Monday, April 29, 2019

Disgorgement of Profits as an Equitable Remedy

Under section 289 of the U.S. Patent Act and the Supreme Court's December 2016 decision in Samsung v. Apple, the successful design patent owner has the option of demanding the disgorgement of the defendant's profits attributable to the relevant "article of manufacture."  The Supreme Court offered no guidance on determining what the relevant article of manufacture is, however, in a case in which the design patent is not coextensive with the end product (or the end product embodies multiple design patents).  Nevertheless, since Samsung the lower courts have instructed the jury to consider the four factors recommended by the Solicitor General of the United States in his amicus brief in that case.  (For Professor Sarah Burstein's previous discussion on this blog, see here; see also this recent discussion by Tracy-Gene Durkin and Gary Griswold on Law360.) 

One issue that, as I have previously noted, has been pretty much overlooked in the case law to date is whether there is a right to have a jury determine the amount of profit to be disgorged.  I'm not a Seventh Amendment scholar, but in my view there is at the very least a serious argument that this remedy is equitable in nature, and therefore that there is no Seventh Amendment right to a jury trial on this issue.  Indeed, the Federal Circuit itself recently characterized disgorgement as equitable in nature, in the context of trade secret misappropriation and other IP infringement (see here).  

Anyway, though not directly on point the Eleventh Circuit last week in Hard Candy, LLC v. Anastasia Beverly Hills, Inc. held that, in the context of trademark infringement, disgorgement of profits is an equitable remedy bestowing no constitutional right to trial by jury.  The court further rejected the plaintiff's argument that it was entitled to a jury trial because it sought disgorgement only as a proxy for its own actual damages, stating that such a rule would be "inconsistent with the longstanding interpretation of the Seventh Amendment set out by the Supreme Court . . . ."  (The opinion also favorably cites  my former colleague Mark Thurmon's paper Ending the Seventh Amendment Confusion:  A Critical Analysis of the Right to a Jury Trial in Trademark Cases, 1 Tex. Intell. Prop. L.J. 1 (2002).)  Hat tip to Professor Dmitry Karshtedt for bringing this case to my attention.

So again, not directly on point, but the court's analysis would seem to lend some weight to the argument that there is no constitutional right to have a jury determine the amount of profit to be disgorged in a design patent case.  Surely someone will at least raise this argument in a design patent case at some point?

Tuesday, April 23, 2019

UK Supreme Court to Hear Appeal in Unwired Planet and Conversant Cases

OK, so I said yesterday that I would be on a blogging break this week, but this is pretty important.  The U.K. Supreme Court has agreed to hear Huawei and ZTE's appeals in the Unwired Planet and Conversant cases.  Read all about it on FOSS Patents and IPKat.  For previous discussion on this blog, see, e.g., here and here.  This will surely be a topic of discussion at the Fordham conference later this week!

Monday, April 22, 2019

Blogging Break

I will be taking a blogging break this coming week, to catch up on some other matters and to attend the Fordham IP Conference.  I hope to see some of you there.

Friday, April 19, 2019

Some New Japanese Cases on Remedies

The November 2018 issue of A.I.P.P.I.--Journal of the Japanese Group of AIPPI includes an article by Yasufumi Shiroyama titled Overview of Intellectual Property Judgments by Japanese Courts in the First Half of 2018.  The article itself includes brief write-ups of, among other matters, three cases on patent remedies issued in early 2018:

1.  Judgment of the Osaka District Court, 21st Division, March 22, 2018:  The court found that 61% of the defendant's air duster products contain absorbers with an ash content within the infringing range of 1 to 20% by weight, and thus (1) enjoined the defendant from marketing products with absorbers falling within that range, and (2) awarded damages under article 102(2) comprising 61% of the defendant's profit from sales of air dusters.

2.  Judgment of the Tokyo District Court, 40th Division, March 2, 2018.  The court found that the plaintiff had obtained a patent on an invention made by the defendant, and then sued the defendant for infringement; the defendant counterclaimed in tort.  The court dismissed the plaintiff's complaint and awarded the defendant ¥5.5 million (about US$50,000).

3.  Judgment of the Osaka District Court, 21st Division, Feb. 15, 2018.  The court recognized that, where an infringing product owes some of its success to the defendant's improvements to the patented invention, it may be appropriate to reduce the plaintiff's damages award; but in this case, only of the products added any inventive element, and it was of minor significance.  The court awarded the defendant's profit, reduced by only 5% for the product embodying the minor improvement.  

Wednesday, April 17, 2019

Infringer's Profits as "Residual Damages" Under German Law

On a couple of occasions I have blogged about Restschadensersatz, or residual damages, under German law (see here and here).  More precisely, in 2013 I wrote:
In Germany, the statute of limitations for filing an action for patent infringement is governed by article 141 of the Patent Act.  WIPO’s translation of this provision reads:
As regards the period of limitation for claims due to infringement of a patent right, the provisions of Part 5 of Book 1 of the Civil Code shall apply mutatis mutandis. If the infringer has gained something through the infringement at the expense of the entitled party, Section 852 of the Civil Code shall be applicable mutatis mutandis.
Focusing on sentence 1, the general statute of limitations for filing a patent infringement claim is three years.  See Thomas Kühnen, Patent Litigation Proceedings in Germany:  A Handbook for Practitioners ¶ 1554,at 389 (6th ed. Frank Peterreins tr. 2013); Benkard, Patentgesetz § 141 ¶ 4, at 1504 (10th ed. 2006).  But the second sentence provides a second opportunity to file a claim for damages, after the three-year period has lapsed.  Here is the text of the referenced section of the Civil Code (BGB § 852) (English translation can be found here, German original here):
If by a tort the person liable to pay compensation obtains something at the cost of the injured person, then even after the claim to compensation for the damage arising from a tort is statute-barred he is obliged to make restitution under the provisions on the return of unjust enrichment. This claim is statute-barred ten years after it arises, or, notwithstanding the date on which it arises, thirty years after the date on which the act causing the injury was committed or after the other event that triggered the loss.
So even after the three-year period, the patent owner may get to file a claim, but for what?  The term used for the damages the patent owner may recover under these circumstances is Restschadensersatz, or residual damages.  Prevailing opinion is that these damages consist of a reasonable royalty only.  See Benkard Patentgesetz, § 141 ¶ 6, at 1505-06.  The argument appears to be that the only benefit the infringer derived at the expense of the entitled party is the royalty it didn’t pay.  For a contrary opinion, however, see Matthias Hülsewig, Der Restschadensersatzanspruch im Patentrecht—beschränkt auf die angemessene Lizenzgebühr?, GRUR 2011, 673, arguing that the patentee should have the option of recovering the infringer’s profit or a reasonable royalty.

Then in 2016 I wrote:
A few weeks back Dr.  Hülsewig kindly emailed me a copy of a 2015 opinion of the German Federal Supreme Court in a copyright matter, in which the court states that the question of whether BGB § 852 permits the recovery of the infringer's profit remains an open question.  See paragraph 34 of Judgment of Jan. 15, 2015, I ZR 148/13 (BGH)--Motorradteile, available here.  In addition, as Dr. Hülsewig pointed out, the new 11th edition of the Benkard treatise on German Patent Law now also takes the position that claims for residual damages are not limited to reasonable royalties but also may include the disgorgement of other pecuniary benefits the infringer has derived ("Daher kann der Rest-Schadensersatzanspruch nicht in jedem Fall auf die (stets geschuldete) angemessene Lizenz beschränkt werden; vielmehr können auch weitere Vermögensvorteile herausverlangt werden" (section 141, p. 1907).  So perhaps we are witnessing a change in the majority view of what claims for residual damages may include under German law.
Well, it looks like the change in the majority view is now complete.  Two weeks ago Dr.  Hülsewig emailed me the BGH's Judgment of March 26, 2019, X ZR 109/16--Spannungsversorgungsvorrichtung ("Power Supply Device"), in which the court definitively holds that the patentee can demand the disgorgement of the infringer's profit as residual damages.  As my previous blog posts on the subject suggest, I'm not convinced this is a great idea as a matter of policy, but the doctrine now appears to be settled.

Tuesday, April 16, 2019

Apple, Qualcomm Settle

From the "I didn't see that coming!" department, Apple and Qualcomm just announced that they have settled all worldwide litigation.  Stories so far from the Wall Street Journal, Bloomberg, and Law360.  More to come, surely.  This doesn't directly affect the FTC's suit against Qualcomm, for which we're still awaiting Judge Koh's opinion.

Update:  See also this follow-up story on Law360, which quotes me; this one on FOSS Patents; and this one on Bloomberg. 

Monday, April 15, 2019

27th Annual Fordham IP Conference

On Thursday and Friday of next week, April 25-26, the Emily C. & John E. Hansen Intellectual Property Institute at Fordham Law School will be presenting the 27th Annual Intellectual Property Law & Policy Conference.  There will be a number of prominent speakers from around the world, and some of the sessions will address remedies and enforcement issues.  I will be on the competition law panel on Friday, April 26 at 2:45, along with Professor Eleanor Fox, Milan Kristof, Suzanne Munck, former FTC Commissioner Maureen Ohlhausen, and Thomas D. Pease.  Here is a link to the conference webpage, from which you can access the program and other information.

Friday, April 12, 2019

From Around the Blogs

1. Last month on IPKat, Eleonora Rosati published a post by Paola De Donato titled Patent infringement and recovery of profits in Italy:  doctrine of equivalence and requirement of negligence, discussing a decision of the Tribunale di Genova on damages and recovery of profits.  Here is a link to the post, and here is a link to the original decision.  Long story short, the court concludes that the plaintiff is entitled to recover from the principal defendant its actual damages, consisting of certain expenses incurred to investigate and try to settle the dispute, etc. (apparently a distinct item from the recovery of litigation costs, which are also awarded), and the disgorgement of the defendant's profits.  However, the court denies the recovery of damages against two other defendants who were neither negligent nor willful infringers (being the importer, distributor, and retailer of the accused product in Italy).

For brief discussion of the relation between fault or state of mind and remedies in certain countries, see my book Comparative Patent Remedies pp. 245, 256-57, 308-09, 354.  The position articulated by the Italian court seems similar to the position of the courts of France.  See also INPRECOMP's discussion of this topic here (pp. 14-19).

2. In February, Norman Siebrasse published a post on Sufficient Description titled Airbus v. Bell Punitive Damages Award Upheld.  The post discusses a recent decision of Canada's Federal Court of Appeal affirming this judgment from 2017, which awarded Can.$1,000,000 in punitive damages (twice the amount of the actual damages).  No surprises in the judgment itself, but seeing how uncommon it is for courts outside the U.S. to award punitive or enhanced damages for patent infringement, it is significant.  For previous mention of the trial court decision on this blog, see here.

3.  In addition to his thorough coverage of the Qualcomm litigation in the U.S. and Germany, Florian Mueller published an interesting post on FOSS Patents a few months ago titled When defending against standard-essential patents, beware of standard-essential utility models.  (For previous discussion on this blog of utility models, see, e.g., here.)  The post raises, among other things, an interesting question about the scope of antisuit injunctions, namely whether an injunction (issued, say, in the U.S.) against enforcement of a patent in another country would cover an attempt to cover a utility model derived from a patent application.  Perhaps it would be advisable, for companies seeking such injunctions, to ensure that their scope is as clear as possible up front.

Wednesday, April 10, 2019

IPKat Report on LMU Conference on Injunctions and Flexibility

Last week I spoke at the the conference at Ludwig Maximilian University of Munich on "Injunctions and Flexibility in Patent Law - Civil Law and Common Law Perspectives."  This morning on IPKat, Eleonora Rosati published a post by Léon Dijkman summarizing the conference presentations, and including a link to the speakers' slides.  (There's also a nice photo of the assembled speakers.)  Highly recommended!
For previous discussion on this blog of the LMU and Erlangen conferences on injunctions, see here.   

Tuesday, April 9, 2019

Federal Circuit Vacates Judgment of Compensatory and Enhanced Damages

The case is Omega Patents, LLC v. CalAmp Corp., and the opinion is by Judge Dyk (joined by Chief Judge Prost and Judge Wallach).  The case is factually complex, involving four patents relating to motor vehicle compatibility systems. Suffice for our purposes to note that the jury found all four patents valid and either directly or indirectly infringed, but on the question of infringement the Federal Circuit reverses as to all but one claim of one single patent.  (There will be a remand for new trial as to the other three.)  As a result, the court vacates the compensatory damages award of $2.98 million, reasoning that the evidence wasn't clear that the one patent CalAmp directly infringed could sustain a $2.98 million award.  ("There is no evidence to support a finding of infringement of more than some unidentified subset of the accused CalAmp devices where the necessary scripts were installed. . .  Such evidence cannot support an award of damages with respect to all of CalAmp's devices" (p.20).)  The court also vacates the willfulness finding, with respect to which the jury was asked whether "CalAmp willfully 'infringed a valid patent,' without specifying which patent or patents or which claim or claims were willfully infringed" (p.20).  Finally, the court concludes that the court erred in excluding testimony from a CalAmp executive regarding his state of mind, and of CalAmp's outside counsel, noting with respect to the latter that "an accused infringer's reliance on an opinion of counsel regarding noninfringement or invalidity of the asserted patents remains relevant to the infringer's state of mind post-Halo" (p.24).

Monday, April 8, 2019

News on Preliminary Injunctions

1. A few weeks back Norman Siebrasse called my attention to a post on IPKat titled PI awarded following disagreement with EPO on added matter - Novartis v Dr Reddy's.  (Decision available here.)  Mr. Justice Birss granted the patent owner a preliminary injunction against the sales of a generic drug, subject to (as is usual) a cross-undertaking in damages.  Interestingly, he also invited the Department of Health and the NHS "to apply to be joined in relation to the cross-undertaking," noting that he had taken similar action in the past in Actavis v. Boehringer, [2013] EWHC 2927, and that the rationale for doing so is that if "it is possible that the entity which loses the most, if it turns out that the interim injunction should not have been granted, is not the generic supplier itself but hte Department of Health or the relevant NHS entities . . . who will be paying the price . . . ."  I don't think U.S. courts are authorized to do that; see, e.g., 11A Charles Alan Wright et al., Federal Practice & Procedure, § 2954 ("Courts at various times have been called upon to decide a number of other issues under [Federal Rule of Civil Procedure] 65(c). For example, there is authority for the proposition that someone who is not a party to the case or restrained or enjoined by order of the court is without standing to demand security for possible damages incurred as a result of any injunction issued.") (citations omitted).  I'd be interested in hearing if Mr. Justice Birss's practice is followed in other countries.  For previous discussion of injunction bonds on this blog, see, e.g., here.

2.  Hui Zhang, Jiao Yuxin, and Yi Wei have published an informative post on the Kluwer Patent Blog titled China: Comments on the New Rules on Preliminary Injunction and Representative Precedents.  The post details the "Provisions of the Supreme People's Court on Several Issues Concerning the Application of Laws in Adjudication of Action Preservation Cases Involving IP Disputes," which  took effect on January 1, 2019.  According to the authors, from 2014-18 Chinese courts issued only 150 pre-suit and 50 in-suit preliminary injunctions in total.  They anticipate, however, that by providing patentees with additional guidance, the new guidelines will spur an increase in requests for and grants of PIs.  Courts are obligated to consider four factors, analogous to those at issue in the U.S., but with "factual and legal basis" for the PI replacing "likelihood of success on the merits."  The guides set forth various subfactors to consider in this regard, and the authors predict that PIs will be available in a wider class of cases than in Germany. They also note the courts' discretion in assessing irreparable harm, and discuss some illustrative cases on this and other factors. Interestingly, there is no right to an interlocutory appeal, as in the U.S. and Germany.

Finally, and relevant to the issue of bonds, the authors state that Chinese law requires that "where a PI ruling is made in error, the moving party should compensate the opposing party's loss caused by the PI," and that this is a matter of strict liability.

Thursday, April 4, 2019

Summary of Erlangen Conference on Injunctions and Proportionality

Today begins day two of the conference at Ludwig Maximilian University of Munich on "Injunctions and Flexibility in Patent Law - Civil Law and Common Law Perspectives." So far the event has been terrific. There were many excellent presentations yesterday, including talks by Judge Klaus Grabinski and Mr. Justice Richard Arnold, and today will feature among others Judge James Robart, Lord David Kitchin, and Judge Matthias Zigann. (For a discussion of the Grabinski and Arnold presentations, see this post on FOSS Patents--definitely worth a read!)  Two weeks ago, I had the honor of speaking at a conference held at Friedrich-Alexander-Universität Erlangen-Nürnberg on "Enforcing Patents Smoothly: From Automatic Injunctions to Proportionate Remedies," and I'm happy to report that IPKat has now published a post summarizing that conference. I encourage any of you who were unable to attend the Erlangen conference to read the post.

Tuesday, April 2, 2019

Conference Thursday and Friday on Injunctions and Flexibility

On April 4-5, Ludwig Maximilian University of Munich will be hosting a conference titled "Injunctions and Flexibility in Patent Law - Civil Law and Common Law Perspectives," at which I will again be discussing the economics of injunctions in patent cases.  Here is a link to the conference announcement, here is a link to the flyer, and here is the agenda:

Thursday, April 4:

10:00 – 10:15 Get-together & registration

10:15 – 10:30 Welcoming remarks

10:30 – 13:00 Economic foundations, civil & common
law perspectives

Thomas Cotter
University of Minnesota Law School
The law & economics perspective

Henning Grosse Ruse-Khan
University of Cambridge
The international legal framework

Lionel Bently
University of Cambridge
Injunctions in common law

Franz Hofmann 
Friedrich Alexander
University Erlangen-Nürnberg
Injunctions in civil law

13:00 – 14:00 Lunch

14:00 – 17:00 Injunctions and proportionality

Richard Arnold
High Court of England and Wales
Proportionality in EU and English law

Klaus Grabinski
Federal Court of Justice (Bundesgerichtshof)
Use-by-periods and proportionality in German law

Willem Hoyng
University of Tilburg and HOYNG ROKH MONEGIER
Proportionality, the UPC and the CJEU

Sapna Kumar
University of Houston Law Center
eBay v. MercExchange: model or monster?

17:00 – 18:00 Recent research

Rafał Sikorski
Adam Mickiewicz University Poznań
Global convergence of approaches towards injunctive relief in patent law: achieving flexibility via different legal tools

Martin Stierle
Ludwig Maximilian University Munich
Injunctions and compulsory licenses

Arthur von Martels 
Preliminary injunctions in patent litigation

Friday, April 5:

09:00 – 11:00 The scope and style of injunctions

Matthias Zigann
Regional Court Munich I (Landgericht München I)
Injunctions as duties to abstain

Jaani Riordan 
8 New Square, London
Injunctions as specific orders

Ulrike Voß 
Court of Appeal Düsseldorf (Oberlandesgericht Düsseldorf)
A duty to recall?

Penny Gilbert 
Powell Gilbert LLP
Exceptions from injunctions and product recall – scenarios where infringing activities could continue

11:00 – 11:15 Coffee break

11:15 – 12:45 Injunctions and medical use

Maximilian Haedicke
Albert Ludwig University Freiburg

EPC 2000 and second medical uses: how to align scope and remedies?

Justin Turner 
3 New Square, London
Drafting injunctions in second medical use

12:45 – 13:45 Lunch

13:45 – 16:30 Injunctions and FRAND

David Kitchin
Supreme Court of the UK
Injunctions in FRAND proceedings – a UK perspective

James Robart
US District Court
The view from the corner of competition law and patents

Christoph Rademacher
Waseda University School of Law, Tokyo
SEP enforcement and government policy in Japan and China

Peter Picht
University of Zurich, Max Planck Institute for Innovation and Competition
Injunctions in SEP cases: current practice and innovative models

16:30 – 17:00 Closing remarks

Matthias Leistner and Ansgar Ohly
Ludwig Maximilian University Munich

Monday, April 1, 2019

Germany May Consider Introducing More Flexibility into the Law on Patent Injunctions

I usually don't post more than twice in a single day, but here is another development on the law of injunctions that potentially could be quite important.  At the recent conference in Erlangen ("Enforcing Patents Smoothly: From Automatic Injunctions to Proportionate Remedies") we were informed that one of the German ministries would be holding a hearing in May to discuss the possibility of introducing greater flexibility into the law relating to patent injunctions.  This morning I noticed that Florian Mueller had published a post about the conference on FOSS Patents, in which he states that he has
obtained official confirmation from the Federal Ministry of Justice and Consumer Protection of Germany that an "expert talk" will take place on May 20, 2019, for the stated purpose of preparing a legislative initiative in the area of intellectual property policy. Industry groups, academics and judges will discuss one of the potential elements of said initiative: a potential reform of the legal framework governing patent injunctions, particularly in connection with SEPs and, more generally, complex products.
Obviously I don't want to jump the gun, but this could prove to be a turning point, depending on how it turns out.  

Anyway, and aside from how the expert talk plays out, if you're interested in hearing more about the Erlangen conference, read Florian's post, as well a forthcoming post (maybe this later this week?) that I understand will be appearing on IPKat.  Some of the Erlangen speakers, including me, also are planning to publish papers based on our presentations in a forthcoming issue of Zeitschrift für Geistiges Eigentum/Intellectual Property Journal, though that will still be many months away.  And finally, for those of you in Europe, there will be another conference on injunctions (at which I will again be speaking) at Ludwig Maximillian University in Munich, which I will blog more about tomorrow.

Patents Court (England and Wales) Issues Injunction in SEP Case

On IPKat, Ashley Merelle Ward has a comprehensive write-up of Mr. Justice Carr's decision, released last week, in TQ Delta LLC v. ZyXEL Communications Ltd.  Mr. Justice Carr had earlier determined that one of the two SEPs asserted in the present action was valid, essential, and infringed, but it is due to expire in a few months.  In this fairly brief decision Mr. Justice Carr concludes, among other things, that ZyXEL engaged in holdout, given that negotiations over several hundred asserted FRAND-committed SEPs began in 2013, and given ZyXEL's reluctance to commit to whether it would be bound by the court's FRAND determination.  He also refuses to stay the injunction to permit ZyXEL to fulfill certain unspecified pending orders and denies leave to appeal.

Ms. Ward recently has posted two other FRAND updates that I had been meaning to bring to readers' attention.  The first, titled Your FRANDly Update: HTC v Ericsson, 5G/IoT SEP Licensing Consultation, Globalization of FRAND, European Parliament SEP analysis & more, provides links to, among other documents, a recently published In-Depth Analysis for the JURI Committee titled Standard Essential Patents and the Internet of Things, the abstract to which reads as follows:
This in-depth analysis, commissioned by the European Parliament’s Policy Department for Citizens’ Rights and Constitutional Affairs at the request of the JURI Committee, assesses the European Commission of (EC) Communication of 29 November 2017 on the EU approach to Standard Essential Patents. The report examines the principles identified in the Communication with respect to the Commission’s proposals on (i) increasing transparency on SEPs; (ii) determining valuation of SEPs( Standard Essential Patents) and FRAND ( Fair, Reasonable, and Non-Discriminatory) terms; and (iii) enforcement.
The report evaluates the efficient resolution of licensing disputes over FRAND, including via litigation, arbitration and mediation, licensing pools and collective licensing. The current document also puts forward some policy recommendations to, inter alia, enhance the general environment of FRAND licencing in the context of SEPs.
The post also links to two competing sets of draft principles for licensing SEPs, one published last fall and backed by IP Europe and Nokia, and the other more recently by the Fair Standards Alliance and ACT The App Association.  Ms. Ward's other post, titled Your FRANDly Update: Ericsson v HTC, FRAND in India, jurisdictional issues (again), Unwired Planet v Huawei, ASUS v Interdigital and more discusses . .  well, the title pretty much says it all.