New Papers, Posts on FRAND

1.  J. Gregory Sidak has published an article titled What Makes FRAND Fair?  The Just Price, Contract Formation, and the Divison of Surplus from Voluntary Exchange, 4 Criterion J. Innov. 701 (2019).  Here is a link to the paper, and here is the abstract:

Long before anyone understood what an economist does and why it might matter, Saint Thomas Aquinas had already endeavored to define “the just price.” Seven centuries after Aquinas opined on the just price there emerged a new institution of capitalism, the standard-setting organization (SSO), which by contract typically obligates the owner of standard-essential patents (SEPs) to offer to license its SEPs on fair, reasonable, and nondiscriminatory (FRAND) terms to willing implementers of the standard. (It is notable that some SSOs require that licenses to SEPs be offered on merely reasonable and nondiscriminatory (RAND) terms.) SSOs generally permit each SEP holder to set a FRAND royalty for its SEPs through private bilateral negotiations with each implementer, rather than require the SEP holder to post tariffed rates for all customers. Such voluntary exchange benefits both parties, who divide their aggregate gains from trade, which economists call surplus. This economic principle—that voluntary exchange is mutually beneficial—is as profound as it is simple, and for that reason economists call it, “The Fundamental Theorem of Exchange.”

This question of the meaning of a fair price turns out to have very real legal ramifications in the present day. Rarely do I disagree with Judge Richard Posner, but I do with respect to his view that “fair” is surplusage in the FRAND contract. Judge Posner, sitting by designation as the trial judge in Apple, Inc. v. Motorola, Inc. in 2012 in the Northern District of Illinois, said that, in the context of FRAND, “the word ‘fair’ adds nothing to ‘reasonable’ and ‘nondiscriminatory.’” My previous writings have followed this convention of making no legal or economic distinction between FRAND and RAND royalties, though I have never excluded the possibility that someone might eventually make a compelling argument for why “fair” is not a throwaway word for parties to insert into a contract. And so, I have previously analyzed at length the differences between actual FRAND contracts and actual RAND contracts with respect to how fairness creeps into the constraint to license SEPs on nondiscriminatory terms. This article will show why courts should take the distinction between FRAND contracts and RAND contracts more seriously.

More than 30 years ago, Robert Frank of Cornell University proposed a precise economic definition that is directly relevant to the question of what makes a FRAND royalty fair:

Using the notions of reservation price and surplus, we can construct the following operational definition of a fair transaction: A fair transaction is one in which the surplus is divided (approximately) equally. The transaction becomes increasingly unfair as the division increasingly deviates from equality.

Frank then explained the problem that unfairness presents: “People will sometimes reject transactions in which the other party gets the lion’s share of the surplus, even though the price at which the product sells may compare favorably with their own reservation price.” This reasoning is very close to the conclusion I had reached before benefiting, late in the process of revising this article over the course of several years, from reading Frank’s 1988 book. Frank and I each find ourselves using Judge Posner as our foil, though for different reasons. Frank criticized Judge Posner’s writings through the mid-1980s as denying what Frank argued was the considerable explanatory power of fairness considerations in law and economics. In contrast, I gently chide Judge Posner for overlooking roughly 25 years later that, by the private ordering of contract law, some SSOs had chosen to impose an obligation of fairness so that (according to my economic interpretation) those SSOs could nudge parties into exercising the degree of moderation in their negotiation demands that is necessary to achieve contract formation reliably and expeditiously.

The irony is that my interpretation of why the word “fair” must have an independent meaning within the FRAND contract is quintessentially Posnerian: a division of surplus that is perceived by both parties to be fair maximizes the probability of contract formation, which in turn immediately benefits the parties to the contract. Thus, fairness clearly promotes static allocative efficiency. Moreover, across time the fairness constraint on the division of surplus also benefits countless consumers, whom the grand edifice of the FRAND contract is surely intended to benefit (though not necessarily by the formal machinery of conferring on those consumers legally enforceable rights of a third-party beneficiary, as the FRAND contract does confer on implementers). As Joseph Schumpeter taught us, it is the consumption of innovative products in the future that delivers radical—not marginal—gains in consumer surplus. Thus, the fairness constraint promotes dynamic efficiency as well. In this respect, Posner’s emphasis on efficiency and Frank’s emphasis on fairness are reconcilable. A lopsided division of surplus is a cost imposed on efficient transactions to the extent that it prevents some otherwise promising negotiations from achieving successful contract formation; if that cost can be eliminated or mitigated, a larger number of efficient transactions will occur. Therefore, regardless of whether one prefers to call it a quest for fairness or a quest for efficiency, an SSO’s constraint on the SEP holder that a royalty for its SEPs be fair is a privately ordered feature of contract—a self-imposed cattle prod—that contributes to a result that proponents of fairness and proponents of efficiency can both applaud.

Thomas Aquinas understood in the Summa Theologica that voluntary exchange produces the just price, which does not have a unique value. If, as I believe, it is more realistic to view voluntary exchange concerning the licensing of standard-essential patents as an infinitely repeated game, then one can explain the constraint of “fairness” in FRAND licensing transactions as a facilitator of efficient contract formation. This explanation does not require one to resort to any normative expression of the aesthetic features of a just or fair distribution of value within the economy. This insight also does not diminish the independent significance of fairness as a goal. To the contrary, it outlines a richer linkage between justice, innovation, and voluntary exchange than appears previously to have been appreciated by either jurists or scholars. And it suggests why the quest for a better understanding of the just price is as salient and profound today as it was in the 13^th century.

2. Also of possible interest:  Jacob Schindler published a post titled Nanjing Judge Sets Chinese SEP Rate in Dispute Between Conversant and Huawei on the IAM Blog; David Cohen published an interesting post on IP Watchdog titled Standard Essential Patents: Examining and Learning from the European Approach; JUVE Patent recently has published posts titled Mannheim Regional Court grants Sisvel injunction against Wiko; Interdigital v. Lenovo:  more SEPs at UK court; and Unwired Planet Patent Paves Way for FRAND Discussions; and another titled Navigating the Fog: SEP litigation in Europe; IPKat published a post titled Huawei makes a surprising announcement, or, the changing role of patents in the global economy; and Law 360 published an article by Ryan Richardson, Michael Specht, and Timothy Tang titled SEPs in the Wake of Qualcomm:  4 Enforcement Issues.

3.   Finally, USPTO Director Andre Iancu recently gave a speech on SEPs at the Solvay Business School in Brussels.  For coverage on Law360, see here.

Injunction Bonds and Wrongfully Issued Injunctions

Law360 published a story this week titled NJ Track Clears Hurdle In Long-Shot Bid For Betting Revenue, discussing the Third Circuit's recent decision that the New Jersey Thoroughbred Horsemen's Trade Association (NJTHTA) had been wrongly enjoined from offering sports betting, and was entitled to recover up to the amount of the injunction bond the NCAA and four professional sports leagues had posted--which, however, amounts to only $3.4 million, much less than the $150 million NJTHTA alleges it suffered as a result of the wrongly-issued injunction.  The case had nothing to with patents or other IP law, but it does call to mind the (arguable) oddity of the U.S. practice of not allowing a wrongly enjoined defendant from recovering the full extent of its damages, beyond the amount of the injunction bond.  This is something I blogged about back in 2014 (see here), where I noted that in other countries wrongly enjoined defendants in patent (and other) cases can recover beyond the amount of the bond, when necessary, and cited a law review article questioning the merits of the U.S. rule.  The Law360 article cites some other commentators suggesting that (though it's a longshot) there might be a basis for recovering above the amount of the bond if the parties seeking an injunction acted in bad faith, so it will be interesting to see what happens on remand.  Perhaps this is an area of U.S. law that needs to be reformed.

Further to this point, however, I should note that the Court of Justice for the European Union recently issued a judgment in Case C-688/17, which appears to take a restrictive view of compensation for a wrongly issued preliminary injunction in patent litigation.  There are write-ups on IPKat and Kluwer.  I haven't yet read the judgment myself--should I wait until an English version comes out, or read the French or German version now?--but will come back with something, I hope in the next week or so, after I have.

Papers on Reforming the Law of Injunctions in Germany

1.  Martin Stierle has published a paper titled Der quasi-automatische Unterlassungsanspruch im deutschen Patentrecht:  Ein Beitrag im Lichte der Reformdiskussion des § 139 I PatG ("The quasi-automatic injunction claim in German Patent Law:  A Comment in Light of the Reform Discussion of  Patent Act § 139 I"), in the September 2019 issue of GRUR (pp. 873-85).  Here is the abstract (my translation from the German):

In various foreign patent systems and in general German civil law, a new development can be perceived at present, of rendering the right to an injunction less mandatory.  To this discussion can be added also the current deliberation over reforming  Patent Act § 139 I, which in practice leads to a quasi-automatic claim for injunctive relief.  For now, four problem areas are discussed:  cases relating to non-practicing of patents, complex products, infringing implementations in which there is a heightened third party interest, and standard-essential patents (SEPs).  The limitation on the right to an injunction with regard to SEPs is clear in its basic structures, in contrast to the considerable lack of clarity regarding the other problem areas.  In these other areas the case law categorically refuses to limit injunction claims, or at least imposes an artificially high factual threshold, even while a substantial portion of the literature critically opposes an unlimited right to an injunction.  From a doctrinal perspective, the law as it exists--especially BGB § 242 in connection with the legal concept of BGB § 251 II--offers adequate possibilities for implementation, which also would permit compensation for the limitation on injunctive relief.  Nevertheless, at least for reasons of clarification, a limited exception--one that can be applied on a flexible, case-by-case basis, and allows for financial compensation as a legal consequence--should be incorporated into Patent Act § 139 I.  The procedural approaches to reform, discussed in parallel, cannot solve the substantive problem areas. 

For readers not familiar with the above provisions of German law, Professor Stierle is arguing that German courts cannot rely exclusively on the Aufbrauchfrist (grace period, stay of injunction) to alleviate the disproportionate hardship that may arise in the problem areas noted above.  Rather, the legislature should amend the German Patent Act to make it clear that in exceptional cases (the types of cases referred to above, not including SEPs which already are adequately addressed by competition law) courts may depart from the norm and award an ongoing royalty in lieu of injunctive relief.  Specifically, he would add language to the effect that the improper assertion of rights could result in the complete or partial loss of the right to an injunction; would note as possible examples the non-practicing of the patent by the owner or a third party, or disproportionate harm in special cases; would require the justifiable interests of third parties to be taken into account; and would specify that, when injunctive relief is denied, reasonable compensation can be awarded. 

2. Taking a somewhat different tack, in the same issue of GRUR (pp. 886-91), are Sascha S. Zhu and Marcel Kouskoutis, in their article Der patentrechtliche Unterlassungsanspruch und die Verhältnismäßigkeit:  Die Vollstreckungsrechtliche Lösung über die Anpassung des § 712 ZPO im Patentgesetz ("The right to an injunction in patent law and proportionality:  The execution-of-judgment solution through the adaptation of Civil Procedure Code § 712 into patent law").  Here is their abstract (again, my translation):

How can one take into account, in a balanced manner, the interests of both sides in patent cases involving claims for injunctive relief?  Aside from the approach of fundamentally altering the character of Patent Act § 139, there is the (hereinafter explained more closely) "Fine adjustment solution." This would allow courts to take into account the proportionality of legal consequences, by making temporary execution of judgments more flexible.  While the infringement plaintiff can at the latest enforce its claim for injunction before the BGH without hindrance, the courts of first and second instance can provide the defendant with reasonable protection against the drastic consequences of enforcement.

Professor Stierle, above, is less convinced about the feasibility of this solution.  

For further discussion of reform efforts in Germany, and of the Aufbrauchfrist, see my posts here and here.

Two Papers on Damages Apportionment

1.  As readers of this blog may already be aware, last week Bernard Chao posted an essay on Patently-O titled Implementing Apportionment.  The essay takes as its starting point the pending cert petition in Time Warner Cable, Inc. v. Sprint Communications Co., L.P., in which the petitioner is trying to overturn a patent damages award in the amount of $139 million.  (For my post on the Federal Circuit decision, see here.  The Scotus Blog page for the case is here.  A Law360 article also discusses Intel's amicus brief in the case.)  Professor Chao's thoughtful analysis notes that there are no easy solutions to the problem of apportioning the value attributable to the patented feature of a complex product, but along the way discusses conjoint analysis, the top-down approach, and other matters.  Definitely worth a read!

2.  Axel Gautier and Nicolas Petit have published a paper titled The Smallest Salable Patent Practicing Unit and Component Licensing:  Why $1 Is Not $1, 15 J. Compet. L. & Econ. 690 (2019).  Here is a link to the paper, and here is the abstract: 

The smallest salable patent pricing unit (SSPPU) is a valuation method used as a preliminary step toward the calculation of fair, reasonable, and nondiscriminatory royalties for licenses over standard-essential patents (SEPs). Under SSPPU, royalties should reflect the value added to the smallest salable component implementing the patented invention. In this paper, we discuss policy-making proposals to convert SSPPU into a pricing rule that not only assists the assessment of SEPs’ added value but also forces the specification of royalties terms as a share of component costs in SEP licensing negotiations. We call this new rule SSPPU+ and we show that it distorts the distribution of surplus between SEP owners and implementers by laying down a revenue cap on standardized technologies. Therefore, a change in the royalty basis is not neutral and $1 is not $1. Furthermore, SSPPU+ imposes uniform pricing of SEPs across different industries and does not allow SEP owners to take advantage of complementarities between technologies. This pleads against a generalization of SSPPU+ at early standardization and negotiation stages.

Update (September 26, 2019):  On FOSS Patents, Florian Mueller has published an interesting post on Time Warner v. Sprint.

Declaratory Judgments in China

My book Comparative Patent Remedies has a very brief discussion of declaratory judgments in China (p.361 n.132).  When I get around to publishing a second edition, I will need to take into account a recent decision of the Supreme People's Court, VMI Holland v. Safe-Run (2019).  Hui Zhang and Xiang Li recently published an informative post on the case on the Kluwer Patent Blog, titled Chinese Supreme Court Recently Clarified the Standard of Filing a Declaratory Judgment Action of Non-Infringement of Patent.  The authors lists the three requirements for bringing a declaratory judgment action in China (notice; demand to bring a lawsuit; and either a refusal to withdraw the notice or initiate a lawsuit within one month of receiving, or two months of the sending of, the demand).  They then discuss the VMI Holland decision, in which the court held that the patentee's filing of an administrative action against a distributor of allegedly infringing merchandise put the manufacturer on notice of the alleged infringement, sufficient to satisfy the first condition. 

New Papers, Posts on SEP, FRAND Issues

1.  Beatriz Conde Gallego and Josef Drexl have published an article titled IoT Connectivity Standards:  How Adaptive is the Current SEP Regulatory Framework?, 50 IIC 135 (2019).  Here is a link to the paper, and here is the abstract:

The Internet of Things is advancing as a new technological paradigm with enormous economic and societal implications. Network connectivity provides the basis. With this in mind, past and current conflicts surrounding the licensing and enforcement of standard essential patents (SEPs) in the information and communications technology (ICT) sector cast a shadow over IoT development. Focusing on the European approach based on competition law, this article explores the extent to which the existing legal framework, which has been mainly developed against the backdrop of problems in the mobile industry, will be capable of responding adequately to the challenges raised by the IoT. 

2.  Peter Picht has posted a paper on ssrn titled Confidentiality in SEP/FRAND Cases-A Criticial Overview of the Recent Legal Developments.  Here is a link, and here is the abstract:

The protection of confidential information looms large in the SEP/FRAND area. A paramount issue is the disclosure of existing license contracts to show, in negotiations or in court, the FRAND compliance of a license offer. Disclosing third-party licenses does, however, come at a cost: On a content level, such contracts oftentimes contain business secrets which neither the licensor nor the licensee wish to share. On a legal level, third-party licenses will usually contain confidentiality clauses prohibiting both parties from disclosing the contract. These aspects create an intricate tension between public and party interests. Against this background, the paper analyzes the existing case law and literature in as well as outside the SEP/FRAND context, points out recent legislative developments, and suggests some improvements to the legal framework.

3.  Jonas Block and Benjamin Rätz have published an article titled Das FRAND-Angebot – Versuch einer internationalen Definition ("The FRAND offer – an attempt at an international definition"), GRUR 08/2019, 797. Here is the abstract (authors' own English translation from the original German):

According to the CJEU’s decision in Huawei Technologies v. ZTE Corp et al, the holder of standard essential patents must submit a license offer to a potential infringer under "fair, reasonable and non-discriminatory" (FRAND) conditions in order to meet its obligations under competition law. German courts and foreign courts judge differently the requirements that such an offer has to meet. The authors therefore attempt to define the term "FRAND offer" according to the CJEU’s criteria within an international context. Firstly, they show that FRAND is to be understood as a corridor, comprising a number of different contractual arrangements. The authors then come to the conclusion that the term FRAND offer is to be understood primarily in economic terms, in that it does not constitute a new offer as understood by contract law when individual contractual modalities are in the course of contract negotiations adapted to the economic circumstances. The authors suggest that this aspect has not been sufficiently considered in recent German case law.

4.  I previously mentioned posts on IPKat and Kluwer regarding the Sisvel v. Xiaomi litigation, in which a Dutch court denied Sisvel a preliminary injunction.  Amy Sandys recently published a post as well on JUVE Patent, which places this litigation in the context of some other FRAND disputes in the Netherlands and other FRAND disputes involving these parties elsewhere.  And on IPWatchdog, James Nurton published a post titled Searching for Answers to the Standard Essential Patents Problem, which discusses, among other matters,the upcoming (in October) Unwired Planet appeal in the U.K.

Ongoing Royalties and Willful Infringement

Hat tip to Professor Michael Risch, for noting on Twitter a recent decision of the District of Delaware, Vectura Ltd. v. GlaxoSmithKline LLC, Civil Action No. 16-638-RGA.  To cut to the chase, a jury found that the defendant willfully infringed claim 3 of U.S. Patent No. 8,303,991, directed to certain "composite active particles for use in a pharmaceutical composition."  In a decision resolving various post-trial motions, however, the district court (applying the Read v. Portec factors) denied the plaintiff's motion for enhanced damages and attorneys' fees, noting among other matters the closeness of the case.  (Plaintiff was seeking a 33.3% enhancement.)  The court also denied the plaintiff's request for an ongoing (post-judgment) royalty of 4% (as compared with the 3% the jury awarded for the pre-judgment infringement).  The court denied this request as well, reasoning as follows:

. . . to determine the ongoing royalty rate, courts have used the Georgia-Pacific factors.  "Generally, the jury's damages award is a starting point for evaluating ongoing royalties." Apple, Inc., 2014 WL 6687122, at *14 (citing Bard Peripheral Vascular, Inc. v. WL. Gore & Assocs., Inc. , 670 F.3d 1171, 1193 (Fed. Cir. 2012), vacated on other grounds, 467 F. App'x 747. I must consider (1) the "change in the parties' bargaining positions, and the resulting change in economic circumstances, resulting from the determination of liability," Amado v. Microsoft Corp. , 517 F.3d 1353, 1360 (Fed. Cir. 2008), (2) "changed economic circumstances, such as changes related to the market for the patented products," XY, LLC v. Trans Ova Genetics, 890 F.3d 1282, 1297 (Fed. Cir. 2018), and (3) any other "post-verdict factor" that would impact "what a hypothetical negotiation would look like after the prior infringement verdict." Id.

Here, the parties have not addressed the Georgia-Pacific factors in full but focus on specific factors supporting a departure from the jury's verdict. Plaintiff asserts that the following factors support increasing the royalty rate above the 3% rate determined by the jury: (1) the jury has determined the '991 patent is valid and infringed; (2) the accused products are more commercially successful now than they were previously; and (3) the jury has determined that Defendants' infringement is willful. (D.I. 339 at 21).

First, I do not believe that the changed circumstances from the jury verdict and increased sales would significantly impact the post-verdict hypothetical negotiation as compared to the hypothetical negotiation considered by the jury. While Plaintiff would be in a stronger bargaining position based upon the jury verdict,^/10  I do not believe that this stronger position would allow Plaintiff to negotiate an "above-market" rate for the '991 patent. At trial, both parties' damages experts referred to a  comparable license between the parties which provided a license to Plaintiffs entire respiratory portfolio at a royalty rate of 3% with an annual worldwide cap. (D.I. 353 at 449:1-450:7, 451:34-454:8; D.I. 355 at 845:5-15, 858:11-859:8). Additionally, Defendants currently license other patents from Plaintiff at a lower 1% rate. (D.I. 353 at 500: 11-24). Plaintiff appears to tacitly agree with the assessment that without enhancement of the ongoing royalty rate for willfulness, the appropriate ongoing royalty rate is 3%. (D.I. 339 at 22).

^/10  I say this because the Federal Circuit has said this, but l am unsure of the logic behind this view. The Federal Circuit's ongoing royalty opinions suggest that it is the resolution of any uncertainty regarding validity and infringement that strengthens the patentee's bargaining position. See Amado, 517 F.3d at 1362 ("Prior to judgment, liability for infringement, as well as the validity of the patent, is uncertain, and damages are determined in the context of that uncertainty. Once a judgment of validity and infringement has been entered, however, the calculus is markedly different because different economic factors are involved."); see also Active Video Networks, In c. v. Verizon Comm 'ns, Inc., 694 F.3d 1312, 1342 (Fed. Cir. 2012) ("[W]hile it is likely true that Verizon would not have agreed to that amount prior to litigation, Verizon has been adjudicated to infringe and the patent has been held not invalid after a substantial challenge by Verizon.").

Yet, in the original hypothetical negotiation, the parties are assumed to be willing licensors and licensees and the patent is considered valid and infringed. After the trial, there is a jury verdict that the patent is valid and infringed. Thus, the jury verdict has not changed anything in that regard. In both hypothetical negotiations, the parties want to reach an agreement. The only difference is the fact of the jury verdict, but since the patent is valid and infringed in either scenario, and the parties know this, it seems to me the pressure on the infringer to take a license is the same in either hypothetical negotiation (assuming any changes in economic circumstances do not impact the negotiation). See Mark A. Lemley, The Ongoing Confusion over Ongoing Royalties, 76 Mo. L. Rev. 695, 704-05(2011); cf. Apple Inc., 2014 WL 6687122, at *2 (citing Lemley).

Defendants assert that the ongoing royalty rate should be capped consistent with the previous license agreement between the parties. (D.I. 344 at 21). Defendants note that every license agreement between the parties included a cap on royalties. (Id. at 22 ( citing testimony from both parties' experts)). I disagree. The jury considered this same evidence and concluded that an ongoing royalty of 3%^/11 would have resulted in the hypothetical negotiation of July 2016. (D.I. 321 ). I see no reason why a post-verdict hypothetical negotiation between the parties would reinstate a cap on the royalty payments, especially in light of the increased sales of the accused products and the strengthened bargaining position of Plaintiff.

^{/11While the jury was not asked to explicitly assess whether or not a cap would be appropriate on the royalty, the jury did have the option to assess a lump-sum payment for the life of the patent. Had the jury felt a capped amount was more appropriate, it could have assessed the lump-sum payment based upon the royalty cap for the remainder of the patent term. The jury did not do so. (See D.I. 321).}

Second, I do not believe that the jury's willfulness verdict would affect a post-verdict hypothetical negotiation. Nor will I enhance the ongoing royalty as the Read factors do not support such an enhancement. Additionally, as at least one court has explained: 

If it is improper to use willfulness as a basis for enhancing the ongoing royalty in a case in which an injunction has been granted and stayed, it would seem at least equally improper to use willfulness as a basis to enhance the ongoing royalty in a situation in which the equities would not even permit the issuance of an injunction  in the first place. And it may be even more improper in a case such as this one, which involves a non-competitor, in which the plaintiff chooses not to seek an injunction, and in which the defendant's continuing infringement in fact benefits the plaintiff by generating sales from which ongoing royalties can be awarded.

Erfindergemeinschaft UroPep GbR v. Eli Lilly & Co., 2017 WL 3034655, at *9 (E.D. Tex. 2017) (discussing Amado v. Microsoft Corp., 517 F.3d 1353, 1356 (Fed. Cir. 2008)). I agree with the Eastern District of Texas that willfulness is not an appropriate ground to enhance an ongoing royalty rate where the plaintiff is a non-competitor who benefits from the defendant's ongoing infringement.

Thus, I will grant Plaintiffs motion for an ongoing royalty rate of 3% to compensate Plaintiff for Defendants' post-judgment U.S. sales of the accused products through the expiration of the ' 991 patent (pp. 12-14).

Although I generally agree with the court's analysis, I do offer a few caveats.

First:  I agree with Mark Lemley (and with Judge Andrews) that when a court denies an injunction economic logic suggests that the ongoing royalty rate should be the same as the prejudgment royalty rate.  Indeed, I've said the same thing myself on numerous occasions.  As a general matter, however, the prejudgment royalty rate itself should be somewhat higher than the rate the parties would have negotiated prior to the infringement, in the real world given that (as footnote 10 indicates) the parties to a real-world license would have discounted the rate based on their views concerning the probability of noninfringement and invalidity.  The reason we calculate reasonable royalties based on the counterfactual assumption that the parties bargained knowing the patent to be valid and infringed is to avoid a double discounting problem.  In addition, real-world licensees sometimes bear risks that infringers avoid.  For these reasons, reasonable royalties generally should exceed negotiated royalties by some amount, all else being equal (though when real-world royalties are negotiated against a backdrop of potential holdup, things get more complicated still).  For discussion of the preceding topics, see Thomas F. Cotter et al., Reasonable Royalties, in Patent Remedies and Complex Products: Toward a Global Consensus 6, 23, 34-41 (Brad Biddle et al. eds. 2019)  

Second, the analysis also is a bit more complicated when there is a finding of willful infringement.  If willful infringement means that the defendant was aware of the patent before it started infringing (or otherwise committed to any particular technological path), then it's a bit hard for me to see why an injunction is improper.  Functionally, it makes sense to deny injunctions when there is a substantial risk of holdup, but when the defendant was aware of the patent before infringing it's not so clear to me that that risk is present--in which case, the social benefits of injunctions (reducing the risk of error and administrative costs in determining ongoing royalties) might outweigh the social costs.   Further, under the eBay factors, the balance of hardships arguably favors the plaintiff, if the defendant knowingly brought its own hardship on itself.  So I'm not sure why an injunction shouldn't issue in such a case.  (I haven't researched the facts of Vectura, or read the E.D. Tex. case the court cites. Maybe the plaintiff didn't request an injunction here?  Maybe it expected the court would apply the eBay factors in a less substantive, more wooden, manner?  I don't know.)

Third, though, if the court doesn't enter an injunction, I still adhere to the view that the ongoing royalty should be at the same rate as the prejudgment royalty, assuming that the latter was correctly calculated at a somewhat higher rate than a negotiated royalty would have been--which is arguably the case here, since (as footnote 11 indicates) the jury didn't impose the equivalent of the royalty cap found in some of the relevant negotiated licenses. 

Fourth,  however--and notwithstanding everything I've said so far--if the court had awarded enhanced damages for the prejudgment infringement, but still denied an injunction, would it make any sense to award a non-enhanced ongoing royalty?  I don't know; probably not.  (This appears to Professor Lemley's view as well, in the Ongoing Royalties article at pp. 702-03, if I'm reading it correctly.)  For reasons already stated, though, I would hope such cases are rare.  

Update:  Professor Erik Hovenkamp makes an interesting point in response to my fourth point above--namely that, contrary to point four, it may be better to concentrate the amount of the enhancement in the prejudgment royalties and not the postjudgment royalties.  He writes:  "In particular, a royalty will raise costs and, by extension, prices, which is bad for consumers. By contrast, damages for pre-judgment infringement are a fixed cost. In principle you could have as strong a punitive effect as you want by just increasing the latter to a sufficient extent. Then you could get your deterrence effect without having to harm consumers by increasing the post-judgment royalty rate."  I've been thinking it over, and I believe he's right.  An enhancement of the prejudgment royalty shouldn't affect the price at which the infringer will sell the infringing product, but an enhancement of the postjudgment royalty would raise the infringer's marginal cost--thus resulting in higher prices and lower output.  One possible caveat is that if the optimal penalty is more than three times the prejudgment rate, you can't concentrate all the deterrent effect in the prejudgment royalty under U.S. law--but then, it's unlikely anyone knows what the optimal penalty would be in any individual case.