Monday, July 31, 2017

Pedigo, Cox Square Off on the Analytical Approach

Although courts in the United States most frequently apply the willing licensor-willing licensee approach to calculating reasonable royalties, there is a less frequently used alternative known as the analytical approach.  The Federal Circuit has described this approach as
focus[ing] on the infringer's projections of profit for the infringing product. See TWM Mfg. Co. v. Dura Corp., 789 F.2d 895, 899 (Fed.Cir.1986) (describing the analytical method as “subtract[ing] the infringer's usual or acceptable net profit from its anticipated net profit realized from sales of infringing devices”); see also John Skenyon et al., Patent Damages Law & Practice § 3:4, at 3–9 to 3–10 (2008) (describing the analytical method as “calculating damages based on the infringer's own internal profit projections for the infringing item at the time the infringement began, and then apportioning the projected profits between the patent owner and the infringer”).
Lucent Techs., Inc. v. Gateway, Inc. 580 F.3d 1301, 1324 (Fed. Cir. 2008).  

In March, Mark Pedigo published on Law360 a short article titled Determining Reasonable Royalties with Analytical Approach, advocating greater use of the analytical approach in calculating reasonable royalties.  Mr. Pedigo argues, among other things, that although "the analytical approach may not be appropriate for every case," it can help to "isolate the value of the benefit (i.e., profitability) provided by the infringed features by comparing the infringing product profitability to noninfringing alternatives . . . (or other measures of normal profit)."  He also states that "In the cases where the analytical approach has been used, expected profit was used at times and actual profit was used at times (typically when expected profit or pre-infringement profit was not available). Normal profit has been based on profitability from the infringer’s industry or other products (other nonaccused products or noninfringing alternatives to the infringing product). An infringer’s target (not specific to the infringing product) profit has also been used as a proxy for its normal profit."

More recently, Alan Cox has published a response on Law360 titled The Limited Role of Analytical Approach to Reasonable Royalty.  Dr. Cox argues, among other things, that the analytical approach
arbitrarily awards the entire incremental profit to the patent owner. . . . A principal legal objection appears to be that the method does not allow for apportioning, nor does it accommodate a negotiation between a willing patent owner and a willing licensee. Instead, it awards all of the infringer’s incremental profits to the patentee, rather than calculating an award based on the harm suffered by the patentee. The calculation of the incremental profit, however, is sometimes used as a cap to a reasonable royalty calculation, as is implicitly suggested in the analytical approach article.
Whatever the legal objections, the analytical approach is an economically unreliable measure of the value of a feature, and the method generally cannot be used to apportion the residual between patented and nonpatented contributions to a feature.
Dr. Cox's principal economic objections are that the concept of "normal" or "target" profit is not very precise; that the approach doesn't account for various other factors that can explain a divergence from the normal rate of return, or for the fact that different products can have different profit margins; and that the approach can unfairly penalize an infringer who has a higher profit rate due to efficiencies in production.

For other critiques of the analytical approach, see William Rooklidge Infringer's Profits Redux:  The Analytical Method of Determining Paten Infringement Reasonable Royalty Damages, 88 BNA Pat., Trademark & Copyright L. Daily 1 (Nov. 5, 2014), which Dr. Cox cites in his paper, and Martha Gooding Analyzing the “Analytical Method” of Calculating Reasonable Royalty Patent Damages, BNA Pat., Trademark & Copyright L. Daily 4, May 14, 2012.  For what it's worth, I find the critiques more persuasive.

Friday, July 28, 2017

Siebrasse & Cotter on Judicially Determined FRAND Royalties

Norman Siebrasse and I have posted a draft book chapter on ssrn, titled Judicially Determined FRAND Royalties, forthcoming in The Cambridge Handbook of Technical Standardization Law (Jorge L. Contreras ed., Cambridge University Press).  Here is a link, and here is the abstract:
This chapter from the forthcoming Cambridge Handbook of Technical Standardization Law reviews the principles and methodologies courts have used for calculating royalties for the infringement of standard-essential patents (SEPs) that the owner is obligated to license on fair, reasonable and non-discriminatory (FRAND) terms. As we show, in the cases so far in which courts have made final judicial determinations of FRAND royalties--the U.S. decisions in Microsoft, Innovatio, Ericsson, and CSIRO, the Japanese Apple v. Samsung judgment, the Chinese Huawei v. InterDigital matter, and the English Unwired Planet v. Huawei case--have tended to focus on a relatively small number of additional considerations beyond the generally applicable principles used for calculating reasonable royalties. Although reasonable minds may disagree with specific features of the relevant decisions, overall the courts (correctly, in our view) have emphasized that the owner of an SEP should receive a royalty that is proportionate to the technology’s contribution to the value of standard -- a principle which, when properly applied, reduces concerns over the potential for SEPs to induce holdup and royalty stacking.

Thursday, July 27, 2017

From Around the Blogs This Morning: Infringer's Profits in the U.S., FRAND in Japan

1.  On the IP Watchdog Blog this morning, Mark Pedigo has posted an article titled Infringer Profits in Design Patent Cases.  Mr. Pedigo discusses the two-part test the U.S. Supreme Court came up with in Samsung v. Apple, and how the lower courts may go about implementing it.  There is an extended discussion of the deductibility of costs in the pre-Samsung v. Apple case law which is worth a look.

2.  On the IAM Blog, Jacob Schindler has an article titled Patent owners sound alarm over proposed “compulsory licensing for SEPs” in Japan, which also links to provisional translations of a document titled "The Intellectual Property System for the Fourth Industrial Revolution" and another titled "The Intellectual Property System for the Fourth Industrial Revolution, April 19, 2017, Ministry of Economy, Trade and Industry: Outline of the Study Group’s Report."  Apparently Japan is considering implementing a system whereby implementers of SEPs could demand the use of an alternative dispute resolution (ADR) proceeding to determine the royalty they owe for the use of an SEP.  Obviously there are pros and cons to going forward with such a proposal, which differs from the approach of the CJEU in Huawei and the recent pronouncements from China (as discussed on this blog earlier this week).  But at the end of the day, would a quasi-compulsory licensing system be all that different from the U.S. approach?  It's a bit hard to imagine a court in the U.S. applying the eBay factors and still entering an injunction in a SEP case these days.  And maybe that's just as well, though as always the details are important:  how confident can we be that the entity deciding on the amount of the royalty will come up with a reasonably accurate amount, and how serious is the risk of holdup if an injunction were entered?

Wednesday, July 26, 2017

Judge Conley Orders Apple to Pay WARF $506 Million

This is the latest installment in the ongoing patent battle between Apple and the Wisconsin Alumni Research Foundation (WARF).  Last month, as I reported here, Judge Conley (E.D. Wisconsin) entered an opinion and order that, inter alia, denied WARF's motion for an injunction and instead awarded an ongoing royalty at a rate of $2.74 per unit.  Yesterday Judge Conley entered judgment (available here), which included "(1) damages awarded by the jury; (2) supplemental damages at the rate of $1.61 per infringing unit for accused processors sold through the initial entry of judgment on October 26, 2015; (3) ongoing royalties at the rate of $2.74 per infringing unit for accused processors from October 27, 2015, through expiration of the '752 patent on December 26, 2016; (4) prejudgment interest calculated at the prime rate compounded quarterly through the initial October 26, 2015, judgment; (5) costs as taxed on June 6, 2017; and (6) post-judgment interest at the statutory rate of 0.232% compounded annually through June 30, 2017."  The total comes to $506,084,992.66.  As discussed in Judge Conley's opinion last month (p.33), the ongoing royalty rate is higher than the prejudgment rate the jury awarded, which is consistent with Federal Circuit precedent (but is nevertheless a bad rule, for reasons I've explained previously).  More on the case from this story from Reuters.  Looks like Apple has already filed it notice of appeal.

Monday, July 24, 2017

Beijing High Court's Revised Guidelines for Patent Infringement Determination

And here, courtesy of Jill Ge, is a link to an English-language translation (available from China Patent Agent (H.K.) Ltd.) of the Beijing High Court's 2017 Guidelines for Patent Infringement Determination.  Articles 149 to 153 are the provisions relating to SEPs and injunctions, mentioned in my post from earlier today.

Ge, Pommiès, & Shen on the Beijing High Court's SEP Guidelines

This morning on the IAM Blog Jacob Schindler introduces a post by Jill Ge, Charles Pommiès, and David Shen on articles 149 to 153 of the Beijing High Court's Revised Guidelines for Patent Infringement Determination, which deal with the litigation of SEP cases.  I mentioned these guidelines here recently, as discussed in a post on the Kluwer Patent Blog by Yin Li, Hui Zhang, and James Yang.  Today's post also links to the guidelines themselves, in Chinese; if any readers can point me in the direction of a translation into English (or French or German), I'd appreciate it.

According to Ge et al., under article 24(2) of the 2016 Interpretations (II) of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Dispute Cases, "an injunction is not generally available where during the negotiations, (i) a patentee intentionally violates the FRAND obligations, and (ii) the accused infringer is clearly not at fault."  The newly issued Beijing High Court Guidelines "affirm the majority view in China that SEP-based injunctions should be denied, unless there is wrongdoing on the part of an implementer.  It should be noted that this FRAND defence to injunctions has nothing to do with the competition law."  In addition, according to the authors, "China has essentially adopted a fault-based analytical framework to assess whether a SEP injunction should be granted" patterned to some degree after the CJEU's judgment in Huawei v. ZTE, though "[c]ompared to Europe there is a greater onus on the patentee/licensor to act 'reasonably'."  In addition, the authors raise questions regarding how Chinese courts will determine whether a party is "at fault for 'obstructing or delaying the licensing negotiation without justifiable reasons,'" and whether "an offer or counter-offer [is] "clearly unreasonable."  They also note that under the guidelines if neither party is at fault the implemener should deposit an interim bank guarantee, but that "leaving the amount of payment to be determined by an implementer without checks by the court could be problematic."

For readers interested in FRAND/SEP issues, this is essential reading; according to Mr. Schindler's introduction, there are over 2O SEP cases pending at the Beiing IP Court right now, suggesting that these issues are only going to become more salient in the months to come.  Additionally, as I noted last week, you also might want to register for a free webinar tomorrow hosted by the USPTO and the Federal Circuit Bar Association covering these issues.  Ms. Ge, who as I like to point out is one of my former students, will be one of the speakers.

Thursday, July 20, 2017

Updates on Compulsory Licensing, Punitive Damages, Unwired Planet

1.  This past Monday I published a post titled German Court Affirms Preliminary Grant of Compulsory License for HIV DrugWe still are awaiting the release of the BGH's judgment in this case (all we have for now is a press release), but the June 2017 issue of GRUR has a brief discussion of the August 2016 judgment of the Bundespatentgericht in an article by Ingrid Kopacek and Wolfgang Morawek titled Aus der Rechtsprechung des BPatG im Jahr 2016:  Teil II:  Patent Recht und Gebrauchsmusterrecht ("From the Case Law of the Bundespatentgericht in 2016, Part 2:  Patent and Utility Model Law").  See pp. 545-57, see in particular pp. 555-56.  Also of possible interest, although it doesn't discuss the recent German case, is an article by Hugh Dunlop titled Compulsory Licensing under a Unitary Patent, 39 EIPR 393 (2017).  Here is the abstract:
Expectations are high that the European Unitary Patent and the Unified Patent Court will get off the ground very soon. The new court will have jurisdiction over unitary patents (and "traditional" patents granted under the EPC that are not opted-out) for actions in relation to patent infringement and licences of right, but compulsory licences are supposed to be left to national courts. This article explores whether this assumption may be challenged and, even if it stands, whether national courts may take an EU-wide view of compulsory licences under unitary patents.
2.  Also this week, Norman Siebrasse published another post on Airbus v. Bell (see my previous post here, which links to Professor Siebrasse's other posts on this case), this one discussing in greater depth the issue of determining the quantum of punitive damages in patent cases.   As Professor Siebrasse notes, the rationales for awarding punitive damages under Canadian law are retribution, deterrence, and denunciation--a trio that dates back to an 18th century English case, Wilkes v. Wood, as cited in the 2002 Canadian Supreme Court decision in Whiten--but the only one of these that provides any real guidance with regard to quantification, if only in an imperfect sense, is deterrence:  
The difficulty with this principled scheme, as I see it, is that it actually provides very little guidance in assessing quantum. Quantum must in the end be expressed as a number. Deterrence, as discussed below, naturally lends itself to quantification, but the siblings of denunciation and deterrence communicate moral values and judgments, which are by the nature almost impossible to quantify.
Highly recommended, and not just for patent aficionados. 

3.  I should also note that Professor Peter Picht's paper Unwired Planet/Huawei: A Seminal SEP/FRAND Decision From the UK, which I previously mentioned on the blog here, has been published in the July 2017 issue of GRUR Int (pp. 569-79).  Here is a link, and here again is the abstract:
With its decision in Unwired Planet (UWP) v. Huawei, Birrs J has not only handed down the first major ruling on SEP/FRAND issues in England but also decided a case that poses a number of questions which are key for this area of the law. Well aware of this, he has drafted a thorough and extensive opinion that is likely to have considerable impact – not only – on the development of EC law. Inter alia, the decision discusses the legal nature of an ETSI FRAND declaration; the question whether “FRAND” is a range or a single set of licensing conditions; the procedural component of FRAND; the existence of a qualified “unFRANDliness”-threshold below which competition law is not triggered; the sequencing of negotiation and litigation over FRAND licences; hard-edged vs. soft-edged discrimination; the role of “Comparables” for calculating FRAND; and the anti-competitiveness of offering a mixed portfolio of SEPs and non-SEPs.

Tuesday, July 18, 2017

USPTO/Federal Circuit Webinar on SEPs in China

The ChinaIPR Blog this morning posted a notice of a free conference/webinar hosted by the USPTO and the Federal Circuit Bar Association, titled "Recent Developments in Standard-essential Patents in China."  The event takes place next Tuesday, July 25, from 9:00 to 11:30 a.m. Eastern Time.  This looks really interesting, with a terrific list of speakers.  Here is a link to the registration page, and here is the description:
The United States Patent and Trademark Office (USPTO) and the Federal Circuit Bar Association (CFBA) are co-hosting this meeting and webinar to discuss updates on the treatment of standard-essential patents (SEPs) in China, with a focus on prosecution and injunctions. This free event will offer an unparalleled opportunity to gather information from leading academics and experts on this topic from the United States, China, and Switzerland. 
Speakers Include:
  • Mark Cohen, senior counsel, USPTO
  • David Kappos, partner, Cravath, Swaine & Moore LLP
  • Koren Wong, director, Global Antitrust Institute, Adjunct Professor of Law, Antonin Scalia Law School, George Mason University
  • Li ZHU, judge, Supreme People’s Court of China
  • Gaétan De Rassenfosse, holder of the chair of innovation and IP policy, College of Management of Technology, Switzerland
  • Yuan HAO, researcher, IP Research Center, Tsinghua Law School, Tsinghua University
  • Yijun Jill GE, IP managing associate, Allen & Overy, Shanghai Office


The meeting is open to members of the public to attend on a first-come, first-served basis. Registration is free. Registration can be done online in advance of the meeting at the link below, and may also be available on site one half hour on the day of the meeting, space permitting. Register to attend here (link is external). 


The meeting will be available for viewing via live webcast (link is external)
  • Event number: 310 682 179
  • Event password: Ey94PWAX
  • Dial-in number (audio only):  +1 (571) 270-7000


The agenda will be published no later than one week prior to the event.

Additional information:
The registration website (link is external) provides additional information about directions and accommodation. For non-press inquiries, please contact Kelly Sheng (link sends e-mail) at the USPTO’s Office of Policy and International Affairs, telephone (571) 272-2227; or Nadine Herbert (link sends e-mail), telephone (571) 272-6094.

Monday, July 17, 2017

German Court Affirms Preliminary Grant of Compulsory License for HIV Drug

As readers of this blog probably are aware, a few decades ago it wasn't all that uncommon for countries either to exclude pharmaceuticals from the scope of patent protection altogether, or to require drug patent owners to submit to the compulsory licensing of those patents.  Following implementation of the TRIPs Agreement, just about everybody now issues drug patents, and while TRIPs permits countries to engage in compulsory licensing subject to various conditions, compulsory licensing isn't all that common any more, particularly among developed countries.  (These days, when governments do invoke or threaten to invoke their power to compel patent licensing, it's more often developing countries such as Brazil or Thailand or India that are involved.)  So when Germany's Federal Supreme Court (the Bundesgerichtshof, or BGH) recently affirmed a ruling of the Federal Patent Court  (Bundespatentgericht) awarding Merck a preliminary injunction to continue selling the HIV drug raltegravir (trade name Isentress), it's big news.  The story has already been covered in other sources including a recent post by Mark Schweizer on IPKat (which also links to this press release, in German, from the BGH, which hasn't yet published its judgment); and discussion of the August 31, 2016 decision of the Federal Patent Court can be found in this post on Kluwer Patent Blog from this past March and this post from Mayer Brown's "All About IP" from this past November.  There's also a summary of the Federal Patent Court decision by Dr. Uwe Friedrich in the May 2017 issue of Mitteilungen der deutschen Patentanwälten.  But I thought I should add a few observations of my own as well. 

First off, before anyone starts jumping to the conclusion that the BGH's recent decision heralds a new era of compulsory licensing in Germany, it's important to note that the underlying facts--as far as I've been able to piece them together so far, albeit without having invested a lot of time into researching the matter--appear to be rather unusual.  The Japanese firm Shionogi & Co. applied for a European patent back in August 2002 (with priority dates going back to August 2001), but the patent (EP 1,422,218, "Antiviral Agent") didn't issue until 2012.  (The Japanese patent appears to have issued in 2005.)  Meanwhile, Merck obtained marketing approval for the drug in the U.S. in 2007 (see here) and in Germany in 2008 (and for all I know, lots of other places too).  The FDA's Orange Book lists several U.S. patents under the heading "raltegravir potassium," the earliest of which appear to have been filed by an Italian inventive entity in October 2002, with priority dates going back to October 2001.  

Anyway, I haven't yet reviewed the patents very carefully, or looked into whether there are any European Patents corresponding to these U.S. patents--so if anyone has any relevant information on these issues that you'd be willing to share with me, or can point to any errors in my reconstruction of the facts, I'd appreciate it--but based on what I have read I gather that Merck (not Shionogi) has marketed the drug in question Europe since 2008.  (I think that Shionogi has been involved in the marketing of other related integrase inhibitor drugs, but not this specific one.)  In 2014, Merck and Shionogi entered into negotiations for Merck to take a worldwide license, but that didn't get anywhere, so Shionogi sued Merck for infringement in Germany in 2015.  That litigation was stayed pending a German invalidity proceeding which is still ongoing (though the patent survived an opposition proceeding before the EPC).  Merck then applied to the German Patent Court for a compulsory license, and moved for a preliminary injunction to allow it to continue marketing the drug, which the court granted--the first time the court has ever granted a preliminary injunction for this purpose.  Earlier this month, the BGH affirmed the grant.  As discussed in the IPKat post:
§ 24(1) Patent Act allows the grant of a compulsory license if (i) the infringer tried to obtain a license on reasonable terms, and (ii) there is a public interest in the grant of the license. In its Polyferon decision, the BGH had further specified the requirements for a compulsory license in the public interest for medicaments (BGH GRUR 1996, 190 – Interferon-gamma/Polyferon). The BGH ruled that in order for a medicament to fulfill the requirement of public interest, it (a) must treat a serious disease that (b) cannot be treated by a comparable product or (c) can only so with considerable side effects.
Applying the Polyferon criteria, the Federal Patent Court held that HIV-infections were both infectious and lethal, thus a “serious disease”. While there might have indeed been alternative compounds like Dolutegravir on the market the Court appointed experts confirmed that the replacement of Isentress with another drug was not acceptable given potential life-long side effects and  disadvantageous drug interaction due to the exchange.
Further, the expert also stated that Raltegravir showed particular advantages in the post-exposure prophylaxis and in the treatment of certain patient groups (e.g. babies, infants, pregnant women and long-term patients). In consequence, as the other pre-requisites of § 24(1) Patent Act were fulfilled, the public interest outweighed Shionogi’s interest in the exclusive exploitation of the patent at issue.
Judging from the media release - the grounds of the decision are not available yet - the Federal Court of Justice fully followed this reasoning, preliminarily permitting Merck to distribute Isentress for the treatment of specific patient groups that could not be treated with other drugs without serious side effects.
Again, I'd like to know more about the underlying facts, which seem quite unusual to me.  I am fairly sure, however, that the fact that the allegedly infringing product was on the market for a long time before Shionogi's European patent issued and before the parties entered into negotiations would have strongly weighed against granting Shionogi a preliminary injunction in its infringement lawsuit, had it sought one.  In the U.S., delay in filing suit can be a factor weighing against granting a permanent injunction as well, both under the eBay factors and the equitable doctrine of laches.  On the other hand, to my knowledge delay in enforcing one's rights wouldn't normally preclude the entry of a permanent injunction in Germany, as long as the action was brought within the relevant statute of limitations; but perhaps in cases like this one the availability of the compulsory licensing option serves much the same purpose as the eBay or laches rules in the U.S.  At some point, in other words, even if you think that patents generally should be protected by property rules (injunctions), perhaps the reliance interests of implementers and their customers must take precedence over the interests of a patent owner that has been slow to assert its rights. 

Finally, if I understand correctly the amount of the compulsory licensing fee is yet to be determined.  I also would assume that, if the preliminary injunction ultimately were to be vacated, Merck would have to reimburse Shionogi for having been wrongly denied the ability to enforce its patents in the interim.

Thursday, July 13, 2017

Stryker v. Zimmer: District Court Awards $248.7 Million in Damages

This case has been up and down the litigation ladder, from district court to Federal Circuit to Supreme Court to Federal Circuit (see my last blog post until today on this case here) and now again to the district court.  Applying the Halo standard for enhanced damages, Judge Jonker has awarded treble damages, plus several million more in supplemental damages, fees, and interest.  Here is a copy of the order on remand, and here is a copy of the judgment.  Here is a link to a story on Reuters.

Wednesday, July 12, 2017

Two Recent Damages Decisions from Australia

These have both been covered by John Collins on the Kluwer Patent Blog (here and here), so I'll be fairly brief.  In the first decision, Bayer Aktiengesellschaft v. Generic Health Py Ltd [2017] FCA 250, the Federal (trial) Court awarded Bayer Aus$25 million in lost profits against a generic drug manufacturer that had introduced an infringing oral contraceptive product (marketed under the brand name "Isabelle").  Bayer started selling its patented contraceptive under the brand name "Yasmin" in 2002.  (In 2008, it began to reduce production of Yasmin in favor of a product marketed under the name "Yaz," which has a lower dosage of ethinylestradiol.)  In 2012, Generic Health began selling the bioequivalent generic version of "Yasmin," under the brand name "Isabelle."  Bayer sued for infringement, but it also applied for permission to amend its patent.  Later in 2012, the court allowed the amendments (which related to, among other things, dosage and composition).  In 2014, the court ordered Generic Health to cease selling "Isabelle," and a week later Bayer began selling its own generic version of Yasmin under the brand name "Petibelle."  Bayer sought damages for lost profits on lost sales of Yasmin due to (1) sales lost to Generic Health's Isabelle from 2012-14, and (2) Bayer's own sales of Petibelle, which sold for a lower price than Yasmin but which Bayer claimed it would not have introduced but for the introduction of Generic Health's product.  The defendant argued, first, that under section 115(1) of the Australian Patent Act Bayer couldn't recover damages for the period of time preceding its amendment of the patent, which states that "Where a complete specification is amended after becoming open to public inspection, damages shall not be awarded, and an order shall not be made for an account of profits, in respect of any infringement of the patent before the date of the decision or order allowing or directing the amendment: (a)  unless the court is satisfied that the specification without the amendment was framed in good faith and with reasonable skill and knowledge; or (b)  if the claim of the specification that was infringed is a claim mentioned under subsection 114(1)."  Upon reviewing the evidence, the court concluded that "Bayer has discharged its onus of proving that the unamended claims and specification as a whole were framed in good faith and reasonable skill and knowledge" (para. 186).  Second, Generic Health argued that Bayer hadn't lost one sale for every sale of Isabelle, but upon review of the evidence the court concluded that Bayer had proven that it had.  Third, Generic Health argued that Bayer couldn't recover the losses caused by its own introduction of a generic version of Yasmin, but the court disagreed, concluding that "but for the infringement, Bayer would not have introduced the lower priced Petibelle" (para. 310).  "Bayer's concern was that Isabelle had disrupted the market possibly introducing a price sensitivity that would not have existed but for Isabelle" (para. 300).  Finally, the court agreed with Bayer's expert on the issue of the deductible costs ("costings"), and held that Bayer was entitled to prejudgment interest based on its pre-, not post-, tax damages.

The other case is Coretell Pty Ltd v Australian Mud Company Pty Ltd [2017] FCAFC 54.  The principal remedies issue of interest is whether the owner of an "innovation patent"--Australia's version of a utility model--can recover damages for the period of time prior to the innovation patent being "certified."  As I mentioned in another recent post, in countries that offer utility model protection applications are examined for compliance with formalities, after which the utility model is granted; but if the applicant seeks to enforce the utility model in court, she will either first have to submit it to a full-blown substantive examination or at the very least its validity will be subject to third-party challenge.  For discussion in my book, see pp. 16-17, 172, 237-38, 301, 338-41, 363-64.  Anyway, under the Australian system (which was amended in 2001, prior to which Australian utility models were called "petty patents") the innovation patent is granted after a formal examination but is not enforceable unless and until it is "certified" by the Commissioner of Patents, following a substantive examination.  The ultimate holding of the court in Coretell (in another opinion by Justice Jagot) is that there is no remedy for the infringement of an innovation patent prior to grant (and subject to certification), even though, as in many countries, the owner of a standard patent can sometimes recover damages for unauthorized pre-grant use, as in the Canadian Dow v. Nova case (see here and here).

Monday, July 10, 2017

Record Patent Damages Award in Canada

At least, I'm reasonably sure this is a record.  The case is Dow v. Nova, and I mentioned the trial court's April 19 opinion here just a couple of weeks ago.  The court didn't set the amount of the award at that time, however, but rather directed the parties to exchange information and "identify any matters that required resolution by the Court."  On July 5, the court issued its"Public Supplemental Judgment and Reasons" resolving three issues relating to deductions for certain costs and the appropriate date from which to convert capital expenditures reported in Canadian dollars to U.S. dollars.  Bottom line:  Nova must pay Can. $644,623,550, "inclusive of pre-judgment interest to April 7, 2017," along with prejugdment interest from April 7 to the date of judgment and postjudgment interest at 5% noncompounded.  Most of this, I would surmise from the April opinion, consists of the defendant's profits.  Hat tip to Norman Siebrasse for calling this to my attention.  There is also a discussion of the case by Richard Lloyd on the IAM Blog, here.

Update:  Norman Siebrasse's post on this opinion can be found here.

Federal Circuit: Causal Nexus for Awarding Injunctions Shouldn't Be Too Strict

The case is Genband US LLC v. Metaswitch Networks Corp., available here; the opinion, which is precedential, is authored by Judge Taranto, joined by Judges Lourie and Chen.  The patents in suit relate to voice over Internet protocol (VOIP) services.  Genband sued Metaswitch and prevailed on infringement and validity.  A jury awarded $8,168,400 in damages.  (The Federal Circuit's opinion doesn't clearly state whether the damages were a reasonable royalty or lost profits, and a quick look at the district court opinion (211 F. Supp. 3d 858 (E.D. Tex. 2016)) doesn't clarify this either, but I find Genband's proposed jury instructions on Lex Machina (Docket Entry No. 451) and it clearly states "Genband seeks a reasonable royalty.")  Judge Gilstrap nevertheless denied entry of a permanent injunction, and the Federal Circuit now remands for reconsideration.  From the opinion (pp. 3-12, emphases in original):    
The district court rested its denial entirely on the determination that Genband failed to show that it would suffer irreparable harm from Metaswitch’s continued infringement. The court gave two reasons, without indicating that the second reason independently supported its determination.
First, the court held that Genband did not demonstrate a causal nexus between the alleged irreparable harm (based on lost sales) and the presence of the infringing features in Metaswitch’s infringing products. Id. at 894–95. In so ruling, the district court stated that “it is Genband’s burden to demonstrate that the patented features drive demand for the product.” . . .
The court then applied its articulated legal standard as follows:
During the bench trial, Genband presented the following regarding the causal nexus, which falls into three general categories: (1) a self-generated “win-loss” report; (2) demonstratives purporting to correlate dates of Metaswitch press releases with an alleged decline in Genband’s market share; and (3) statements from Metaswitch marketing materials and opinion testimony from Mr. McCready [a Genband executive].
Genband’s presentation of evidence does not satisfy its burden to show causal nexus. Accordingly, Genband fails to show that it has suffered irreparable harm as required for a permanent injunction. . . .
The district court’s second reason for finding no irreparable harm involved Genband’s litigation choices. The court found that, although Genband did not unreasonably delay in suing Metaswitch for infringement, it did delay in suing for several years after analyzing Metaswitch’s products, and the court also observed that Genband did not seek a preliminary injunction. Those facts, the court concluded, weighed against a finding of irreparable harm from Metaswitch’s sales. Id. at 895. The district court denied the requested permanent injunction without addressing other considerations. . . .
In this case, the sole basis for denial of the requested injunction was the district court’s finding that Genband did not show irreparable injury from the conduct it sought to enjoin, one precondition to issuing the requested injunction. . . . Genband relied on evidence that Metaswitch was making sales in direct competition with it, causing Genband to lose sales and thereby to suffer harms of the type often found irreparable. . . . But the district court held that Genband had not met a requirement that is part of the irreparable-injury component of eBay in cases like this—namely, the requirement of “some causal nexus” between the infringing features of the infringer’s products and the sales lost to the patentee. Apple I, 678 F.3d at 1324; see Apple II, 695 F.3d at 1374–75 (“a sufficiently strong causal nexus [that] relates the alleged harm to the alleged infringement” is “part of the irreparable harm calculus”); Apple III, 735 F.3d at 1364 (“some causal nexus between [defendant’s] infringing conduct and [patentee’s] alleged harm” is required); Apple IV, 809 F.3d at 640 (requiring “a causal nexus linking the harm and the infringing acts” to ensure that “an injunction is not entered on account of ‘irreparable harm caused by otherwise lawful competition’” (quoting Apple III, 735 F.3d at 1361)).
The district court’s opinion, however, leaves us uncertain whether the court relied on too stringent an interpretation of the causal-nexus requirement. The court declared that Genband had to prove that “the patented features drive demand for the product.” . . . . But we cannot be sure that the district court, in demanding such proof, used the standard for causal nexus now established to be the governing standard. 
The “drive demand” formulation, on its face, is susceptible to importantly different interpretations, some stricter, some more flexible, at least in situations where the product at issue has multiple purchasers and multiple features that different purchasers might assign different weights in their purchasing decisions. For example, as the district court in Apple III had assumed, the “drive demand” formulation could require that the infringing feature be “the driver” of decisions by consumers treated collectively as a kind of unit, even requiring proof that no or almost no buyers would buy the product but for the infringing feature. Or it could require less, e.g., that the infringing feature be “a driver” of decisions by a substantial number of individual consumer decision-makers considering multiple features. 
Here, Genband argued for a standard on the less stringent side of the spectrum. The district court described Genband’s argument, but the court did not itself say anything to indicate its adoption of the argument. . . . Yet it has been clear since at least Apple III that a standard of the less demanding variety—as an interpretation of “drive demand,” a standard based on “a driver” as opposed to “the driver,” applied in the multi-consumer, multi-feature context—is the governing one for what suffices to meet the causation component of the requirement of irreparable injury, i.e., that the injury asserted to be irreparable be injury from the defendant’s use of infringing features. . . .
Where the patentee relies on lost sales to show irreparable injury, it matters what reasons various buyers have for making the purchases lost to the patentee. If all but an insignificant number of purchases from the infringer would have been made even without the infringing feature, the causal connection to the asserted lost-sale-based injury is missing. But this court’s cases have now made clear that, under the causation approach suitable for a multi-feature, multi-purchaser context, the patentee may be able to make the causal connection between infringement and the relevant lost sales through evidence of various kinds, e.g., that the infringing features significantly increased the product’s desirability, that soundly supports an inference of causation of a significant number
of purchasers’ decisions. . . .
Of course, the causation requirement does not end the injunction inquiry, even as to the irreparable-injury requirement, let alone as to the other elements of the eBay analysis. But here the only dispositive basis of the district court’s denial of the injunction was the causal nexus requirement. And we cannot be confident that the district court applied the current governing approach to causation rather than an unduly demanding approach. 
We conclude that a remand is needed. . . . 
Apart from its causal-nexus determination, the district court deemed the timing of Genband’s suit and Genband’s choice not to seek a preliminary injunction to weigh against a finding of irreparable injury. . . . Genband correctly points out that, when a patent owner postpones suit and forgoes a preliminary injunction, there may well be reasons for the patent owner’s actions independent of any implied concession that the infringement-caused injury is not actually irreparable . . . . But Genband has not justified a per se rule making the patent owner’s choices about when to sue and whether to seek interim relief legally irrelevant.
In this case, the timing of Genband’s suit and Genband’s decision not to ask for preliminary relief call for an evidentiary judgment—a determination of what weight they have in determining irreparability of the harm at issue (under the governing legal standards) in the context of the evidence as a whole. We are remanding for a redetermination of the causal-nexus issue. That determination,and the findings made in making it, may affect the need for and content of the required evidentiary evaluation of these additional, irreparability considerations. . . .
As the court's cites to the Apple-Samsung litigation suggests, causal nexus was a bone of contention in those cases too, and indeed is one of the issues regarding which Samsung has petitioned the U.S. Supreme Court for review

I'm inclined to agree that the test for causal nexus shouldn't be overly strict, because injunctions may be desirable even if the plaintiff cannot prove specific lost sales resulting from the infringement.   But I also think that the whole framework for awarding injunctions post-eBay has become too formalistic, and that it would be better to focus more on the economic rationales for granting injunctions (among other things, injunctions can conserve on adjudication and error costs by not requiring a court to calculate an ongoing royalty) and against doing so (injunctions can enable holdup).  I've just started work on a paper on injunctions with Norman Siebrasse, where we hope to flesh things out along these lines, though right now we are at a very early stage. 

Saturday, July 8, 2017

2nd TILEC Conference on Competition, Standardization, and Innovation

Tilburg Law and Economics Center (TILEC) is hosting a 2nd TILEC Conference on Competition, Standardization, and Innovation December 18-19, 2017 in Tilburg, the Netherlands.  Here is a description:
Innovation is widely recognized to be the main driver of economic growth. Yet, much remains to be learned about how the economic and institutional environment affects the incentives to innovate. Although competition in both R&D and product markets is known to play an important role for innovation, open questions abound. It is not well understood to which extent competition policy can and should take into account dynamic efficiency concerns. Recent years have seen much debate about the functioning of the patent system. Has it become an impediment to, rather than a catalyst of, innovation? In high-tech industries, where products often combine multiple components, the need for interoperability has enhanced the importance of standardization. But how should the standard setting process be organized to best promote investment in, and use of, technology?
The goal of this interdisciplinary conference is to bring together economists and legal scholars in order to advance our understanding of the relationships between competition, standardization, and innovation, as well as their implications for public policy. It aims at fostering exchange between the two disciplines in this field where complementarities between law and economics are particularly strong. Papers need not display use of both legal science and economics, but speakers will be invited to make their results accessible to a mixed audience.
Research of the highest scientific or scholarly quality will be selected, independently of the field of origin and methods used (theory, empirics, experimental research, case study, etc.), provided it sheds light on at least two, and preferably three, of the relevant dimensions (i.e., competition, standardization, and innovation).

Specific topics (non-exhaustive list)

  • The relationship between competition and innovation
  • The effect of legal institutions on the incentives for innovation
  • The treatment of innovation incentives by competition policy
  • Competition policy in innovative sectors
  • The implications of big data for competition and innovation
  • The treatment of standardization processes under competition law
  • The treatment of standardization processes under international trade law
  • Institutional design of standard-setting organizations
  • Fair and reasonable terms for licensing standard-essential patents
  • Optimal design of intellectual property regimes
  • Alternative incentive mechanisms for fostering innovation
Here is a link to the conference website, for further information.  The deadline for submission of papers is September 15, 2017.  I spoke at the first of these conferences in December 2015, and based on my experience I would highly recommend the event. 

Friday, July 7, 2017

Federal Circuit Again Finds an Abuse of Discretion in Denying a Fee Award

Judge Reyna's opinion, Adjustacam, LLC v. Newegg, Inc., was handed down Wednesday and is available here.  From the opinion (pp. 10-16):
The district court erred by ignoring our mandate “to evaluate whether this case is ‘exceptional’ under the totality of the circumstances and a lower burden of proof” in the first instance. Remand Order, 626 F. App’x at 991. Instead of engaging in an independent analysis, the district court adopted the previous judge’s factual findings wholesale. . . .
The district court’s failure to follow our mandate is sufficient reason to find an abuse of discretion. Separate and apart from that issue, however, the district court’s clearly erroneous findings about the substantive strength of AdjustaCam’s case independently support reversal. . .  .
The district court found that the strength of AdjustaCam’s litigation position was not exceptional because Newegg’s ball-and-socket products were constrained in such a way that AdjustaCam could reasonably argue they rotated on a single axis. J.A. 6. But AdjustaCam did not advance that argument. Instead, AdjustaCam argued that the constraint on Newegg’s ball-and-socket joint limited the rotation to a single axis at a time. See J.A. 482–83; see also J.A. 484 (acknowledging “two axes” but arguing “they are separate”). AdjustaCam did not introduce any evidence that Newegg’s ball-and-socket products were limited to a single axis of rotation. We find no dispute that Newegg’s cameras rotate about at least two axes. As such, there is no possible way for Newegg’s products to infringe the ’343 patent. No reasonable factfinder could conclude that Newegg’s products infringe; therefore, AdjustaCam’s litigation position was baseless. These are traits of an exceptional case. The district court’s contrary conclusion was based on “a clearly erroneous assessment of the evidence.” Highmark, 134 S. Ct. at 1748 n.2. Fees are warranted. 
Octane disclosed another reason why this case is exceptional that was not considered by the district court: AdjustaCam litigated the case in an “unreasonable manner.” Octane, 134 S. Ct. at 1756. This measure of exceptionality is evident through AdjustaCam’s repeated use of after-the-fact declarations. . . .
Finally, we take note of AdjustaCam’s damages model. We agree with the district court that there is no minimum damages requirement to file a patent infringement case. J.A. 7. Asserting seemingly low damages against multiple defendants—or settling with defendants for less than the cost of litigation—does not necessarily make a case “exceptional” under § 285. But here, AdjustaCam asserted nuisance-value damages against many defendants, settled with them for widely varied royalty rates, and continued to press baseless infringement contentions well past an adverse Markman order and expert discovery. The original judge stated that AdjustaCam’s damages theory was not “so outrageous and unreliable to support an award of attorney fees,” J.A. 9, which the subsequent judge repeated, J.A. 1_6. Under the governing clearly erroneous standard of review, we would be inclined to affirm if AdjustaCam’s damages methodology were the only issue. In light of AdjustaCam’s frivolous infringement argument and unreasonable manner of litigation, however, we conclude that the district court clearly erred by failing to consider AdjustaCam’s damages methodology as part of a totality-of-the-circumstances analysis. The irregularities in AdjustaCam’s damages model and the purported nuisance value of many of its settlements should have played a role in the evaluation of whether this is case exceptional.
Meanwhile, in a nonprecedential opinion handed down the same day (Parallel Networks, LLC v. Kayak Software Corp.), the court (per Judge Chen) affirmed a denial of a fee award, on the ground among others that there was some room for debate (albeit not enough to overcome a motion for summary judgment) over whether the defendants' "applets" infringed.  See pp. 7-8 ("The defendants first contend that the district court abused its discretion in concluding that Parallel Networks had a plausible infringement theory because their applets  were no different than those accused applets we previously held were non-infringing. But that is not quite so. . . .  [S]ome daylight existed between the accused applets from our earlier decision and the accused applets here.").  Overall, though, the Federal Circuit over the past month arguably seems to be showing a somewhat greater willingness to require fee awards, see previous discussion on this blog here and here.

For coverage of the Adjustacam case on Patently-O, see here.

Wednesday, July 5, 2017

New Publications on FRAND, Patent Remedies in China

1. On Monday of this week, Yin Li, Hui Zhang, and James Yang published a post titled New Developments on SEP-Related Disputes in China on the Kluwer Patent Blog.  The post discusses the Huawei v. IDC and Iwncomm v. Sony cases, as well as the April 2016 Interpretations (II) of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Dispute Cases and the April 2017 Beijing High People's Court Guidelines for Patent Infringement Determination.

2.  A company called IP House published a report titled Beijing Intellectual Property Court :  Judicial Protection Data Analysis Report (2015), which has information on (among other matters) damages awards (see pp. 21-30).  The report has previously been discussed by Mark Cohen on China IPR and by Jacob Schindler on the IAM Blog.

3.  Liu Wei published The Boundary for Proper IP Warning Letter--An Analysis of the Supreme People's Court Decision in the Edan Case, China IP Magazine (Oct.-Nov. 2015), pp. 66-68, discussing the standards for determining the circumstances under which an IP owner might be liable under unfair competition law for sending warning letters to an alleged infringer's business partners or for communicating allegations of infringement to the public.  Wang Guiling (Lucy Wang) also published an article titled Proposals for Improving Remedies Available for Patent Infringement in China in the same issue (pp. 69-72).

4.  Xiutin Yuan and Paul Kossof published Developments in Chinese Anti-Monopoly Law:  Implications of Huawei v. InterDigital on Anti-Monopoly Litigation in Mainland China in 37 EIPR 438-41 (2015).  Here is the abstract:
Recent litigation between Huawei Technologies and InterDigital Group in the People’s Republic of China has been closely followed by the international legal community owing to its relation to cases in the US and implications for intellectual property holders and licensees. This article analyses this important case and the potential effects on anti-monopoly litigation in China.
5. Brian J. Love, Christian Helmers, and Marks Eberhardt have published Patent Litigation in China:  Prpotecting Rights or the Local Economy? in the April 2017 issue of Mitteilungen der deutschen Patentanwälten (pp. 163-69).  Here is the abstract:
Today, China is the world leader in both patent filings and litigation.   However, many in the West believe that the Chinese patent system facilitates protectionism, not innovation.  We took a look at five years of Chinese invention patent litigation to see what the data can tell us.
The authors previously published a paper by the same name in the Vanderbilt Journal of Entertainment and Technology Law (see here).

Update (July 6):  Also of possible interest to some readers might Zhu Dan titled Review and Reconstruction of the jurisdiction System of the Criminal Trial of Intellectual Property in China, China IP Magazine, 11-12/2016, pp. 58-63 (translated by Liu Xiaoyu).  From the introduction:
Jurisdiction is the prerequisite and basis for the trial.  If the jurisdiction is imperfect, it will inevitably hinder the improvement of trial quality.  At present, many weak points in the criminal justice protection for intellectual property rights (IPR) in China are caused by imperfect trial jurisdiction system.  Therefore, in order to promote the perfection of the IPR criminal jurisdiction system in China, this article puts forward some ideas and suggestions on reforming and reconstructing the IPR criminal trial jurisdiction system by fully reviewing Chinese current IPR criminal trial jurisdiction system.

Monday, July 3, 2017

Comparative Patent Remedies Listed as One of Feedspot's Top 100 I.P. Blogs

Which accounts for the nifty badge now displayed over to the right.  Here is a link to the list.  (Comparative Patent Remedies comes in at #86 as of the most recent ranking).  According to the Feedspot Blog, the list includes:
The Best Intellectual Property blogs from thousands of top Intellectual Property blogs in our index using search and social metrics. . . .  These blogs are ranked based on following criteria:
Google reputation and Google search ranking
Influence and popularity on Facebook, twitter and other social media sites 
Quality and consistency of posts
Feedspot’s editorial team and expert review.
I'm certainly pleased to have the blog listed among such other well-known I.P. blogs.  Thank you to my readers for making this a worthwhile project!