Friday, September 21, 2018

Further Analysis of Power Integrations

Michael Risch posted a comment to my post from yesterday, which has caused me to rethink whether (as I stated) the Federal Circuit's revised opinion in Power Integrations articulates a stricter standard for invoking the entire market value rule.  I now think that Professor Risch (and Dennis Crouch, who appears to take the same view) are correct, and that my characterization of the revised opinion as articulating a stricter standard was wrong--though I have to say, I find this entire question very confusing.  Maybe it's just me.  Or maybe litigants should start hiring analytical philosophers as consultants or expert witnesses in patent cases . . .

Anyway, as stated yesterday the Federal Circuit altered the relevant passage from its original opinion in Power Integrations as follows (modifications shown below in boldface):
Where the accused infringer presents evidence that its accused product has other valuable features beyond the patented feature, the patent holder must establish that these features are not relevant to consumer choice do not cause  consumers to purchase the product. A patentee may do this by showing that the patented feature “alone motivates customers to purchase [the infringing product]” in the first place. See id. at 69. But when the product contains multiple valuable features, it is not enough to merely show that the patented feature is viewed as essential, that a product would not be commercially viable without the patented feature, or that consumers would not purchase the product without the patented feature. Id. at 68. When the product contains other valuable features, the patentee must prove that those other features did not influence purchasing decisions do not cause consumers to purchase the product
I stated that I viewed the revised opinion as making "it slightly more difficult than it already was to use the entire market value of the infringing end product as the royalty base; or, to put it another way," as rendering "the conditions under which courts may invoke the entire market value rule (EMVR) even more strict than they were before." Professor Risch's comment on my post, however, reads as follows:
I'm not sure I agree with your reading. I read this as less stringent than before. I think that it is much easier to show that a feature did not CAUSE a purchase than it is to show that a feature did not INFLUENCE a purchase.
I think the way to resolve this is to focus on the distinction between "causing" and "influencing" (or being "relevant").  Consider a hypothetical device that includes two features, A and B.  A infringes P's patent, B is in the public domain.  P wants to use the entire market value of the device (including A and B) as the royalty base; D says the base should include the value of A only.  Under the original panel opinion, P would have to show that B is not "relevant" to consumers' demand for the device.  Under the new opinion, P would have to show that the presence of B does not "cause" consumers to buy the device.  Which rule is tougher on P?   

To answer this question, I think we need to focus on what it means to be "relevant" (or "irrelevant").  One possibility is that B is irrelevant if consumers are indifferent to the presence of B.  A device with AB* is just as good as one with AB.  In that case, I think it's fair to say both that (1) B is irrelevant to consumers' purchasing decisions, and (2) B's presence does not cause consumers to buy the device.  So there's no practical difference between the two standards.  But maybe you need a B-like thing--whether it's B or B*--to sell the product at all.  That is, B and B* provide the same functionality, and you need one of them, but it doesn't have to be B; B* is just as good.  Consumers are indifferent to B over B*, and the presence of B (as opposed to B*) doesn't cause consumers to buy the device, but you have to have either B or B* in the product or it won't sell.  So, is it fair to say that B is irrelevant to consumer demand?  That it doesn't cause consumers to buy the product?  I'm honestly not sure what the right answer is, but again I'm not seeing much of a difference at all between the two standards (causation and relevance).

Alternatively, maybe all it means to say that B is "relevant" or "influences" consumers is that consumers will consider B in deciding what to buy--it's a factor they take into account--but it won't affect the purchasing decisions of an identifiable number of them.  In that case, maybe it's correct to say that the presence of B does not "cause" consumers to buy the device, but it does "influence" them or is "relevant" to them.  And in that case, the new standard for invoking the EMVR is less strict than the one articulated in the original opinion, as Professor Risch surmises.  Consumers might prefer AB to AB*, but if AB is the one on the market and AB* isn't, they will buy AB rather than some other alternative (maybe A*B?).  (Though is it fair to say that, under such circumstances, the presence of B "influences" their decisions?)

I think my own confusion over this is due to the difficulty of proving a negative.  I would think that it is harder to prove that X causes Y than it is to prove that X is "relevant" to Y as that term is used in the above paragraph.  That is, it should be harder to prove that the presence of B causes some consumers to buy the device, than it is to prove that the presence of B is something that they would consider in deciding what to buy.   But it doesn't follow that it is harder to prove that the presence of B does not cause consumers to buy the device, than it is to prove that the presence of B is something they would not consider; in fact, precisely the opposite.

All that said, I still wonder how much of a practical difference any of this will make, and whether it is worth the effort . . .

1 comment:

  1. This brings to mind a problem in Canadian pharma patent law. Patentee has a patent for new use of a known drug. Generic wants to sell the drug, and the question is whether its product monograph (PM) can instruct the infringing use. It might seem that the answer is obviously no, but there has been evidence in some cases that doctors and pharmacists don’t actually consult the PM, especially when the use in question is the gold standard for treatment. In such cases the answer boils down to the standard for influence: on an “encouragement” standard or “material contribution” standard for causation, the answer is no, but on a “but for” standard, the answer depends on the specific evidence in the case. As you might imagine, there is a real problem in trying to assess, on the basis of expert evidence from a few doctors, whether there are any doctors out there who might read and follow the PM. So maybe the point of this example is that it might be helpful to think about the kind of evidence that would be needed to prove one formulation rather than the other.