Wednesday, April 16, 2014

Developments in the law of injunctions, arbitration, and related matters in Canada, France, Germany, Portugal, and the U.S.

1.  According to an article in yesterday's Wall Street Journal, in an oral ruling on Friday a federal district court judge in Delaware entered an injunction against Medtronic's CoreValve in a patent infringement suit brought by Edwards Lifesciences.  Last year I blogged about the Federal Circuit's decision reversing the district court judge's decision declining to award an injunction (see my post, here).  Joseph Walker, the author of the Wall Street Journal article, describes the ruling as a "surprise" and states further that:
. . . Judge Sleet said the court was "convinced" that Medtronic's CoreValve "is a safer device and that patients in whom it is implanted have better outcomes with a lower risk of death," according to a transcript of the ruling.
He added: "At the same time, the Court cannot downplay the strong public interest favoring enforcement of patent rights. Thus, the court finds that the public interest weighs in favor of granting Edwards a preliminary injunction."
He allowed for one exception, granting Medtronic the right to sell its product in cases where patients are ineligible to have the Edwards device implanted, which doctors said could occur because of anatomical differences between patients.
I'd like to read the judge's opinion in its entirety when he publishes one (the transcript can be downloaded from Dennis Crouch's Patently-O Blog), but my initial reaction is that I find the decision quite troubling.  The fourth eBay factor asks whether the patentee has demonstrated "that the public interest would not be disserved by a permanent injunction."  Notwithstanding the importance of patent rights in the medical device industry, it seems to me that the public interest would weigh in favor of an ongoing royalty if, as the judge is reported to have said, the CoreValve device is safer and poses "a lower risk of death."  

The article states that Medtronic has filed an emergency motion for a stay pending appeal, and Dennis Crouch has more information on this matter here (along with links to the transcript and the motion papers), which I commend to readers' attention.  Dennis writes:
. . . the Federal Circuit has asked for immediate briefing on whether to grant a stay of preliminary relief - a decision is expected by the expiry of the district court's seven business day temporary reprieve. . . .
. . . the patent expired in May 2012, but the FDA has granted an interim extension of patent rights under 35 U.S.C. § 156 (for delays in FDA approval). One limitation of a patent term extension is that ordinarily, the extension does extend the term of the entire patent, but instead is “limited to any use approved for the product.” In Merck v. Kessler (Fed. Cir. 1996), the court interpreted this as extending only to “the product on which the extension was based.” Here, Medtronic argues that its product – although perhaps covered by the original patent – is different from Edwards approved product (Sapien) and therefore is not covered by the term extension.
The district court considered these issues and decided that the clear language of Section 156(b) was limited approved uses not approved products. And, since the accused infringing product has the same use (valve transplant), then the patent covers it as well.
This is extremely interesting, and I'm sure that many of use will be keeping close watch on what happens.

2.  On April 9, 2014, the U.S. Court of Appeals for the Federal Circuit issued an opinion in Trebro Manufacturing, Inc. v. Firefly Equipment, LLC, vacating a district court order denying a preliminary injunction in a case involving the alleged infringement of a patent on a machine known as a sod harvester.  The Federal Circuit concluded that the district court erred in finding no likelihood of success on the merits and in finding a substantial question as to patent validity.  In addition, the court concluded that the plaintiff faced the prospect of irreparable harm, noting that "sod harvester market at issue . . . is a tiny market with only three players," and that "Trebro sells only roughly eight sod harvesters per year."  The court also noted the potential loss of market share and customers, and the possibility that Trebro would have to lay off workers.  Moreover, the fact that Trebro did not practice the patent in suit was not dispositive, since Trebro does compete with the defendant in the sale of sod harvesters.  Finally, the court noted that the district court had not resolved the final two factors (balance of equities and public interest) and remanded for further proceedings, though I would read the court's closing "observations" on these two factors as strongly hinting that it views the patent owner as having the stronger case here as well.

3.  PatLit published a post titled Compulsory Arbitration and Applications for Interim Relief:  Is Portugal's Law Invalid, or Just Plain Wrong?, from an article in BMA Newsflash by the Lisbon, Portugal firm of Baptista, Monteverde & Assodiados titled Patent Enforcement:  Is Mandatory Arbitration in Line with the Portuguese Constitution?  According to the article, a Portuguse law published in December 2011 requires that "disputes arising from industrial property rights, including injunctions, related to reference medicines are subject to mandatory arbitration."  Recently Bayer requested a preliminary injunction against Laboratórios Effik, which the court denied based on this law.  Bayer appealed to the Constitutional Court, and a decision is expected sometime this year.  The authors state, and I agree, that the Portuguese law seems hard to square with article 9 of the EC Enforcement Directive.

On the other hand, sometimes drug companies want arbitration.  Another article from Tuesday's Wall Street Journal notes that Eli Lilly is seeking to have Canada placed on the U.S. "Priority Watch" list of countries that do not offer sufficient protection for intellectual property rights, based upon some Canadian rulings invalidating Lilly patents under the "promise of the patent" doctrine.  (I don't profess to know much about the merits of this doctrine, though Professor Siebrasse has been highly critical of it.  See, e.g., this post.)  The article also briefly discusses Lilly's invocation last fall of a provision of NAFTA authorizing the arbitration of so-called investor-state disputes--that is, Lilly is compelling Canada to arbitrate Lilly's claim that Canada's law violates NAFTA, and that Lilly is entitled to $ Can. 500 million in damages.  For further discussion of the notice of arbitration, and the controversy over whether investor-state arbitration will be included in the TPP and TAFTA, see here, here, here, and here.    

4.  Thomas Musmann and Simon Klopschinski have a post on the Kluwer Patent Blog titled German Court is Soothsaying What the Future Will Bring for FRAND and Compulsory License Defenses, about a recent decision of the Karlsruhe Court of Appeals not to stay provisional enforcement, pending the CJEU's decision on the conformity of the German Orange Book procedure with E.U. competition law, of an injunction issued by the Karlsuhe District Court against the infringement of a FRAND-encumbered SEP.  The opinion itself (in German; it's fairly short) is also accessible from the post.

Update:  In going through some files I just discovered that I overlooked Florian Mueller's post on this same case from March 13.  Here's the link.

5.  The EPLaw Blog has a post from Véron & Associés about a recent French appellate decision. Biogaran v. Laboratoires Negma, awarding € 3,650,000 in damages for the enforcement of a preliminary injunction of a patent later found to be invalid and for abuse of proceedings.  According to the post (which also links to the decision itself in French and an English translation), this decision "is the first reported decision of a French court of appeal on the consequences of the enforcement of an interim injunction against an alleged infringer of a patent that is alter found invalid."   The court held that liability is "strict and automatic," and in addition concluded that the patent owner "committed abuse of proceedings by carrying out wrongful maneuvres" that "went beyond the legitimate defence of its interests".  The amount of damages included € 3,500,000 in lost profits, € 150,000 for harm to Biogaran's image, and € 30,000 for the abuse of proceedings.

Readers may be aware that in many countries damages are routinely awarded under such circumstances-- the Kluwer Patent Blog post above notes the availability of this form of relief in Germany too--though not in the U.S., where the patentee's liability for a wrongly issued injunction is capped by the amount of the injunction  bond.  I blogged about a recent English decision on this topic just a couple of weeks ago here (and more generally on the subject here), and may incorporate discussion of both the French and English cases in my forthcoming article on wrongful patent enforcement.  

6. The February 2014 issue of Mitteilungen der deutschen Patentanwälten has an article by Lars Petri, Eugen Tuchscherer, and Christian Stadler titled Probleme bei der Vollziehung der einstweiligen Verfügung im Gewerblichen Rechtsschutz ("Problems in Enforcing a Preliminary Injunction involving Industrial Property Rights").  Here is the abstract (my translation from the German):

Preliminary injunctions in industrial property rights can include, aside from an injunction order, an order for the disclosure of information (Auskunftsanordnung) and/or the surrender of alleged infringing goods with a view to the securing of a destruction order, which matter is decided first in the principal proceedings.  In order to sustain its legal validity over the long run, a preliminary injunction must be enforced within one month according to section 936 and 929(2) of the German Civil Procedure Code.  In this situation, different measures are necessary, respectively, for the enforcement of the different orders for injunction, disclosure, or surrender.  In practice, this sometimes leads to uncertainties; in the end, incorrect handling by one's legal advisor can easily lead to liability.  The following essay concerns itself with enforcement with the respective preliminary orders and makes proposals for handling them in practice. 
7.  Finally, while not relating to the law of injunctions, I'd like to call to readers' attention Florian Mueller's very interesting recent series on the damages/royalties issues in the Apple-Samsung litigation, here, here, and here.  Many of you probably have been following this discussion already, but if not it's certainly worth a look.


  1. Re 1, Canadian law of preliminary injunctions was shaped by a similar case, in which a trial judge granted a preliminary injunction enjoining the Red Cross from using the patented technology in its blood collection system. The effect, if enforced, would have been to stop blood collection in Canada. To my mind, the trial court erred in assessing the balance of convenience, but that was The Court of Appeal reversed, but it did not say that the trial court had erred in assessing the balance, which to my mind is the real problem, perhaps because that assessment is reviewed on a deferential standard. Instead, it drastically raised the bar for preliminary injunctions as a matter of law, with the result that even today, preliminary injunctions are almost impossible to obtain in Canada in patent infringement actions. On a slightly different note, I am inclined to think that the public interest should be an important factor in preliminary injunction cases, but not for permanent injunctions, where holdup should be the main concern. If there isn’t a holdup problem, then the parties should be able to settle to allow the better product on the market.

    Re 5, you probably also have this on your list, but also consider the Canadian cases on damages under our patent linkage system (aking to Hatch-Waxman), in which a generic which is wrongly kept out of the market by the statutory stay is entitled to recovery of full damages.

  2. You're certainly right that, as rational actors, P & D should be able to bargain in the shadow of an injunction and reach an agreement whereby D will be able to market its superior product for an appropriate royalty. Given the many imperfections in the market for health care in this country, though, I'm not sure whether that prediction would necessarily holds true or not. (I'm not saying it wouldn't, I just honestly don't know.) And people don't always, 100% of the time, act rationally. Maybe I'm just letting my heart get ahead of my head, but I am concerned about the possibility that people could die in the event, even if it is an unlikely event, that the parties don't reach an agreement.

    I definitely do need to add the patent linkage cases to my list. I'll be re-reading your blog posts to get a better handle on how it works in Canada.

  3. I agree that there is a real possibility of irrational failure to licence, but if that is enough to deny a permanent injunction, then that would amount to a rule that permanent injunctions can never be granted for patent infringement in the medical devices industry, where every advance has the potential to save a life. I'm also skeptical about putting too much weight on the safety findings in a patent trial. A proper safety assessment is difficult, as we have seen from cases where FDA approved drugs are removed from the market, and patent litigation is a particularly poor venue for assessing the accuracy of such claims, especially since the parties have an incentive to make exaggerated representations both to support non-obviousness and a higher royalty claim. No doubt there are occasional major advances, but I expect that most a pretty incremental. I don't think it would be a good idea to require a high degree of proof a increased safety, or lack thereof, in determining whether to grant an injunction, because that could very substantially increase litigation costs, and I'm not sure how reliable the results would be (especially with a new product that doesn't have a long history or good studies). But if is grounds for refusing an injunction without a strong showing of increased safety, then we're back to the problem that there will be no injunctions in medical devices. I expect that will also lead to a lot more litigation over reasonable royalties, again with less accuracy than if the parties were to bargain.

  4. You may be right; the systemic costs of taking this sort of thing into account could be high--though maybe that's inherent to the "public interest" factor. (And therefore presents an interesting question whether "public interest" really should be a factor in connection with permanent, as opposed to preliminary, injunctions. If I remember correctly, in the U.K. the prevailing view is that public interest rarely if ever should be a consideration in granting a permanent injunction.) Still, on the facts of this case, the judge did make a finding that the infringing device presents a lower risk of death, and at least according to the WSJ article others in the field appear to agree . . .