Monday, August 31, 2020

Commentaries on Unwired Planet

I'll probably have something of my own pretty soon, but in the meantime here are some commentaries on the U.K. Supreme Court's decision last week in Unwired Planet v. Huawei:

1.    Jonathan Browning & Susan Decker, Huawei Loses U.K. Top Court Ruling Over Global Patent Rates, Bloomberg, Aug. 26.

4.  Bonnie Eslinger, English Courts Can Set Global SEPs Rates, Top Court Rules, Law360, Aug. 26.
7.  Alex Latham & Andrew Bowler, , Kluwer Patent Blog, Aug. 28.

Meanwhile, on August 25, Erik Puknys and Michelle Rice published a piece about the German Federal Supreme Court's decision in Sisvel v. Haier, titled German FRAND Decision May Shape Global SEP Landscape, Law360, Aug. 25.  And Enrico Bonadio and Dr. Luke McDonagh published a piece about the Mannheim District Court's Nokia v. Daimler decision, titled , Kluwer Patent Blog, Aug. 31.

Wednesday, August 26, 2020

Unwired Planet Is Out

I'm taking the week off, so I will have more to say about this next week.  But in the meantime, here is a link to the U.K. Supreme Court's webpage for Unwired Planet v. Huawei,  from which you can find the judgment and press release.  The U.K. Supreme Court affirms, holding "that the contractual arrangements ETSI has created under its IPR Policy give the English courts jurisdiction to determine the terms of a global license of a multi-national patent portfolio."

Friday, August 21, 2020

Bloomberg Law Article on Recent Federal Circuit Damages Cases

Perry Cooper has published an article in Bloomberg Law titled Sweat the Small Stuff: Lessons of Federal Circuit Damages Cases.  The article discusses six recent Federal Circuit damages opinions (most of which I also have mentioned on this blog, see here, here, here, here, and here):   Arctic Cat v. Bombardier Recreational Products Packet Intelligence v. NetScout Systems, Bio-Rad Laboratories v. 10X Genomics, Hologic v. Minerva Surgical, Hafco Foundry & Machine v. GMS Mine Repair, and WCM Indus., Inc. v. IPS Corp. The article quotes me (stating, among other things, that the opinions show how important seemingly small matters such as patent marking can be), Professor Dmitry Karshtedt, and Orrick partner Mel Bostwick. 

I plan to take a blogging break next week, August 24-28.

Thursday, August 20, 2020

SIIT Conference: The Past, 20/20, and Future of Standardisation

The 11th International Conference on Standardisation and Innovation in Information Technology (SIIT): "The Past, 20/20 and FUTURE of ICT Standardisation" will be taking place, in the virtual world, on September 2-3.  From the conference webpage:
While a regular conference turned out to be impossible given the COVID-19 situation, we were happy to see that many of the friends of SIIT felt strongly about having an alternative event this year. As a result, SIIT 2020 will comprise six online panel discussions on important current topics, featuring a number of well-known experts. The panels will take place on 2-3 September; access will be free of charge. Below are the details on the confirmed sessions (and we expect to add further details on the other sessions soon). 
I will be on the following panel:
The Future of Intellectual Property and Standards — What Do the Data Tell Us?
Time and Date: 2 September 2020, 17.00 – 18.30 CEST, 8.00am – 9.30am US PDT
Organiser: Jorge Contreras, U. of Utah, US
Justus Baron, Northwestern U., US
Rudi Bekkers, TU Eindhoven, NL
Tim Pohlmann, IPlytics, DE
Tim Simcoe, Boston U., US
Tom Cotter, U. of Minnesota, US
I hope that some of my readers will be able to attend.  As it says above "access will be free of charge" (but you do have to register).

Wednesday, August 19, 2020

From Around the Blogs: Nokia Gets Injunction Against Daimler in Germany, Bill to Limit ITC Jurisdiction, and More

1. Several commentators have noted the recent decision by the Mannheim District Court granting Nokia an injunction against Daimler in case involving a FRAND-committed SEP.  See articles on Bloomberg Law, FOSS, IPKat, Law360, and JUVE.  This certainly seems to resemble the old Orange-Book-Standard framework, more than an application of Huawei v. ZTE.  The CJEU is going to have to get involved in this topic again, I think.

2.  On Law360 Ryan Davis published a article on a bill that would make it more difficult for PAEs to initiate proceedings before the International Trade Commission, and also would highlight the Commission's obligation to consider the public interest before issuing an exclusion order.  These strike me as sound ideas.  Also on Law360 is an article by Matthew Perlman discussing whether the FTC will petition for a rehearing en banc in FTC v. Qualcomm.  It has come to light since last week that Chairman Simons is no longer recused, so this really could go either way depending on his vote.

3.  Finally, and again on Law360, Jack Lu published an article titled Can Big Damages Awards Affect Patent Valuation Dynamics?

Monday, August 17, 2020

Is Knowledge of the Patent Prior to Suit Sufficient to Withstand a Motion to Dismiss a Willfulness Claim?

According to a recent district court decision, Michigan Motor Technologies LLC v. Volkswagen Aktiengesellschaft, Case No. 19-10485 (E.D. Mich July 13, 2020), the answer is no.  (Hat tip to Professor Dmitry Karshtedt for sending me a copy of this opinion, along with a recent write-up on the Shearman & Sterling IP Blog). The court dismisses claims that the defendants willfully infringed four patents, where the second amended complaint (1) includes only conclusory allegations that the  "defendants were made aware of the patents-in-suit at least as early as March 4, 2015, when [they were] provided notice of the patents via letter", and (2) alleges that they were made aware no later than February 18, 2019, the date on which the first complaint was filed.  The court states that "The plaintiff did not attach a copy of the referenced letter, never specified what the letter stated, did not mention who sent the letter, and did not mention to whom the letter actually was sent. There are too many dots to connect before the Court can arrive at finding that the letter indeed was sent to the defendants or their agents and that it informed the defendants that they were potentially infringing on MMT’s patents."  In addition, "there are no facts in the SAC from which a factfinder could infer that the defendants deliberately copied the ideas or design of another, that the defendants had a motivation for infringing the patents, or that that they otherwise behaved poorly or acted with bad faith."  The court states that its understanding of the governing standards post-Halo v. Pulse is consistent with the majority of other district courts that have considered this issue (and with Justice Breyer's concurring opinion in Halo, which the court cites more than once), though it notes a minority view to the contrary from the Eastern District of Texas.  The court also dismisses claims for induced and contributory infringement on largely the same grounds, noting inter alia the lack of any factual allegations in support of the claim that the defendants were "willfully blind."

For previous discussion on this blog of whether post-suit conduct can suffice to support a theory of willful infringement, and of whether willful blindness is an adequate substitute for knowledge of the patent to support such a claim, see here, here, here, and here.  See also pp. 117-18 of the recently-published second edition of my casebook.

Friday, August 14, 2020

Husovec Reviews "Patent Remedies for Complex Products"

Martin Husovec has posted a review essay of the book Patent Remedies for Complex Products:  Toward a Global Consensus (Brad Biddle, Jorge L. Contreras, Brian J. Love & Norman V. Siebrasse eds., Cambridge Univ. Press 2019), titled How will the European patent judges understand proportionality?, 60 Jurimetrics __ (forthcoming 2020).  Here is a link, and here is the abstract:
Patent Remedies and Complex Products: Towards a Global Consensus is an excellent piece of scholarly work. It blends comparative and forward-looking analyses that enable rapid understanding of existing legal systems and specific problems, while keeping in mind the original goals of the patent system. In this contribution, I would like to expand on the view that courts in Europe and else-where should increasingly moderate injunctive relief beyond the confines of competition law. Concurring with this view, I will outline (1) why competition law and its framing is only a by-product of European federalism and (2) why the same federalism keeps the Court of Justice of the European Union (CJEU) from having any real impact on patent law remedies, including why proportionality as a concept needs to be clarified. 
For open access to the book itself, which won the IPKat Book of the Year Award, click here

Wednesday, August 12, 2020

A few further thoughts about FTC v. Qualcomm

1.  I've seen some speculation today whether the FTC could file a petition for rehearing en banc, or even a cert. petition.  In my comments yesterday, I was assuming that the answer was no, absent authorization from the Commission itself, which is deadlocked 2-2.  But maybe I'm wrong; maybe appellate counsel could do that on its own initiative.  I would be interested in hearing from someone who knows more about this topic.

2.  I've also seen commentary taking the court to task for two points in particular, one of which I alluded to yesterday, the other not.  The one I didn't is the court's statement at p.28 "If, in reviewing an alleged Sherman Act violation, a court finds that the conduct in question is not anticompetitive under § 1, the court need not separately analyze conduct under § 2."  To the extent this conflates the standards for liability under §§ 1 and 2, that's obviously wrong, though I think in context all the court meant is that if the plaintiff fails to prove any anticompetitive effect, as it apparently believes was the case here, it's going to fail under either provision.  Still and all, that statement does seem contrary to statements made by other courts.  See, e.g., United States v. Microsoft Corp., 253 F.3d 34, 70-71 (D.C. Cir. 2001):
On appeal Microsoft argues that “courts have applied the same standard to alleged exclusive dealing agreements under both Section 1 and Section 2,” Appellant's Opening Br. at 109, and it argues that the District Court's holding of no liability under § 1 necessarily precludes holding it liable under § 2. The District Court appears to have based its holding with respect to § 1 upon a “total exclusion test” rather than the 40% standard drawn from the caselaw. Even assuming the holding is correct, however, we nonetheless reject Microsoft's contention.
The basic prudential concerns relevant to §§ 1 and 2 are admittedly the same: exclusive contracts are commonplace—particularly in the field of distribution—in our competitive, market economy, and imposing upon a firm with market power the risk of an antitrust suit every time it enters into such a contract, no matter how small the effect, would create an unacceptable and unjustified burden upon any such firm. At the same time, however, we agree with plaintiffs that a monopolist's use of exclusive contracts, in certain circumstances, may give rise to a § 2 violation even though the contracts foreclose less than the roughly 40% or 50% share usually required in order to establish a § 1 violation. See generally Dennis W. Carlton, A General Analysis of Exclusionary Conduct and Refusal to Deal—Why Aspen and Kodak Are Misguided, 68 Antitrust L.J. 659 (2001) (explaining various scenarios under which exclusive dealing, particularly by a dominant firm, may raise legitimate concerns about harm to competition).
In this case, plaintiffs allege that, by closing to rivals a substantial percentage of the available opportunities for browser distribution, Microsoft managed to preserve its monopoly in the market for operating systems. The IAPs constitute one of the two major channels by which browsers can be distributed. Findings of Fact ¶ 242. Microsoft has exclusive deals with “fourteen of the top fifteen access providers in North America[, which] account for a large majority of all Internet access subscriptions in this part of the world.” Id. ¶ 308. By ensuring that the “majority” of all IAP subscribers are offered IE either as the default browser or as the only browser, Microsoft's deals with the IAPs clearly have a significant effect in preserving its monopoly; they help keep usage of Navigator below the critical level necessary for Navigator or any other rival to pose a real threat to Microsoft's monopoly. See, e.g., id. ¶ 143 (Microsoft sought to “divert enough browser usage from Navigator to neutralize it as a platform.”); see also Carlton, at 670.
Plaintiffs having demonstrated a harm to competition, the burden falls upon Microsoft to defend its exclusive dealing contracts with IAPs by providing a procompetitive justification for them. Significantly, Microsoft's only explanation for its exclusive dealing is that it wants to keep developers focused upon its APIs—which is to say, it wants to preserve its power in the operating system market. 02/26/01 Ct. Appeals Tr. at 45–47. That is not an unlawful end, but neither is it a procompetitive justification for the specific means here in question, namely exclusive dealing contracts with IAPs. Accordingly, we affirm the District Court's decision holding that Microsoft's exclusive contracts with IAPs are exclusionary devices, in violation of § 2 of the Sherman Act.
3.  The other principal error, which I alluded to yesterday, is the court's apparent failure to perceive that conditions imposed on the OEMs (no license, no chips; de facto exclusive dealing; incentives not to challenge Qualcomm's patents; etc.) harm not just the OEMs, but would distort the markets for CDMA and LTE modem chips, by excluding potential competition in those markets.   As I stated, "Throughout the opinion the court talks about how Judge Koh focused on the harm to OEMs and not so much on harm to the markets for CDMA and LTE modem chips (see, e.g., pp. 30-31, 36, 41, 44), but as I understood the FTC's case the theory was that the policies imposed on OEMs had the intended effect of distorting competition in those chip markets." 

Tuesday, August 11, 2020

The Ninth Circuit's Decision in FTC v. Qualcomm: A Brief Analysis

As I noted this morning, the Ninth Circuit has now issued its opinion in FTC v. Qualcomm, reversing the district court and vacating the injunction.  The opinion is by Judge Callahan, who clearly seemed to be persuaded by Qualcomm during the oral argument, joined by Judges Rawlinson and Murphy.  With the FTC itself divided 2-2 (Chairman Simon having recused himself), it looks like this will be the end of the road for this litigation.  I'm disappointed--I thought the FTC had a meritorious case, for reasons discussed here, here, and here, and I joined a brief supporting affirmance, see here--but so it goes.  Here are a few highlights from the opinion.

First, in light of its ruling on the antitrust issues, the court has vacated, as moot, Judge Koh's judgment that Qualcomm breached its contractual obligation, under the TIA and ATIS SSO policies, by not licensing rival chipmakers (opinion p.20).  So whether those policies (and other policies having similar wording) impose a license-to-all requirement, as Judge Koh found, or an access-to-all policy, as Qualcomm contended, is legally an open issue.  (For my recent thoughts on license-to-all versus access-to-all, see here.  This is becoming an extremely important issue in the 5G/connected cars sphere.)

Second, it's pretty clear that the panel has bought into the SEP owner/DOJ/George Mason Law School view of antitrust economics and of the antitrust/SEP interface.  The opinion cites with favor the Supreme Court's 5-4 decision in American Express several times, which I suppose you could say is nothing odd, since it's a Supreme Court decision; but it is an opinion that (in my view, and in the views of several leading antitrust commentators including Herb Hovenkamp and Fiona Scott Morton, see pp. 31-32 of this paper) takes a decidedly, in some ways shockingly, narrow view of the scope of antitrust.  There is also a reference to Qualcomm as "disruptive" (p.51)--inevitable, I suppose, given the author's frequent use of that term during oral argument--and the opinion is rife with quotes from commentators such as Josh Wright, Judges Paul Michel and Douglas Ginsburg, and Geoff Manne.  Part IV of the opinion sums up the panel's take:  that while "[a]nticompetitive behavior is illegal under federal antitrust law," "[h]ypercompetitive behavior is not."  Qualcomm isn't liable simply because it "acted with sharp elbows" (p.55).  Let me add, I'm not saying this is wrong, just that it kind of shows where the panel is coming from in approaching the issues here.

On the substance, the court begins by attacking what has always seemed to me to be the most vulnerable part of Judge Koh's analysis, namely that Qualcomm had (and breached) an antitrust duty to deal under Aspen Skiing (pp. 31-36).  In my view (and in the FTC's view), that holding wasn't crucial to the FTC's theory, or to the judgment; so again, I suppose, the fact that this is what the panel highlights shows you where they're coming from in approaching the issues in this case.  (I will note, however, in this regard, that Herb Hovenkamp has an interesting take on why the rationale behind Aspen actually would support Judge Koh's finding of an antitrust duty to deal--because evasion of "a FRAND requirement by licensing selectively only to noncompetitors threatens to undermine the entire competitive purpose of the [SSO] joint venture," see here at p.138.)

The panel also doesn't buy what I thought was a strong argument for the FTC--namely, that the "no license-no chips" policy in effect enabled Qualcomm to maintain its monopoly in the CDMA and LTE modem chip markets, by being able to manipulate the two components of the all-in price charged to OEMs in such a way as to discourage them from buying chips from Qualcomm's rivals.  I'm not sure whether the court simply disagrees on whether the evidence supported this theory (see p.47, citing 411 F. Supp. 3d at 800; but compare amicus brief p.15 n.8), or (with all due respect) just doesn't get how such a policy could have this impact.  Throughout the opinion the court talks about how Judge Koh focused on the harm to OEMs and not so much on harm to the markets for CDMA and LTE modem chips (see, e.g., pp. 30-31, 36, 41, 44), but as I understood the FTC's case the theory was that the policies imposed on OEMs had the intended effect of distorting competition in those chip markets.

The court also disagrees with Judge Koh's conclusion that Qualcomm's royalty rates were unreasonable, noting that in support of this conclusion she cited Federal Circuit case law on the SSPPU/entire market value rule debate, which the panel concludes is equivocal on the point (and more designed for jury trials) (see pp. 42-44).  As I recall, however, this was hardly the only evidence that Judge Koh cited that Qualcomm was charging supra-FRAND royalties.  Of course, none of that is relevant anyway if merely charging a high price is not an antitrust violation (which it isn't, in the U.S.), though again if looked at as part of the mechanism by which Qualcomm was able to manipulate the all-in price to discourage competition in the chip markets, it is.

Finally, the court shows a bit of sympathy for the FTC's de facto exclusive dealing argument (p.53 & n.24), before concluding nonetheless that the evidence didn't show that the agreements at issue foreclosed competition (p.54) or justify an injunction going forward (p.55).     

Well, as I said, I'm disappointed in the result; I think it's wrong on the economics, and ultimately sets a bad precedent by making it easier for incumbents to fend off nascent or potential competition.  It was certainly a hard-fought battle on all sides.  On now to other fronts in the SEP wars.

*                    *                  *

And in other news, this just in via Law360:  ED Texas jury awards PanOptis $506 million in 4G patent suit against Apple.

Bloomberg Is Reporting Ninth Circuit Reversal in FTC v. Qualcomm

Story here.  Opinion should be up on the Ninth Circuit's website within the hour.  More later.

UpdateOpinion is available now.  More later.

Monday, August 10, 2020

From Around the Web

1. I fell behind a bit in checking out the EPLaw Blog, so I missed a couple of important posts.  One, from March 20, 2020, noted the publication by the European Patent Academy of a study titled Patent Enforcement in Europe:  A Country-by Country Overview.  The study is over 500 pages long, and covers every country within the EPC.  I may have more to say about it after I looked through it more carefully.

2.  Another EPLaw post I missed was by Nadine Westermeyer and Stefan Lieck, titled DE-"Leiterklemme"--Requirements for the Reasons for a Preliminary Injunction in Patent Litigation.  The post links to a translation and remarks on the Bardehle Pagenberg firm's website, which in turn links to the original judgment.  According to the post, the judgment (a December 2019 judgment of the Munich Court of Appeals) overturns previous case law from that district, and conforms to case law from Karlsruhe and Düsseldorf, to the effect that a patentee may obtain a preliminary injunction only if, inter alia, "the patent in suit has already survived first instance opposition or nullity proceedings or if an exception applies."  For another EPLaw post on this case, with a link to further analysis by Philipp Rastemborski, see here.

3.  Also relevant to the topic of interim injunctions are Norman Siebrasse's two posts on the decision of Canada's Federal Court of Appeal in Arctic Cat, Inc v Bombardier Recreational Products Inc 2020 FCA 116, discussing the criteria for granting a stay pending appeal (see here and here).  Professor Siebrasse is surprised that the court denied the application for a stay without any discussion whether the patentee (Bombardier) had provided an undertaking in damages for the harm the defendant (Arctic Cat) might incur in the event the judgment for the patentee is reversed on appeal.  He also discusses whether the question of potential harm to third parties should be taken into account as part of the irreparable harm or balance of convenience stage of the analysis--the relevance being that, according to some Federal Court decisions, a court will reach the balance of convenience stage only if it concludes that there is irreparable harm.

4.  Gowling WLG has made available an interesting webinar titled The Game Begins:  Strategies for the Early Stages of Patent Litigation--The Claimant's View.  The webinar discusses, among other matters, the likelihood (or not) of obtaining preliminary relief in various countries, including China, Russia, France, Germany, the U.K., Canada, and the U.S.  Hat tip to Norman Siebrasse for calling this to my attention.

5.  The German firm Kather Augenstein will be hosting an English language webinar on August 20 on Sisvel v. Haier.  Information here.  For previous discussion on this blog, see here and here

6.  Also relevant to this last item, on JUVE Patent Matthieu Klos published a piece titled Haier files constitutional complaint over FRAND judgment.  According to the article, Haier is asking the German "Constitutional Court to review whether the decision of the Federal Court of Justice . . . is compatible with European law."

Friday, August 7, 2020

Federal Circuit on Damages and Remedies Blog

I thought I should call readers' attention to this blog I just discovered the other day.  It's now listed in the left-hand column of this page, under "Other Blogs of Interest."  It's called "Federal Circuit on Damages and Remedies," and is authored by attorney Jean Dassie.  Looks like a good resource.

Wednesday, August 5, 2020

Shapiro & Lemley on Antitrust and Patent Holdup

Carl Shapiro & Mark Lemley's paper The Role of Antitrust in Preventing Patent Holdup, 168 U. Pa. L. Rev. 1 (2020), a draft of which I read a few months ago, is now available on ssrn.  Here's a link, and here is the abstract:
Patent holdup has proven one of the most controversial topics in innovation policy, in part because companies with a vested interest in denying its existence have spent tens of millions of dollars trying to debunk it. Notwithstanding a barrage of political and academic attacks, both the general theory of holdup and its practical application in patent law remain valid and pose significant concerns for patent policy. Patent and antitrust law have made significant strides in the past fifteen years in limiting the problem of patent holdup. But those advances are currently under threat from the Antitrust Division of the Department of Justice, which has reversed prior policies and broken with the Federal Trade Commission to downplay the significance of patent holdup while undermining private efforts to prevent it. Ironically, the effect of the Antitrust Division’s actions is to create a greater role for antitrust law in stopping patent holdup. We offer some suggestions for moving in the right direction.
This is an important paper, which I highly recommend.

Tuesday, August 4, 2020

Federal Circuit Vacates Fee Award Against the Federal Government

In other news yesterday, the Federal Circuit vacated a fee award in FastShip, LLC  v. United States (precedential opinion by Judge Dyk, joined by Judges Wallach and Chen).  This was an action by a patent owner for compensation against the U.S. government, pursuant to 28 U.S.C. § 1498(a), which states:
Whenever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or manufacture the same, the owner's remedy shall be by action against the United States in the United States Court of Federal Claims for the recovery of his reasonable and entire compensation for such use and manufacture. Reasonable and entire compensation shall include the owner's reasonable costs, including reasonable fees for expert witnesses and attorneys, in pursuing the action if the owner is an independent inventor, a nonprofit organization, or an entity that had no more than 500 employees at any time during the 5-year period preceding the use or manufacture of the patented invention by or for the United States. Notwithstanding the preceding sentences, unless the action has been pending for more than 10 years from the time of filing to the time that the owner applies for such costs and fees, reasonable and entire compensation shall not include such costs and fees if the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust.
In earlier proceedings, the patent owner had prevailed in part, and was awarded approximately $7 million.  See FastShip, LLC v. United States, 892 F.3d 1298 (Fed. Cir. 2018).  The Court of Federal Claims thereafter awarded an additional $6.1 million in attorneys' fees, based partly on the government's pre-litigation conduct, which in that court's view was not (to use the statutory language above) "substantially justified."  See yesterday's opinion p.3, discussing how the Claims Court "found it unreasonable for a government contractor to gather information from FastShip about designing a [littoral combat ship] but not to include it as part of the team that awarded the contract," and also that "the Navy took an exceedingly long to time to act on FastShip's administrative claim and did not provide sufficient analysis in denying that claim."  In May 2020, however, the Federal Circuit in Hitkansut v. United States held that a fee award under § 1498(a) cannot be based on pre-litigation conduct (see previous blog post here, discussing the court's reasons for reaching this conclusion).  In that case, the court nevertheless affirmed the award based on the government's conduct during litigation; here, however, the court remanded for further consideration, noting that one of the two problems the Claims Court found with the government's litigation conduct (its use of an expert witness who was a person of "extraordinary," rather than "ordinary," skill in the art) wasn't relevant either.

Note that, in normal patent infringement litigation in which the government is not the defendant, the court can award fees only in "exceptional cases" under Patent Act § 285.  This would seem to be a higher standard than in a § 1498(a) action--though in the latter context, the statute limits awards to prevailing plaintiffs only, and even then only if they qualify as small entities ("an independent inventor, a nonprofit organization, or an entity that had no more than 500 employees at any time during the 5-year period preceding the use or manufacture of the patented invention by or for the United States").  On the other hand, the case law under § 285 makes it clear that pre-litigation conduct (e.g., willful infringement on the part of the defendant, or a pattern of questionable patent assertion by the plaintiff) can be relevant to the determination of whether a case is exceptional.

For further discussion of FastShip, see this story on Bloomberg.

Federal Circuit Affirms Damages Award, Partially Vacates Injunction

The case is Bio-Rad Laboratories, Inc. v. 10X Genomics Inc., opinion by Judge O'Malley, joined by Judges Newman and Taranto.  There were three patents in suit, all of them
directed to systems and methods for forming microscopic droplets (also called “plugs”) of fluids to perform biochemical reactions. Microfluidic systems—often called “labs-on-a-chip”—allow scientists to conduct microscale chemical and biological reactions. For example, the technology allows scientists to analyze and compare DNA, RNA, and proteins within large numbers of individual cells. This technology therefore has applications in medical diagnostics and high-throughput screening (p.3).
The jury found all three patents valid and willfully infringed, and awarded damages in amount of $23,930,716.  (The opinion doesn't say anything about a damages enhancement, notwithstanding the finding of willfulness; maybe that issue is still pending before the district court?)  On appeal, the Federal Circuit affirms the finding of infringement under the doctrine of equivalents as to the ’083 patent, which is an apparatus claim.  It vacates the finding of infringement as to the other two (method) patents, based on a disagreement over claim construction, and remands for further proceedings as to those two patents.  It affirms as to damages and partially affirms the entry of a permanent injunction, as discussed below.  As usual, I'll just focus on the remedies issues; the other issues are quite interesting but also complex, and not necessary to the discussion below.  

First, as to damages, the court states that the award can stand even though two of the patents in suit possibly weren't infringed:
Despite vacating the district court’s judgment of infringement of two of the patents-in-suit, we proceed with considering the parties’ arguments concerning damages because we affirm the judgment of infringement of the ’083 patent—which covers all six accused product lines. The jury verdict and jury instructions show that the damages award is not predicated on infringement of any one patent. . . . As Bio-Rad explained during oral argument, affirming the judgment of infringement on the ’083 patent—which includes the only asserted apparatus claims—would leave the damages award undisturbed. . . . 10X did not dispute this point either at oral argument or in its briefing to us (p.25).
On the merits, the defendant's principal argument was that the plaintiff's expert witness relied on three purportedly comparable licenses that weren't sufficiently comparable; and that the defendant's own proposed comparable license would have resulted in a lower royalty rate.  The Federal Circuit, however, concludes that there as no abuse of discretion in allowing the jury to hear about the licenses the plaintiff's expert relied upon (even though, on a post-trial motion, the district court concluded that one of them wasn't technologically comparable after all), and that there was sufficient evidence to support a damages award in the full amount sought by the plaintiffs.  The discussion here mostly centers on the factual evidence, which the court reviews at some length (pp. 26-32).  In addition, the court rejects the defendant's argument that the plaintiff's expert failed "to apportion damages between the patented and unpatented features of the accused products" (p.33).  Again, resolution of this issue largely comes down to the sufficiency of the evidence:
In 10X’s view, Mr. Malackowski claimed that his 15% royalty rate was already apportioned in the comparable licenses, but failed to provide any numerical value to support his analysis. 10X also argues that none of the other witnesses provided any testimony that could fill the gaps as to the technical contributions of any of the patents. We disagree.
As Bio-Rad correctly points out, there is no blanket rule of quantitative apportionment in every comparable license case. In Elbit Systems Land & C4I Ltd. v. Hughes Network Systems, LLC, for example, we accepted “built in apportionment” for a comparable license agreement. 927 F.3d at 1301 (internal quotations omitted). 10X argues that Elbit is distinguishable because the license at issue in that case was the “closest” comparator and the expert in Elbit actually made a quantitative adjustment to the comparator license. . . . But this argument rests primarily on the faulty assumption that the Chicago/RainDance license (with the 1–3% royalty rate) is the most comparable license in this case. As discussed above, the jury was free to accept Bio-Rad’s evidence that this license was not comparable (p.33).
Finally, the court affirms the entry of an injunction as to those of 10X's products for which there was a noninfringing alternative, but not as to those of its products for which there isn't.  First, on the issue of irreparable harm, the court states:
It is undeniable that Bio-Rad has suffered harm from 10X’s first mover advantage and “sticky” customer relationships. The district court found that Bio-Rad is being forced to compete with 10X’s products that incorporate the infringing technology. Based on its willful infringement—a finding 10X does not challenge on appeal—10X has established a strong market lead over Bio-Rad. The court also found that, based on 10X’s first mover advantage, Bio-Rad had to increase its marketing costs. Money damages will not be able to compensate Bio-Rad for the harms stemming from 10X’s first mover advantage (p.36). 
Second, however, as to balance of hardships:
We acknowledge that Bio-Rad, although a much larger company, will suffer considerable hardship absent an in-junction because it has invested almost half a billion dollars to develop its products, including acquisitions and tens of millions of dollars a year on research and development. But at the same time, 10X, a much smaller company, de-pends entirely on the sales of the enjoined products for its revenue. Although the district court concluded that the hardship to 10X is mitigated because it can sell its non-in-fringing alternatives, the district court failed to consider the lack of non-infringing products for two out of the five product lines. In the absence of non-infringing alternatives for the Linked-Reads and CNV products, we conclude it was an abuse of discretion for the district court to enjoin sales of these two product lines (p.37).
Finally, the court concludes that the district court's carve-out for products used or sold before the injunction's effective date sufficiently mitigates any harm to the public interest:
The district court carved out an exception for infringing products that were sold or in use before the effective date of the injunction (the “Historical Installed Base”). For these products, 10X can also continue to supply consumables, and support, service, repair, and replace them under warranty. This exception is conditional on 10X paying a 15% royalty on the net revenue 10X receives from the permitted Historical Installed Base sales until the expiration of the patents-in-suit. . . .
We see no abuse of discretion here. Under the district court’s injunction, 10X’s existing customers are not enjoined from using their installed systems, as long as 10X pays royalties. Thus, there is no basis for 10X’s argument that scientists will lose their years of research or be financially precluded from working on existing projects. On-going research projects will not be affected . . . .
. . . In these circumstances, we conclude that the district court did not abuse its discretion in granting Bio-Rad an injunction, except as to the Linked-Reads and CNV product lines. . . (p.38).
The one thing I find a bit odd here is the apparent conclusion that, as long as an injunction is (as a practical matter) unnecessary, because the defendant has ready access to a noninfringing alternative, there is no abuse of discretion in granting one; but where the defendant cannot compete except by infringing, it is entitled to do so upon payment of an ongoing royalty, notwithstanding the irreparable harm accruing to the plaintiff.  On the other hand, under an equitable standard, a sufficient showing of irreparable harm to the defendant (and to the public) might outweigh the irreparable harm to the plaintiff, so perhaps the result can be defended on that basis.

Monday, August 3, 2020

Federal Circuit Affirms Denial of Preliminary Injunction

The decision, handed down this past Friday, is Takeda Pharmaceuticals U.S.A., Inc. v. Mylan Pharmaceuticals Inc., precedential majority opinion by Chief Judge Prost, dissent by Judge Newman. (There is also a nonprecedential opinion in a companion case,  Takeda Pharmaceuticals U.S.A., Inc. v. Alkem Laboratories Ltd., announcing the same result with the same judicial lineup.)  To make a long story short, Mylan filed an ANDA covering a generic version of colchicine; Takeda filed suit for infringement; and the parties settled, on terms that allowed Mylan to sell a generic product on:
The date that is [a specified time period] after the date of a Final Court Decision (as defined in Exhibit A) holding that all unexpired claims of the Licensed Patents that were asserted and adjudicated against a Third Party are either (i) not infringed, or (ii) any combination of not infringed and invalid or unenforceable[.]
In addition, "[a]ccording to Section 1.10 of the License Agreement, if Mylan breaches Section 1.2, the parties stipulate that such breach “would cause Takeda irreparable harm.”

Takeda thereafter sued Hikma for the infringement of eight of the Licensed Patents referenced above.  (Hikma had filed an NDA covering its own colchicine product.)  Takeda voluntarily dismissed with prejudice five of the patents, and the district court granted summary judgment that Hikma's product did not infringe the other three.  Mylan then entered the market, relying on its right to do so under the settlement--specifically, because all unexpired claims of the three Licensed Patents that were asserted and adjudicated against Hikma were found to be noninfringing.  Takeda argued, however, that because it had voluntarily dismissed its claims against Hikma under five of the Licensed Patents, the conditions that would allow Mylan to enter the market were not satisfied:  in other words, that because five of the Licensed Patents were asserted but not adjudicated, the settlement did not permit Mylan's entry.  

Takeda moved for a preliminary injunction, which the district court denied, and the Federal Circuit affirms.  First, the majority agrees with the district court that Takeda did not show a likelihood of success on the merits, because as a matter of law Mylan's interpretation of the settlement agreement appears likely to succeed on the merits.  Second, the majority agrees that Takeda is not faced with irreparable harm:
. . . Takeda states generally that each sale by Mylan reduces the units sold by Takeda and that Mylan’s sustained launch “likely will cause” Takeda to incur irreversible price erosion and long-term loss of market share. . . . Though we have recognized that price erosion and loss of market share may in some cases be irreparable injuries, see Aria Diagnostics, Inc. v. Sequenom, Inc., 726 F.3d 1296, 1304 (Fed. Cir. 2013), a bare assertion of irreparable harm is never sufficient to prove such harm or justify the “extraordinary remedy” of a preliminary injunction, see Winter, 555 U.S. at 24. . . . See also Frank’s GMC Truck Ctr., Inc. v. Gen. Motors Corp., 847  F.2d 100, 102–03 (3rd Cir. 1988) (“The availability of adequate monetary damages belies a claim of irreparable in-jury. . . . [S]ince Frank’s GMC has failed to articulate and adduce proof of actual or imminent harm which cannot otherwise be compensated by money damages, it has failed to sustain its substantial burden of showing irreparable harm”). Takeda’s nonspecific and unsupported assertion that Mylan’s sales “likely will cause” irreparable harm falls far short of establishing that irreparable harm has occurred, or will likely occur, absent a preliminary injunction.
Judge Newman, dissenting, disagrees that the settlement condition had been met:
I cannot agree, for the cited event relates to a different product of a different provider having a different FDA approval for different uses, and is not a generic counterpart of Colcrys®. That product . . . and the then ongoing litigation is not mentioned in the License Agreement as possibly providing an accelerating event.