Some Issues Surrounding Damages for Induced Infringement Under U.S. Law

Section 271(b) of the U.S. Patent Act states that “[w]hoever actively induces infringement of a patent shall be liable as an infringer.”  Earlier this month, the U.S. Supreme Court issued its decision in Hikma v. Amarin, a case that elaborates on what it means to induce an act of patent infringement under U.S. law.  As summarized by Justice Jackson in her unanimous opinion in Hikma, previous case law has established that a plaintiff asserting a claim under § 271(b) must prove (1) that there was “direct infringement by a third party”; (2) that the defendant knew that “the induced acts constitute patent infringement”; and (3) that the defendant took “active steps . . . to encourage direct infringement.”  Hikma, slip op. at 4-5 (internal citations omitted).  In this specific case, Hikma had obtained authorization from the U.S. Food and Drug Administration (FDA) to market a generic drug, subject to a carve-out for Amirin’s patented method of using the drug “to reduce cardiovascular risk in hypertriglyceridemia patients who already take statins” (id. at 5).  Hikma then marketed the drug with a so-called “skinny label” that included only the indication for a different use of the drug, but which otherwise (in accordance with FDA requirements) was identical to Amarin’s label.  Himan also described its product as “generic” Vascepa (the brand-name drug) in press releases, and its website “listed the drug’s therapeutic category as ‘[h]ypertriglyceridemia’, a category that includes but is broader than” the unpatented method of use (id. at 6).  The Federal Circuit held that this conduct was sufficient to sustain a finding of inducement, because it was “at least plausible that a physician could read the label, website, and press releases ‘as an instruction or encouragement to prescribe’” the generic drug for any approved use, including the use that still remained under patent.  The Supreme Court reversed, however, holding that a defendant can be liable for inducement only if it expressly or implicitly provides clear and affirmative encouragement to infringe.  It is not enough that it may be “plausible” or “possible” that third parties might read the defendant’s statements in such a way that will cause them to infringe; for liability to attach, the statute requires active, not passive, inducement.  See id. at 8-12.

The reversal was not surprising, especially in view of the Court’s recent restrictive reading of indirect infringement in the context of copyright law in Cox v. Sony, also decided this term; and in my view the Hikma decision is correct as a matter of policy as well.  For purposes of this blog, however, I want to highlight a couple of remedies-related questions pertaining to induced infringement that may deserve further attention.

First, there is the question of how damages should be assessed when a defendant is found liable for induced (or contributory) infringement.  To my knowledge, the late Dmitri Karshtedt’s article Damages for Indirect Patent Infringement, 91 Wash. U. L. Rev. 911 (2014), previously noted on this blog here, remains the leading piece addressing the conflicting case law on whether royalties for induced infringement should be limited to “proven, enumerated acts of direct infringement of the asserted patents (‘the atomistic approach’),” or instead whether “the extent of directly infringing use of the patent should be viewed as one of many pieces of evidence for measuring the extent of damages (‘the evidentiary approach’).”  Professor Karshtedt argued in favor of the latter standard, noting inter alia that, but for the infringement, practical evidentiary considerations might motivate the hypothetical bargainers to agree, ex ante, to a royalty that depends on estimates of third parties’ direct use of the patented technology, rather than atomistic, ex post calculation of such use.  I am inclined to think he was right, for reasons Norman Siebrasse and I discussed in our New Framework article in evaluating Federal Circuit cases such as Hanson v. Alpine Valley Ski Area (a case Professor Karshtedt cited with approval in his article as well).  But given the renewed focus on matters relating to indirect infringement, I would like to give the matter some more thought over the coming weeks, and may have more to say about it then.  

Second, a question that I am planning to address in my current paper on extraterritoriality is the following.  Suppose that an entity outside the U.S. induces an entity within the U.S. to infringe a U.S. patent, and that the patentee wants to sue the inducer for damages.  The Federal Circuit has held on more than one occasion that an extraterritorial act that induces the domestic infringement of a U.S. patent is actionable under U.S. law, notwithstanding the general presumption against extraterritorial application of U.S. law.  The court has yet to address, however, whether this rule is consistent with the Supreme Court’s WesternGeco v. ION decision, under which (absent a clear indication that Congress intended to displace the presumption against extraterritoriality) a court should consider whether the “conduct relevant to the focus” of the statutory provision at issue is domestic conduct.  Here—though I am still thinking through the issue—my initial take is that it seems more natural to think of the “focus” of § 271(b), and conduct relevant to that focus, as the inducing act, rather than the direct infringement.  But if that is right, then it would seem to follow that extraterritorial inducement is not actionable after all, notwithstanding the Federal Circuit case law to the contrary.  See Robert H. Stier, Jr., Extraterritoriality and the Active Inducement of Infringement, 19 UIC 204 (2024) (essentially making this argument).  And yet this result seems kind of odd.  In WesternGeco, although the infringing conduct was domestic (the act of supplying a component from the United States), the sales the plaintiff lost were foreign; nevertheless, because the conduct relevant to the focus was the domestic act of supplying components, the plaintiff could recover the profits it lost on those sales outside the U.S.  (I happen to think this was the correct outcome, for reasons I have explained on numerous occasions elsewhere, but I also can understand how someone might reach the opposite conclusion.)  The hypothetical with which I began this paragraph can be thought of as the mirror image of WesternGeco, in that the financial impact, if any, would be domestic, while the relevant conduct would be foreign activity that had (and was intended to have) effects within the United States; but if the conduct relevant to the focus of § 271(b) is that foreign conduct, then those effects might not be sufficient to render the foreign actor liable under U.S. law.  (Of course, the patentee could, in principle, seek to recover from the domestic direct infringer(s); but that is not always a practical option, which is precisely why indirect liability exists.)  This thought experiment makes me wonder whether, in such a case, excluding the foreign actor from liability would amount to an overly wooden interpretation of WesternGeco.  One way to avoid such an interpretation would be to consider the inducing act and the direct infringement to be coequal focuses of § 271(b), though I wonder whether that would be a plausible extension of the Supreme Court’s current extraterritoriality jurisprudence.

The preceding analysis also calls to mind the UPC Court of Appeal’s recent decision, also handed down while I was away earlier this month, in Kodak GmbH v. Fujifilm Corp.  I should probably blog about this decision at length sometime soon, but for now I will note only that one of the questions presented was whether the UPC could find the German defendant Kodak Graphic Communications GmbH liable for infringing the U.K. portion of the European Patent at issue.  Under the CJEU’s 2025 decision in BSH v. Electrolux, the Court holds, the lower court had jurisdiction to consider this issue—but under U.K. substantive law, there could be no liability unless the German defendant was a joint tortfeasor with the relevant (non-party) U.K. entity, Kodak Ltd.  For this to be the case, the Court of Appeal states:

Under UK law, merely supplying outside the jurisdiction goods to a party in the UK who later sells them within the jurisdiction is not enough for joint tortfeasorship, even if the supplier knows his customer intends so to sell in the UK (Generics v Lundbeck [2006] EWCA Civ 1261, para. 25). As Fujifilm acknowledges, joint tortfeasorship arises when multiple entities jointly commit a tort by acting pursuant to a common design.

 

. . . [E]ven though liability for patent infringement is strict and does not require any awareness of its unlawfulness, for a person to be liable as a joint tortfeasor it is necessary to show (1) that he had procured the company to infringe or been joined in common design with the company; and (2) knew of the essential facts which make the act done wrongful (because a person cannot be allowed to escape liability by relying on ignorance of the law it, knowledge of patent infringement cannot be required). As such, knowledge of the existence of the UK designation of the Patent and that the attacked embodiments disclose all the features of the claim(s) of the Patent would be required. . . . [I]t is not evident – and Fujifilm has not shown – that such knowledge actually existed with any of the Kodak companies prior to Fujifilm’s allegation that the attacked embodiment infringes the UK designation of the Patent (paras. 326-27).

For these reasons, among others, the lower court erred in granting an injunction against the German defendants with respect to sales within the U.K.

Assuming that the above interpretation of U.K. substantive law is accurate (which it appears to be, based upon the cited cases), the standards for indirect liability under U.K. and U.S. law post-Hikma seem not so far apart.  Moreover, if I am understanding correctly, in a case (unlike the present one) in which the prerequisites for liability under U.K. substantive law were present neither the UPC nor the U.K. would have a problem in finding a German entity liable for inducing a U.K. entity to infringe a U.K. patent within the U.K.  In this respect, then, the UPC and U.K. case law would seem to align with the Federal Circuit’s current understanding of § 271(b) of the U.S. Patent Act.  Whether that current understanding itself aligns with WesternGeco is nevertheless unclear, though as suggested above perhaps the “conduct relevant to the focus” test should be applied with some degree of flexibility to the tort of induced infringement, in view of the potentially substantial domestic effects of foreign inducement.  

If readers have any thoughts they would like to share on these issues, please let me know. 

Guest Post: Roya Ghafele on "The Global Patent Chess Game"

Editor's note:  This will be my last post before going on holiday.  I plan to resume blogging the week of June 15.  This weekend, however, I am pleased to present a guest post by Roya Ghafele of OxFirst, discussing her upcoming conference (on issues that also happen to be central to a paper I am currently working on, tentatively titled On the Law and Economics of Extraterritoriality and IP Rights).  Take it away, Roya:

 

OxFora’s 14th IP & Competition Forum: When U.S. Patents Come to Munich

By Roya Ghafele, info@oxfirst.com

The 14th IP & Competition Forum, taking place in Munich on 23 and 24 June 2026 under the title “The Global Patent Chess Game: International Patent Strategy in a Fragmented World Order,” will address one of the most urgent questions in patent litigation today: what happens when territorial patent rights collide with global litigation strategy?

The recent BMW/Onesta dispute illustrates the point. Onesta brought proceedings in Munich involving, among other rights, U.S. patents. BMW responded in the Western District of Texas, arguing that U.S. patent claims should not be litigated abroad in a way that may bypass core features of the U.S. system, including the right to a jury trial.

Patent rights are territorial. Patent litigation strategy increasingly is not.

The Forum is designed around this new reality: long-arm jurisdiction after BSH v. Electrolux, cross-border patent enforcement, injunctions as bargaining chips in licensing disputes, forum choices, SEPs, FRAND, global rate-setting and the emerging European patent litigation architecture. What makes the discussion unusual is the breadth of judicial and institutional participation. The programme brings together voices from the German Federal Court of Justice, the Unified Patent Court, the EPO Boards of Appeal, the Supreme People’s Court of China, the Court of Rio de Janeiro and the Munich patent judiciary, including Prof. Peter Meier-Beck former German Supreme Court, Dr Juan He of the China Supreme Court, Judge Victor Torres from the Brazilian Judiciary and selected Munich patent judges.

After BSH v. Electrolux, European courts are being asked how far they may go in cross-border patent disputes. At the same time, U.S. courts are being asked how far they should go to protect their own patent adjudication system. The result is a new kind of patent conflict: not only over infringement, validity or damages, but over which court gets to control the dispute.

That matters because the next phase of patent litigation will not be shaped by doctrine alone. It will be shaped by institutional choices: which court moves first, which procedural safeguards apply, how far remedies may reach, and how courts respond when patent disputes become global before the law has fully caught up.

For companies, patent strategy now requires a global map. A filing in Munich may trigger a response in Texas. An injunction in one jurisdiction may reshape negotiations worldwide. A procedural move may matter as much as the substantive patent claim.

For courts, the challenge is harder: how to enforce rights effectively without overreaching into another legal system; how to respect territoriality without ignoring commercial reality; and how to preserve legitimacy when patent disputes increasingly have global consequences.

Munich is the right place to have this conversation. It sits at the centre of European patent litigation, close to the EPO, the DPMA and the UPC, and it is increasingly part of the global debate on how far courts should go in shaping international patent outcomes.

The global patent chess game is already underway. The question is whether the rules are keeping up. Join us in Munich, to debate and discuss.

More information is available at OxFora.
The previous 12th IP & Competition Forum provides further background on the series.
You can also follow OxFirst on LinkedIn and OxFora on LinkedIn.

For further information, please contact: info@oxfirst.com

Questions Surrounding Awards of Monetary Relief for Trade Secret Misappropriation

One of my upcoming projects is to write something on trade secret damages—with a primary focus on U.S. law, where in the past few years we have seen a number of very high damages awards (in the nine and even ten-figure range).  I already have touched on this topic to some extent in my recently-published book Remedies in Intellectual Property Law, but the law is continuing to evolve in real time, and there are several issues that in my view are not as fully developed as perhaps they could be in the legal/law-and-economics literature.  Among these are the applicability of U.S. patent damages standards on topics such as apportionment of damages to trade secret disputes; the standards for awarding punitive damages for trade secret misappropriation; and most importantly, perhaps, the availability of monetary relief for “unjust enrichment.” 

In regard to the last of these, last week the Federal Circuit in Versata Software, LLC v. Ford Motor Co., held that, under the federal Defend Trade Secrets Act (DTSA) and the Michigan Uniform Trade Secrets Act, a plaintiff is entitled to recover “unjust enrichment” damages as a matter of statutory right.  (For an excellent discussion on Patently-O, see here; see also this discussion of unjust enrichment, from a few weeks ago, on IP Watchdog)  Both statutes explicitly reference “unjust enrichment,” so in that respect the Federal Circuit’s decision seems straightforward (and, coincidentally, consistent with an understanding of unjust enrichment that prevails in some civil law countries, as well as U.S. copyright and design patent law)—but there is a strain of contrary precedent, exemplified by the Second Circuit in Syntel Sterling Best Shores Mauritius Ltd. v. TriZetto Group, Inc., 68 F.4th 792 (2d Cir. 2023), in which the court held that the DTSA permits an unjust enrichment award of the defendant’s avoided costs only if the misappropriation injured the plaintiff beyond the amount of its quantifiable actual damages.  (In effect, this would render such awards a type of compensatory damages rather than a gain-based remedy, the latter being how one might otherwise think of unjust enrichment.) This holding also points to another issue that perhaps has not been sufficiently theorized, namely exactly what should an unjust enrichment award mean in the context of trade secret law.  Presumably it can include the disgorgement of the defendant’s profit attributable to the misappropriation, if there is any such profit; but if there is no such profit, or perhaps even if there is, should courts sometimes award the costs the defendant avoided incurring by using the plaintiff’s secret information?  If so, how do you calculate those avoided costs—and what, if anything, is the relationship between an award of avoided costs and injunctive relief (including head-start injunctions)?

Other questions also deserve further analysis.  Should an award of unjust enrichment ever mean just an award of a reasonable royalty (an outcome the Federal Circuit appears to disapprove of in Versata, but which in theory could be justified if you think that, absent the misappropriation, the plaintiff would have licensed the defendant to use the secret)?  Doctrinally, is the remedy best thought of as a matter of right, or as an equitable (and hence discretionary, and perhaps jury-less) remedy?  The latter would seem to rule out the "as a matter of course" option, but if this is correct should eligibility for an unjust enrichment award hinge on the defendant’s having intentionally misappropriated?  (To be sure, that standard that usually will be satisfied in this context, because liability for trade secret misappropriation, unlike liability for other types of IP infringement, requires proof of knowing or intentional conduct, or at least constructive knowledge--though there may be cases where the defendant had a good faith but erroneous belief that the information it acquired, used, or disclosed was not secret.)  Or should we require something more (willfulness, egregiousness, whatever), to avoid risking overdeterrence?  Relatedly, what (if anything) should be the relationship between an award of disgorgement of profits and punitive damages—should a plaintiff be allowed to recover both, or is that overdoing it?  Alternatively, is there anything to be said, at least as a policy matter, for doing away disgorgement of the defendant’s profits altogether, as U.S. law has done with respect to utility patent infringement?  (The New York Court of Appeals in E.J. Brooks Co. v. Cambridge Sec. Seals, 105 N.E.3d 301 (N.Y. 2018), might be read as interpreting New York law as not permitting this measure of recovery for trade secret misappropriation (New York doesn’t follow the Uniform Trade Secrets Act), although the dissenting judge in that case argued for limiting the majority holding precluding an award of avoided costs to cases seeking damages at law as opposed to equity.)  

I’m not entirely sure yet what my own views are on all of these issues, but I am starting to supplement my existing research file and to develop some ideas.  And if readers have any leads, including non-U.S. cases addressing any of these issues, I’d be happy to hear from you.

*                    *                    *

I will be taking a blogging break for the next two weeks.  I plan to resume on or about June 15.

Zhang and Geng on Regional SEP Royalty Discounts

Zhang Guangliang and Geng Bang have published an article titled A Study on Regional Discounts on SEP Royalty Rates, China Patents & Trademarks No. 2, 2026, pp. 35-46 (Chinese original at pp. 26-35).   The authors note that U.K., U.S., and Chinese decisions establishing global FRAND royalty rates have applied regional discounts, but that the legal basis for doing so “still lacks elaboration,” and that courts have not explained the reasons for providing discounts and the relevant factors.  The authors seek to fill this gap, first by tying the practice of regional discounts to the principle of territoriality, which they argue permits countries to craft practices that are tailored to their stage of development (subject, of course, to international obligations) and which results in a geographic distribution of patents that varies from one region to another.  In addition, implementers “tend to adopt differentiated product pricing strategies for different regions so as to accord with the actual demands of local markets.”  Consequently, the authors argue, courts should consider “three major factors . . . when determining regional discounts”:  differences in the geographic distribution of patents and of products sold by implementers, and “other factors including the differences in market competition and economic development.”  They then provide some examples of how their methodology would work in practice.

Also in this issue of China Patents & Trademarks is an article by Rui Songyan titled Adjudication Logic and Rules for SEP Infringement Cases (pp. 13-25, Chinese original at pp. 3-12).  

Judge Gilstrap’s Opinion in Collision v. Samsung

U.S. District Judge Rodney Gilstrap’s May 18 opinion in Collision Communications, Inc. v. Samsung Electronics, Inc., Civil Action No. 2:23-CV-00587-JRG, has gotten quite a lot of coverage already elsewhere.  In November, the jury awarded Collision a running royalty amounting to $445,494,160 for the infringement of four patents, and found the infringement to be willful.  Whether Judge Gilstrap will award enhanced damages remains to be seen.  The issue in the May 18 opinion was whether to award Collision a permanent injunction for the infringement of one of the four patents, U.S. Patent No. 7,593,492.  (According to the opinion, Collision did not seek an injunction for the other three because their remaining terms are “negligible.”)  The case is notable because, among other things, Collision argued that as a matter of law ongoing infringement constitutes irreparable harm, because that would have been the understanding in courts of equity in 1789, and under Trump v. CASA federal courts are obligated to apply the law of equity as it would have been understood as of that time.  The case is also notable because the U.S. Department of Justice and the U.S. Patent and Trademark Office filed a Statement of Interest, not supporting Collision’s argument as such but contending instead that injunctive relief can be an appropriate remedy for the infringement of a patents owned by a non-practicing entity (NPE), because patents can be difficult to value and damages difficult to calculate accurately.  The case is therefore reminiscent of another matter that was pending before Judge Gilstrap last year, Radian v. Samsung (see discussion here); that case later settled. 

To make a long story short (again, others have already covered this at length), the court denies the injunction, concluding inter alia that it remains obligated to follow eBay, and thus ongoing infringement is not as a matter of law or presumptively irreparable; that, nonetheless, under the totality of the circumstances—including the fact that Collision had sought a “design win” for its technology—Collision was faced with irreparable harm, and an ongoing royalty would not be an adequate remedy at law, for the reasons advanced by the DOJ and USPTO, even if the plaintiff is an NPE; and yet, notwithstanding the irreparable harm, Collision had not demonstrated that the balance of hardships favored it or that the public interest would not be disserved by the entry of an injunction.  As others have noted, the burden of proof appears to have been important here, but it also seems a bit odd that Collision argued for a one-month grace period which (it says) would suffice for Samsung “to bring its infringement to an end.” Does this mean by settling, or by designing around?  The latter seems to be implied by the discussion at p.15 n.2, but if so the judge concludes that this representation is hard to square with Collision’s argument at trial that there were no noninfringing alternatives; it also would seem to difficult to reconcile with the assertion of irreparable harm in the absence of an injunction.

There’s more to the opinion, but for my purposes I’d like to consider the case from a different angle—namely, what the outcome of a case like this should be if one were inclined to apply economic reasoning, as opposed to legal formalism or (as Collision would have it) originalism.  On this issue, the DOJ and USPTO certainly are correct that patents can be hard to value and damages difficult to calculate accurately; under the familiar Calabresi/Melamed formulation, these are the standard reasons in favor of protecting entitlements by means of property rules (injunctions).  But, as I’ve tried to argue in several single- or coauthored papers over the years, there are other considerations to take into account as well.  For one things, if we take it as a given that the overarching goal should be to reward the prevailing patent owner commensurate with its contribution to the state of the art, that means neither under- nor overrewarding them.  To assume that court-awarded ongoing royalties underreward, rather than overreward, patent owners is just that, an assumption, not a demonstrable fact.  More to the point, let’s consider why the parties in a case like Collision v. Samsung have staked out the positions they have.  It seems unlikely to me that Collision is ultimately interested in excluding Samsung from the market for the technology at suit.  Rather, it thinks that an injunction will provide it with more leverage in royalty negotiations; and Samsung must think the same thing, or it wouldn’t oppose the injunction.  So from a policy standpoint, it is reasonable to ask whether it is more or less likely that the added leverage resulting from an injunction would move the resulting royalty negotiations closer to or further away from attaining the “right” number—one that would correlate with the contingent ex ante value of the patented technology over alternatives, and that would not include a substantial premium based on Samsung’s higher costs (if any) of switching to an alternative ex post (i.e., holdup value).  Further, if as a practical matter the added leverage from an injunction risks overrewarding the patent owner, an economic analyst would want to know whether that consequence is more (or less) of a problem than the risk that a court-ordered ongoing royalty will underreward them.  This all sounds very abstract, to be sure, and I recognize that we need legal standards that are operable in the real world.  But the goal should be to develop operable standards that are a reasonably good proxy for the economic realities.  (In some of my own work, I’ve proposed some possibilities.)  But until we get away from legal formalism, originalism, inapt analogies to real property, etc., whether in the U.S. or elsewhere, those economic realities are likely to remain obscured.