Wednesday, July 31, 2013

Paper on injunctive relief for standard-essential patents, with an emphasis on Chinese law

Wu Chengjian and Zhang Xiao have published an article titled On Injunctive Relief for Standard-Essential Patents in China Patents & Trademarks No. 2, 2013, pp. 27-33.  (The magazine's website is here.)  The authors first provide an "overview of judicial practice relevant to injunctive relief in China and abroad," with particular emphasis on the U.S., Germany, and China.  The authors note that Chinese courts have some discretion to deny injunctive relief to the prevailing patentee, as in the Wuhan Jingyuan case of 2009 (discussed in my book at pp. 349-50) which, however, did not involve a standard-essential patent.  The authors also note that in recent years Chinese authorities have tried to work out to some rules relating to injunctive relief for standard-essential patents, but that to date no such rules have been adopted.  The authors then present their views on three different possible models for approaching the issue:  (1) "no injunction is granted in all events"; (2) "license negotiation under court supervision"; and (3) "license negotiation before injunction takes effect."  They argue in favor of the third option, under which a court would grant an injunction but stay its effect while the parties negotiate the terms of a license.  If no license is concluded, the court would then determine whether the defendant's offer was within the FRAND range; if so, the injunction would be lifted.  I don't agree with the authors' conclusion, but the article makes for stimulating reading.

Relatedly, in a decision earlier this year in an antitrust dispute brought by Huawei against InterDigital, a court in Shenzhen held that InterDigital violated China's antitrust law by requesting excessive royalties and bundling essential and nonessential patents together.  In addition, the court calculated that a FRAND royalty "should not exceed 0.019% of the actual sales price of each Huawei product."  Lisha Zhou, Joy Shaw & Eliot Gao, Chinese regional court makes landmark FRAND judgement in Huawei/InterDigital.  (Hat tip to Danny Sokol for bringing this article, from "Policy and Regulatory Review," to my attention.)  The court's ruling is not public, so at this point we don't know how the court calculated the royalty.  There is also coverage here and here.

Monday, July 29, 2013

Decision Expected Within the Next Week on Whether to Veto ITC Exclusion Order Against Apple

As reported in the Wall Street Journal earlier today, the U.S. Trade Representative must decide by Sunday, August 4 whether to veto the ITC's June 4 exclusion order against certain models of Apple iPads and iPhones. (I don't see anything in the Tariff Act that extends this deadline to the following business day, August 5, but perhaps I've missed something.)  I blogged about the June 4 order here, and there has been extensive commentary in Foss Patents and the Essential Patents Blog on the public version of the Commission's order, which was made public last month.  

I have expressed my view--that the ITC should not enter exclusion orders in cases involving standard-essential patents--in several places, including this essay, and I don't have much more to add at this point.  One possibility in the present case, however, is that the USTR will decline to veto the order, since vetoes are rare and the order in this case involves mostly older-model devices; and that the executive branch will instead continue its push for legislative reform.  The House Judiciary Committee held a hearing on the ITC just a couple of weeks ago; the transcript is available here.

Of possible further interest is this article by Jenna Greene from the June 17, 2013 issue of the National Law Journal, titled "ITC Losing Its Luster:  Large Corporations Are Using the Forum Less for Their IP Disputes."

Sunday, July 28, 2013

Some new papers of mine on patent remedies

Professor Ted Sichelman will be publishing a paper in a forthcoming issue of the Texas Law Review titled "Purging Patent Law of ‘Private Law’ Remedies".  The review solicited a response from me in its online supplement, "Texas Law Review See Also."  I don't think that a current version of the Sichelman paper is available on ssrn (though I assume the print version will be out very soon), but my short response--titled "Make No Little Plans: Response to Ted Sichelman, Purging Patent Law of ‘Private Law’ Remedies"--is available on ssrn, here.  Here is the abstract of my response:
This essay responds to Professor's Ted Sichelman's forthcoming article, Purging Patent Law of "Private Law" Remedies, 91 Tex. L. Rev. __ (2013), which argues that courts should abandon the conventional view of patents as private rights for which private-law remedies are appropriate, and instead should award damages and injunctions only when, and to the extent that, doing so serves the public interest for which patents are granted in the first place. Although some of Sichelman’s specific recommendations are well within the mainstream of contemporary patent scholarship, in particular some of his recommendations relating to permanent injunctions and enhanced damages, he also argues that courts should award monetary relief for patent infringement so as to align ex ante incentives with ex post rewards; this could mean awarding either more or less than would be necessary to restore the patentee to the position it would have occupied but for the infringement (the traditional benchmark for compensatory damages). Although I remain skeptical that such a system could ever work in the real world, Sichelman defends his thesis with aplomb – and recognizes its practical infeasibility in the near term. In addition, his analysis suggests that at least in industries in which patents are unlikely to play a major role in inducing invention, disclosure, or commercialization, efforts to ensure that defendants restore patentees to the position they would have occupied, but for the infringement, may not be worth the candle; some risk of undercompensation may be more tolerable than is commonly assumed. I will suggest that this implication, if valid, possibly could have some practical payoff even in the short run.
I also posted an undated version of a symposium piece that will be coming out in the Santa Clara Computer & High Technology Law Journal, here.  (The updates are pretty modest, so if you've read the previous version there's probably no good great urgency to reading this version.)  Here is the abstract:
           This essay, which builds on my recent work on the law and economics of comparative patent remedies, presents three proposals relating to the enforcement of domestic patent rights. The first, which may be close to being adopted in the United States, is for the courts and the International Trade Commission (ITC) to adopt a general presumption, grounded in patent law and policy, that patent owners who have committed to license their standard essential patents (SEPs) on fair, reasonable, and nondiscriminatory terms are not entitled to permanent injunctions or exclusion orders, but rather only to a damages in the form of an ongoing royalty calculated on the basis of what a reasonable licensor and licensee would have agreed to prior to the adoption of the standard in question. Countries such as Germany that have addressed the issue of remedies for the infringement of SEPs within the context of competition law, while otherwise leaving in place an almost-automatic entitlement to permanent injunctive relief, have in my view taken the wrong tack. Second, I argue that Congress should amend Patent Act § 289, which permits design patent owners to recover the infringer’s profits, so as to require that such awards reflect only the profit derived from the use of the infringed design (and not the entire product of which the design is a part). Such apportionment is the norm in other countries (and in U.S. copyright and trademark law). By contrast, the archaic U.S. design patent rule threatens substantial overdeterrence and overcompensation, as reflected in the recent jury award in Apple v. Samsung. My third suggestion — really more of a thought experiment inspired by Judge Posner’s opinion in Apple v. Motorola than a serious proposal for reform — is to consider whether it would be possible to eliminate the unique U.S. practice of trial by jury in a wide swath of U.S. patent cases by statutorily recasting awards of reasonable royalties as a form of equitable restitution rather than as compensation.

Saturday, July 27, 2013

Trimble on patent law and remuneration for inventions in pre-1989 Czechoslovakia

Notwithstanding my admiration for the novels of Milan Kundera, Czech is one of those languages I doubt I will ever get around to learning.  My ability to dig into primary sources of Czech law therefore is likely to remain limited as well.  So I'm happy to note that Professor Marketa Trimble has posted a very interesting paper on ssrn, which I just finished reading, titled The Patent System in Pre-1989 Czechoslovakia, which will appear as a chapter in a forthcoming edited volume titled Intellectual Property in Eastern Europe and the Commonwealth of Independent States (Mira T. Sundara Rajan, ed., LexisNexis).  Highly recommended!

Here is her abstract:
The chapter analyzes patent law in Czechoslovakia in the period from 1945 until the end of communist rule in 1989. In addition to reviewing the legislative development of patent law – the laws on the books – the chapter explains the law in action, which includes the application of the law in practice and the attitudes of Czechoslovak society toward inventive activities and patenting. The chapter shows that post-1945 Czechoslovak patent law drew on a highly developed pre-1940 Czechoslovak patent law and practice that was based on the Austrian patent law inherited by Czechoslovakia in 1918 when it split from the Austro-Hungarian Empire. Although Czechoslovak patent experts after 1948 were under severe pressure to adopt the Soviet patent law model, it was not until 1972 that the Soviet model was fully imposed upon the Czechoslovak patent system. Notwithstanding the political distortions forced upon the Czechoslovak patent system in the 1950s, 1970s and 1980s, the legacy of a high level of technical expertise developed under the Austro-Hungarian Empire survived in Czechoslovakia in large measure through the end of communist rule in 1989.
The chapter aims to achieve three goals. First, it aims to dispel misperceptions that have appeared in some recent scholarship that no developed patent system existed in Czechoslovakia prior to 1989. Second, the chapter contributes to the recent trend in the historiography of the Soviet bloc countries with a showing that patent law development was not uniform across the Soviet bloc, with an explanation that the development did not occur in complete isolation from the West, and with a presentation of the practical everyday effects of the patent system on the people of Czechoslovakia. Third, the chapter presents features of the Czechoslovak patent system that might be of interest to current critics of patent systems in various countries. Critics interested in changing from the property rule to the liability rule in patent law may find the Czechoslovak system interesting because the Czechoslovak system de facto deprived most inventors of injunctions. Critics who are concerned about rewards for unpatentable discoveries may find it useful to learn about the protection for such discoveries that appeared in Czechoslovak law until 1990. The lessons learned in Czechoslovakia in the pre-1989 period are not easily transferable to current practice, and particularly not to any democratic society with a functioning market economy; however, it is helpful to recall and understand the functioning of the features and the impact that they had on inventive activity within their past context to see if any of the lessons might be relevant today.

Friday, July 26, 2013

U.S. Federal Circuit Reverses Lost Profits Judgment

Last week the United States Court of Appeals for the Federal Circuit handed down a damages opinion in Calico Brand, Inc. v. Ameritek Imports, Inc., NoS. 2008-1324, 2008-1341 (Fed. Cir. July 18, 2013).  The opinion can be found on the Federal Circuit's website, here.  The opinion is nonprecedential--presumably because it doesn't break any new legal ground--but is interesting nonetheless for its application of the law of willful infringement and lost profits.

The plaintiff, Calico, owns three patents on "a combination of components comprising a lock mechanism that  allows a user to operate a [utility] lighter in a safe, non-complicated manner."  Ameritek imported infringing lighters from China and sold them to Acme, which in turn sold them to retailers.  In October 2004, Calico notified Ameritek and Acme that it believed its lighters infringed Calico's patents.  Acme sought reassurance from Ameritek that Ameritek would indemnify Acme in the event damages were awarded against Acme.  (While awaiting Ameritek's response, Acme sold 74,556 lighters.  At trial, however, Calico did not establish that these particular lighters infringed Calico's patents.  Calico filed suit in January 2005, after which Ameritek conceded that the imported lighters infringed.)  The district court concluded that the patents were valid and trial was held on damages.  The jury found willful infringement and awarded lost profits damages of $719,395 against Ameritek and $178,035 against Acme.  In the alternative, the jury determined that a reasonable royalty would be $113,471 as to Ameritek and $23,250 as to Acme.  The district court overturned the finding of willful infringement, and both parties appealed the resulting judgment.  The Federal Circuit affirmed the district court's judgment that the infringement was not willful, but reversed the lost profits judgment and remanded with instruction to enter judgment in the amount of the reasonable royalty.

Writing for the court, Judge Reyne first turned his attention to willfulness, stating that the district court
analyzed uncontroverted evidence presented at trial and concluded that there was no showing that Acme had knowledge of Calico's patents at the time it was selling the infringing Ameritek lighters before October 22, 2004. Rather, the district court found that, when informed of Calico's patents, Acme switched to selling readily-available non-infringing lighters and returned the inventory of infringing lighters to Ameritek. J.A. 9. Weighing the totality of the evidence, the district court determined that “[p]erhaps Acme should have done more to ensure that Ameritek was not selling [it] infringing goods,” but that this failure constituted, at most, negligent conduct. Id.
On the issue of lost profits, the court set out the Panduit factors ("In general, a patent owner must prove causation in fact by showing (1) a demand for the patented product, (2) an absence of acceptable non-infringing substitutes, (3) the manufacturing and marketing capability to exploit the demand, and (4) the amount of profit the patent owner would have made") and concluded that factors (1) and (2) were lacking.  As for customer demand:
. . . Acme argues that the district court erred in finding lost profits to be an available form of damages because the child safety features claimed in the patents in suit are divorced from consumer demand. Acme points to evidence indicating that the only distinguishing feature influencing consumers to buy the infringing lighters over the Calico lighters was price. Appellee Br. 31 (citing J.A. 166).
Calico responds that the evidence supports the conclusion that “but for” the infringement, Calico would have maintained its market share of 28.4% and would not have experienced a 7% decrease in sales during the period of infringement. . . .

Here, the district court credited testimony regarding accounting records for sales of Calico utility lighters as sufficient evidence of customer demand. J.A. 11. We disagree that evidence of gross sales data is sufficient under the Rite–Hite framework to establish consumer demand based on the patented safety mechanism. . . .
Similarly, on the issue of non-infringing alternatives, the court concluded:
Calico failed to demonstrate a reasonable probability that, in the absence of the infringing Ameritek lighters, Acme and/or its customers would have purchased Calico lighters rather than the non-infringing alternatives. . . .
There is no dispute that at all relevant times, Acme and Calico competed in the same market for utility lighters. But Calico and Acme were not the sole competitors in the market. At minimum, Easton Products, Beacon Products, BIC, and New York utility lighters also competed in the same market. J.A. 168. Given the crowded nature of this market, there is no reasonable basis to support an assumption that Calico would have made additional sales “but for” the presence of Ameritek lighters. The record evidence shows that there were 20 to 30 brands of utility lighters comparable to the Ameritek product. J.A. 189

Indeed, the district court acknowledged in its summary judgment ruling that Acme was able to switch to an alternative product and maintain its sales volume. J.A. 115. . . .  A seamless substitution of the asserted product with a non-infringing, alternative product that is sourced from a third party supplier, is evidence of acceptable non-infringing alternatives under the second Panduit factor.
Toward the end of the opinion, the court also noted that:
In entering judgment, the district court held that Acme and Ameritek were jointly and severally liable for damages. On appeal, neither party challenges the district court's decision to impose joint and several liability.
 The imposition of joint and several liability is, I believe, correct under U.S. law. I hope to take up the question of how this issue is determined in other countries in a future post. 

Wednesday, July 24, 2013

Posner and Becker on Patent Trolls

This topic is, I think, closely enough related to patent remedies to merit a mention here.  Richard Posner and Gary Becker discuss the issue of patent trolls on their blog this week.  I agree with much of Judge Posner's analysis, but not all of it.  In his blog post and in some previous comments of his in The Atlantic and Slate he seems to be calling for a patent working requirement.  My understanding is that patent working requirements--roughly, the idea that a patent is enforceable only if the patent owner practices the invention within a set period of time--were at one time fairly common in some countries' patent laws (and, as mentioned in my post the other day, according to Christoph Rademacher failure to work appears to remain a ground for granting a compulsory license in Japan, though there appear to be no cases on point), but that they are rarely found today (or if found, rarely invoked).  (There is also the question whether working requirements, permissible under some circumstances under the Paris Convention, are consistent with TRIPs.  For a recent discussion, see Levon Barsoumian, Comment, India's Use It or Lost It:  Time to Revisit TRIPs?, 11 J. Marshall J. Intell. Prop. L. 797 (2013), available here (discussing whether a provision of Indian law that would permit compulsory licensing in cases of failure to locally work the patent is consistent with TRIPs article 27, which among other things states that patents shall be granted without discrimiunation as to whether the patented product is imported or locally produced).) As a matter of policy, the common arguments against working requirements are that (if licensing doesn't count as working) they discourage entities that lack the ability to make products (e.g., universities) from investing in the inventive process.  Licensing, after all, can be an economically efficient division of labor.  They also might be easily evaded if a small amount of manufacture would suffice. 

Anyway, regardless of the merits (and meaning) of patent working requirements, there are a couple of things Judge Posner states that strike me as questionable:
. . . There are no upfront costs if the patented invention is never produced, but serves merely as an excuse for a threat to sue.

It’s not just that patent trolls don’t do anything that encourages innovation; they impair innovation. Trolldom requires inventors to invest more resources in searching the files of the patent office before applying for a patent (and for safety’s sake again after they begin making the patented product or process), to avoid being hit by a license demand from a troll. This makes trade secrecy a more attractive alternative to patent protection than it would otherwise be. And trade secrecy not only is often a costly or even infeasible alternative to a patent; it also conceals information that a patent is required to disclose.   
As for the upfront costs, I think Judge Posner is confusing the costs of invention (research, development, testing, etc.) with the costs of innovation (producing and marketing a commercial embodiment).   A nonworking patentee does not incur the second of these costs but does incur the first.  As for the trade secrecy point, I don't get it.  I suppose that a company that worries about being sued by a patent troll might be marginally less motivated to seek patent protection itself for fear of disclosing its technology to the troll and thus inviting a lawsuit, but that point seems to be belied by the number of patents in existence (which Judge Posner also notes), and in any event all you need to do to invite a troll lawsuit is to produce a product, not to obtain a patent on it.  Judge Posner's point about trade secrecy strikes me as a non sequitur.

For discussion of some possible reasons why suits by patent assertion entities seem to be less prevalent (though not zero) in other countries, and cites to some relevant sources, see my book at pp. 246-47, 286-87; see also Menno Driese, Trolling Strategies of Non-Practicing Entities in Europe (May 25, 2012), available here, and Anna Mayergoyz, Note, Lessons from Europe on How to Tame U.S. Patent Trolls, 42 Cornell Int'l L.J. 241 (2009).  Bottom line, while explanations such as patent quality and expansive claim drafting play a major role, I think that the law of remedies--in particular, the high damages awards and disinclination to award attorneys' fees in the U.S.--is also partly responsible (though the eBay standard cuts the other way).  Query:  will the Unified Patent Court (if and when it takes effect in Europe) make Europe a more attractive option for patent trolls?

Monday, July 22, 2013

Rademacher on injunctions in the U.S., Germany, and Japan

Shortly before I left for Munich last month Professor Toshiko Takenaka sent me a copy of her new edited volume, Intellectual Property in Common Law and Civil Law (Edward Elgar 2013).  I haven't had a chance to read very much of it yet, but it appears to have a wealth of interesting material from a variety of well-known contributors, including Professor Takenaka herself, Joseph Straus, Frédéric Pollaud-Dulian, and Marketa Trimble.  

With regard to patent remedies in particular, Professor Christoph Rademacher has contributed a chapter titled Injunctive Relief in the US, Germany and Japan:  Recent Developments and Outlook.   The chapter begins with a good overview of injunctive relief in the U.S. courts following the eBay decision and in the ITC.  It then continues with a discussion of German law, which generally views injunctive relief as an entitlement unless the conditions for granting a compulsory license under either competition law (the Orange-Book-Standard defense) or patent law are present.  In practice, German courts rarely grant compulsory licenses under either regime.  

With respect to Japan, Professor Rademacher notes that there has been a good deal of discussion concerning whether to adopt an eBay-like rule, but that "[i]n light of the low success rates of Japanese patentees in Japanese patent infringement lawsuits and the difficulties defending the validity of plaintiffs' patents, the consensus in the Japanese patent community has been to refrain, at least for the time being, from introducing any measures that would result in further weakening the status of the patentee" (p.341).  (For discussion of win rates and invalidity rates in Japan, see also my book at pp. 298-300.)  The chapter concludes with a discussion of the possibility, in Japan, of avoiding an injunction by asserting a patent misuse defense (unsuccessfully raised in Canon v. Recycle Assist), or by seeking a compulsory license.  Regarding the latter,  Professor Rademacher suggests (at pp. 343, 344-46) that a nonpracticing entity that merely licenses its patent would not be viewed as "practicing" the invention and therefore might be vulnerable to compulsory licensing under section 83 of the Japanese Patent Act; unlike section 93, this section does not require a showing that the license is necessary to serve the public interest.  Apparently there are no cases, though. 

Professor Rademacher has previously published The Enforcement of Patent Rights in Japan, 20 IIP Bull. 1 (2011), which I cite in my book at p.331 and which is available here; and a book, Die Gerichtliche Duchsetzung von Patent- und Markenrechten in Deutschland, Japan und den USA (2010). 

Sunday, July 21, 2013

Two recent articles on patent damages in Australia

Chapter 4 of my book discusses patent remedies in the U.K., Canada, and Australia.  I discuss the law of patent damages in Australia in particular at various places in between pages 188 and 210.  (The case law is fairly sparse, but there a few leading decisions.)  Anyone looking for a more detailed discussion may wish to consult two papers I came across during my recent research visit at the Max Planck Institute.  One, by Dimitrios Eliades, is titled Damages for Patent, Design and Trade Mark Infringement and is published in the September/October 2011 edition of the Australian Intellectual Property Law Bulletin, at pages 124-28.  (It appears that a version of the paper is also available online here, in 62 Hearsay:  The Journal of the Bar Association of Queensland (2013).)  The other, by Gavin Adkins, is titled Decisions, Decisions:  Damages or an Account of Profits for Patent Infringement?, and is published in 22 AIPJ 10-28 (2011).  This paper provides a detailed account of the leading cases and notes some of the open questions under Australian law, including whether Australian courts will follow the U.K.'s United Horse-Shoe principle (discussed in relation to Canadian law in my previous post, and in relation to Australian law in my book at p.189 n.93); whether courts may award damages "at large" when other evidence quantifying the harm is lacking; and whether "additional damages" under Australian Patent Act section 122(1A) (discussed in my book at p.210) are available when the plaintiff seeks an award of defendant's profits.  Both papers cite Australian cases in other areas of IP law and thus provide some helpful context in understanding how Australian courts may approach patent damages in future cases.       

Thursday, July 18, 2013

Canadian Court Rejects the Argument that Noninfringing Alternatives Are Relevant to Lost Profits

As I explain in my book (see in particular pp. 110-14, 187-89, 264-65, 314-17), courts throughout the world disagree on whether the patentee is entitled to recover lost profits in a case in which the infringer could have made the same number of sales simply by resorting to the use of an available noninfringing alternative.  In some countries, including the U.S. and France, the existence of a noninfringing alternative in such a case eliminates the patentee's ability to recover lost profits.  In other countries, most notably the U.K., noninfringing alternatives are irrelevant; the leading case there is an old one, United Horse-Shoe & Nail Co. v. John Stewart & Co. (1888) L.R. 13 App. Case 401 (H.L.), but courts in the U.K. have continued to cite it with approval.  As for Canada, the Supreme Court held in Monsanto Canada Inc. v. Schmeiser, 2004 SCC 34, that noninfringing alternatives are relevant to the calculation of the defendant's profits (see my book pp. 191, 203-05). The question remained, however, whether Canadian courts would apply that same rule to a case involving the plaintiff's lost profits, or whether they would follow United Horse-Shoe

Professor Siebrasse has now brought to my attention a Canadian decision, Merck & Co. v. Apotex, Inc. (Fed. Ct. July 16, 2013), that was released to the public this past Monday and that addresses this issue head-on.  As Justice Snider explains in her opinion, the patent in suit (which has now expired) was a "product-by-process patent for the anti-cholesterol drug, lovastatin, when made with a micro-organism known as Aspergillus terreus."  In an earlier proceeding, the court concluded that the patent was valid and infringed.  The principal issue in the damages trial was whether Merck was entitled to recover its lost profits or only a reasonable royalty, given that Apotex's suppliers could have made lovastatin "using a non-infringing process (referred to as AFI-4), a process which uses the micro‑organism Coniothyrium fuckelii rather than Aspergillus terreus."  (Indeed, some lovastatin was made for Apotex using the noninfringing process.)  In a lengthy opinion, Justice Snider squarely rejects "Apotex’s argument that its non-infringing alternative should be taken into account in assessing damages," and awards Merck Canada and Merck USA a grand total of $Can 119,054,327, plus pre- and post-judgment interest (which I think makes this one of the biggest damages judgment ever in Canada, though I could be mistaken).  In reaching this conclusion, Justice Snider distinguishes Schmeiser on the ground that an accounting of defendant's profits is fundamentally different from an award of plaintiff's lost profits, in that the former is an equitable remedy whereas damages are available as a matter of right (para. 45).  She also notes the U.K.'s adherence to United Horse-Shoe and the citation of that case with approval in some Canadian case law, including one of her own previous decisions.  On a policy basis, Justice Snider concludes that accepting noninfringing alternatives as relevant "would result in an inadequate compensation for injured plaintiffs and the infringer escaping responsibility for its infringement" (para. 113), and states that she "could not agree more" with the following passages from Merck's final written argument (paras. 119-20):
Where a patentee like Merck does not typically license its invention, a would-be infringer with a less efficient non-infringing alternative would simply proceed to infringe the patent with full knowledge that, at the end of the day, the infringer will only have to pay a reasonable royalty for its unauthorized use of the patent.  Adopting such a rule amounts to a judicial sanction on infringers like Apotex taking for itself a compulsory license and is flatly inconsistent with Canada’s public reasons for repealing compulsory licensing, and inconsistent with Canada’s international obligations.
Thus, if adopted, the NIA defence would render illusory the grant of the monopoly that this court has already found to be valid and infringed.  Such an approach would be inconsistent with the intent of the Patent Act.
Far from protecting valid and infringed patents, Apotex’s assertion, if accepted, would actually create an incentive to infringe.  Apotex’s position in this litigation is that it should only have to pay (at most) the cost savings associated with using the infringing AFI-1 process.  If this position is accepted, a competitor will always choose to infringe rather than use the more expensive and less efficient non-infringing alternative.
My own view, as expressed repeatedly in my book, is that United Horse-Shoe and its progeny are fundamentally wrong as a matter of economic logic.  If, but for the infringement, the defendant would have resorted to a noninfringing alternative that would have enabled it to make all the sales it made using an infringing product, the patentee quite literally has suffered no lost profit attributable to the infringement.  Put another way, the patentee's profit on sales of its patented products in the hypothetical world of no-infringement would have been no different than its profit on actual sales in the real world of infringement.  Awarding the patentee lost profits premised on its having captured all of the defendant's infringing sales thus results in overcompensation.  The correct remedy to restore the patentee to the position it would have occupied but-for the infringement is a reasonable royalty calculated on the basis of what the parties would have agreed to in arms-length negotiations prior to the infringement (e.g., some portion of the defendant's expected cost savings from using the infringing process as opposed to the next-best available noninfringing alternative).  In response to the argument that this rule "create[s] an incentive infringe," I would note that the infringing defendant is worse off than the noninfringing defendant to the extent that it incurs attorneys' fees--both its own and, in Canada and in most countries other than the U.S., some portion of the prevailing patentee's fees as well--and is potentially subject (in Canada) to punitive damages or (in the U.S.) to treble damages or (in yet other countries) to some form of enhancement to compensate for risks that the licensor bears and that the infringer forgoes. 

Anyway, whether you agree with Justice Snider or with me, her opinion is a good read.  Personally, though, I hope that the Federal Court of Appeal or the Canadian Supreme Court will see fit to lay United Horse-Shoe to rest, once and for all, in my neighbor to the north.

Update:  Professor Siebrasse informs me that, as large as the judgment is in the above case, it's not the largest in Canadian history.  The biggest is the $215 million judgment awarded to generic drug maker Apotex for having been kept out of the market by Sanofi-Aventis. See Professor Siebrasse's write-up, here.

Friday, July 12, 2013

Effect of the Unified Patent Court on Remedies, Part 3

A couple of things I hadn't noticed before reading Professor Jean-Christopher Galloux's article Le brevet européen à effet unitaire:  greffe et chimère, 43 Propriétés Intellectuelles 193, 198-99 (2012), which discusses earlier versions of the two documents discussed below:

First, Regulation (EU) No. 1257/2012--relating to the proposed European Patent with Unitary Effect--has as its 13th recital the following:
The regime applicable to damages should be governed by the laws of the participating Member States, in particular the provisions implementing Article 13 of Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights.
(Article 13 of the 2004 Enforcement Directive is the one concerning damages for infringement.)  

Second, Council Regulation (EU) No. 1260/2012--relating to translation arrangements--states in article 4(4):
In the event of a dispute concerning a claim for damages, the court hearing the dispute shall assess and take into consideration, in particular where the alleged infringer is a SME, a natural person or a non-profit organisation, a university or a public research organisation, whether the alleged infringer acted without knowing or without reasonable grounds for knowing, that he was infringing the European patent with unitary effect before having been provided with the translation referred to in paragraph 1.
(There is similar language in recital (9) to this Regulation.)

So, does the above language from Regulation 1257/2012 decide the question whether damages will be decided in accordance with national law?  Does it matter that the quoted language is found only in that regulation, and only in the recitals?

Regarding injunctions, does the language in Regulation 1260/2012 suggest that the determination whether an infringer was not negligent (and hence potentially not subject to an injunction under Rule 118(2) of the Draft Rules of Procedure for the Unified Patent Court) will be a matter of E.U. law, not (or at least not exclusively) national law?  Or is the language above only relevant to claims for damages, and only in cases involving European Patents with Unitary Effect?