Unified Patent Court Agreement Enters into Force This Week

On Thursday, June 1, to be precise.  So far, 17 EU members have ratified the agreement. Seven others (Cyprus, the Czech Republic, Greece, Hungary, Ireland, Romania, and Slovakia) are signatories but haven't yet ratified it.  This day has been a long time coming, and I hopeful that the court will prove to be a great success. 

The remedies provisions of the UPCA, articles 59-69, include as one would expect provisions on injunctions (permanent and provisional), corrective measures, and damages.  They are similar, though not identical in every respect, to the provisions found in the Intellectual Property Rights Directive.  In this regard, I published a post in March titled Some Resources on Damages in the UPC, which included a JUVE Patent article titled UPC: How are damages dealt with; an OxFirst article titled Considering Patent Infringement Damages Calculations under the Unified Patent Court and a very good OxFirst webinar titled Legal underpinnings of patent damage calculations in Germany, featuring Dietrich Kamlah; and what I described as "a brief discussion of damages under the UPC in Paul England's book A Practitioner's Guide to European Patent Law:  For National Practice and the Unified Patent Court (2d ed. 2022), at pp. 235-36."  I also noted that Dr. England had recently published another book titled A Practitioner's Guide to the Unified Patent Court and Unitary Patent, which I did not yet have a copy of but now do; it has an extensive discussion of remedies available from the UPC at pp. 155-160, and in chapters 15, 16, and (especially) 18.  Also relevant is chapter 12, which discusses declarations of noninfringement.  (Of course, it may be a while before any of these provisions, other than perhaps the ones on orders to produce evidence and inspect premises, freezing orders, and provisional and protective orders get used.)  I should also note that Pierre Véron has a webpage titled Unified Patent Court Document Repository, which you might want to bookmark for its handy links to the Unitary Patent Regulations, the UPCA, and other relevant documents.

Federal Circuit Affirms Denial of Attorneys’ Fees

The precedential decision, handed down yesterday, is OneSubsea IP UK Ltd v. FMC Techs., Inc., opinion by Judge Clevenger, joined by Chief Judge Moore and Judge Dyk.  The patents in suit relate to the ”subsea recovery of production fluids from an oil or gas well” (p.3).  The case was ultimately decided in favor of FMC, on noninfringement grounds, at least in part because the trial court found the plaintiff’s expert testimony in support of its theory of liability inadmissible.  The facts of the case, including its tortuous procedural history, are exceptionally prolix and exceptionally boring, but unfortunately for FMC that doesn’t make this an “exceptional case” meriting attorneys’ fees under 35 U.S.C. § 285.

For present purposes, I’ll just note a couple of takeaways.  First, according to the Supreme Court’s decision in Highmark Inc. v. Allcare Health Mgt. Sys. Inc., 572 U.S. 559 (2014), the standard of review on appeal from an order denying an award of fees is abuse of discretion.  The rationale for this standard is that “the district court ‘is better positioned’ to decide whether a case is exceptional . . . because it lives the case over a prolonged period of time.”  FMC argued that this standard doesn’t apply where, as here, the district judge who decided the fee motion took over the case at its end, after the original judge had retired (p.16).  Not surprisingly, the Federal Circuit doesn’t buy it.  Second, the fact that the original district judge had indicated skepticism that he was going to grant FMC’s motion for summary judgment following the Markman hearing, after which the case was stayed for three years while the PTAB decided various IPRs, itself suggests that this wasn’t an exceptional case (p.20).  Third, this wasn’t a case, the Federal Circuit says, in which the plaintiff “produced no evidence at all to support its case” (p.21).  Specifically:     

OSS produced evidence from two experts, with the evidence based on the first expert’s declaration sufficient to undermine FMC’s initial summary judgment motion. The second expert’s report, on which OSS’s challenge to FMC’s 2020 summary judgment motion relied, repeated the same theory of infringement as the first expert. The second expert, however, emphasized the retrievability of FMC’s Flow Module, leading the expert into the error of failing to appreciate the stipulated construction of “tree,” which in turn led to the district court’s exclusion of the expert’s report. As the district court noted, OSS adduced evidence to support its infringement theory, but the shortcomings of its expert undermined the admissibility of that evidence. In the district court, FMC did not offer any authority for finding a case exceptional simply because a party offered and relied on evidence that was ultimately found to be inadmissible. FMC has likewise produced no such authority here. There was no abuse of discretion in the district court’s finding that OSS’s reliance on inadmissible evidence failed to make this case exceptional (p.21).

Finally, the court rejects arguments that the plaintiffs engaged in litigation misconduct, and that the district court misapplied the Octane Fitness standard for finding a case exceptional (pp. 21-22).

Dennis Crouch has a very good analysis of the case on Patently-O.

Estimating Damages Without the Benefit of Expert Testimony

This post is prompted by Bonnie Eslinger's Law360 article, which I came across this morning, titled Sonos’$90M Damages Ask Tossed as Google Jury Gets Case.  The article states that Judge Alsup submitted Sonos’ case against Google to a jury on Friday, but told them “to disregard a $90 million damages estimate from a Sonos expert witness, sending them into deliberations with instructions to calculate any damages themselves based on other evidence in the record.”  I have no basis at this stage for evaluating whether the judge was correct in ruling that Sonos’ expert testimony was inadmissible, much less any prediction as to what the jury will do if it finds for Sonos on liability.  I will note, however, that this is hardly the first time that a U.S. court has concluded that, because expert testimony on damages was inadmissible, a jury may have to use whatever other evidence is in the record to determine the amount of damages.  As I wrote a few years ago in my paper Patent Damages Heuristics, 25 Tex. Intell. Prop. L.J. 159, 180-81 (2017):

Section 284 of the U.S. Patent Act, for example, states that “[u]pon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer” (emphasis added).  In Apple, Inc. v. Motorola, Inc.,⁷⁴ the Federal Circuit interpreted the italicized language to mean that, even when the patent owner fails to introduce admissible evidence quantifying the amount of its loss, the court still has an obligation to “determine what constitutes a reasonable royalty from the record evidence”--in effect, creating a rebuttable presumption that the patent owner is entitled to something as a consequence of the infringement.  The rule is consistent with practice in some other countries,⁷⁶ but it provides no guidance on how to calculate the royalty due when the parties' evidence is deficient.  One might imagine, though, that in such cases courts will have to take it upon themselves to apply methodology heuristics akin to those I discuss in a subsequent section below, based on whatever record evidence there may be concerning the amount of the use, comparable license rates, and the advantages of the technology over alternatives. For now, however, this appears to be an area in which U.S. patent damages law remains largely underdeveloped. . . .

 

^/74  757 F.3d 1286 (Fed. Cir. 2014).

 

^/75  Id. at 1328.  Further:

 

. . . if the patentee's proof is weak, the court is free to award a low, perhaps nominal, royalty, as long as that royalty is supported by the record . . . .

 

Thus, a fact finder may award no damages only when the record supports a zero royalty award. For example, in a case completely lacking any evidence on which to base a damages award, the record may well support a zero royalty award. Also, a record could demonstrate that, at the time of infringement, the defendant considered the patent valueless and the patentee would have accepted no payment for the defendant's infringement. Of course, it seems unlikely that a willing licensor and willing licensee would agree to a zero royalty payment in a hypothetical negotiation, where both infringement and validity are assumed.

 

At summary judgment, as is the case here, a judge may only award a zero royalty for infringement if there is no genuine issue of material fact that zero is the only reasonable royalty. Thus, if a patentee raises a factual issue regarding whether it is due any non-zero royalty, summary judgment must be denied. In any event, simply because a patentee fails to show that its royalty estimate is correct does not, by itself, justify awarding a royalty of zero at summary judgment, as the district court did here . . . .

 

Id.

 

^/76  See, e.g., Markus Schönknecht, Determination of Patent Damages in Germany, 43 IIC 309, 311-13 (2012) (discussing the German courts' “free discretion” (nach freier Überzeugung) to estimate patent damages under § 287 of the Code of Civil Procedure); see also Charlotte Scott, Damages Inquiries and Accounts of Profits in the IPEC, 38 E.I.P.R. 273, 273 (2016) (asserting that the procedural rules employed in the Intellectual Property Enterprise Court of England and Wales--a sort of smallish-claims court in which damages are capped at £500,000--“enable a rough and ready determination with more limited disclosure”). According to Schönknecht, in Germany “[t]he injured party is not required to prove the exact amount of its damage; rather, it is sufficient if it presents a factual basis on which the court can establish ‘at least a rough estimate’ of the damage.” Schönknecht, supra, at 312 (citing Federal Supreme Court (Tolbutamid), 1980 GRUR 841, 842, translated in 11 IIC 763, 764 (1980)). Statutory damages, which are (by far) the dominant form of damages award for IP infringement in China, arguably are intended to play a similar role of allowing the court to provide compensation when the evidence on lost profits, royalties, and defendant's profits is lacking, though critics argue that awards of statutory damages are not closely correlated with actual losses or gains. For discussion, see Jingjing Hu, Determining Damages for Patent Infringement in China, 47 IIC 5 (2016).

I also noted in my more recent paper Standing, Nominal Damages, and Nominal Damages “Workarounds” in Intellectual Property Law After TransUnion, 56 UC Davis L. Rev. 1085, 1144_ (2023), that the Federal Circuit has cited Apple v. Motorola

as standing for the proposition that a patentee who puts on no admissible evidence of damages may receive zero damages. In TecSec, Inc. v. Adobe Inc.,²⁴³ the patent owner sued (among other parties) Adobe, for (among other things) direct infringement of certain patents relating to cryptography. . . .  A jury returned a verdict for the plaintiff and awarded $1.75 million in damages, an award the district judge vacated for lack of sufficient evidence. . . .  Rejecting the argument that the statute “require[s] an award of damages greater than zero in all cases where the jury finds infringement” . . . the Federal Circuit affirmed this aspect of the judgment, stating that “The statute does not require an award of damages if none are proven that adequately tie a dollar amount to the infringing acts” . . . and that “there can be an award of no damages where ‘none were proven”’ . .  . .

 

^/243  978 F.3d 1278 (Fed. Cir. 2020).

Again, I’ll state that I have no idea at this point what the correct result is in the Sonos v. Google case, but I will make two observations.  The first is that allowing the trier of fact, whether jury or judge, to assess damages in a complicated patent infringement case without the benefit of expert testimony is far from ideal.  If courts were willing to employ neutral damages experts, that might help (see recent discussion on this blog here), but I don’t see that happening anytime soon in the U.S.  The second, related, observation is that no matter how conscientious a given jury may be, having lay jurors decide matters like this, typically with no explanation as to how they come to any specific amount, is also hardly ideal, though again I don’t see any practical solution to the problem.  In the U.S.,  the practice of employing juries in complex patent cases (a practice that, to my knowledge, even other common-law systems have long since abandoned) is attributable to the Seventh Amendment to the U.S. Constitution (“In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise reexamined in any Court of the United States, than according to the rules of the common law”). And constitutional norms are a prime example of what William MacAskill, in his very interesting book What We Owe the Future (Basic Books 2022), refers to as “value lock-in,” or “early plasticity, later rigidity”--that is, “that it can be much easier to influence the norms, standards and laws surrounding a technology, idea or country when they are still new than later on, when things have settled.”  (There may be plenty of other constitutional-law examples one could cite, including the obstacles the Constitution itself imposes on amending it, as I believe con law scholars Jack Balkin and Sanford Levinson have argued, but I won’t go into those here.)  The best we can do is to tinker at the margins, perhaps in some of the ways I suggest in the above articles (see the Standing article footnotes 165 and 166 in particular), though sometimes I think it’s a bit like trying to fix a leaky boat with adhesive tape.    

 

Neuhaus on Two Recent German Decisions Regarding Urgency and Preliminary Injunctions

Before proceeding to the post for today, I will note that the U.S. Supreme Court delivered two important IP-related opinions today, Amgen Inc. v. Sanofi and Andy Warhol Foundation for the Visual Arts v. Goldsmith. The first affirms a Federal Circuit decision holding that Amgen failed to enable a person of skill in the art to make and use the claimed genus of antibodies; the second affirms a Second Circuit decision holding that the purpose and character of the late Andy's Warhol unauthorized use of the plaintiff's photograph of the musician Prince did not weigh in favor of the use being a lawful fair use.  Neither is about patent remedies, which is the subject of this blog, so I will leave it at that, but you can bet that I will be spending considerable time today reading through these two. 

Anyway, for today's post, Stephan Neuhaus has published an article titled Die Dringlichkeit in zeitlicher Hinsicht bei der patentrechtlichen einstweiligen Verfügung:  Zugleich Besprechung von LG Düsseldorf ˶Solarzelle II˝ und LG München I ˶Bortezomib II˝ (“Urgency in Relation to Timing in Preliminary Injunctions in Patent Litigation:  Considering Together the Decision of the Düsseldorf Regional Court’s Decision in “Solar Cell II” and the Munich District Court I’s Decision in Bortezomib II”), 2023 GRUR-RR 200-04.  Excerpts from the decisions themselves follow, at pp. 205-13.   

To put the issues under discussion in context, in deciding whether to grant a preliminary injunction in a patent case, German courts consider whether the movant has shown “urgency” (Dringlichkeit); and, according to long-standing practice in both venues, typically there is no urgency if the movant, having become aware of the alleged infringement, delays filing its motion for more than one month.  Also relevant here, however, is the CJEU’s April 28, 2022 decision in Phoenix Contact.  As I wrote earlier this year, in a post discussing an article by Christian Heinze discussing two other decisions by the Munich and Düsseldorf courts:

 

. . . for a time, and subject to various exceptions, German courts generally denied requests for preliminary relief unless the patent in suit had previously withstood an opposition or validity challenge.  On April 28, 2022, however, in the Phoenix Contact case, the CJEU ruled that there is no general rule precluding the entry of preliminary relief where the patent in suit has not yet survived a nullity challenge, and in the course of its decision stated that “European patents enjoy a presumption of validity from the date of publication of their grant.”  . . . The author briefly notes the varying views of German commentators regarding how and to what extent Phoenix Contact changes German practice, and discusses two recent opinions that interpret the decision somewhat differently—with the Düsseldorf court stating that the CJEU didn’t mean there is a presumption (of validity) “in the legal sense,” and the Munich court adopting a sort of burden-shifting approach.

Anyway, coming back to the present matter, in the Solar Cell II case the Düsseldorf court concluded that the patent owner’s motion for a preliminary injunction was timely, even though the owner waited two years after warning the defendant of the latter's alleged infringement, given that there were several cancellation proceedings pending in the interim.  (It's complicated, and I'm not going to review all the complications here.)  Suffice to say that the relevant cancellation proceedings were decided in favor of the patent owner, which then filed its motion within one month.  According to the court, this change in circumstances starts the running of a new one-year urgency clock.   

The Munich case involved the alleged infringement of a utility model, from which a patent application had “branched off.”  The EPO had indicated on April 11, 2022 that the claims of that application, which were identical to those in the utility model, would be granted.   The court concluded that the owner of the utility model was aware of, and had sufficient grounds for asserting, its claim for infringement more than one month before it moved for a preliminary injunction (in June 2022).  The Phoenix Contact decision, as noted above, had been rendered on April 28, and even if it took two weeks for the owner to learn of the decision (that is, by May 11), the motion for a preliminary injunction was filed more than one month after that date.  (Interestingly, the court noted the possibility that a “rigid” one-month period may not be in conformity the IP Rights Enforcement Directive, but concluded that it didn’t matter on the facts here, where the owner delayed, despite having had a sufficient factual basis to proceed, in order to obtain additional legal advice, a step that could have been taken in parallel with its factual investigation.)     

The author argues that the cases are consistent, and in particular that the Munich decision is consistent with the idea that the urgency clock could begin running anew upon changed circumstances, in particular a positive validity decision.