Design Patents and Treble Damages

I may have a post of my own later this week or early next week on the Munich court's issuance of an anti-antisuit injunction injunction against Daimler, as reported here and here.  But for today, I am pleased to hand over the reins to Professor Sarah Burstein, for a guest post on a recent U.S. design patent decision decision, Kustom Cycles, Inc. v. Dragonfly Cycle Concepts, LLC, No. 5:18-cv-05024 (D.S.D. July 9, 2019). 

Professor Burstein:  Normally, a damages award of $750 for patent infringement might seem to only be noteworthy for being so small. But the recent award in Kustom Cycles, Inc. v. Dragonfly Cycle Concepts, LLC is noteworthy because it is entirely too much. Three times too big, to be precise.

In Kustom Cycles, the plaintiffs filed a lawsuit alleging infringement of U.S. Patent No. D586,275, which was issued in 2009 for a design for a “Flared Windshield for a Motorcycle”:

 

The defendants never responded, and the clerk entered a default. The plaintiffs moved for default judgment, seeking $750 in design patent damages. Specifically, the plaintiffs argued that they were entitled to $250 under § 289, which the court should treble pursuant to § 284:

Moreover, because this case involves allegations—now deemed true—concerning willful infringement, this Court should award enhanced damages of three times the statutory minimum requested under 35 U.S.C. § 284, for a total of $750. See, Halo Electronics, Inc. v. Pulse Electronics, Inc., 831 F.3d 1369, 1381 (Fed Cir. 2016) (“the subjective willfulness of a patent infringer, intentional or knowing, may warrant enhanced damages” under § 284).

The court agreed and awarded the plaintiffs $750 for design patent infringement—contrary to clearly-established Federal Circuit law.

Design patent owners are entitled to all the remedies that utility patent owners are entitled to, including “damages adequate to compensate for the infringement, but in no event less than a reasonable royalty” under 35 U.S.C. § 284. But for certain acts of infringement, design patent owners can elect to recover a different monetary remedy, set forth in 35 U.S.C. § 289:

Whoever during the term of a patent for a design, without license of the owner, (1) applies the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale, or (2) sells or exposes for sale any article of manufacture to which such design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit, but not less than $250, recoverable in any United States district court having jurisdiction of the parties.

Nothing in this section shall prevent, lessen, or impeach any other remedy which an owner of an infringed patent has under the provisions of this title, but he shall not twice recover the profit made from the infringement.

Thus, in cases where § 289 applies, the patent owner is entitled to the infringer’s “total profit” for the “article of manufacture to which the infringed design has been applied,” Samsung Elecs. Co. v. Apple Inc., 137 S. Ct. 429, 436 (2016), but in any case, no less than $250. (If you’re wondering, Congress set this minimum amount in 1887 and hasn’t updated it since.) 

Importantly, while § 284 explicitly allows a court to “increase” an award under that section “up to three times,” § 289 contains no such language. Therefore, in 1992, the Federal Circuit ruled that judges may not treble § 289 awards. Braun Inc. v. Dynamics Corp. of Am., 975 F.2d 815, 824 (Fed. Cir. 1992). 

Of course, litigants are free to argue that settled law is wrong. But there’s no indication that’s what happened here. The plaintiffs’ motion for default judgment made no mention of Braun and the district judge did not appear to be aware of it, either. 

This case is a good reminder of the need for both litigants and judges to closely read the applicable statutory provisions and not assume that principles in utility-patent cases automatically or necessarily apply in design patent cases.

New Papers on FRAND, SEP Issues, Part 1

1.  Liyang Hou and Mengchi Tian have posted a paper titled IPR Protection and Antitrust Regulation of SEPs in China.  Here is a link, and here is the abstract:

This chapter explores the practice of IPR protection and antitrust regulation of standard essential patents (SEPs) in China and discusses whether the licensing of SEPs should be regulated in a way different from other patent cases. With regard to IPR protection, the Chinese judiciary has actively taken a role in patent infringement trials. Differences are observed in SEP infringement lawsuits as compared to ordinary patent cases in terms of non-infringement defense, counter-injunction defense, and damages. In relation to antitrust regulation, the Chinese competition agencies and the courts have mainly focused on price-related abuses and SEP-related merger review, and paid particular attention to the possibility of SEP holders leveraging, tying SEPs with non-SEPs, and charging high royalty fees. Since SEPs have raised a different issue than other types of IPRs, a delicate balance between protecting the private interest of the SEP holders and the public interest of standardization will have to be re-struck.

Hat tip to Danny Sokol for first mentioning this article on the Antitrust & Competition Policy Blog.

2.  Juan Martinez has published a paper titled FRAND as Access to All versus License to All in the July 2019 issue of GRUR Int (pp. 630-40).  Here is the abstract:

In the last few decades, cellular standardised technology has experienced an impressive (r)evolution.  This is mainly due to the success of open standardisation marked by the commitment of some companies to contribute their best innovative technologies to standards and to make them accessible to all on Fair, Reasonable, and Non-Discriminatory (FRAND) terms and conditions.  Recently, a discussion has emerged on whether such commitment implies that the patent holder has an obligation to license everyone across the supply chain ('license to all') or whether he is only obliged to offer everyone access to its standard essential patents through licences with end user devices ('access to all').  Also discussed is whether a requirement to grant a licence at all levels of the supply chain is legally and practically possible.  This paper will analyse the commercial licensing practice in the Information and Communication Technology field, the economic efficiencies of such licensing approaches, as well as the legal and practical implications of each of them.    

3.  Also appearing in the July 2019 issue of GRUR Int. (pp. 658-60) is an article by Franziska Kurz, Hanno Magnus, and David Berger, titled Enforcing Patents Smoothly:  From Automatic Injunctions to Proportionate Remedies.  Tagungsbericht über die Veranstaltung am 22.3.2019 an der Friedrich-Alexander-Universität Erlangen-Nürnberg, a report (in German) on the March 22 conference on injunctions held at Friedrich-Alexander-Universität.  Readers may recall that I participated in this conference, and also in one two weeks later at Ludwig Maximilian University in Munich, which resulted in this paper to be published in a forthcoming issue of  Zeitschrift für Geistiges Eigentum/Intellectual Property Journal.  For discussion elsewhere of the Erlangen conference, see here. 

4.  Finally, I would note that over the weekend Florian Mueller published a post on FOSS Patents thoroughly discussing the recent briefing on the question of whether to grant a stay pending appeal in FTC v. Qualcomm. 

Some New Papers on IP Remedies

1.  Marketa Trimble has published The Territoriality Discrepancy Between Intellectual Property Rights Infringement Claims and Remedies, 23 Lewis & Clark L. Rev. 501 (2019).  Here is a link to the paper, and here is the abstract:

When in Equustek v. Google a Canadian court ordered that Google de-list the pages of a defendant that infringed intellectual property (“IP”) rights under Canadian law, some commentators were surprised not only by the Canadian court’s assertion of personal jurisdiction over Google (a U.S. third party who was not a party to the original Canadian IP rights infringement litigation), but also by the court’s issuance of a remedy with global effects. However, global and other extraterritorial remedies are not unknown in IP rights infringement cases: U.S. courts have granted extraterritorial remedies in a number of such cases. This Article reviews the various types of “extraterritorial remedies”— which the Article defines as remedies that reach beyond the territorial scope of the underlying claim—and points out the problems caused by the resulting territorial discrepancy between the territorial scope of claims and the territorial scope of the remedies. The existing literature and international treaty negotiations have not focused on these remedies, which are typically discussed as part of the category of cross-border remedies. The Article explores the phenomenon of the territorial discrepancy and considers the ways in which the problems generated by the territorial discrepancy might be addressed.

I mentioned an earlier draft of the paper here.

2.  Jason Reinecke has published a note titled Lost Profits Damages for Multicomponent Products: Clarifying the Debate, 71 Stan. L. Rev. 1621 (2019).  Here is a link to the paper, and here is the abstract:

In Mentor Graphics Corp. v. EVE-USA, Inc., the Federal Circuit determined that the “but for” compensatory damages test applies to the calculation of lost profits damages in patent infringement cases involving multicomponent products. The court rejected defendant Synopsys’s argument that because multicomponent products necessarily have many important features beyond the one or two that are infringing, the plaintiff should only be awarded the portion of the compensatory damages apportionable to the infringing features. Although some scholars have supported the decision, many believe that the Mentor Graphics rule will overcompensate patentees, and that an apportionment rule is preferable.

This Note offers a comprehensive economic framework for implementing the Mentor Graphics “but for” compensatory damages scheme in scenarios that were not before the court in Mentor Graphics but which will arise in the future. By exploring the implications of this framework, this Note provides needed clarity to the Mentor Graphics debate. First, it shows that a properly constructed compensatory damages rule and the apportionment rule advocated for by Synopsys and many scholars operate far more similarly than commentators currently believe.

Second, this Note shows that if the proposed framework is adopted, then each of the concerns expressed by scholars over the Mentor Graphics rule would either be alleviated, overstated, or in need of some revision. It concludes by clarifying exactly what might still remain concerning about the Mentor Graphics rule.

I previously mentioned this paper here. 

3.  Veena Tripathi has published a note titled Halo from the Other Side: An Empirical Study of District Court Findings of Willful Infringement and Enhanced Damages Post-Halo, 103 Minn. L. Rev. 2617 (2019).  Here is a link, and here is the abstract:

The United States patent system is designed to reward inventors and patent holders who contribute novel, impactful, and non-obvious work. To maintain this system, Congress authorized damages as a remedy for infringed inventions. Whether compensatory or punitive, the system’s main goal is to prevent the proliferation of unwanted “infringing” behavior. Outside of that guidance, there is little definition of what qualifies as egregious behavior, thereby leaving lower courts significant discretion to decide how much to award in damages. Integral to the allocation of damages is the standard by which courts evaluate egregious, or “willful,” behavior. This standard has changed several times over the past few decades. With its 2016 decision in Halo Electronics v. Pulse Electronics, the Supreme Court provided further guidance to lower courts on how to evaluate claims of infringement. However, critics of Halo argue that the decision did not make a difference in the outcome of cases and the subsequent award of damages. As of yet, there are no comprehensive studies that evaluate the effect of the Halodecision on findings of willfulness and enhanced damages.

This Note fills that void by conducting the first comprehensive empirical study of willfulness and enhanced damages post-Halo. It examines cases from two years before and two years after the Halo decision and asks the question: did Halo matter? Ultimately, the study concludes that findings of willfulness are distinctly different before and after Halo. Additionally, the standard has led to increased findings of enhanced damages. This study concludes by discussing the various implications of the new standard and areas for future research.

I was pleased to supervise Ms. Tripathi's paper during her second year of law school, and to have her as a student in both my patents and patent remedies courses.  Good luck with the bar exam next week!

The U.K. Supreme Court's Damages Decision in Morris-Garner

I mentioned a few months back (here) an analysis by Michael Burdon, published by Rose Hughes on the IPKat Blog, discussing the problems inherent to having courts in one country determine the terms of a global FRAND license (as in Unwired Planet, which is now on appeal to the U.K. Supreme Court).  My post noted, among other matters, Mr. Burdon's citation to a 2018 U.K. Supreme Court decision, Morris-Garner v One Step Ltd [2018] UKSC 20, which had previously escaped my attention.  Morris-Garner was a breach of contract decision, but the opinions discuss at great length, and with citation to several U.K. patent cases, the availability in some instances of "notional" or "user" damages, which are similar to the concept of a reasonable royalty under U.S. law.  I'd recommend that anyone interested in a serious analysis of this concept take a look at the decision, which includes a majority opinion authored by Lord Reed and separate opinions by Lords Sumption and Carnwath.  Lord Reed's opinion summarizes his conclusions as follows:

95. The foregoing discussion leads to the following conclusions:

(1) Damages assessed by reference to the value of the use wrongfully made of property (sometimes termed “user damages”) are readily awarded at common law for the invasion of rights to tangible moveable or immoveable property (by detinue, conversion or trespass). The rationale of such awards is that the person who makes wrongful use of property, where its use is commercially valuable, prevents the owner from exercising a valuable right to control its use, and should therefore compensate him for the loss of the value of the exercise of that right. He takes something for nothing, for which the owner was entitled to require payment.

(2) Damages are also available on a similar basis for patent infringement and breaches of other intellectual property rights.

(3) Damages can be awarded under Lord Cairns’ Act in substitution for specific performance or an injunction, where the court had jurisdiction to entertain an application for such relief at the time when the proceedings were commenced. Such damages are a monetary substitute for what is lost by the withholding of such relief.

(4) One possible method of quantifying damages under this head is on the basis of the economic value of the right which the court has declined to enforce, and which it has consequently rendered worthless. Such a valuation can be arrived at by reference to the amount which the claimant might reasonably have demanded as a quid pro quo for the relaxation of the obligation in question. The rationale is that, since the withholding of specific relief has the same practical effect as requiring the claimant to permit the infringement of his rights, his loss can be measured by reference to the economic value of such permission.

(5) That is not, however, the only approach to assessing damages under Lord Cairns’ Act. It is for the court to judge what method of quantification, in the circumstances of the case before it, will give a fair equivalent for what is lost by the refusal of the injunction.

(6) Common law damages for breach of contract are intended to compensate the claimant for loss or damage resulting from the non-performance of the obligation in question. They are therefore normally based on the difference between the effect of performance and non-performance upon the claimant’s situation.

(7) Where damages are sought at common law for breach of contract, it is for the claimant to establish that a loss has been incurred, in the sense that he is in a less favourable situation, either economically or in some other respect, than he would have been in if the contract had been performed.

(8) Where the breach of a contractual obligation has caused the claimant to suffer economic loss, that loss should be measured or estimated as accurately and reliably as the nature of the case permits. The law is tolerant of imprecision where the loss is incapable of precise measurement, and there are also a variety of legal principles which can assist the claimant in cases where there is a paucity of evidence.

(9) Where the claimant’s interest in the performance of a contract is purely economic, and he cannot establish that any economic loss has resulted from its breach, the normal inference is that he has not suffered any loss. In that event, he cannot be awarded more than nominal damages.

(10) Negotiating damages can be awarded for breach of contract where the loss suffered by the claimant is appropriately measured by reference to the economic value of the right which has been breached, considered as an asset. That may be the position where the breach of contract results in the loss of a valuable asset created or protected by the right which was infringed. The rationale is that the claimant has in substance been deprived of a valuable asset, and his loss can therefore be measured by determining the economic value of the right in question, considered as an asset. The defendant has taken something for nothing, for which the claimant was entitled to require payment.

(11) Common law damages for breach of contract cannot be awarded merely for the purpose of depriving the defendant of profits made as a result of the breach, other than in exceptional circumstances, following Attorney General v Blake.

(12) Common law damages for breach of contract are not a matter of discretion. They are claimed as of right, and they are awarded or refused on the basis of legal principle.

Lord Sumption, by contrast, sees the user principle as having applicability in

a very disparate group of cases governed by different principles and not always consistent among themselves. The case law can be conveniently be categorised under three heads: (i) cases in which damages are not limited to pecuniary loss, because the claimant has an interest in the observance of his rights which extends beyond financial reparation; (ii) cases in which the claimant would be entitled to the specific enforcement of his right, and the notional release fee is the price of non-enforcement; and (iii) cases in which the claimant has suffered (or may be assumed to have suffered) pecuniary loss, and the notional release fee is treated as evidence of that loss. Clear analysis requires a distinction to be made between these cases. But it does not require principles to be formulated for one category without regard to those which apply to another. The law should develop coherently across different categories. It should not be allowed to fragment into self-contained sectors governed by arbitrary rules which have little relationship to the task in hand or to the principles applied in cognate areas (para. 109).

Thus, he would regard user damages as, in some instances, serving "as an evidential tool for assessing a party's true loss in appropriate cases" (para. 123).  

Lord Carnwath summarizes the differences between Lord Reed's and Lord Sumption's opinions, and states why he joins in the former.  Toward the very end of his opinion, he also expresses some views about the use of post-breach evidence:

153. Finally, I would add a comment on an issue mentioned by Lord Reed (para 56), but not treated by him as needing to be resolved in this appeal. Lord Sumption touches on the same issue, noting that the hypothetical release fee is “normally to be assessed at the time of the breach” (para 108). He cites the statement by Neuberger LJ in Lunn Poly Ltd v Liverpool and Lancashire Properties Ltd [2006] 2 EGLR 29, para 29:

“Given that negotiating damages under the Act are meant to be compensatory, and are normally to be assessed or valued at the date of breach, principle and consistency indicate that post-valuation events are normally irrelevant. However, given the quasi-equitable nature of such damages, the judge may, where there are good reasons, direct a departure from the norm, either by selecting a different valuation date or by directing that a specific post-valuation-date event be taken into account.” . . .

156. Neuberger LJ referred in particular to AMEC Development v Jury’s Hotel Management (UK) Ltd (2001) 82 P & CR 22. The judge (Anthony Mann QC, sitting as a Deputy High Court judge) noted that Brightman J in Wrotham Park (p 815H) had taken as his starting point for the hypothetical negotiation the profit which the developer “with the benefit of foresight” would have assumed. As the deputy judge commented, Brightman J seems to have imagined a negotiation before the infringement, but using actual profits as evidence of what the parties would have contemplated “before they actually accrued”. He took this as showing that the negotiation analysis need not be pursued “rigorously to its logical end”, and that he was not required to “guess at something which events have in fact made certain” (para 13).

157. While declining to lay down any “firm general guidance”, Neuberger LJ did not accept the deputy judge’s approach as generally applicable. Once the court had decided on a particular date of valuation, “consistency, fairness and principle” pointed against ignoring factors existing at that date or taking account of factors which occurred afterwards (para 29). He then set out what he regarded as “the proper analysis” in the passage cited above. As can be seen, he saw the “quasi-equitable” nature of the jurisdiction as permitting a relatively flexible approach, guided only (it seems) by whether the judge sees “good reasons” to direct a departure from the norm.

158. In my view, the more detailed examination by this court of the subject of “negotiating damages” allows for more precise and principled guidance. Here again there are useful statutory parallels. The Bwllfa case (Bwllfa and Merthyr Dare Steam Collieries Ltd (1891) v Pontypridd Waterworks Co [1903] AC 426) established that, in assessing compensation for loss caused by limits to mine-working imposed under a statutory notice, the arbitrator was entitled to take account of evidence of increase of prices since the date of the notice; he was “not required to conjecture on a matter which has become an accomplished fact” (p 431 per Lord Macnaghten). That was in a case where, as Lord Robertson observed (p 432) the statutory compensation was not for an assumed sale of the coal at the date of the notice, but for “a continuing embargo on working”.

159. In the same way, in the present context account must be taken of the nature of the claim. Under the user principle, whether as applied to the taking of a horse or infringement of a patent, the inquiry is as to the price or fee that the defendant would have been expected to pay at the time of the taking or the infringement. Logically the assumed knowledge should be limited to that which was available to the parties at the time. The position is different where the award is by way of compensation for the refusal of an injunction. This is a reflection not simply of the more flexible (“quasi-equitable”) nature of the jurisdiction, but (as Lord Reed explains: para 47) the different bases of the awards: “past, on the one hand, and future or continuing, on the other”. Where the causes of the claimant’s loss are not limited to past breaches, but include the judge’s refusal of an injunction to restrain future breaches, there is no reason in principle to exclude information available to the parties up to the time of the judge's decision.

Lord Carnwath's views seem consistent with the current approach of the Federal Circuit in the U.S., but different from the views Norman Siebrasse and I have expressed elsewhere (see here); see also pp. 53-57 of Patent Remedies for Complex Products.

There also have been a couple of articles published recently in EIPR discussing this case, which I may have more to say about in due time.

Not particularly relevant to damages, but having little knowledge of the Welsh language, I would greatly appreciate guidance from readers on how to pronounce the names in paragraph 158 of Lord Carnwath's opinion, particularly Bwllfa ("bool-fa"?).  

FTC Files Brief Responding to Qualcomm, DOJ et al.

Here is a link to the Federal Trade Commission's brief in response to Qualcomm's motion for a partial stay pending appeal.  The brief also responds to the arguments raised in the DOJ's filing last week, that Judge Koh's order threatens national security (see here and here).  From the FTC brief:

If Qualcomm and the DOJ contend that any antitrust remedy that diminishes Qualcomm’s corporate profits constitutes an impermissible threat to national security, that argument is misplaced. Congress determined, in enacting the Sherman Act, that competition furthers the public interest . . . .

Moreover, the apparent assertion by DOJ and its supporting declarants that Qualcomm should be shielded from any financial consequences for violating the antitrust laws—as opposed to identifying specific national security concerns with specific provisions of the remedy—is, in essence, an assertion that Qualcomm should be immune from antitrust scrutiny. But antitrust immunity can only be conferred through the processes established by Congress. .  .  . If  legitimate national security objectives require subsidizing Qualcomm, and taxing Qualcomm’s rivals and United States consumers to do so, there are proper political channels for pursuing those objectives. Interference in the judicial resolution of an action to enforce the antitrust laws is not one of them (pp. 23-24).

For further discussion in Law360, see here.

Mr. Justice Henry Carr

I was sorry to hear this morning that Mr. Justice Henry Carr has died.  He was a highly regarded justice of the Patents Court of England and Wales, and in recent months had presided over hearings in Conversant and TQ Delta.   Here is the announcement from Courts and Tribunals Judiciary.

Sherliker on the Court of Appeals Decision in TQ Delta

On IPKat, Tristan Sherliker has an informative post on the July 11 decision of the Court of Appeal for England and Wales, cancelling the RAND trial Mr. Justice Birss had scheduled in TQ Delta v. ZyXEL.  In U.S. parlance, I think we would say there is no longer a case or controversy in the U.K.--and that, as a result, the court may not declare what the terms of a RAND license would be outside the U.K., notwithstanding Unwired Planet.

I don't have anything to add just now, but commend Mr. Sherliker's discussion to readers' attention. 

More on FTC v. Qualcomm

Further analysis of the DOJ's Statement of Interest, which I discussed here and here, can be found on today's FOSS Patents and on Law360 (which quotes me).  Also, for anyone who's interested, here are the briefs filed, respectively, by Ericsson and by former Chief Judge Paul Michel in support of Qualcomm.  I come away from the latter more convinced that ever that the people who agree with Qualcomm and the DOJ believe that if they keep repeating the same tired arguments over and over, never bothering to actually engage the people who disagree with them (see, e.g., here and here), that everyone will start to believe it . . . . 

Also, there have been some nice tributes to the late Justice Stevens across the media spectrum.  Here's a link to another Law360 story, which quotes me among others on Justice Stevens's impact on IP law.

DOJ Statement of Interest in FTC v. Qualcomm

Here's a copy, along with the supporting affidavits from the Department of Defense and the Department of Energy.  Coverage also on Bloomberg and Law360.  These materials lay it on a bit thick, in my opinion:  "A hobbled Qualcomm, without the ability to make significant investments in R&D, presents a serious threat to DoD's extensive networks, advanced telecommunications systems, and ultimately its ability to control the battlespace"; "Any measure that inappropriately reduces Qualcomm's revenue substantially, and hence its ability to invest in R&D and standard setting activities, could harm national security"; "The Department [of Energy] believes that any remedy that cause undue financial strain on Qualcomm may result in undermining Qualcomm's position int he growing 5G market (among other telecommunications markets) and ceding to foreign entities, in particular China, a dominant position in the development and expansion of 5G technology." 

Breaking News # 2: Justice Stevens Dies

As readers may already have seen, former U.S. Supreme Court Justice John Paul Stevens has died at the age of 99.  (He had just recently come out with a new book, The Making of a Justice:  Reflections on My First 94 Years.)  Over the course of his long career on the bench, he authored many important opinions, including some on IP and antitrust.  Sometimes I agreed with him, sometimes I didn't, but I think he will long be remembered as a voice of reason.  

On a personal note, I had the honor of meeting Justice Stevens once, back in 1987, when he interviewed me for a clerkship.  I didn't get the job--I'm sure there were other candidates much more qualified than I was--but it was a thrill for me nonetheless.  The thing I will remember most is when he showed my a baseball he kept on his desk, autographed by his (and my) favorite team, the Chicago Cubs.  

Rest in peace, Justice Stevens. 

 

Breaking News # 1: DOJ Files Statement of Interest, Again, in FTC v. Qualcomm

I just saw this on Twitter, reported by Bloomberg's Victoria Graham.  The Antitrust Division wants the Ninth Circuit to stay the injunction.  (As Yogi Berra would say, it's déjà vu all over again.)  The Division also is representing that the Department of Defense "firmly believes that any measure that inappropriately limits Qualcomm's technological leadership, ability to invest in research and development (R&D), and market competitiveness, even in the short-term, could harm national security."  I'm having a hard time wrapping my head around the idea that national security requires that we throw antitrust law under the bus, but we'll see. 

Federal Circuit Issues Slightly Revised Opinion in SRI v. Cisco

I blogged about the original panel opinion in March (here), stating:

On willfulness, the court concludes that the evidence did not permit the inference that Cisco willfully infringed during the entire time period that finding covered, and remands for further proceedings . . . .

Surprisingly, perhaps, since fees often are not awarded to the plaintiff unless the infringement was willful, the court affirms the exceptionality finding, though it remands for a recalculation . . . .

On Friday, the court issued a revised opinion modifying the portion of the opinion addressing attorneys' fees.  Here is the relevant portion of the original opinion: 

. . . To meet the abuse-of-discretion standard, the appellant must show that the district court made “a clear error of judgment in weighing relevant factors or in basing its decision on an error of law or on clearly erroneous factual findings.” Bayer, 851 F.3d at 1306 (quoting Mentor Graphics, 150 F.3d at 1377); see also Highmark, 572 U.S. at 563 n.2.

We see no such error in the district court’s determination that this was an exceptional case. The district court found:

There can be no doubt from even a cursory review of the record that Cisco pursued litigation about as aggressively as the court has seen in its judicial experience. While defending a client aggressively is understandable, if not laudable, in the case at bar, Cisco crossed the line in several regards.  Post-Trial Motions Op., 254 F. Supp. 3d at 722.

The district court further explained that “Cisco’s litigation strategies in the case at bar created a substantial amount of work for both SRI and the court, much of which work was needlessly repetitive or irrelevant or frivolous.” Id. at 723 (footnotes omitted). Indeed, the district court inventoried Cisco’s aggressive tactics, including maintaining nineteen invalidity theories until the eve of trial but only presenting two at trial and pursuing defenses at trial that were contrary to the court’s rulings or Cisco’s internal documents. Id. at 722. The district court concluded that all of this, in addition to the fact that the jury found that Cisco’s infringement was willful, led it to exercise its discretion pursuant to § 285 to award SRI its attorneys’ fees and costs. Id. at 723. We conclude that the district court did not abuse its discretion in so finding (pp. 22-23).

Here is the modified opinion, with the new matter in boldface:

. . . To meet the abuse-of-discretion standard, the appellant must show that the district court made “a clear error of judgment in weighing relevant factors or in basing its decision on an error of law or on clearly erroneous factual findings.” Bayer, 851 F.3d at 1306 (quoting Mentor Graphics, 150 F.3d at 1377); see also Highmark, 572 U.S. at 563 n.2.

We see no such error in the district court’s determination that this was an exceptional case. The district court found:

There can be no doubt from even a cursory review of the record that Cisco pursued litigation about as aggressively as the court has seen in its judicial experience. While defending a client aggressively is understandable, if not laudable, in the case at bar, Cisco crossed the line in several regards.
Post-Trial Motions Op., 254 F. Supp. 3d at 722.

The district court further explained that “Cisco’s litigation strategies in the case at bar created a substantial amount of work for both SRI and the court, much of which work was needlessly repetitive or irrelevant or frivolous.” Id. at 723 (footnotes omitted). Indeed, the district court inventoried Cisco’s aggressive tactics, including maintaining nineteen invalidity theories until the eve of trial but only presenting two at trial and pursuing defenses at trial that were contrary to the court’s rulings or Cisco’s internal documents. Id. at 722. Nevertheless, the district court relied in part on the fact that the jury found that Cisco’s infringement was willful in its determination to exercise its discretion pursuant to § 285 to award SRI its attorneys’ fees and costs. Id. at 723. Accordingly, we vacate the district court’s award of attorneys’ fees and remand for further consideration along with willfulness (pp. 22-23, emphasis added).

So, unless I'm missing something, that's it.  I'm having a bit of a hard time wrapping my head around the simultaneous affirmation that there was "no . . . error in the . . . determination that this was an exceptional case," and the decision to remand to determine if the decision to award fees was based on an incorrect determination of willfulness; but I think the court is saying that the exceptionality finding can stand, but that the possible lack of willfulness should factor in to the determination whether to award fees.

Ninth Circuit Expedites Appeal in FTC v. Qualcomm

A copy of the order granting an expedited appeal is available here.  Qualcomm's opening brief is due on August 9, the FTC's on October 4, and Qualcomm's reply brief on October 25.  Story on Law360 (behind a paywall) here.

STRONGER Patents Act Would Revive Presumption of Injunctive Relief

Senator Coons and Representative Stivers have reintroduced their Support Technology & Research for Our Nation’s Growth and Economic Resilience (STRONGER) Patents Act.  Here is the text of the bill.  (Bloomberg Law and IP Watchdog also have posts, with useful links.)  The bill, like the previous version, would partly overrule eBay by creating a presumption in favor of injunctive relief (more precisely, upon finding the patent valid and infringed, the court would presume irreparable injury and inadequacy of remedies at law).  I wrote about last year's version of the bill here.

As I've said in the past, neither eBay itself nor the courts' application of it is perfect; but the eBay standard is an improvement over the near-automatic granting of injunctions that we had in place before.  I worry that the bill's presumption of injunctive relief, unless further clarified, could be interpreted in a manner that would make it unduly difficult to avoid granting injunctions in cases where there is a substantial risk of holdup.  (Is it a rebuttable presumption?  By what standard--preponderance or clear-and-convincing evidence?  What evidence would be sufficient to rebut?)  Further, the evidence so far does not indicate that eBay has had a negative effect on U.S. innovation--indeed, the contrary appears to be true.  And prevailing patent owners still get injunctions in the majority of cases in which they seek them (contrary to the statement on IP Watchdog about "permanent injunctions being overwhelmingly denied since eBay").  But why let facts get in the way of ideology?

For my most recent article on the economics of injunctions in patent law, see here.

Patent Remedies and Complex Products: Open Access Link

Recently I mentioned the publication of Patent Remedies and Complex Products:  Toward a Global Consensus (Brad Biddle, Jorge L. Contreras, Brian J. Love & Norman V. Siebrasse eds., Cambridge Univ. Press 2019).  I coauthored several of the chapters, and I am delighted to see the work in print.  You can obtain a hard copy from CUP, Amazon, or other sellers, but as I mentioned before the book is also available on an open-access basis.  The open-access link on CUP's webpage doesn't appear to be working as of right this moment (July 9, 2019, 12:40 p.m. Central Time), but Brian Love has provided this direct link.  So, I hope readers will take a look, and as I said before, reviews are welcome.

Folliard-Manguiral and Tréfigny on the Cour de Cassation's Profits Decision

A few weeks ago I published a post titled "Vigand and Raynard on the Cour de Cassation's Profits Decision," discussing a recent article in the May 2019 issue of Propriété Industrielle (pp. 21-25) that included the text of a Cour de cassation decision, Carrera SARL et Texas de France SAS v. Muller et Cie, PIBD No. 1112, III, 120 (Jan. 23, 2019) which I had previously blogged about, with commentary by Privat Vigand and Jacques Raynard.  I realized the other day that I missed another article in the same journal, by Arnaud Folliard-Manguiral and Pascale Tréfigny, on the same case (but published underneath the heading "Marques et autres signes distinctifs," that is, "Marks and other distinctive signs," which is why I didn't read it initially).  The article is titled Les chefs et critères de l'indemnisation en matière de contrefaçon . . .  ("The heads and criteria for compensation in regard to infringement"), and can be found at pp. 25-27.  The authors state that, while the Carrera case involves patent rights, "the sanction for infringement is treated the same way whatever may be the right concerned (author's rights, trademarks, design rights, patents, geographical indications, etc.") (my translation).  They note that there was a failure of proof here on moral prejudice, but that the court recognized that such harm could in principle exist (in the form of loss of credit, reputation, or any other "extrapatrimonial" harm).  They also appear to read the decision as standing for the proposition that it is appropriate to take the infringer's profit into consideration, in crafting an appropriately compensatory remedy.

Breaking News: Judge Koh Denies a Stay Pending Appeal in FTC v. Qualcomm

Not a big surprise, in my opinion.  Story here on Bloomberg Law, here on Reuters. and here on FOSS Patents.  For previous discussion of the briefs filed in connection with Qualcomm's motion for a stay, see FOSS Patents posts here, here, and here.

Cotter on the Economics of Injunctions

I recently posted on ssrn a draft of a paper titled On the Economics of Injunctions in Patent Cases.  This paper is based on the presentations I gave at two conferences earlier this year, “Enforcing Patents Smoothly: From Automatic Injunctions to Proportionate Remedies,” held at Friedrich-Alexander Universität Erlangen-Nürnberg, and “Injunctions and Flexibility in Patent Law–Civil Law and Common Law Perspectives,” held at Ludwig Maximilian University in Munich.  (For previous discussion of these conferences, see here and here.)  I understand that my paper will be published in a forthcoming issue of the German journal Zeitschrift für Geistiges Eigentum/Intellectual Property Journal.  Anyway, here is a link to the ssrn version, and here is the abstract:

Courts in many countries continue to follow the traditional practice of awarding the prevailing patent owner a permanent injunction, absent exceptional circumstances. First-generation law-and-economics scholarship, building on Calabresi and Melamed’s work on property and liability rules, largely supported this practice, based upon the perceived advantages of injunctions (as opposed to damages awards) in inducing bargaining and reducing valuation errors. More recent scholarship, however, has questioned the wisdom of automatic injunctions, particularly in cases in which the conditions conducive to patent holdup are present—among them, cases involving standard essential patents, patents incorporated into complex, multipatent devices, and actions brought by patent assertion entities.

Building upon this more recent work, I argue that the social benefits and costs of injunctions vary depending on the circumstances. To assist policymakers in rendering decisions in the real world, I propose two simplifying assumptions that would enable courts to compare the expected cost of holdup with the expected cost of valuation error. A simple set of recommendations follows, namely that courts generally should (1) grant injunctions when the probability of holdup is low, and (2) deny them when the probability of holdup is great and the expected harm from valuation error low to moderate. For indeterminate cases—for example, when the probability of holdup and the expected harm from valuation error are both high—courts can mitigate both risks to some degree by granting injunctions subject to stays pending design-around.

Also on the topic of injunctions, readers may be interested in IP2Innovate's document titled Supporting Innovation in Germany Through a Balanced Patent System, which argues for (1) legislation authorizing German courts to take proportionality into account in deciding whether to grant injunctions, and listing some relevant factors; (2) reducing the effect of the "injunction gap," that is, the time between the conclusion of infringement and validity proceedings (which are bifurcated in Germany); and (3) requiring PAEs to post bonds to cover attorneys' fee awards.