Wednesday, May 12, 2021

France's Cour de Cassation Overturns Appellate Judgment on Damages

The case is Time Sport International SAS v. Décathlon France SAS, Décathlon SA et DHG Knauer GmbH, Cour de Cassation comm., March 17, 2021, PIBD 1159-III-1.  I have blogged about this case, involving a patent relating to bicycle helmets, twice before, first after the initial decision of the Tribunal de la grande instance de Paris in 2016 (see here), and again after the decision of the Cour d'appel de Paris in 2018 (see here).  To make a long story short, the trial court awarded, inter alia, 20% of the gross profits of distributor Décathlon France and manufacturer Knauer, pursuant to a provision of  article 615-7 of the French IP Code, which at the relevant period of time read in part (translated) "To set damages, the court takes into account the negative economic consequences, including the loss of profit suffered by the injured party, the benefits made by the infringer and the moral prejudice caused to the right-holder because of the infringement."  The appellate court reversed, and as to Knauer awarded 6% of Décathlon's turnover--effectively, a reasonable royalty under the second sentence of article 615-7, which at the relevant period of time stated that a court could "alternatively, upon request by the injured party, award damages as a lump sum that shall not be less than the amount of royalties or fees that would have been due if the infringer had requested authorization for the use of the right infringed"--amounting to just €28,620.90.  The Cour de Cassation now reverses the appellate court, concluding that it is up to the plaintiff to choose which compensation method it wants, and here the plaintiff requested an award based on Knauer's profits, not a reasonable royalty.  In this regard, the high court's rationale seems similar to its rationale in a 2019 decision I blogged about, Carrera SARL et Texas de France SAS v. Muller et Cie, PIBD No. 1112, III, 120 (Jan. 23, 2019) (see here), which also held that it is up to the plaintiff to select its method of compensation.  (See also this discussion of Carrera on the Patent My French blog.)  In neither Time Sport not Carrera, however, does the Cour de Cassation explain exactly what it means to "take into account" the defendant's profits:  does it mean that the court may award a disgorgement of those profits, or only (literally) take them into account in estimating the plaintiff's actual loss?  Though in case like Time Sport in which the plaintiff isn't practicing the patent itself, from an economic perspective wouldn't the actual loss essentially be its forgone royalty--and if so, is there a meaningful difference between this royalty and the royalty a court would award under article 615-7 para. 2?

For my previous post on the 2014 amendments to article 615-7, which were not at issue in Time Sport, see here.

Monday, May 10, 2021

From Around the Blogs: SEP/FRAND Issues

1.  On the Kluwer Patent Blog, Enrico Bonadio, Luke McDonagh, and Francesco Chierichetti published a post titled .  The post discusses four cases, though as the authors note the most recent is a Court of Milan decision Ical et al. v Rovi Guides et al. from 2015.  The authors conclude that this decision and an earlier decision of that same court in Samsung v Apple are the two most important, the Samsung case because "it was noted that it is crucial to enforce SEPs in a way which is not abusive and does not jeopardise competition, taking into account the need to encourage cultural and scientific progress," and the Ical case because it "clearly highlighted the importance of relying on correct declarations of essentiality." 

2. On Law360, Mathew Perlman published an article titled Does DOJ's Rebranding Of Patent Policy Letter Hint At More?  The article discusses the DOJ's recent restoration of its 2015 IEEE Business Review Letter, and speculates whether this heralds a broader repudiation of the Trump Administration's SEP/FRAND policies.  Let's hope so.

3.  IP Watchdog has published three recent posts on SEP issues:  Tim Pohlmann's SEP Litigation Trends: What Does the Data Say?, which provides an empirical overview of SEP litigation trends around the world; Roya Ghafele's A Standard Essential Patent Valuation Perspective on Ericsson v. Samsung, which discusses comparables versus top-down and calls for greater transparency to assist in valuation efforts; and Curtis Dodd's A New Trial is Ordered with Respect to Damages in Optis Wireless v. Apple, Despite No FRAND Claims at Issue, discussing a recent decision by Judge Gilstrap in the E.D. Tex. ordering a new trial on damages in Optis Wireless Technology, LLC et al. v. Apple Inc., Civil Action No. 2:19-cv-00066-JRG (E.D. Texas).  (For other coverage of the order in Optis v. Apple, see this write-up on Law360). 

4. On FOSS Patents, Florian Mueller published a post titled CJEU sets August deadline for observations from European Commission, EU member states and parties on standard-essential patent licensing questions in Nokia v. Daimler, setting out the CJEU's official translation of the questions presented (addressing the requirements of E.U. competition law relative to the license-to-all versus access-to-all question, and several clarifications relating to Huawei v. ZTE). 

5. EPLaw published a PowerPoint presentation by Marie-Léa Rols, Matthew Raynor, Philipp Widera, and Roeland Grijpink titled Anti(-anti)-suit injunctions.

6. On the ChinaIPR Blog, Mark Cohen published an informative post titled Three SPC Reports Document China’s Drive to Increase its Global Role on IP Adjudication.  The author discusses, among other things, the Chinese court's emphasis on antisuit injunctions to resolve global IP disputes.

Friday, May 7, 2021

Samsung, Ericsson Settle

See post on FOSS Patents here.  So presumably we won't be getting a Federal Circuit decision on the anti-antisuit injunction issue in this case.

Thursday, May 6, 2021

The Comparative Patent Remedies Blog Turns Eight

I admit, until now I had completely forgotten that today (May 6, 2021) is the eighth anniversary of the launching of this blog.  So happy birthday, blog, and thank you, readers!

Wednesday, May 5, 2021

Breaking News: Biden Administration to Support TRIPS COVID Waiver

See here, and stories on Bloomberg, the New York Times, the Wall Street Journal, and the Washington Post.  It remains to be seen what the final deal will look like, and there will certainly be a lot more coverage from other sources in the hours and days to come.  My tentative views are that (1) as far as patents are concerned, a waiver will be of greater importance prospectively than immediately, since to my knowledge there are at present few if any issued patents relating to COVID vaccines; and (2) the greater significance of the waiver may pertain to trade secrets, which would be covered by the waiver as originally proposed by South Africa and India, and which may present a bigger obstacle than patents to developing countries making their own generic versions of vaccines. 

For readers looking for other discussions on this topic to date, here are some resources I shared with my International Intellectual Property class this past semester.  A couple of them are by my students:

Communication from India and South Africa, Waiver from Certain Provisions of the TRIPS Agreements for the Prevention and Treatment of COVID-19 (Oct. 2, 2020).

WTO, The TRIPS Agreement and COVID-19: Information Note (Oct. 15, 2020).

Matt Apuzzo & Selam Gebrekidan, Governments Sign Secret Vaccine Deals. Here’s What They Hide, N.Y. Times, Jan. 28, 2021

Joanna T. Brougher & Andrew Kingsbury, Calls for Compulsory Licensing and IP Waivers of COVID-19 Vaccines Ignore Technical Complexities, IP Watchdog, Mar. 30, 2021.

Marra Clay, Patent Pledging Problems: The Open COVID Pledge and Long-Term Solutions to Licensing Intellectual Property in Global Emergencies, Minnesota Law Review Blog, Mar. 23, 2021.

Jorge Contreras, Deconstructing Moderna’s COVID-19 Patent Pledge, Bill of Health, Oct. 21, 2020.

Andrew Karpan, WTO Fails to Reach Deal on COVID IP Waiver Proposal, Again, Law360, Mar. 11, 2020.

Sapna Kumar, Guest Post: Pandemic Drug Shortages: Is Compulsory Licensing the Answer?, Patently-O, Jan. 28, 2021.

Saeed Shah, Developing Countries Push to Limit Patent Protections for Covid-19 Vaccines, Wall St. J., Sept. 17, 2020.

Rachel Thrasher, Why Innovation Would Survive a COVID-19 Waiver, IP Watchdog, Mar. 24, 2021.

Daniel Walsh, Intellectual Property in Crisis: Does SARS-CoV-2 Warrant Waiving TRIPS, LawSci Forum, Feb. 21, 2021.

Update:  Very interesting write-up here from Professor Dennis Crouch. 

Further update:  And this post from Professor Lisa Larrimore Ouellette is excellent too.

Federal Circuit Affirms Vacatur of Injunction

The decision, handed down this morning, is Cap Export LLC v. Zinus, Inc., opinion authored by Judge Dyk, joined by Judges Bryson and Hughes.  Plaintiff Cap filed an action for declaratory judgment of noninfringement and invalidity of the U.S. Patent No. 8,931,123 (“the ’123 patent”), which is directed to “[a]n assemblable mattress support” that “can be shipped in a compact state with all of its components compactly packed into the headboard”’ (p.2).  Defendant Zinus, the patent owner, counterclaimed for infringement.  To make a long story short, the court ultimately granted summary judgment of infringement and validity on the counterclaim, awarded damages, and entered a permanent injunction against Cap.  As a result of another infringement action filed by Zinus against another company, however, it subsequently came to Cap's attention that Zinus had purchased from a Malaysian company beds, which the district court later characterized as "functionally identically in design to the claims in the ’123 patent" (p.9), before Zinus's filing date.  Cap Export then filed a motion to vacate the judgment and injunction under Federal Rule of Civil Procedure "60(b)(3), which provides grounds for relief for reason of 'fraud . . . , misrepresentation, or misconduct by an opposing party'” (p.5).  The district court granted the motion, concluding that Zinus president Lawrie's earlier testimony that he was not aware of any such prior art was false. (In his defense, Lawrie states that his earlier testimony was "literally incorrect," but not intentionally so.) 

The Federal Circuit affirms on the ground that the district court did not abuse its discretion in granting the motion.  The appellate court expresses some doubt, however, as to the regional (Ninth) circuit's requirement that a judgment can be vacated under Rule 60(b)(3) only if the conduct could not have been discovered through the exercise of due diligence (a requirement not found in the statutory text) (p.12).  More specifically:

Even though the Ninth Circuit’s requirement for Rule 60(b)(3) that the “fraud” not be discoverable through due diligence seems questionable, we follow it here. . . . The question is what constitutes due diligence in discovering fraud. Ninth Circuit cases applying Rule 60(b)(3) do not elaborate on the due diligence requirement, but Ninth Circuit decisions in other contexts provide guidance.

In other contexts, due diligence in discovering fraud does not require investigation unless there is reason to suspect fraud. . . . 

The issue thus is not whether the conduct of Cap Export’s counsel fell below the standard of care for attorneys practicing patent litigation, but whether a reasonable company in Cap Export’s position . . . should have had reason to suspect the fraud—here, that [Zinus president] Lawrie had testified falsely—and, if so, took reasonable steps to investigate the fraud. . . .

On this record, there has been no showing that there was reason to suspect that Lawrie’s statements were fraudulent. Cap Export deposed Lawrie, as a person claiming knowledge of the relevant facts, “asked him, repeatedly, about his knowledge of disassembled beds shipped in a single box with all components stored in the headboard,” and “Lawrie then repeatedly misrepresented his knowledge of such bed designs.” J.A. 18. Cap Export had no reason to suspect fraud. Cap Export “undertook numerous prior art searches that failed to reveal evidence of the Woody Furniture purchases.” Id. at 26–27. Nor was “[t]he material evidence concealed by Lawrie’s misrepresentation . . . widely available, a matter of public record, or information already in Cap Export’s possession.” Id. at 20. We see no clear error in the district court’s determination that the Ninth Circuit’s due diligence requirement was satisfied (pp. 13-16).

The court further finds no clear error in the district court's conclusion that the misrepresentation was intentional and material.  On materiality, although the defendant "contests whether the Woody Furniture beds 'qualify as invalidating prior art'", the court concludes that it isn't necessary to show whether the evidence would have altered the result, but only that it "prevented Cap Export from fully and fairly presenting its case" (pp. 16-19).

Monday, May 3, 2021

Chiang on "The Information-Forcing Dilemma in Damages Law"

Tun-Jen Chiang's article The Information-Forcing Dilemma in Damages Law, 59 Wm. & Mary L. Rev. 81 (2017), is (as the parenthesized date indicates) not a new paper, but rather one that I missed when it came out.  I just read it the other day, in preparation for a project I hope to work on this summer tentatively titled Nominal Damages for IP Infringement (for my previous musings on the topic, see here, here, and here).  Here is a link to the paper, and here is the abstract:

Courts assessing compensatory damages awards often lack adequate information to determine the value of a victim’s loss. A central reason for this problem, which the literature has thus far overlooked, is that courts face a dilemma when applying their standard information-forcing tools to the context of damages. Specifically, the standard method by which courts obtain information is through a burden of proof. In the context of damages, this means a rule requiring plaintiffs to prove the value of a loss. But courts will often face a situation where a plaintiff can clearly prove the existence of a loss, yet cannot prove the value of the loss with any precision. A court that strictly enforces the burden of proof would award zero damages in such a case, producing a harsh result. But a court that avoids this result by instead awarding its best guess at the correct amount—effectively forgiving the inadequacy of plaintiff’s proof—then undermines future incentives for plaintiffs to produce rigorous evidence.

 

The result of this dilemma is that courts oscillate between strict and forgiving approaches, causing much confusion. Explaining the dilemma helps alleviate the confusion and points to a solution. In principle, courts should require a party to produce more rigorous damages evidence if, and only if, the party is the lower-cost provider of that evidence, and the benefit of having the evidence (in facilitating a more accurate damages award) outweighs the cost of collecting it. The messy legal standards for calculating damages in various fields can be understood as clumsy attempts by courts to arrive at this unifying principle. Interpreting the messy doctrine in light of this “cheaper cost-effective producer” principle thus helps make damages law more coherent.

It's an interesting paper, and I certainly need to give it some more thought.  The obvious criticism, as Professor Chiang recognizes, is that courts lack the information necessary to carry out his proposal.  In this regard, however, he argues toward the end of the paper that:

           one response to this objection is that I am not envisioning anything more than rough guesses on the costs and benefits, imperfectly and intuitively applied. A second response, however, is that the cheaper cost-effective producer principle is capable of more simple application than one might think. Specifically, courts can implement the principle by using the following methodology: (1) At the close of evidence, a court determines whether either party has been negligent in producing evidence; if no party is negligent then the court proceeds to the merits determination. (2) If the court believes one party has been negligent, it penalizes the negligent party (by reducing damages if the negligent party is the plaintiff, or increasing them if the defendant is the negligent party). (3) If the court believes both parties have been negligent, it penalizes the more negligent party (p.141).

And if even this seems like too much to ask of courts, Professor Chiang suggests that Westinghouse Elec. & Mfg. Co. v. Wagner Elec. & Mfg. Co., 225 U.S. 604 (1912)--a case litigated back in the days when U.S. utility patent owners could seek the disgorgement of the defendant's profits--might provide some guidance.  In that decision, the Supreme Court, as described by Professor Chiang

            held that, if a patentee "has exhausted all available means of apportionment" but still cannot prove a reasonably precise number, then the patentee is entitled to the entire profit unless the defendant can prove the correct apportionment. As the Court acknowledged, "[T]his is but another way of saying that the burden of proof is on the defendant." But the Court emphasized that the burden is not shifted until "after the plaintiff has proved the existence of profits attributable to his invention and demonstrated that they are impossible of accurate or approximate apportionment." Viewed from the cheaper cost-effective producer principle, this burden-shifting framework reflects the two criteria I have described. The plaintiff bears the initial burden of proof, and must satisfy this burden of proof by producing all cost-effective evidence, that is, "exhaust[] all available means of apportionment. Once this is done, then the burden shifts, until the court has the best evidence that can be cost effectively obtained. At that point the work of an information-forcing mechanism (that is, a burden of proof) is done (pp. 143-44).

Professor Chiang acknowledges, however, that the result in Westinghouse differs from his proposal in that "the Court in Westinghouse would still penalize the defendant by awarding the plaintiff with the entire profit even if the defendant produces all cost-effective evidence (as long as the evidence does not suffice to determine the correct apportionment), whereas my proposal would have a court take its best guess. The difference is largely immaterial from the perspective of economic incentives. See Douglas G. Baird et al., Game Theory and the Law 18 (6th prtg. 2003)" (p.144 n.265).  Perhaps another relevant concern, at least in cases in which the substantive law permits awards of the infringer's profits, should be whether the defendant was a willful infringer, since otherwise the defendant may be saddled with a wildly disproportionate penalty?  See also the discussion of Westinghouse in Pamela Samuelson, John M. Golden & Mark P. Gergen, Recalibrating the Disgorgement Remedy in Intellectual Property Cases, 100 B.U. L. Rev. 1999, 2070 (2020) (stating that "[i]n less than a generation, this arrangement was deemed to over-enforce patent rights," as reflected in Learned Hand's decision in Cincinnati Car Co. v. New York Rapid Transit Corp., 66 F.2d 592 (2d Cir. 1933), which expressed a preference for an award of reasonable royalties "as a device in aid of justice").  Professor Chiang notes Cincinnati Car at pp. 118-19; for my previous discussion of this immensely insightful opinion, see here.