Wednesday, June 13, 2018

Some Interesting Policy Questions Posed by Recent French Damages Decision

The case is Hutchinson SA v. CF Gomma Barre Thomas SA, Cour de Cassation, ch. comm., Mar. 21, 2018, PIBD No. 1093, III, 290.  The case involves EP 0 6 910 481, for improvement in rods connection certain vibrating parts of vehicles to the bodies of such vehicles.  Hutchinson is the owner of the patent, which it exclusively licensed to co-plaintiff Paulstra SNC.  The court affirms a finding of liability with regard to certain products, but also affirms the denial of damages to Hutchinson on the ground that it did not substantiate its loss.  Hutchinson declined to offer evidence of the revenue it derives from Paulstra (which is an affiliated company of Hutchinson, as well as the latter's exclusive licensee), and of how much of this revenue is attributable to the patent in suit.  The court also concludes that a license negotiated, post-injunction, with (if I'm understanding this correctly) another (co-defendant) firm that took over the management of the defendant's affairs as a result of a reorganization, was not probative.  Finally, the court affirms a judgment of lost profits awarded to Paulstra, which apparently was based in part on the sales revenues earned by the defendants, on the ground that the resolution of this matter was within the discretion of the Court of Appeals.  

The case poses some interesting policy questions, in my view.  First, as I discuss here at pp. 19-20, as a matter of policy it isn't clear to me whether a court should do its best to award some sort of royalty when the parties' evidence falls short, or deny damages altogether.  The latter was Judge Posner's view in Apple v. Motorola, but the Federal Circuit thought otherwise; and this also appears to be the view among the German courts, which generally make an effort to award something by application of their “free discretion” (nach freier Überzeugung).  Second, on the issue of what damages to award the patentee/exclusive licensor, see this article by Mark Lemley, stating (at p. 673) that "In my view, a patentee who has granted an exclusive license should stand in the shoes of the exclusive licensee; if the exclusive licensee has lost profits because of infringement, those losses should be compensable in a suit by either or both parties, divided as per the agreement between them," but also noting that Federal Circuit case law appears to the contrary.  Third, without using the term "holdup," the court appears to recognize that a settlement entered into after entry of an injunction may not provide a good reflection of the value of the patented technology.  For previous discussion on this blog, see, e.g., here.  Finally, for discussion of whether the defendant's sales revenue can ever be a good-enough heuristic from which to infer the plaintiff's lost sales and hence lost profit, see again this article, at p.25.

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