ElgarBlog has posted my piece Finding the Right Remedy for IP Infringement. The piece discusses my recently-published book Remedies in Intellectual Property Law (Edward Elgar Publ. 2026), as well as why I think it is important for IP professionals today to be well-versed in both the law of remedies and comparative IP law. Enjoy!
S. Frederick Liu has published The “Last-Patent Problem” in Patent Portfolio Licensing, 106 J. Pat. & Trademark Off. Soc’y 107 (2026) (available on Westlaw). Here is the abstract:
Companies often license patents in portfolios because doing so can reduce transaction costs and infringement uncertainty. However, some companies include static royalty rates in their patent portfolio licenses, requiring licensees to pay the same royalty rate until the last patent in the portfolio expires or is invalidated. Such a practice turns the last remaining patent in the portfolio into a lever and imposes a “public-domain tax” that inflates prices, depresses output, and stifles innovation. This Article introduces and analyzes the problem created by such a practice as the “last-patent problem.” Part I explains why companies transact in patent portfolios and how patent portfolio licenses with static, non-diminishing royalty rates, though often efficient ex ante, become distortionary as the patents in the portfolio expire or are invalidated. Part II formalizes the last-patent problem with several simple economic models showing that a static portfolio royalty rate magnifies price-cost wedges over time relative to a proportional step-down rate tied to the share of remaining value-bearing patents. Part III situates the analysis in the history of the U.S. patent system. Part IV shows that the patent-misuse doctrine, narrowed by statute and case law, does not reach the last-patent problem, and that because relief under antitrust’s rule of reason is costly, under-deterrence follows. Part V proposes structural and behavioral remedies that administrative agencies, legislatures, and courts can adopt or mandate to alleviate the last-patent problem. The goal of the remedies offered in this Article is to preserve the efficiencies of patent portfolio licensing while restoring fidelity to the mandate of the Constitution's Intellectual Property Clause to “promote the Progress of Science and useful Arts.”
This is an interesting paper. One question I have, however, is whether patent owners with sufficient market power to impose portfolio licensing contracts of the type the author objects to would respond to his policy recommendations by charging higher (albeit diminishing over time) licensing rates during the earlier years of the portfolio license’s term (as suggested by Scheiber v. Dolby Labs., Inc., 293 F.3d 1014, 1017 (7th Cir. 2002), cited at p.145 n.233). I tend to agree with the author’s proposal for greater transparency in licensing (e.g., restricting the use of “Black Box” licensing, see p.143).
So, I must confess—on Friday, January 16, I published a short post about my newly-published book, Remedies in Intellectual Property Law. I also stated that “this morning the Federal Circuit released a 59-page nonprecedential (!) opinion in Sunoco v. Powder Springs Logistics dealing with, among other things, damages; I'll probably have something to say about it next week.” I then, apparently, forgot entirely about Sunoco until this morning, when I saw that Dennis Crouch had published a post titled Whole or Apportioned: Sunoco Asks the Supreme Court to Rethink Lost Profits, concerning Sunoco’s petition for certiorari. The petition poses the following two questions:
1. Whether the Federal Circuit’s standard for recovery of lost profits damages violates 35 U.S.C. § 284.
2. Whether Rule 702 requires courts to exclude expert testimony when record evidence is contrary to a critical fact upon which the expert relied, as the Federal Circuit holds, or whether juries should determine whether facts upon which an expert relied are true, as all other Circuits have held.
The principal issue presented by Question 1 is whether the district and appellate courts erred in holding that Sunoco was not entitled to present its lost profits argument to the jury.
The basic facts are these. Sunoco and Powder Springs both competed for a contract to be awarded by Colonial Pipeline Company, relating to the provision of services pertaining to the blending of gasoline with butane. Sunoco offered its standard contract, the Butane Supple Agreement (BSA), under which it obtains either a 40/60 or 50/50 share of the profits a customer earns on sales of gasoline gallons created. Under those contracts, as described by the Federal Circuit, “Sunoco (1) constructs and operates its patented system at a licensee's gasoline terminal, (2) supplies butane needed for the system, and (3) grants a limited license to its patents, all in exchange for sharing the licensee's profits from selling the extra gasoline created using the patented inventions. Also under the BSAs, Sunoco performs services related to (1) making and using the patented inventions, such as designing, engineering, constructing, and maintaining the blending systems; and (2) providing regulatory oversight support, maintenance and support services, risk management, customer services, and financial services related to butane hedging, among others. Additionally, Sunoco's BSAs include the use of its proprietary blending algorithm with its patented system.” (Slip op. at 13-14.) Powder Springs won Colonial's business, however, but ultimately was found to infringe one of Sunoco’s patents. While there were other issues on appeal, both substantive (patent eligibility) and damages-related (e.g., whether the lower court erred in not awarding a damages enhancement), the principal damages issue of interest here is whether Sunoco was entitled to present expert testimony that it would have made a profit on the Colonial business, in the amount of at least $150.3 million, but for the infringement. (Instead, based on the district court’s evidentiary rulings, the jury awarded a reasonable royalty in the amount of about $12 million.)
The Federal Circuit held that it was not an abuse of discretion to exclude Sunoco’s evidence pertaining to its lost profits theory, because Sunoco (1) had not apportioned these purported damages to account for the other services provided under the BSA, or shown that the patent in suit drove the demand for a BSA contract; and (2) did not satisfy what is sometimes thought of as an alternative method of apportionment under Mentor Graphics Corp. v. EVE-USA, Inc., 851 F.3d 1275 (Fed. Cir. 2017), under which proof of the four Panduit factors suffices to satisfy apportionment. (The Panduit factors, as originally set forth in Panduit Corp. v. Stahlin Bros. Fibre Works Inc., 575 F.2d 1152 (6th Cir. 1978), and subsequently adopted by the Federal Circuit for use in establishing lost profits, are “(1) demand for the patented product, (2) absence of acceptable noninfringing substitutes, (3) his manufacturing and marketing capability to exploit the demand, and (4) the amount of the profit he would have made.”)
So perhaps I should say a word first about Mentor Graphics. In fact, I’ll just quote what I say about that case in my aforementioned book at pages 146-47:
The plaintiff and defendant were the only two competitors in the market for a type of emulator system for which there was one single customer, Intel. The plaintiff had a patent on a process and apparatus essential to the functioning of its emulator systems, and for which there were no noninfringing alternatives (although the emulator systems incorporated “thousands of [other] hardware and software features” as well). The defendant’s emulator systems infringed the patent; and, the defendant conceded, but for that infringement, the plaintiff would have sold Intel additional emulator systems on which the plaintiff would have earned approximately $36 million. The defendant argued, however, that the patentee was obligated to “further apportion its lost profits to cover only the patentee’s inventive contribution.” Rejecting this argument, the Federal Circuit affirmed the judgment in favor of the plaintiff, stating:
While there may have been other features of the emulator that were important to Intel, only Mentor could sell Intel an emulator with all the features it required. Because Mentor had proprietary rights to the only means of satisfying this demand by Intel, because no other party could sell Intel an emulator with those two components, no one else had the right to sell emulators to Intel that satisfied all of Intel's requirements. In short, for these particular sales, no other party could satisfy the Panduit factors, making it impossible for multiple patentees to obtain lost profit damages for the same sales.
The court cautioned, however, that cases like this may be rare: “[w]ith such multi-component products, it may often be the case that no one patentee can obtain lost profits on the overall product—the Panduit test is a demanding one.” Nevertheless, “when the Panduit factors are met, they incorporate into their very analysis the value properly attributed to the patented feature.” Simply put, the but-for principle controls in the (perhaps unusual) cases in which infringement of a single component deprives the IP owner of sales of a multicomponent product.
In affirming the district court, the Federal Circuit panel in relevant part wrote (slip op. pp. 49-53):
Sunoco contends that Dr. Ugone established a prima facie case of “but for” causation for lost profits by opining on how the Panduit factors were met. As part of these opinions, Dr. Ugone calculated that Sunoco would have averaged a per-gallon profitability that ranged from $0.25/gallon (from a 40/60 profit-share) to $0.28/gallon (from a 50/50 profit-share) but for infringement, resulting in lost profits of $150.3 to $166.7 million. . . .
The district court did not abuse its discretion in striking Dr. Ugone's lost profits opinions under the Panduit factors for the same reasons discussed above related to his opinion on reasonable royalty and comparable licenses. Dr. Ugone used the full profit-share of the unapportioned BSAs to calculate Sunoco's lost profits. While Sunoco may be able to show demand for its BSAs, the BSAs are not coextensive with the asserted patents and instead encompass more services and products than the patented inventions. Thus, there was no prima facie showing under Panduit factor one—demand for the patented product—or Panduit factor four—the amount of profit Sunoco would have made— without apportioning the value of the patents from the other services. . . .
In [Mentor Graphics], we acknowledged that “apportionment is an important component of damages law generally, and we believe it is necessary in both reasonable royalty and lost profits analysis.” We then narrowly held (1) that “[i]n this case, apportionment was properly incorporated into the lost profits analysis and in particular through the Panduit factors,” and (2) “that on the undisputed facts of this record, satisfaction of the Panduit factors satisfies principles of apportionment: Mentor's damages are tied to the worth of its patented features.” Id. at 1288. We also emphasized that Mentor was “a highly factual case, and [the defendant] did not appeal any of the jury's fact findings relating to damages.” Id. at 1289.
There are no undisputed facts on the Panduit factors here. Indeed, Magellan contests both Panduit factors one and two. And again, as to factor one, Dr. Ugone did not start his analysis with demand for the claimed inventions; instead, he and Sunoco sought to conflate demand for the claimed inventions with the demand for the BSAs as a whole. But they cannot start with the demand for undisputedly more than the patented inventions—indeed, for an entire basket of services—to base patent damages on. See, e.g., VirnetX, 767 F.3d at 1326 (“[A] patentee must take care to seek only those damages attributable to the infringing features.”).10
10/ As to factor 2, Magellan points out that following the jury's verdict of infringement, Powder Springs switched to a non-infringing manual blending operation, indicating that there were acceptable non-infringing alternatives.
My take on this is that there were two possibilities at the time the parties were vying for the Colonial contract. First, it may be that Colonial would have considered an offer from Powder Spring that contemplated the use of a noninfringing manual blending operation to be more attractive than signing a BSA with Sunoco, at the price and for the services Sunoco was offering. In that case, the infringement didn’t cost Sunoco a sale, but Sunoco should get a reasonable royalty that reflects some portion of the benefit Powder Spring derived from the use of the infringing method. Alternatively, it may be that Colonial would have rejected such an offer and gone with Sunoco, in which case the infringement did cost Sunoco a sale, and Sunoco should recover the entire profit it would have made on that BSA, even though the BSA included more than just a license to the one patent that ultimately was in suit. What I can’t tell from the Federal Circuit opinion alone is what the state of the evidence was on noninfringing alternatives before the jury verdict. If there was conflicting evidence on this issue, I would be inclined to think that the plaintiff’s expert’s opinion should have been admissible; but otherwise, not. In other words, in my view, from an economic perspective the presence of an acceptable noninfringing alternative should be dispositive on the issue of whether the infringement caused the plaintiff to lose the contract with Colonial. Also relevant, however, as a practical matter, is the burden of proof. Under U.S. law, it’s the patentee’s burden to come forward with evidence of the absence of acceptable noninfringing alternatives. In that sense, I guess, one could say that we presume that there are acceptable NIAs, absent evidence to the contrary—though if the plaintiff does prove that there are no acceptable NIAs on the market, the burden shifts to the defendant to prove that an NIA nevertheless would have been available (see my book, p.143; one could debate, moreover, where the burden of proof should lie, as a matter of policy).
For this reason, I tend to think that all of the discussion about apportionment and “demand for the patented invention” tends to obscure the relevant economic question. Again, consider Mentor Graphics. That case was correctly decided, in my view, because the patentee was able to prove that but for the infringement, Intel would have selected Mentor Graphics over EVE-USA. Mentor therefore was entitled to the entire profit it would have earned on that lost sale, without any apportionment or reduction, even though the Mentor Graphics emulator incorporated many other valuable components. And while you could say, as the Federal Circuit did, that in a case like Mentor Graphics apportionment is already taken into account by the Panduit factors, I actually think it might be more accurate, or at least less confusing, simply to say that the relevant question is whether the patentee has adequately proven that but for the infringement it would have made the sale in question. I therefore have disagreed with critics of Mentor Graphics who would have required some further apportionment of the lost profit awarded in that case. In Sunoco, on the other hand, I would tend to conclude that if (but only if) the patentee didn’t adequately carry its burden of proving the absence of NIAs, the case was rightly decided.
Following up on my post from Wednesday (with update), I though I should note a recent article by Katarina Foss-Solbrekk, titled Delay-and-Pay: Prolonging Pharmaceutical Patent Proection Without Paying the “Price”, 56 IIC 1684 (2025). Here is the abstract:
This article argues that actors use the patent system as part of a “delay-and-pay” strategy to preserve drug prices for as long as possible by delaying generic/biosimilar market entry – and that they have a significant financial incentive to do so. This strategy is based on the notion that it is much more profitable for patentees to delay generic/biosimilar market entry by way of a patent infringement claim and ensuing injunction, then pay damages to the enjoined party should the infringement claim be defeated. Indeed, patentees have much to gain and little to lose under “delay-and-pay”. My analysis establishes that the money national health bodies spent purchasing the more expensive, patented drug whilst the interim injunction remained in effect is not usually compensated following a patent revocation and discharged injunction. That is neither just, nor fair: the losses of national health bodies ought to be recovered.
Dr. Foss-Solbrekk’s thesis is based on the economic reality that the patentee’s gain from a wrongly-issued preliminary injunction often will exceed the loss suffered by the enjoined party; and she makes a compelling argument that national health services, who also often suffer substantial harm, also should be reimbursed for their interim losses. The topic of how the law should respond to wrongly-issued injunctions is one that I too discuss, in chapter 4 of my recent book Wrongful Patent Assertion: A Comparative Law and Economics Analysis (Oxford Univ. Press 2026), at pages 85-104; and I regret that Dr. Foss-Solbrekk’s paper came out too late for me to engage with there—though I do cite one of her other papers, The Divisional Game: Using Procedural Rights to Impede Generic/Biosimilar Market Entry, 53 Intʼl Rev. Intell. Prop. & Comp. L. 1007 (2022), in chapter 7, and I look forward to reading more of her work in the future.
I also discovered, in reading Dr. Foss-Solbrekk’s recent paper, a typographical error in my book, where I cited Professor Uri S. Hacohen’s paper Evergreening at Risk, 33 Harv. J.L. & Tech. 479 (2020), but spelled his name “Haconen”. My apologies to Professor Hacohen. Perhaps the three of us will all meet some day at some conference on wrongly-issued injunctions—a topic that really does deserve increasing scrutiny!
The case is Otsuka Am. Pharm., Inc. v. Hetero Labs Ltd., opinion by Judge Bryson. Judge Stoll joins the opinion in its entirety. Judge Dyk dissents on the principal issue in the case—whether the district court, in granting the preliminary injunction, properly construed the claim at issue—but he joins the majority on the bond issue.
The patent in suit—which is due to expire on August 13, 2026—is for a method for treating emotional lability in patients with (e.g.) certain neurodegenerative diseases, and involves the administration of two drugs, dextromethorphan and quinidine. The FDA approved the defendant’s ANDA for a generic version of Otsuka’s drug, after which Otsuka filed suit and moved for a temporary restraining order (later converted to a preliminary injunction). The principal issue on appeal, as noted above, is whether the district court properly construed the claim in suit. (The claim requires a weight-to-weight ratio of dextromethorphan to quinidine of 1:0.5 or less, and the question is whether a product in which the weight ratio of the salt forms of these drugs is less than 1:0.5, but the weight ratio of the free bases is greater than 1:05, falls within the scope of the claim. The majority holds that it does.) The majority concludes that the answer is yes, which apparently points to a likelihood of success on the merits, and there is no discussion of any of the other issues relevant to granting a preliminary injunction in the appellate opinion. The issue that does come up is whether the district court should have waived the bond requirement. From the opinion:
According to Federal Rule of Civil Procedure 65(c), a court “may issue a preliminary injunction . . . only if the movant gives security in an amount that the court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained.” The Third Circuit has recognized limited exceptions to the Rule 65(c) bond requirement, but has noted that waiver is “so rare that the requirement is almost mandatory.” Frank’s GMC Truck Ctr., Inc. v. Gen. Motors Corp., 847 F.2d 100, 103 (3d Cir. 1988).
The Third Circuit has held that the bond requirement may be waived if “there is no risk of monetary loss to the defendant.” Id. (citing Sys. Operations, Inc. v. Sci. Games Dev. Corp., 555 F.2d 1131, 1145–46 (3d Cir. 1977)). The court has also held that the bond requirement may be waived under circumstances such as those described in Temple University v. White, 941 F.2d 201, 219–20 (3d Cir. 1991). That case explained that a court may excuse compliance with the bond requirement “at least in non-commercial cases . . . [upon] consider[ing] the possible loss to the enjoined party together with the hardship that a bond requirement would impose on the applicant.” Id. at 219 (quoting Crowley v. Local No. 82, Furniture & Piano Moving, 679 F.2d 978, 1000 (1st Cir. 1982), rev’d on other grounds, 467 U.S. 526 (1984)). An exception to the bond requirement may also apply in “suits to enforce important federal rights or public interests, arising out of comprehensive federal health and welfare statutes.” Id. at 220 (quoting Crowley, 679 F.2d at 1000) (citation modified).
Applying the first Temple exception, the district court found the risk to financial harm to Hetero “speculative at best” and expressed concern regarding “a chilling effect on access to justice” if a multi-million-dollar bond were required in this case. J.A. 31 (citation omitted). Thus, the court waived the requirement for Otsuka to post security under Rule 65(c). J.A. 32. We are bound to follow the Third Circuit’s narrow exceptions to Rule 65(c). And the Third Circuit has “never excused a [d]istrict [c]ourt from requiring a bond where an injunction prevents commercial, money-making activities.” Zambelli, 592 F.3d at 426. Hetero’s attempt to enter the market with its generic pharmaceutical product is clearly a commercial, money-making activity. Accordingly, we vacate the Rule 65(c) bond waiver and remand the bond issue to the district court for reconsideration.
On remand, the district court may exercise its discretion in determining an appropriate amount to require as a security in light of the limited time remaining before the ’282 patent expires. With regard to the district court’s concern about imposing a large expense for a bond on the plaintiffs, we note that under the Local Rules for the United States District Court for the District of Delaware, the “reasonable premiums or expenses paid on bonds or security stipulations shall be allowed” as taxable costs when those amounts are “furnished by requirements of the law or rule of Court . . . or where required to enable a party to receive or preserve some right accorded the party in an action or proceeding.” D. Del. R. 54.1(b)(10) (pp. 18-20).
This seems right to me. As I discuss in chapter 4 of my new book Wrongful Patent Enforcement: A Comparative Law and Economics Analysis, I think it is important to ensure that the defendant who is temporarily excluded from the market on the basis of a patent that turns out, ex post, to have been either invalid or not infringed (or otherwise unenforceable), is compensated for the interim losses it suffers. (Indeed, arguments are sometimes made that even compensatory damages may be insufficient from a policy standpoint, because the temporary exclusion may leave a monopolist plaintiff better off than it otherwise would have been, even if it has to compensate the defendant for the loss of the latter’s duopoly profit. Nevertheless, I wouldn’t advocate requiring the plaintiff to disgorge its profit, for reasons I discuss in the book.) In some countries, moreover, the wrongly-excluded defendant is presumptively entitled to full compensation, in whatever amount is ultimately proven, though in the U.S. compensation is almost always limited to the amount of the bond; and concerns are sometimes voiced that.the amount of the bond as set by the court sometimes turns out to be less than fully compensatory. (For that reason, I think courts should be permitted to award proven damages in excess of the bond.) That said, I agree that there may be some exceptional situations where the balance of equities weighs in favor of dispensing with a bond or any form of compensation; but the Federal Circuit’s application of the law to the facts of this case seems correct to me. One thing that puzzles me, however, is the district court’s implication, as stated in the Federal Circuit opinion, that the defendant’s harm was speculative and that, absent a waiver, the plaintiff might have to post a multimillion dollar bond. At first blush, these two concerns seem to point in opposite directions--if the defendant’s expected harm is low, then you would think that the amount of the bond should be low too--though perhaps on the facts of this case, the defendant faces a low probability of harm, while at the same time the amount of the harm, should it come to pass, would be substantial, thus inclining the court to require the posting of a multimillion dollar bond just in case; I don’t know.
Update: Further to the above, the 7/2026 issue of GRUR includes an editorial by Dr. Ruth Janal, titled Entschädigung wegen ungerechtfertigter Durchsetzung eines Einheitspatents? (meaning, "compensation for unjustified enforcement of a Unitary Patent?"). The editorial notes that the UPC has yet to decide any cases addressing this issue, but suggests that the court has jurisdiction over claims for compensation for wrongly granted provisional measures. Dr. Janal recommends, inter alia, that the court apply a strict liability standard, as permitted by the CJEU's Mylan decision.
Both the World Intellectual Property Organization (WIPO) and the European Patent Office have recently published reports on FRAND determinations. WIPO’s, titled FRAND Economics: Valuation Methods in Licensing Standard Essential Patents, is available here, and the EPO’s, titled Methodologies for FRAND determination: evidence from global case law, is available here. I think it is fair to generalize that the WIPO report emphasizes economic issues pertaining to FRAND, with some discussion of case law, and that the EPO report provides a more detailed discussion of the relevant judicial decisions, to date, from around the world (but also includes good discussion of the relevant economic issues--and a few citations to some of my sole and co-authored work). Both reports should prove useful to policymakers, practitioners, and academics.
The case is Trump v. Slaughter; for previous discussion on this blog, see here. Essentially, it means that the president can fire federal officers exercising executive powers--such as, here, commissioners of the Federal Trade Commission, which as readers may be aware is, along with the Antitrust Division of the Justice Department, one of the two federal antitrust enforcement agencies--at will. The result is unfortunate, in my opinion, but not unexpected. In a separate case, however, Trump v. Cook, the Court upheld the requirement that Federal Reserve governors can only be fired for cause, reasoning that the central bank's independence from political manipulation is consistent with eighteenth and early nineteenth century practice.
