U.S. Jury Awards Edwards Lifesciences $394 million in patent damages

I noticed this story in my local paper, the Minneapolis Star-Tribune, this morning.  The patent in suit relates to a transcatheter aortic valve.  There will undoubtedly be postverdict motions and an appeal, and there are no reported decisions in the case on Westlaw, so I don't have much to comment about at this point, other than to note that this is a second large patent damages award in favor of Edwards and against CoreValve (a subsidiary of Medtronic).  I blogged about a previous decision, involving a different U.S. patent relating to transcather heart valves, here.  According to the Star-Tribune story, Medtronic believes the damages will be reduced by $40 million because of overlap with the damages awarded in that other case.  The article also states that an injunction against Medtronic was lifted in Germany after the patent in suit in a case there was invalidated by the EPO, and that it remains to be seen whether the district court in yesterday's case will enter an injunction.  For other coverage of yesterday's jury verdict, see here and here.

Stryker Corp. v. Zimmer Inc.: U.S. District Court awards $217 million in trebled lost profits damages

I mentioned last month that I would be blogging about this case, which was decided last August but only recently made available on Westlaw.  The Westlaw citation is Stryker Corp. v. Zimmer Inc., No. 1:10-CV-1223, 2013 WL 6231533 (W.D. Mich. Aug. 7, 2013).   I don’t have any personal knowledge of the underlying facts, but the court’s discussion of the law is quite interesting—particularly on some of the more obscure legal questions, such as those involving patent marking and the standards for awarding and calculating prejudgment interest.  I don’t know whether an appeal is pending.

The plaintiff and the defendant are the two principal competitors in the market for a medical device, known as an orthopedic pulsed lavaged device, used for cleaning wounds and tissue during surgery.   In December 2010, Stryker sued Zimmer for infringing three patents.  Two years later, the jury returned a verdict that the patents were valid and willfully infringed, and awarded Stryker $70 million in lost profits.   In August 2013, the district court denied Zimmer’s post-verdict motions for judgment as a matter of law or for new trial; concluded that the case was exceptional and merited an award of attorneys’ fees, and that Stryker was entitled to $2,351,257.66 in supplemental (post-verdict) damages and $11,167,670.50 in prejudgment interest as well; and ordered judgment for treble the lost profits and supplemental damages, or about $217 million, not including the interest and fees.   I’ll focus here on some of the remedial issues.

First, Zimmer argued that Stryker was not entitled to recover damages for the period preceding the date Stryker filed suit, December 10. 2010, because Stryker did not mark “substantially all” of its products.  (For more on patent marking requirements around the world, including the U.S. patent marking statute, and their relevance to damages awards, see here.)  The court rejected this argument on the ground, among others, that there was evidence from which the jury could conclude that Stryker marked “substantially all” of its products’ labels during the time period for which Stryker sought damages:

The parties largely agree that, during those periods, Stryker marked roughly 99.52% of the relevant products with the 329 patent, 99.78% of the relevant products with the 807 patent, and 83.96% of the relevant products with the 383 patents. Although, as Zimmer argued at trial, a reasonable jury might conclude that those numbers did not amount to “substantially all” of the relevant products, it is equally true that a reasonable jury could conclude that, under the circumstances, each of those percentages rises to the level of “substantially all” products. See, e.g., Funai Elec. Co., Ltd. v. Daewoo Elec. Corp., 616 F.3d 1357, 1374–75 (Fed.Cir.2010) (affirming that marking 88–91% of all the commercial embodiments of a patent sufficed to satisfy the marking statute). Accordingly, Zimmer is not entitled to JMOL on marking.

That leaves Zimmer's motion for a new trial on the issue of marking. Zimmer asserts that the Court erred when it instructed the jury that, in deciding whether Stryker complied with the marking statute, the jury could consider “whether some portion of the Stryker products not marked with a particular patent number were marked with other related patent notices.” ( See Final Draft Jury Instructions, doc. # 377–1, at Instruction # 29.) An erroneous jury instruction warrants a new trial only if the party moving for a new trial establishes, inter alia, that the instructions were legally erroneous and that the instructions had a prejudicial effect on the jury. Bettcher Indus. v. Bunzl USA, Inc., 661 F.3d 629, 638 (Fed.Cir.2011); NTP, Inc. v. Research In Motion, Ltd., 418 F.3d 1282, 1311–12 (Fed.Cir.2005).

 

In this case, Zimmer has not established that the challenged instruction was erroneous or that it had a prejudicial effect on the jury. As to whether the instruction was erroneous, Zimmer has not pointed to a single case holding that marking a product with a given patent is necessarily not an effective means of notifying other parties that the product is also covered by other, related patents from the same family as the patent with which the product is marked. To the contrary, in at least some circumstances, marking the product with a closely related patent would appear to provide reasonable persons with exactly the sort of constructive notice the patent marking statute is calculated to effect. See, e.g., Ethicon Endo–Surgery, Inc. v. Hologic, Inc., 689 F.Supp.2d 929, 945–46 (S.D.Ohio 2010) (noting “the [Supreme] Court's long-standing focus on the notice effected by the method of marking the patented article rather than on the precise mechanistic compliance with the statute.”). Given the broad, functional reading courts have ascribed to the patent marking statute, the Court's instruction on marking was not so clearly erroneous.

Moreover, even if the Court's instruction was erroneous, Zimmer has not produced any evidence that the challenged instruction was prejudicial. To determine whether an instruction was prejudicial, a court must consider “the entirety of the proceedings, including the jury instructions as a whole.” Delta–X Corp. v. Baker Hughes Prod. Tools, Inc., 984 F.2d 410, 415 (Fed.Cir.1993). Looking at Jury Instruction 29 in its entirety, it is clear the thrust of the instruction was that the jury should consider whether Stryker had shown, by a preponderance of the evidence, that it marked its products in accordance with the patent marking statute. The instruction defined “marking” as “placing the word ‘patent’ or the abbreviation ‘PAT’ with the number of the patent on substantially all of the products it sold that included the patent invention.” (Final Draft Jury Instructions, doc. # 377–1, at 42.) That is, almost verbatim, the language Zimmer insists in its motion the Court should have used. It is telling, moreover, that, at trial, Zimmer argued that the challenged language from Instruction 29 actually helped Zimmer's case. ( See Trial Tr., doc. # 389, at 138 (“So Mr. Vogler's pointing to something he says helps him. It doesn't. It makes it worse.”).) On balance, then, the whole of the instructions, together with Zimmer's own arguments from trial, make clear that the jury was not erroneously instructed in a way that prejudiced Zimmer. Thus, there is no basis for granting a new trial.

2013 WL 6231533, at *10-11.

Second, the court denied Zimmer’s motion for JMOL that the infringement was not willful.  Perhaps the most interesting question here was the relationship between the court’s pretrial denial of Stryker’s motions for summary judgment and the issue of whether Zimmer’s conduct was “objectively reasonable”:

. . . the Court turns to the first prong of the willfulness analysis-whether Zimmer's conduct was objectively reasonable. If an “accused infringer's position is susceptible to a reasonable conclusion of no infringement,” the infringer's conduct cannot be objectively unreasonable. Cohensive Techs., Inc. v. Waters Corp., 543 F.3d 1351, 1374 (Fed. Cir. 2008). Zimmer's central argument on this point is that, because the Court did not grant Stryker's motions for summary judgment on the issues that went to trial, Zimmer's positions on those issues were, necessarily, reasonable. In other words, Zimmer contends that since the Court determined that a reasonable jury might agree with Zimmer's view, Zimmer was not objectively unreasonable in holding that view. The flaw in Zimmer's argument is that there is a difference between an “objectively reasonable” position and a position with which a reasonable jury could agree. The bare fact that some jury, somewhere might adopt Zimmer's position does not mean Zimmer's position is objectively reasonable. See Depuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 567 F.3d 1314, 1337 (Fed.Cir.2009) (“[T]he fact that an issue was submitted to a jury does not automatically immunize an accused infringer from a finding of willful infringement....”). To the contrary, an action is objectively unreasonable if “the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.” In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed.Cir.2007).

In this case, while it was conceivable that the jury could have accepted one or more of Zimmer's defenses, it was far from likely. . . .

Id. at *13.

Third, the court rejected Zimmer’s arguments that the “jury improperly disregarded Zimmer’s two proposed noninfringing alternatives,” reasoning that there was sufficient evidence for the jury to conclude that the two alternatives were not viable.  See id. at *15-16.

Fourth, the court concluded that, on the basis of the eBay factors, a permanent injunction was appropriate, and that a stay pending appeal was not.  See id. at *23-26.

            Fifth, the court concluded that the case was “exceptional” based on the fact that both court and jury had found, by clear and convincing evidence, that Zimmer willfully infringed.  The court decided that attorneys’ fees would be appropriate:

Having found this case to be “exceptional,” the Court must consider whether to award attorneys' fees. The decision on attorney's fees is left largely to the Court's discretion. Bard Peripheral Vascular, Inc., 670 F.3d at 1191–92. Exercising that discretion, the Court concludes that an award of attorneys' fees is appropriate in this case, based on the principles animating § 285. In particular, § 285 is meant to prevent the waste of judicial resources that comes from willful infringement and the oftentimes unnecessary litigation it engenders. Univ. of Pittsburgh v. Varian Med. Sys., Inc., No. 08–cv–1307, 2012 WL 1436569, at *8–*9 (W.D.Penn. Apr. 25, 2012). By pursuing this action, Zimmer has forced Stryker and this Court to expend considerable resources in the name of a case that, for the most part, was not terribly close.⁵ That is the essence of the harm that § 285 was designed to remedy. See Brooktree Corp. v. Advanced Micro Devices, Inc., 977 F.2d 1555, 1582 (Fed.Cir.1992) (“The statutory purpose of such award is to reach cases where the interest of justice warrants fee-shifting.”); Central Soya Co., Inc. v. Geo. A. Hormel & Co., 723 F.2d 1573, 1578 (Fed.Cir.1983) (“The purpose of § 285 is, in a proper case and in the discretion of the trial judge, to compensate the prevailing party for its monetary outlays in the prosecution or defense of the suit.”). Accordingly, the Court awards Stryker its reasonable attorneys' fees.

 Id.  at 27.  In footnote 5, the court made clear that the fee award "was in no way a comment on the quality of Zimmer’s counsel’s advocacy through these proceedings.  Counsel for Zimmer has consistently made the best of a bad case . . . .”  (For a more recent Federal Circuit case on fee awards, see Kilopass Technology, Inc. v. Sidense Corp., No. 2013-1193 (Dec. 26, 2013), which I blogged about last week.)   

            Sixth, the court awarded prejudgment interest on all three components, at Stryker’s proposed rate of 3.83%, based on its “Stryker’s weighted-average interest rate,” which is “considerably below the prime rate, which courts routinely use when calculating prejudgment interest.”  Interest will be compounded monthly:

The other remaining question is whether interest will be compounded monthly, as Stryker requests, or quarterly, as Zimmer suggests. Resolution of this question, also, is left largely to the Court's discretion. See Bio–Rad Labs., Inc. v. Nicolet Instrument Corp., 807 F.2d 964, 969 (Fed.Cir.1986) (“The rate of prejudgment interest and whether it should be compounded or uncompounded are matters left largely to the discretion of the district court.”). Zimmer's argument that interest should be compounded quarterly is based on the fact that Davol pays Stryker a royalty for use of a Stryker patent on a quarterly basis. But the damages in this case are for lost profits from infringing sales, not loss of a reasonable royalty, and Stryker accumulates sales revenue for its patented devices on a daily, not quarterly, basis. From that vantage point, then, Stryker's proposal that interest be compounded monthly is conservative. The Court agrees with Stryker, then, that compounding interest on a monthly basis is appropriate in this case. As such, Stryker is entitled to an award of $11,167,670.50 in prejudgment interest on the jury award and supplemental lost profit damages Stryker incurred from December 1, 2012 to February 28, 2013. In addition, for the same reasons the Court found this to be an “exceptional case,” the Court awards Stryker additional prejudgment interest, calculated at a rate of 3.83% and compounded monthly, on its reasonable attorney's fees. See Mathis v. Spears, 857 F.2d 749, 761 (Fed.Cir.1988) (“[A] district court does have authority, in cases of bad faith or other exceptional circumstances, to award prejudgment interest on the unliquidated sum of an award made under Section 285.”).

             Seventh, the court considered whether to enhance damages by applying the Read v. Portec factors:

   . . . In evaluating the egregiousness of the defendant's conduct, courts typically rely on the nine Read factors, which are: (1) whether the infringer deliberately copied the patentee's ideas or design; (2) whether the infringer investigated the scope of the patent and formed a good faith belief that  it was invalid or not infringed; (3) the infringer's conduct during litigation; (4) the infringer's size and financial condition; (5) closeness of the case; (6) duration of the infringing conduct; (7) remedial actions, if any, taken by the infringer; (8) the infringer's motivation for harm; [and] (9) whether the infringer attempted to conceal its misconduct. Id. at 826–27.

In this case, all nine Read factors favor substantial enhancement of the jury's award. . . .

Because the Read factors so overwhelmingly favor enhancement, the real question here is not whether enhancement is warranted, but how much enhancement is appropriate. Given the one-sidedness of the case and the flagrancy and scope of Zimmer's infringement, the Court concludes that treble damages are appropriate here. . .

The last question in this case is whether Stryker is also entitled to treble damages on the Court's award of supplemental damages. The Court answers that question in the affirmative. . . .

Id. at *30-32.

Monday Miscellany: Protective Letters, Developments in France, the E.U., and South Korea, and More

1. I mention in my book (p.244 n.104) that in Germany and Switzerland potential infringement defendants can "file, ex parte, a 'protective writ' (Schutzschrift) [also known in English as a "protective letter"] with a court in anticipation of a possible ex parte motion for a preliminary injunction on the part of a patentee. The writ explains why, in the defendant’s opinion, a potentially accused product does not infringe. The existence of the writ is not disclosed to the patentee unless and until the patentee moves for a preliminary injunction."   Dr.  Andreas Wehlau has written an entire book on the subject, Die Schutzschrift (Carl Heymanns Verlag 2011).  Dr. Wehlau and Dr. Björn Kalbfus also discuss protective letters, in English, here, noting among other things that they are also used in the Netherlands and Belgium.  Apparently they're trying the procedure out in France too, according to this article by Dominique Ménard.

Over the past few months, some of the patent law blogs have been discussing the question of whether the protective letter procedure is now available in Spain.   PatLit published a post a couple of weeks ago, "Barcelona court allows filing of 'protective leter' by alleged infringer," that discusses what may be the first use of the procedure in Spain.  (According to this post, the court in Barcelona requires that a patent owner who has sent the alleged infringer a warning letter be notified of the protective letter.)  However, on October 17 the Kluwer Patent Blog published a post by Miguel Montañá titled "Protective Writs in Spain?" that discusses what sounds like the same case (and one other later case), and expresses some doubt that either case should be read as firmly embracing the procedure.  Yet another write-up, by Manuel Lobato of Bird & Bird, seems to side with the position expressed on PatLit (and notes that "protective letters are also mentioned in the draft Rules of Procedure for the [Unified] Patent Court"--Rule 207, to be precise--so maybe we'll be seeing more of them in other European countries).  I guess we'll see how future courts resolve the issue.

2.  The December 2013 issue of the French IP journal Propriété Industrielle discusses (both in the introductory comments by Professor Christian LeStanc and in a longer article by Xavier Buffet Delmas d'Autane and Jules Fabre) a recent proposed law to combat the infringement of intellectual property  rights.  The proposal is available, in French, here.  Of particular interest to me is the proposal to amend the damages provisions of the Code de la Propriété Intellectuelle.  (The amendments read alike for patents, copyrights, trademarks, and other IP rights).  For patents, the current text of the law, as amended in 2007, reads:

Pour fixer les dommages et intérêts, la juridiction prend en considération les conséquences économiques négatives, dont le manque à gagner, subies par la partie lésée, les bénéfices réalisés par le contrefacteur et le préjudice moral causé au titulaire des droits du fait de l'atteinte.

Toutefois, la juridiction peut, à titre d'alternative et sur demande de la partie lésée, allouer à titre de dommages et intérêts une somme forfaitaire qui ne peut être inférieure au montant des redevances ou droits qui auraient été dus si le contrefacteur avait demandé l'autorisation d'utiliser le droit auquel il a porté atteinte.

This can be translated as:

For assessing damages and interest, the court takes into account the negative economic consequences, including loss of profit, suffered by the injured party, the profits realized by the infringer and the moral prejudice caused to the rightholder by the infringement.

However, the court may, 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.

(Thanks to my former research assistand Margaret Wade for suggesting some revisions to my original translation some months back.)   The new law would amend this provision to read:

Pour fixer les dommages et intérêts, la juridiction prend en considération distinctement :

« - les conséquences économiques négatives de la contrefaçon, dont le manque à gagner et la perte subis par la partie lésée ;

« - le préjudice moral causé à cette dernière ;

« - les bénéfices réalisés par le contrefacteur et, le cas échéant, les économies d'investissements intellectuels, matériels et promotionnels que celui-ci a retirées de la contrefaçon.

« Si la juridiction estime que les sommes qui en découlent ne réparent pas l'intégralité du préjudice subi par la partie lésée, elle ordonne au profit de cette dernière la confiscation de tout ou partie des recettes procurées par la contrefaçon.

« Toutefois, la juridiction peut, à titre d'alternative et sur demande de la partie lésée, allouer à titre de dommages et intérêts une somme forfaitaire. Cette somme est supérieure au montant des redevances ou droits qui auraient été dus si le contrefacteur avait demandé l'autorisation d'utiliser le droit auquel il a porté atteinte. »

I would translate this as:

For assessing damages and interest, the court takes into account distinctly:

the negative economic consequences, including loss of profit and the loss sustained by the injured party;

the moral prejudice incurred by the latter;

the the profits realized by the infringer and, where appropriate, the savings of intellectual, material, and promotional investments which the latter has derived from the the infringement.

If the court determines that the resulting amounts do not make good the entirety of the prejudice suffered by the injured party, it orders to the profit of the latter the confiscation of all or part of the revenue procured by the infringement. 

However, the court may, alternatively, upon request by the injured party, award damages as a lump sum.  This amount is higher than the royalties or fees that would have been due if the infringer had requested authorization for the use of the right infringed. 

According to Messrs. Buffet Delmas d'Autane and Fabre, these remedies provisions are the most ambitious part of the proposal.  They also predict there will be debate over the meaning of the terms "entirety of the prejudice" and "revenue"; and while they believe that judges have been to reluctant to apply the new rules for calculating damages permitted under the 2007 revision and therefore that the proposal is a step in the right direction, they note that some will regret that it doesn't mention taking into account the infringer's bad faith.  There also are proposed amendments relating to customs and to saisies-contrefaçon.

It appears that the French Senate has passed the proposal, see here.  The next step is the National Assembly, see here.

3.  Thorsten Bauch and Anja Petersen-Padberg recently published a couple of interesting items on the Kluwer Patent Blog.  The first is  "New Regulation on Customs Action as of 1 January 2014: In a Nutshell, Important Changes in View of Patent Rights," available here. The authors write that "Patent practitioners should note that national utility model and future unitary patents are also covered by this new Regulation."  Until now, the EU regulation on border measures did not extend to utility models, although German law did; see my book p.249 n.120.  The second is titled "Enforcement of IPR at German Trade Fairs--The Long-Standing 'On-Call Duty' of the RC Braunschweig," available here.  According to this post, "With regard to these important trade fairs and many more taking place in Hanover, the presiding judge of the specialized chamber for patent, utility model, design and trademarks at the Regional Court Braunschweig and his team are prepared to receive requests for provisional injunctions as of 7:00 am as well as on Saturdays and Sundays, depending on the schedule of the trade fair. The court is even willing to hold a hearing at the exhibition site."

4.  The EPLaw Blog has two interesting recent posts, one on a recent grant of a preliminary injunction in the Netherlands (Unilever v. Procter & Gamble), and another by Sabine Agé on a recent French case (HTC v. Nokia) holding that a party requesting a saisie-contrefaçon "has no obligation to put forward any and all defences and arguments that the defendant may raise on the merits; it should only disclose those legal and factual circumstances which might have an influence on the decision to grant the saisie order."

5.  On Bloomberg BNA World Intellectual Property Report (available here, but behind a paywall), C. Leon Kim of FirstLaw PC, Seoul, has published an article titled "Korean Presidential Council Announces IP Adjudication Reform, KIPO Introduces Changes to Patent Act."  Of most immediate relevance to patent remedies is the announcement of a "judicial reform plan to consolidate all IP litigation cases of first instance under the jurisdiction of two designated district courts and all appeal cases to be heard by one appellate court."  Also interesting is KIPO's announcement that "a computer program per se is expected to become patent eligible in Korea from 2014."  This seems to be going against prevailing sentiment in some other parts of the world these days, e.g., Germany (see here) and New Zealand. 

6.  For the last several months, I've been aiming to blog approximately three times a week.  With my teaching responsibilities resuming this month, starting next week I plan to blog only twice a week for the next few months--most likely Mondays and Thursdays--though I will chime in more frequently, as needed, if and when something of particular importance (e.g., an important Supreme Court case) comes down.  Of course, most of what I blog about is relevant to my research and teaching, so I will continue to keep abreast of new developments in the comparative law and economics of patent remedies, even if I am a little less prompt in posting.