of the ’278 patent beyond that reflected in the licenses introduced as comparable, I believe that approach is too restrictive given our precedent" (dissenting opinion, p.4).