Monday, February 19, 2018

Bharadwaj on Injunctions and the Public Interest in India

Ashish Bharadwaj has published an article titled Patent Injunction and the Public Interest in India, 40 EIPR 55-58 (2018).  Here is the abstract:
In Bayer Intellectual Property GmbH v Ajanta Pharma Ltd, the Delhi High Court weighs public interest with an injunction in an infringement suit pertaining to a drug patent on new grounds. The decision is functionally a compulsory licensing arrangement, although it is characterised as voluntary licensing. Moreover, the decision represents a dramatic expansion in the scope of patents that fall under the public interest exception to the grant of patents under the Indian patent law. The decisive ruling has implications for future cases in India, where courts could now refuse to grant injunctions for patent infringement based on a very broad economic rationale.
As the abstract suggests, the author argues that the case departs from Indian precedent in effectively permitting a court to issue a compulsory license in the public interest, even though the drug is not a life-saving medicine (it's an erectile dysfunction drug), based on "economic factors such as employment or tax revenues for the state."  (Ajanta was making the patented drug in India, without Bayer's permission, for export to other countries. Bayer itself was not working the drug in India.)   Several posts about the Bayer/Ajanta case also have appeared over the past few months on the SpicyIP Blog, as I noted here.  In addition, here is a link to a post on Mondaq from March 2017 by Dinesh Kumar Sharma, titled Patent Infringement in India and Interim Injunctions: Jurisprudence on "Public Interest" Continues to Evolve, which discusses Bayer/Ajanta among others.  Finally, I should note that in September Pankhuri Agarwal and Shamnad Basheer published two posts on Spicy IP titled Towards More Intelligible "Open Access" at the India Patent Office:  A Study of Compulsory Licensing Cases (see here and here), which discusses the difficulty one of the authors encountered in trying to obtain online access to compulsory licensing decisions of the India Patent Office, and provides their recommendations for improving online access.

Friday, February 16, 2018

Lex Machina 2017 Patent Litigation Year in Review

Lex Machina's Patent Litigation Year in Review 2017, authored by Brian Howard, is now available.  As in previous years, the report presents a wealth of data on U.S. patent litigation.  This year's report includes an extensive discussion of the effect of the TC Heartland case on patent venue (which, as many readers are probably aware, is now to some degree shifting away from the Eastern District of Texas to the District of Delaware), as well as a brief section on design patent litigation.  (For brief discussion of TC Heartland on this blog, see here.)  Page 28 includes some data on injunctions, which Lex Machina classifies by default/consent and merit-based decisions, as well as by permanent injunctions, preliminary injunctions, and TROs.  I was somewhat surprised to see that, among the merit-based decisions (80 cases in 2017), motions for permanent injunctions were granted in 31 cases and denied in only 2 cases.  (Is that because litigants can now predict most of the time whether a permanent injunction is likely or not, and thus either are (1) agreeing to the entry of a permanent injunction when it's likely one will be granted, and (2) not bothering to request a permanent injunction when it isn't?)  The grant rate for merit-based preliminary injunctions is 19% (8 out of 42), which seems about right to me, and for TROs 38% (but based on only a handful of cases, 3 grants out of 8 motions).  There are also data on damages, showing for example that in 2017 courts awarded $763 million in reasonable royalties and $284 million in lost profits, "with only a few outliers driving the high totals.  Among all damages awarded in cases filed since the year 2000, 90% of the reasonable royalty awards in cases have been less than $46.5m, 75% less than $15.2m, and half less than approximately $4.4m; the amounts for lost profits are lower" (p.30).  Finally, there is also a chart on ITC investigations, which indicates that 60 were filed in 2017 (p.39).

Thursday, February 15, 2018

Minor Changes to TCL v. Ericsson Opinion

David Long reports on the Essential Patents Blog that Judge Selna has issued an order making a few minor corrections to his December 2017 FRAND opinion in TCL v. Ericsson (previously discussed on this blog here).  Rather than repeating Mr. Long's analysis, I will simply direct readers to his post, here.  Basically, the court appears to have rebuffed most of Ericsson's arguments for amending the findings of fact found in the December opinion.

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Just a reminder--Jorge Contreras, Christopher Thomas, and I will be participating in an IP Chat Channel webinar on TCL v. Ericsson on February 28.  More details soon.

Wednesday, February 14, 2018

Liability for Willful Infringement Without Knowledge of the Patent Prior to Suit?

On occasion I have posed the question whether, in the wake of the U.S. Supreme Court's decision in Halo, the trier of fact may find that the defendant willfully infringed if the defendant (1) lacked actual knowledge of the patent at the time the infringement began, but (2) continued to infringe after acquiring such knowledge, such as where the defendant continues to infringe after the patent owner sends a cease-and-desist letter or files suit.  (See, e.g., here, discussing an article by Feldman and Lemley.) On the one hand, the Court in Halo states that "culpability is generally measured against the knowledge of the actor at the time of the challenged conduct,” but does that necessarily mean that a defendant who continues to infringe once the lawsuit has been filed is potentially a willful infringer from that point forward?  Of course, the defendant may have a good faith basis for believing the patent is invalid or not infringed, in which case it probably isn't a willful infringer; so does the issue turn on the defendant's subjective state of mind once the suit is filed (or the cease-and-desist letter is received)?  Or might there be other considerations (such as the difficulty of designing around immediately) that should affect the analysis of willfulness?

Judge Lucy Koh effectively answered the question stated in the first sentence of the preceding paragraph in the affirmative in Apple Inc. v. Samsung Elecs. Corp., Case No. 12-CV-00630-LHK (N.D. Cal .June 23, 2017) (see previous discussion here); and now it appears that another court may have done so too, in Microsoft Corp. v. Corel Corp., Case No. 5:15-cv-05836-EJD (N.D. Cal. Feb. 9, 2018).  The jury verdict finds that Microsoft did not notify Corel of three of the design patents at issue prior to suit, but that Corel nonetheless willfully infringed those three design patents (as well as one other design patent and two utility patents).  (Here is a copy of the verdict.  Here is a link to a story about the case on Law360, and here is a link to one on IP Watchdog.) The jury awarded actual damages of $278,000, and I assume that it remains to be seen whether the judge will award an enhancement.  (I also infer from the Law360 article that the question of whether Microsoft notified Corel may have been relevant to the date on which actual damages began to accrue, under U.S. Patent Act section 287.  I gather that Microsoft was hoping for a larger damages award, based on the theory that damages started accruing several years prior to the initiation of litigation.  For discussion of section 287, see, e.g., here.)  Without knowing anything more about the case, I also can't say whether there was evidence that Corel had actual knowledge (as opposed to actual notice from Microsoft) of any of the patents pre-suit; and actual knowledge is irrelevant under section 287.  But if the case does stand for the proposition that willfulness can be based on a continuation of infringement post-filing, despite the defendant's lack of knowledge prior to that point, this could be an important precedent, assuming it withstands appellate review. 

Monday, February 12, 2018

Damages and Profits?

David Brodsky has posted an article on ssrn titled General Damages and an Account of Profits ‒ An Irish Innovation?, JIPLP (forthcoming 2018).  Here is a link, and here is the article:
This article considers the ‘orthodox’ rule requiring an election between damages or an account of profits in light of a recent Irish court decision that would appear to open the door for the granting of both remedies.
Following a brief review of the background and historical development of the ‘orthodox’ view, the specific judicial arguments underlying the decision are presented. The crux of the judge's reasoning centred on the distinction between special and general damages. Interpreting these terms in the manner set forth by the Irish Supreme Court for trade mark/passing off cases, the judge concluded that the ‘rule’ requiring a plaintiff to make an election between the two remedies refers to an election between special damages and an account of profits, so that nothing precludes a plaintiff from making a claim for general damages and an account of profits.
The article shows that the legal and economic logic underlying the judgment is not easily refuted. Moreover, at least in certain situations the ‘orthodox’ position can be seen to send a clear, albeit unintended, signal to potential infringers that they need not worry unduly about the quality of their workmanship, or tarnishing the victim's trade mark or reputation.  
The basic idea is that an award of the infringer's profit substitutes for "special" damages (lost profits, that is, profits actually lost on sales that would have been made but for the infringement) but not for "general" damages (injury to goodwill or reputation, which the author views as, in economic terms, encompassing more of a future harm yet to be suffered), and thus that there is no discrepancy between granting an award of infringer's profits and an award of general damages.  The author notes, however, that the infringer's profits could be greater or less than the plaintiff's lost profits, and that the plaintiff typically will seek whichever form of relief offers a higher payout.  So I would be concerned that an award of infringer's profits coupled with general damages for harm to reputation would result in overcompensation and, potentially, overdeterrence.  Of course, if there is reason to think that compensatory damages won't provide sufficient deterrence in a given type of case, there may be good economic reasons to award enhanced damages or, if that option isn't available in a particular country, an award of the infringer's profits instead.  But I'd still be wary about adding general damages on top of that; I don't see why an award of infringer's profits should be viewed as compensatory damages at all, though I recognize that courts in some countries (e.g., Japan) do continue to invoke that premise.

To be sure, the situation the author describes may not come up much in patent, as opposed to trademark, cases.  (He notes as well that in the case he's discussing, the judgment was later reversed on liability, so Justice Cregan's statements about damages are dicta.  Here's a link to Justice Cragen's opinion, by the way, in case you're interested.)  But there may be cases in which patent owners can make a reasonable case that the infringement has injured their reputation or caused some other less tangible harm.  See, e.g., Ronen Avraham's recent article arguing for pain-and-suffering damages in patent cases (a view I don't particularly share, however), which I mentioned here , and some of my previous posts on damages for "moral prejudice" in patent law (see, e.g., here and here).  So the issue Mr. Brodsky discusses could in theory come up in a patent case too, and if so it will be interesting to see if other courts find the Irish judge's reasoning persuasive.

For a discussion of a recent Canadian case holding (not surprisingly) that the defendant cannot elect between damages and an accounting of profits, see Norman Siebrasse's Friday post on Sufficient Description.

Friday, February 9, 2018

From Around the Blogs

1.  The U.S. Supreme Court's decision to grant cert in WesternGeco LLC v. ION Geophysical Corp., No. 16-1011, a case I have discussed several times previously (see, e.g., here), has been the subject of some recent blog commentaries in addition to those I've already noted, including this one by Steve Brachmann on IP Watchdog and this one on Patently-O citing a paper that Professor Sapna Kamur presented at UT in 2016.   

2.  There also have been at least three recent commentaries on the Federal Circuit's recent decision in Exmark Mfg. Co. v. Briggs & Stratton Power , which as I noted last month arguably opens the door a bit wider to the use of the entire market value as the royalty base.  For other discussions, see this one by Cass Christenson & Rob Kramer & Carl Bretscher on IP Watchdog; this one by David Long on Essential Patents; and this one by Mark Engstrom on Kluwer.

3.  IPKat recently published an interesting post titled Trial Sequence in SEP Litigation-Time for a Rejig?, discussing some dicta of Justice Carr in TQ Delta v. Zyxel to the effect that in FRAND/SEP cases it might make sense for the court to conduct the FRAND royalty trial before the trial on infringement and validity--what in the U.S.  is referred to as a "reverse bifurcation," such as Judge Holderman performed in Innovatio.  Hat tip to Norman Siebrasse for bringing this to my attention.

4.  Some other recent posts relevant to SEP/FRAND issues include Peter Picht, Standard Essential Patents, Antitrust, and Market Power on IP Watchdog; Joff Wild, The State of Mobile SEP Licensing, on the IAM Blog; and Michael Risch, What Is Essential?  Measuring the Overdeclaration of Standards Patents, on the Written Description Blog (discussing a recent paper by Sitzing, Sääskilahti, Royer, and Van Audenrode titled Over-Declaration of Standard Essential Patents and Determinants of Essentiality (I have not yet read the paper myself).

Wednesday, February 7, 2018

Should FRAND Royalties Be Returned to SEP Licensees if the SEP Is Invalidated?

Stephan Altmeyer and Christopher Weber have published an article titled Rückzahlung von Linzenzgebühren bei rückwirkender Vernichtung eines SEP? ("Reimbursement of Royalties in Response to a Subsequent Invalidation of an SEP?" in the December 2017 issue of GRUR, pp. 1182-88.  Here is the abstract (my translation):
The case law has long held that paid-out royalties are not to be returned, if the licensing IP right is subsequently invalidated.  On the other hand, it has never been decided whether this principle also applies to so-called standard-essential patents.  This essay presents the development of the case law from the Reichsgericht up to the most recent CJEU decisions, and identifies the fundamental legal and business differences between this case law and license contracts concerning SEPs.
The authors trace the general rule, that licensees are not entitled to recover back the fees they have paid to license a patent that is later declared invalid, back to 19th century case law, and then forward to the CJEU's more recent decisions such as Genentech finding no violation of EU competition law from a contractual provision requiring the payment of royalties even after a patent is found to be invalid or not infringed.  One of the rationales of the case law is that, even if a patent is eventually invalidated, up until that point the licensee enjoys a market advantage vis-à-vis non-licensees.  But this rationale, the authors argue, doesn't apply in the case of FRAND-committed SEPs, which can be used by any and everyone subject to the payment of a FRAND royalty.  The authors also argue that, under the present system, the incentive on the part of SEP licensees to challenge potentially invalid patents is deficient--due to, among other things, the cost of challenge, and though the authors don't mention it directly, the fact that the beneficiaries of a successful challenge include the challenger's competitors as well as the competitor itself--such that, as a result, the price of goods incorporating such technologies may be artificially high. 

Overall, it's an interesting argument, though I wonder if the authors' proposal were to be adopted if the upfront rate demanded by licensors would simply increase to offset the risk; if so, then without some regulation of that upfront rate, licensees might not be any better off, over time and in the aggregate, than they currently are.   For previous discussion on this blog, see here.
 
One further note--the general rule in France appears to be the same as in Germany, namely that the licensee doesn't get the royalties back even if the patent is invalidated.  See Alain B. v. Thiérart SARL, PIBD No. 1068, III, 202, 203-04, Trib. de la grande instance de Paris, Jan. 12, 2017 (citing SA New Holand France v. SA Greenland France, Cour de cassation, Jan. 28, 2003); see also Jacques Raynard, Anéantissement du brevet et sort des redevances de license:  efficacité de la clause prévoyant la non-restitution des redevances acquitées, Propriété Industrielle, July-Aug. 2017, pp. 27-30 (critiquing the rule, in the absence of a contractual provision permitting the licensor to keep the royalties).