Thursday, April 30, 2020

Competing Perspectives on "License to All" Versus "Access to All" Under EU Law

The question of whether owners of FRAND-committed SEPs are obligated, under E.U. law, to license their SEPs to suppliers (e.g., component manufacturers) at any level of the supply chain who want one ("license to all") or only to, say, end users ("access to all"), is a topic of discussion in the following papers, which reach quite different conclusions.  (For previous discussion of "license to all" versus "access to all," see also this article by Judge Thomas Kühnen, which I mentioned here in November.) 

1.  Damien Geradin has posted a paper on ssrn titled SEP Licensing After Two Decades of Legal Wrangling:  Some Issues Solved, Many Still to AddressHere is a link to the paper (previously noted on FOSS Patents), and the abstract is below.  The discussion of "license to all" versus "access to all" comes mostly toward the end of the paper.
This paper explores where we stand after two decades of European Commission investigations, substantial patent litigation in national courts, and a major judgement of the Court of Justice of the European Union devoted to SEP licensing and its relationship with EU competition law. As will be seen, while consensus has been reached over several issues, a lot remains to be done. This paper is divided in four parts. Part II describes the issues that have been addressed, albeit not always satisfactorily, by competition authorities and courts over the past years. Part III discusses some of the SEP licensing issues that still largely need to be solved with a focus on six questions: (i) what is the nature of the FRAND commitment?; (iii) what is a FRAND license?; (ii) should the gaps left by the CJEU in Huawei v. ZTE be filled and if so how?; (iv) can a court that finds that local SEPs have been infringed force the infringer to take a global license on pain of an injunction?; (v) access for all v. license to all: What are the obligations of the SEP holder?; and (vi) how should SEP licensing adapt the IoT context? Part IV concludes. 
2.  Jean-Sébastien Borghetti, Igor Nikolic, and Nicolas Petit have posted a paper titled FRAND Licensing Levels Under EU LawHere is a link to the paper, and here is the abstract:
 This paper investigates whether EU or national law provide legal authority to impose a direct or indirect obligation on Standard Essential Patent (“SEP”) holders to license at all levels of the value chain, including at component level (“license to all”, hereafter LTA). Extensive analysis of EU text and case-law (general principles of EU law, patent, contract and competition laws) suggests that there are only very limited doctrinal grounds to impose an LTA obligation on SEP holders that made a FRAND commitment. Similarly, French contract law – which applies to FRAND-committed SEP before the European standard setting organisation ETSI – does not give rise to a legal basis for the introduction of a ‘license to all’ regime. In the rare cases where licensing obligations might be imposed on SEP holders, these would effectively be akin to compulsory licensing, where public policy calls for restraint.
3.  Florian Mueller also has a recent post relevant to this issue on FOSS Patents, see here

4.  In other FRAND-related news, Enrico Bonadio and Luke McDonagh have published a post titled on the Kluwer Patent Blog.  The post expresses the authors' hopes and expectations for a report, expected later this year, on licensing and valuation of SEPs. to be published by an E.U. Group of Experts.

Friday, April 24, 2020

Federal Circuit Affirms Denial of Injunction

The Federal Circuit has been keeping me unusually busy this week with a number of remedies-related opinions.  Today's entry is Verinata Health, Inc. v. Ariosa Diagnostics, Inc., nonprecedential opinion by Judge Reyna, joined by Judges Wallach and Hughes.  Verinata, a wholly-owned subsidiary of Illumina (also a party plaintiff), makes and sells tools for DNA analysis.  Illumina owns the ’794 patent, directed to DNA assay optimization techniques, and Verinata owns the ’430 patent, "which is directed to methods for NIPT screening of fetal chromosomal abnormalities."  The plaintiffs filed suit against defendants Ariosa and its parent company Roche:
The jury returned a verdict finding the ’430 patent not invalid and infringed by the Harmony V1 product and the ’794 patent not invalid and infringed by both the Harmony V1 and Harmony V2 products; that Ariosa did not have an express license to the Harmony V1 product under the SSA [sale and supply agreement]; and that Illumina did not breach the SSA by suing Ariosa. The jury awarded plaintiffs approximately $27 million in damages (p.10).
Most of the opinion discusses validity and infringement, and affirms the district court judgment on these issues.  Important though these issues are, I will skip over them and focus on remedies.  Apparently there was no dispute on appeal over the amount of the compensatory damages (other than prejudgment interest, as noted below), so the only major issue is whether the district court abused its discretion by denying a permanent injunction.  The Federal Circuit says no:
Regarding irreparable injury, Illumina argues that the district court failed to recognize that Roche and Illumina are direct competitors and that Roche’s infringement causes irreparable injury because each sale made by Roche is a sale forever lost by Illumina. . . . Illumina argues that the district court’s understanding of ActiveVideo Networks, Inc. v. Verizon Communications, Inc., 694 F.3d 1312 (Fed. Cir. 2012), was too broad and caused it to err in its conclusion of no direct competition. Id. at 26-30. We disagree.
In ActiveVideo Networks, we held a lack of direct competition is a substantial basis for finding no irreparable harm. 694 F.3d. at 1338. We reversed the injunction because the defendant (Verizon) competed with ActiveVideo’s third-party licensees but not with the patentee (ActiveVideo). Id. The harm to ActiveVideo was therefore indirect, and ActiveVideo’s loss was a “[s]traightforward monetary harm” and “certainly not irreparable.” Id. Here, the district court found that Illumina licenses its patents and products under the SSA, allowing third party laboratories to conduct their own tests. . . . The district court also found that Ariosa does not utilize a licensing model but instead sells its Harmony V2 test directly. Id. Relying on ActiveVideo, the district court found that the different sales models evidenced a lack of direct competition because defendants compete with Illumina’s licensees. Id. The district court concluded that defendants’ losses would be quantifiable based at least on licensing fees per lost subscriber. . . . As we find no reason to disturb the district court’s findings on irreparably injury, we turn to the next eBay factor, available remedies.
Illumina argues that the district court erred by finding that monetary relief would be adequate. Illumina reasserts that the district court erred in its reliance on ActiveVideo and its reasoning that, where licensees compete with the infringer, royalties are adequate forms of compensation. See J.A. 60 (citing ActiveVideo, 694 F.3d at 1338). As noted above, the district court’s reliance on ActiveVideo does not constitute an abuse of discretion. And Illumina does not challenge the district court’s finding that third-party licensees compete with Ariosa. . . . Because Illumina failed to establish irreparable injury and inadequacy of monetary relief, the district court did not abuse its discretion in denying Illumina’s request for a permanent injunction (pp. 20-21).
As readers of this blog are aware, I believe that the eBay standard is an improvement over the near-automatic injunction rule that preceded it; but I believe that an even better standard would be one that focused on economic substance, rather than a slog through the eBay factors.  For that reason, I've long had some reservations over the court's analysis in ActiveVideo, which is reaffirmed here.  Here's my reasoning.  On the one hand, I can see the logic of assuming that, where the plaintiff licenses its patent to third-party licensees, the infringement deprives the plaintiff of the royalty it would have earned from authorized sales by those licensees; so there's no uncertainty over the amount the plaintiff lost.  But I'm not sure that the presence of third-party licensees necessarily dictates that result.  I would want to know, for example, whether the plaintiff licensed to any company that wanted a license; if so, whether it charged them all the same rate; whether the licenses were exclusive or nonexclusive; whether the plaintiffs considered licensing this defendant on the same or similar terms, or on other terms; and whether there was any reason to think that patent holdup was a serious concern (e.g., the defendant was unable to bargain prior to launch, the product embodies numerous other patented features, etc.).  To be fair, the lower court opinion does appear to address some of these issues (see here, pp. 57-61), finding that Illumina did want to license the defendant and others on a nonexclusive basis.  I just wish the Federal Circuit had noted these points too (though I recognize this is a nonprecedential opinion).  

The other remedies issues relate to supplemental damages and interest.  First, the court declines to decide whether supplemental damages are appropriate here, since this issue was raised for the first time on appeal.  Second, the court rejects the plaintiff's argument that the district court erred in its use of the T-bill rate rather than the prime rate, stating that "[d]istrict courts have wide latitude in the selection of interest rates" (p.21).

Thursday, April 23, 2020

U.S. Supreme Court: Willfulness Is Not Required for an Award of Profits for Trademark Infringement

Here is a link to the opinion in Romag Fasteners, Inc. v. Fossil Group, Inc., the latest in a series of ill-considered Supreme Court I.P. opinions opting for (what I can only guess will be) some sort of amorphous totality of the circumstances test.  Justice Gorsuch wrote the opinion, joined by all of the justices except Justice Sotomayor, who concurs separately (see below).  Justice Alito, joined by Justices Breyer and Kagan, joins the majority opinion but also concurs separately.  

The whole thing, including the two concurrences, comes to just 12 pages, and is yet another misguided, purportedly textualist opinion that relies on Black's Law Dictionary while ignoring the relevant underlying policies.  To be sure, the opinion does concede that "it is a principle long reflected in equity practice where district courts have often considered a defendant’s mental state, among other factors, when exercising their discretion in choosing a fitting remedy," and that "given these traditional principles, we do not doubt that a trademark defendant’s mental state is a highly important consideration in determining whether an award of profits is appropriate."  It concludes, however:
But acknowledging that much is a far cry from insisting on the inflexible precondition to recovery Fossil advances.
With little to work with in the statute’s language, structure, and history, Fossil ultimately rests on an appeal to policy. The company tells us that stouter restraints on profits awards are needed to deter “baseless” trademark suits. Meanwhile, Romag insists that its reading of the statute will promote greater respect for trademarks in the “modern global economy.” As these things go, amici amplify both sides’ policy arguments. Maybe, too, each side has a point. But the place for reconciling competing and incommensurable policy goals like these is before policymakers.This Court’s limited role is to read and apply the law those policymakers have ordained, and here our task is clear.
Right.  The Court's task is so "clear" that this issue has divided the lower courts and ultimately made its way to the Supreme Court.  It's all just a matter of reading the statute.

To say I am disgusted would be an understatement.

Of course, just four years ago the Court reaffirmed in Halo v. Pulse that enhanced damages for patent infringement are available only for "willful," "egregious" misconduct; and yet the text of section 284 of the Patent Act says nothing about willfulness or any other state of mind.  Concededly, the majority noted that this was the long-standing practice of the courts prior to the 1952 codification, and assumed that Congress legislated against that backdrop.  In the present case, the majority views the pre-Lanham Act caselaw are being more ambiguous on this point.  If you think through the logic of Halo, though, courts must have developed the willfulness criterion on their own at some point, for it to have formed the backdrop against which Congress legislated in 1952.  My point is that this modern emphasis on text, text, text, which is hardly limited to the IP realm, has long seemed to me to be completely ahistorical and--let's not mince words--ultimately politically motivated.
The concurring opinion by Justice Alito, at least, hedges a bit, stating that "The relevant authorities, particularly pre-Lanham Act caselaw, show that willfulness is a highly important consideration in awarding profits under §1117(a), but not an absolute precondition. I would so hold and concur on that ground."

Justice Sotomayor's opinion, concurring in the judgment only, highlights what I fear could be the impact of the majority's opinion going forward.  She writes:
I agree that 15 U. S. C. §1117(a) does not impose a “willfulness” prerequisite for awarding profits in trademark infringement actions. Courts of equity, however, defined “willfulness” to encompass a range of culpable mental states—including the equivalent of recklessness, but excluding “good faith” or negligence. See 5 McCarthy on Trademarks and Unfair Competition §30:62 (5th ed. 2019) (explaining that “willfulness” ranged from fraudulent and knowing to reckless and indifferent behavior) . . . .
The majority suggests that courts of equity were just as likely to award profits for such “willful” infringement as they were for “innocent” infringement. . . . But that does not reflect the weight of authority, which indicates that profits were hardly, if ever, awarded for innocent infringement. . . . Nor would doing so seem to be consistent with longstanding equitable principles which, after all, seek to deprive only wrongdoers of their gains from misconduct. . . . Thus, a district court’s award of profits for innocent or good-faith trademark infringement would not be consonant with the “principles of equity” referenced in §1117(a) and reflected in the cases the majority cites. . . .
Because the majority is agnostic about awarding profits for both “willful” and innocent infringement as those terms have been understood, I concur in the judgment only.
Update (4-24-2020):  Professor Pam Samuelson has an excellent post on Patently-O this morning, which notes that the majority opinion characterizes disgorgement of the infringer's profits as an equitable remedy.  Her post also cites to her forthcoming article, coauthored with Mark Gergen and John Golden, on disgorgement in IP cases, which I highly recommend.  IP Watchdog has two posts on the Romag decision (here and here), expressing a variety of views. 

Wednesday, April 22, 2020

Federal Circuit Affirms Damages Judgment Despite Invalidity of One of Two Patents in Suit

The case is Hologic, Inc. v. Minerva Surgical, Inc., opinion by Judge Stoll.  This a complicated case, but basically its boils down to the following.  An inventor, Truckai, procured two patents, one including certain method claims and one a device claim.  He assigned the two patents to an assignee, and eventually they were acquired by Hologic.  Hologic later asserted that Truckai's firm, Minerva, was infringing the two patents.  Minerva petitioned for inter partes review of the two patents in suit.  The PTAB instituted review of the patent that includes the method claims in suit, and found those claims invalid; it did not institute review of the other patent.  The Federal Circuit, in a previous opinion, affirmed.  But before that happened, the district court entered summary judgment of validity and infringement, and held a trial on damages.  The jury awarded lost profits for a portion of the infringing sales and a reasonable royalty for the remainder, without distinguishing between the two patents.

Under Federal Circuit precedent, the doctrine of assignor estoppel precludes the defendant here from asserting the invalidity of the patents in suit as a defense to infringement.  However, the doctrine doesn't apply to IPRs. The defendant therefore asserts that the district court is bound by the doctrine of collateral estoppel to respect the PTAB finding, affirmed on appeal, of invalidity as to the method claims.  On appeal, the Federal Circuit agrees.  

One can debate the merits of this outcome as a matter of policy, but this blog is about damages, so I'll focus on the damages issues.  The most important of these is whether the damages case must be retried because the jury didn't distinguish between the valid and (subsequently determined to be) invalid patent.  The Federal Circuit says no:
“The general rule is that when a ‘jury was told it could rely on any of two or more independent legal theories, one of which was defective,’ the general verdict must be set aside.” WesternGeco L.L.C. v. ION Geophysical Corp., 913 F.3d 1067, 1073 (Fed. Cir. 2019) (citations omitted). “In a situation—such as this one—where the jury rendered a single verdict on damages, without breaking down the damages attributable to each patent, the normal rule would require a new trial as to damages.” Verizon Servs. Corp. v. Vonage Holdings Corp., 503 F.3d 1295, 1310 (Fed. Cir. 2007) (citing Memphis Cmty. Sch. Dist. v. Stachura, 477 U.S. 299, 312 (1986)); see also DDR Holdings, LLC v., L.P., 773 F.3d 1245, 1262 (Fed. Cir. 2014) (vacating the damages award upon holding the claims of one of the two patents-in-suit invalid as anticipated and noting that its decision “could warrant a new trial on damages” (citing Verizon, 503 F.3d at 1310)).
We have recognized, however, an exception to this general rule. A single damages award “can be sustained” if, despite the fact that some of the asserted claims were held invalid or not infringed subsequent to the award, “undisputed evidence” demonstrated that the sustained patent claim was necessarily infringed by all of the accused activity on which the damages award was based. WesternGeco, 913 F.3d at 1074. In such cases, “we apply a harmlessness analysis similar to our approach in the case of erroneous jury instructions.” Id. (citation omitted); see also Chrimar Holding Co., LLC v. ALE USA Inc., 732 F. App’x 876, 886 (Fed. Cir. 2018) (holding that a new trial to determine damages on a patent-by-patent basis was unnecessary because the same royalty damages applied whether the claims of one or three asserted patents were infringed). For the reasons that follow, we conclude that a departure from the general rule is warranted in this case.
In each of WesternGeco, Verizon, and DDR, this court vacated the damages award and remanded to the district court to determine in the first instance whether a new trial on damages was warranted based on this court’s invalidity or noninfringement ruling. See WesternGeco, 913 F.3d at 1075; Verizon, 503 F.3d at 1310; DDR, 773 F.3d at 1262. By contrast, the district court in this case addressed the issue of apportionment and determined that the jury verdict on damages was “adequately supported by the finding of infringement of Claim 1 of the ’348 patent.” JMOL Op., 2019 WL 1958020, at *3. The district court’s determination is supported by undisputed evidence. Hologic’s damages expert explained to the jury that the same royalty rate he used in his damages calculation would apply to either the ’183 patent or ’348 patent, “individually or the two patents collectively,” since they “both cover the entire procedure and device respectively.” J.A. 30439 at 1084:7–25. The expert was then cross-examined about his reasoning. Thus, Hologic presented evidence to the jury that the damages award could be supported if either or both of the ’183 and ’348 patents’ claims were infringed and valid. Minerva did not present any contrary evidence. Accordingly, we conclude that a departure from the general rule requiring a new trial is warranted in this case.
Minerva asserts that it asked for a jury instruction on apportionment but that its request was denied. The district court reasoned, however, that Minerva had not presented any evidence to the jury explaining why apportionment was necessary. . . . When asked during oral argument on appeal whether there was any evidence on apportionment other than the testimony by Hologic’s expert, Minerva’s counsel could not identify anything in the record. . . . Likewise, following oral argument, this court did not receive any supplemental briefing identifying any testimony or other evidence to rebut Hologic’s expert’s testimony.
Because Hologic’s expert’s testimony remains undisputed, we see no error in the district court’s conclusion that the jury’s royalty award should stand. We have considered Minerva’s additional arguments concerning the jury’s damages award, including its award of lost profits, but we do not find them persuasive. Accordingly, we affirm the district court’s denial of Minerva’s motion for judgment as a matter of law of no damages or, alternatively, for a new trial on reasonable royalty damages (pp. 21-23).
The court also rejects various arguments relating to the award of supplemental damages (damages for infringing acts from April 1, 2018 to November 19, 2018).  Nevertheless, it finds that the district court erred in using the date of judgment on the jury verdict (August 13, 2018) as the date from which to calculate pre- and postjudgment interest on the supplemental damages, because for interest on the supplemental award the relevant date is the date of entry of the judgment on supplemental damages (here, June 3, 2019). 

Tuesday, April 21, 2020

Another Federal Circuit Decision on Final Judgments and Attorneys' Fees

In the past two weeks, the Federal Circuit has decided two cases, in O.F. Mossberg & Sons, Inc. v. Timney Triggers, LLC., and Keith Mfg. Co. v. Butterfield, which reach (arguably) different conclusions regarding whether a voluntary dismissal counts as a final judgment for purposes of determining whether a case might qualify as "exceptional," and therefore potentially meriting an award of attorneys' fees, under Patent Act section 285.  (For my previous post on Mossberg, see hereMossberg involved a unilateral dismissal, Keith a stipulated dismissal.)  Today's entry is Dragon Intellectual Property, LLC v. Dish Network LLC.  The precedential opinion is by Judge Moore, joined by Judges Lourie and Stoll.  

Dragon filed an infringement action against several defendants, but (1) following the district court's claim construction, the parties stipulated to noninfringement and the patent owner appealed the adverse claim construction ruling; (2) the PTAB found the claims in suit invalid; and (3) the Federal Circuit affirmed the PTAB ruling and held that the appeal from the district court action was now moot.  Meanwhile, the defendants had moved for an award of fees, but following the Federal Circuit appeal the patent owner moved to vacate the district court judgment and dismiss the case as moot.  The district court vacated the noninfringement judgment as moot, and concluded that the defendants were not entitled to fees, because "they were not granted 'actual relief on the merits'" (p.5).  The defendants appealed this ruling, and the Federal Circuit vacates and remands:
We have held that “a defendant can be deemed a prevailing party even if the case is dismissed on procedural grounds rather than on the merits.” See, e.g., B.E. Tech., L.L.C. v. Facebook, Inc., 940 F.3d 675, 678–79 (Fed. Cir. 2019). . . . 
We held that “even though the mootness decision was made possible by winning a battle on the merits before the PTO,” Facebook was a prevailing party because it “rebuffed B.E.’s attempt to alter the parties’ legal relationship in an infringement suit.” Id. at 679. Although B.E. Technology involved the interpretation of prevailing party under Fed. R. Civ. P. 54(d), we see no meaningful distinction that would warrant a different interpretation under § 285. . . . Therefore, consistent with our decision in B.E. Technology, we hold that DISH and SXM are prevailing parties. Accordingly, we vacate and remand the district court’s order denying Appellants’ motions for attorneys’ fees under 35 U.S.C. § 285.
The court also remands for the district court to consider the defendants' request for fees to compensate for their PTAB proceeding, while cautioning that it sees no basis for such an award under section 285.  Note, by the way, that the court's statement that there is no meaningful distinction between the meaning of "prevailing party" under FRCP 54(d) and section 285 disposes of one potential ground (as noted, though rejected, by Dennis Crouch) for reconciling the outcomes of Mossberg and Keith.

Monday, April 20, 2020

Federal Circuit on Enhanced Damages, Postjudgment Interest

This morning the Federal Circuit handed down a nonprecedential opinion in WCM Industries, Inc. v. IPS Corp.  The opinion is by Chief Judge Prost, joined by Judges Linn and Taranto.  This is the second time this case has come before the Federal Circuit.  A little over two years ago, the court affirmed a finding of willfulness but vacated the award of enhanced (treble) damages,  on the ground that the district court did not give adequate attention to some of the Read v. Portec factors.  (See my previous blog post here.)  On remand, the district court awarded a slightly lower enhancement (2.5 times the actual damages, see district court opinion here), and the Federal Circuit rejects the defendant's arguments that the lower court still paid inadequate inattention to some of the enhancement factors.  The court reverses the award of postjudgment interest, however, on the ground that the district court used the wrong date for the accrual of these damages:
We apply the regional circuit’s law when reviewing the accrual date for post-judgment interest. Taltech Ltd. v. Esquel Enters. Ltd., 604 F.3d 1324, 1335 (Fed. Cir. 2010). The Sixth Circuit applies the rationale of Kaiser Aluminum & Chemical Corp. v. Bonjorno, 494 U.S. 827 (1990), to determine when post-judgment interest starts accruing. See Adkins v. Asbestos Corp., Ltd., 18 F.3d 1349, 1351 (6th Cir. 1994). Under Bonjorno, post-judgment interest starts accruing from the date that the judgment is “meaningfully ascertained.” Adkins, 18 F.3d at 1351–52 (quoting Bonjorno, 494 U.S. at 836). A damages award is not meaningfully ascertained if it is not supported by the evidence. See id. (citing Bonjorno, 494 U.S. 830–31). . . .
Here . . . the enhanced damages award was not subsequently modified by a distinct and easily determinable amount. Rather, in WCM I we vacated the entirety of the enhanced damages. . . . Our WCM I decision did not merely ask the district court to reduce the amount of enhancement by a distinct amount, but rather required the district court “to reconsider . . . the amount by which the damages should be enhanced, if at all.” Id. (emphasis added)). Further, as WCM stated in its brief, “the district court made additional factual findings” to comply with our mandate. Appellee’s Br. 8 (capitalization normalized). Accordingly, we conclude that the enhanced damages were not sufficiently ascertained as of December 4, 2015.
. . . We therefore determine that the post-judgment interest on the enhanced damages should have started accruing from the district court’s March 14, 2019 decision.

Friday, April 17, 2020

From Around the Blogs, Part 2

1.  On IPKat, Marie Barani published a post titled Sisvel v. Sun Cupid: a Dutch SEP injunction absent any counterclaim.  Apparently the defendant put up no defense, not even sending a lawyer to the hearing.   Ms. Barani concludes "Given the lack of evidence in support of a number of the claims made by Sisvel (and the lack of defence from the defendants), the decision seems quite favourable to the patent-holder: the finding of infringement is based only on the standard implementation, it provides for the notification, recall and destruction of products (subject to certain limits) and gave the patent owner the election as to how to calculate damages."

2.  On IP Watchdog, McCord Rayburn published a post titled Your Licensees' Patent Marking Program Is Also Your Concern.  The post discusses the Federal Circuit's recent decision in Arctic Cat Inc. v. Bombardier, in which the court held that the patent owner could not recover damages for a period of time during which its licensee did not mark the patented articles it was licensed to make.  Mr. Rayburn provides some helpful advice to patent owners, including ensuring that one's licensees are marking products by including such an obligation in the license agreement, and monitoring licensee conduct. 

For my post on the Arctic Cat decision, see here.  For Dennis Crouch's take on the case, in which he argues (citing a law review article by Michael McKeon) that it actually may be inconsistent with a very old Supreme Court decision on marking, see here.

3.  On Sufficient Description, Norman Siebrasse published a post this morning titled The “Would Have” Branch of the Non-Infringing Alternative Analysis.  The post discusses the question of how to determine whether a proposed noninfringing alternative (NIA) should count, for purposes of calculating patent damages.  The Canadian courts follow what might be described as a "could" and "would" approach which focuses both on whether the NIA could have been available and whether the infringer would have resorted to it.  The latter question in turn raises the issue of whether the infringer's non-economic motivations for avoiding the alternative should matter.  Professor Siebrasse argues they should not, and I agree.     

4.  Finally, on the Kluwer Patent Blog, Jonathan Ross published a post titled   The post discusses a recent decision of the Court of Appeal for England and Wales affirming the denial of a motion to dismiss an action for  an Arrow declaration.  Specifically, according to the opinion, "Mexichem wishes to be free to market [refrigerants] ze and yf in the UK for use in MACs [mobile air-conditioning systems].  In addition to seeking to revoke the six patents in suit, Mexichem is also concerned that Honeywell has at least four other divisional patent applications in the pipeline undergoing examination in the European Patent Office.  In order to protect itself against the possible impact of the grant of patents in the future on those further applications, Mexichem has sought declaratory relief aimed at establishing that the mere idea of using ze or yf in a MAC was obvious at particular dates." For previous mention of Arrow declarations on this blog, see, e.g., here and here.  One of these days, however, I should devote more sustained attention to this topic, which appears to be quite distinct from declaratory judgments in the U.S.

Wednesday, April 15, 2020

From Around the Blogs, Part 1

1.  On Sufficient Description, Norman Siebrasse published a post titled Market Share Expert Not Required for Market Share Damages Analysis.  The post discusses a recent (Canadian) Federal Court of Appeal case, DNOW Canada ULC v. Estate Grenke, 2020 FCA 61, which concludes that the patent owner could recover market share damages based on testimony from a witness who is neither an accountant nor an economist, but who is knowledgeable about the relevant industry.  The court also affirms the general principle that the prevailing patent owner can recover its lost profits on lost sales of convoyed goods, but concludes that the evidence here was insufficient to establish the necessary causal link.

In a subsequent post, Professor Siebrasse discusses Evolution Technologies Inc v Human Care Canada Inc 2019 FCA 11, in which the Federal Court of Appeal granted a stay of judgment pending appeal.  Applying the Cyanamid factors, the court concludes that the defendant faced irreparable harm if it were required to pay the judgment and be excluded from the market pending appeal.  The balance of convenience factor therefore also favored the defendant.  The decision was only recently published; and, as it turns out, the defendant actually did succeed on appeal.

2.  On Law360, Brian Johnson published an article titled Asserting RAND Defenses at the ITC: 3 Common Pitfalls.  Mr. Johnson states that "Reasonable and nondiscriminatory defenses at the U.S. International Trade Commission have always been rocky territory, but perhaps never more than they are now."  He discusses "three pitfalls for respondents to avoid," namely forfeiting the ability to assert a RAND defense, failing to demonstrate that RAND agreements are enforceable, and failing to show that the patents in suit are essential. 

3.  Also on Law360, Greg Schodde and Amber Carpenter published an article titled Strategies for Discouraging Nuisance Patent Suits. The authors argue that courts should consider steps to discourage nuisance suits by PAEs, including greater use of fee shifting, expedited hearings on dispositive issues such as claim construction, and centralized multidistrict consolidation.

Monday, April 13, 2020

Federal Circuit: No Fee Award Following Voluntary Dismissal

The Federal Circuit this morning handed down a short precedential opinion in O.F. Mossberg & Sons, Inc. v. Timney Triggers, LLC.  The opinion is by Judge Hughes, joined by Judges Lourie and Reyna.  The basic facts are as follows.  The patent owner filed suit against the defendant in 2012.  The defendant responded by filing a petition for reexamination with the USPTO, after which the district court stayed the action.  Eventually, the PTAB concluded that the challenged claims were invalid, and the plaintiff voluntarily dismissed the district court action pursuant to Federal Rule of Civil Procedure 41.  The district court entered an order dismissing the action without prejudice.  The defendant then filed a motion for attorneys' fees, which was denied.  The Federal Circuit affirms, concluding that in cases like this one there is no final judgment which could provide a basis for characterizing the action as an exceptional case:
Under § 285, a court may award reasonable attorney’s fees to the prevailing party in an exceptional patent infringement case. 35 U.S.C. § 285; see also Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 553−54 (2014). The Supreme Court has said that “the touchstone of the prevailing party inquiry must be the material alteration of the legal relationship of the parties. This change must be marked by judicial imprimatur.” CRST Van Expedited, Inc. v. E.E.O.C., 136 S. Ct. 1642, 1646 (2016) (internal quotation marks and citation omitted). In CRST, in the context of a claim for attorney’s fees under Title VII, the Court held that a defendant may be “prevailing” for purposes of attorney’s fees “even if the court’s final judgment rejects the plaintiff’s claim for a nonmerits reason.” Id. at 1651. . . .
But the issue here is not whether there was a final decision on the merits. It is whether there was a final decision at all. Neither CRST, nor Raniere, nor B.E. Technology went so far as to hold that one could become a prevailing party without a final court decision. E.g., CRST, 136 S. Ct. at 1651 (holding that a “defendant has . . . fulfilled its primary objective whenever the plaintiff’s challenge is rebuffed, irrespective of the precise reason for the court’s decision,” and that a “defendant may prevail even if the court’s final judgment rejects the plaintiff’s claim for a nonmerits reason” (emphases added)).
In this case, there was no such final court decision. A properly filed Rule 41(a)(1)(A)(i) voluntary dismissal becomes effective immediately upon plaintiff’s filing of the notice of dismissal. See Fed. R. Civ. P. 41(a)(1)(A) (for voluntary dismissals by the plaintiff “Without a Court Order,” the plaintiff may “dismiss an action without a court order” (emphasis added)). Although the district court in this case entered a dismissal order after Timney filed its notice of voluntary dismissal, that dismissal order had no legal effect. That leaves only the stay, which cannot “change . . . the legal relationship of the parties,” Raniere, 887 F.3d at 1306, because it remained in place while the parties de-termined the patent’s validity in a separate venue—the Patent Office. And the stay did not change the legal relationship between the parties; the Board’s invalidity decision and Mossberg’s voluntary Rule 41(a)(1)(A)(i) dismissal did. A stay, standing alone, is simply not a final court decision capable of establishing the judicial imprimatur required for a litigant to emerge as the prevailing party under § 285.
Update (4/14/2020):  Dennis Crouch has an interesting post on this case over at Patently-O.  Professor Crouch notes some tension between the outcome in this case and another Federal Circuit decision handed down last week, Keith Mfg. Co. v. Butterfield, which however involved a dismissal with prejudice.  For his post on Keith, see here.  Tiffany Hu also has an extensive analysis of Mossberg on Law360, here.

Thursday, April 9, 2020

Federal Circuit Vacates Preliminary Injunction in Case Alleging Wrongful Accusation of Infringement

The opinion, published last Friday, is Myco Industries, Inc. v. BlephEx LLC, and is authored by Judge O'Malley, joined by Judges Newman and Taranto.   The facts, in brief, are as follows.  Myco alleges that BlephEx publicly accused Myco of infringing BlephEx's patent for a method for treating blepharitis, a condition that affects the eyelid.  Myco thereafter filed suit in federal district court, requesting a declaratory judgment that it neither directly nor indirectly infringes the relevant patent, and that the patent is invalid; and seeking an injunction and damages for unfair competition, based on the alleged false accusation of infringement.  Of interest here, Myco sought "a preliminary injunction, seeking to bar BlephEx from (1) 'Making false allegations that Myco’s AB Max infringes the ’718 patent' and; (2) 'making baseless threats against Myco’s medical-practitioner potential customers of AB Max.'"

The district court concluded that neither Myco nor its customers were infringing; and that even if the customers were using the patented method, they were immune from suit under Patent Act § 287 (relating to medical practitioner liability).  As for the unfair competition claims:
the district court found that “[t]he record does not establish that [Myco]’s version of the facts is more credible or accurate tha[n] [BlephEx]’s.” Myco, 2019 WL 4023789, at *7. Accordingly, the district court held that it could not “establish that Defendant made any false or misleading statements about the AB Max” and concluded that Myco had “not demonstrate[d] a strong likelihood of success on its unfair competition claims.” Id. (pp. 13-14 n.3).
Nevertheless, the court entered a preliminary injunction enjoining "BlephEx, its officers, agents, and those in active concert with BlephEx 'from making allegations of patent infringement and from threatening litigation against [Myco’s] potential customers.'”  This was based on (and I'm quoting here from the district court opinion) its conclusions that
Plaintiff has demonstrated a strong likelihood of success that it is not infringing Defendant’s patent. Second, this Court has found that Plaintiff has shown that it will suffer irreparable harm absent a preliminary injunction. Third, the Court concluded that Defendant has not shown that it will face substantial harm if this Court issues a preliminary injunction. Lastly, the Court has found that both parties have public interest considerations that weigh in their favor, leaving this factor neutral. Balancing these factors, this Court concludes that the issuance of a preliminary injunction is the proper remedy. This Court will issue a preliminary injunction enjoining Defendant, its officers, agents, and those in active concert with Defendant from making allegations of patent infringement and threatening litigation against Plaintiff’s potential customers.
The Federal Circuit vacates the injunction. For one thing, the district court was incorrect in its analysis of § 287, since that statute only prevents the patent owner from obtaining a remedy against certain practitioners of medical use patents.  It does not render those practitioners' unauthorized use of a valid patent noninfringing, nor does it prevent suits against third parties for indirect infringement.  In addition, the Federal Circuit perceives some problems with the district court's claim construction analysis, which requires vacating the finding of a likelihood of success on the merits of the noninfringement claim.  Most importantly, however, the district court should not have entered the preliminary injunction absent a finding of bad faith on the part of the defendant:   
[W]hen a preliminary injunction prevents a patentee from communicating its patent rights, a court applies “federal patent law and precedent relating to the giving of notice of patent rights.” GP Indus., Inc. v. Eran Indus., Inc., 500 F.3d 1369, 1373 (Fed. Cir. 2007). In such cases, the grant of a preliminary injunction is reviewed “in the context of whether, under applicable federal law, the notice of patent rights was properly given.” Id. We have further held that “federal law requires a showing of bad faith” before a patentee can be enjoined from communicating his patent rights. Id.
A showing of “bad faith” must be supported by a finding that the claims asserted were objectively baseless. See id. at 1374. An asserted claim is objectively baseless if no rea-sonable litigant could realistically expect success on the merits. Id. (citing Prof’l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60 (1993)) (p.15).
The district court abused its discretion when it granted a preliminary injunction enjoining patentee speech without a finding of bad faith. . . . In this case, the district court neither made a finding of bad faith nor even adverted to the requirement. To the extent the court made any factual findings relevant to bad faith, moreover, the court expressly declined to find that any of BlephEx’s statements were either false or misleading. Myco, 2019 WL 4023789, at *7. This alone warrants reversal (pp. 15-16).
In conclusion:
Speech is not to be enjoined lightly. Here, there is not even a finding, let alone a finding supported by evidence and a correct view of the law, that the speech restrained was either false or misleading. The district court abused its discretion when it granted a preliminary injunction en-joining BlephEx from making allegations of patent infringement without a finding of bad faith and with no adequate basis to conclude that allegations of patent infringement would be false or misleading. It also abused its discretion in enjoining BlephEx from threatening Myco’s potential customers with litigation where there was not only no finding of bad faith but no evidence in the record that any such threats had even been made. We therefore reverse and vacate the district court’s preliminary injunction, and remand (p.25).

Monday, April 6, 2020

Cotter on Damages for Noneconomic Harm

Long-time readers may recall that I have occasionally blogged on the subject of damages for "moral prejudice" in patent (see, e.g., here, here, and here) and other bodies of IP law (see, e.g., here and here).  My coauthors and I also very briefly touched on this subject in chapter 2 of Patent Remedies for Complex Products (pp. 70-71).  I now have a new paper up on ssrn, titled Damages for Noneconomic Harm in Intellectual Property Law, 62 Hastings L.J. __ (forthcoming 2021).  Here is a link, and here is the abstract:
This article provides a comprehensive analysis of awards of “noneconomic” damages for reputational and emotional harm in intellectual property (IP) law, including trademarks, copyright and moral rights, the right of publicity, and patent law. The article discusses, among other matters, the Second Circuit’s recent decision in Castillo v. G&M Realty LP, affirming a $6.75 million award of statutory damages for the infringement of artists’ moral rights in graffiti art; the European Union’s Intellectual Property Rights Enforcement Directive and its 2016 Liffers decision, which appear to require member states to award, where warranted, noneconomic (“moral prejudice”) damages across the full range of IP cases; and some recent arguments in favor of awarding damages for emotional harm in, even, patent infringement actions. Prompted by these and other developments, I argue that courts should recognize reputational harm as a potentially cognizable injury throughout all of the branches of IP law, but that damages for emotional harm should be limited to right of publicity and moral rights matters. In addition, I discuss the various options for providing monetary relief in response to noneconomic harm, including awards of general damages, statutory damages, disgorgement of the infringer’s profits, and enhanced or punitive damages; and I conclude with a set of recommendations for crafting awards in a manner that would both vindicate the relevant, cognizable interests of plaintiffs while reducing the risks of arbitrary, uncertain, and potentially overdeterrent relief. 
I probably will be making some revisions over the coming months, and would appreciate any feedback that interested readers may have. 

Friday, April 3, 2020

IP Chat Channel Webinar on Willful Blindness and Enhanced Damages

On Thursday, April 9, from 2-3 p.m. Eastern Time, the IP Chat Channel will be hosting a webinar titled Willful Blindness and Enhanced Damages:  Litigation and Patent Search Policy.  I will be one of the speakers, along with Charlotte Jacobsen and Jenifer Ward.  Here is a link to register, and here is the description:
In its 2016 Halo v. Pulse decision, the U.S. Supreme Court relaxed the standard for finding willful infringement. Now patent owners are more likely than before to pursue a willful infringement claim and enhanced damages, yet experts say considerable uncertainty still exists as to when and how enhanced damages are to be awarded. Much of this uncertainty centers on whether the policy of forgoing patent search is equivalent to willful blindness and can lead to enhanced damages post-Halo. Testimony to the FTC and anecdotal reports indicate that, for some companies, the risks of enhanced liability from reading patents outweigh the teaching benefit those patents could otherwise provide.
Panelists include a senior IP counsel at a diversified high-tech multinational, an experienced patent litigator who has researched this issue, and a law professor specializing in patent remedies. They will analyze:
  • The current state of relevant case law, including Halo, GlobalTech, Exmark, Eko, and the gaps where case law hasn’t yet reached;
  • The factors in-house counsel must balance to determine the appropriate level of search diligence, including the industry and the risk of another patent covering R&D or new product, cost of search and of investment, and understanding of changing case law;
  • Teachings of district court cases such as Motiva Patents v. Sony Corp.; HTC Corp., Nonend Inventions N.V. v. Apple Inc., et al.; and VLSI Tech. LLC v. Intel Corp.; and
  • Evidence that a jury aware of alleged willful infringement is more likely to find infringement and ensuing defense tactics such as trying to knock willfulness allegations at the pleading stage or in summary judgment.

 For previous discussion of this topic on this blog, see here, here, and here.

Wednesday, April 1, 2020

News on SEPs from Around the Blogs

1.  Rien Boekstra has published a post on the Kluwer Patent Blog titled , discussing a recent decision of the Hague Court of Appeal affirming the denial to Sisvel of a preliminary injunction against Xiaomi for the alleged infringement of two FRAND-committed SEPs.  According to the post, the court weighed the competing interests--including the fact that the plaintiff is a nonpracticing entity--and concluded that the balance of interests weighed in favor of denying the injunction, even if one were to assume that the patents in suit were valid and infringed; and that article 9 of the EC Intellectual Property Rights Enforcement Directive "is subject to the fundamental principles of EU law, including the principle of proportionality."  Mathieu Klos also has an article on JUVE Patent, titled Court of Appeal rules Xiaomi may continue to sell products in the Netherlands.

2.  IPWatchdog and Law360 both recently published posts commending the DOJ, USPTO, and NIST Policy Statement on Injunctions and SEPs.  The first, by Robert Stoll, is titled The New U.S. Essential Patents Statement – Safeguarding the Integrity of the Patent System.  The second, by Theodore Stevenson, Nicholas Mathews, and Patrick Pijls, is titled New US Policy on SEP Remedies Restores Critical Balance.  As readers of this blog are aware, I disagree with these views, and would note once again that (fortunately, in my view) the policy statement does not have the force of law.  For previous discussion, see here, here, here, and here.