As I noted the other day, on January 11 the CJEU issued its decision in Mylan AB v. Gilead Sciences Finland Oy, Case C-473/22.  The decision addresses, among other things, article 9(7) of the Intellectual Property Rights Enforcement Directive (IPRED), which reads as follows:

Where the provisional measures are revoked or where they lapse due to any act or omission by the applicant, or where it is subsequently found that there has been no infringement or threat of infringement of an intellectual property right, the judicial authorities shall have the authority to order the applicant, upon request of the defendant, to provide the defendant appropriate compensation for any injury caused by those measures.

The operative portion of the Mylan decision reads as follows:

Article 9(7) of Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights must be interpreted as not precluding national legislation which provides for a mechanism for compensation for any injury caused by a provisional measure, within the meaning of that provision, based on a system of strict liability of the applicant for those measures, in the context of which the court is entitled to adjust the amount of damages by taking into account the circumstances of the case, including whether the defendant played a part in the occurrence of the injury.

As Miquel Montaña has noted, the decision seems a bit hard to square with the CJEU’s 2019 decision in Bayer v. Richter, and leaves open several questions—though I was critical of Bayer v. Richter, and I am more sanguine about the Mylan decision than is Dr. Montaña.

As I have written before, portions of the Bayer decision (e.g., paragraphs 62-63) might be read as expressing the view that article 9(7) precludes a strict liability regime like Finland’s, although the operative part of the judgment states only that:

Article 9(7) of Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights, in particular, the concept of ‘appropriate compensation’ referred to in that provision, must be interpreted as not precluding national legislation which provides that a party shall not be compensated for losses which he has suffered due to his not having acted as may generally be expected in order to avoid or mitigate his loss and which, in circumstances such as those in the main proceedings, results in the court not making an order for provisional measures against the applicant obliging him to provide compensation for losses caused by those measures even though the patent on the basis of which those had been requested and granted has subsequently been found to be invalid, to the extent that that legislation permits the court to take due account of all the objective circumstances of the case, including the conduct of the parties, in order, inter alia, to determine that the applicant has not abused those measures.

In any event, Mylan v. Gilead clearly provides more leeway than some might have considered possible after Bayer v. Richter, for EU member states that wish to do so to apply some sort of strict liability approach.  On this issue, Dr. Montaña expresses the concern that, in the absence of a harmonized rule there will be an incentive for forum shopping, though I am not as convinced about the significance of this concern.  A company that believes its patent is being infringed, and that it is faced with irreparable harm pending trial, in numerous EU countries will still have an incentive to file suit in those countries in which it faces irreparable harm, I should think—though it will be more cautious, perhaps, in countries like Finland where the stakes of getting it wrong are more substantial.  To be sure, as Dr. Montaña notes, there could be forum shopping in favor of the UPC, which might adopt a more patentee-friendly interpretation of its governing provisions, but I’m not sure why forum shopping in favor of the UPC is a bad thing either, unless the rule it adopts is clearly suboptimal.

The actual rule adopted in Mylan nevertheless is a bit puzzling, as Dr. Montaña suggests; one would think that strict liability is, after all, strict, and not subject to a consideration of “the circumstances of the cases.”  But that is how the case was presented (see, e.g., para. 23, stating that “according to settled Finnish case-law . . . the amount of compensation may be reduced on the ground that the defendant himself or herself enabled the injury to occur or failed to take reasonable measures to avoid or mitigate the injury and thereby contributed to its occurrence”).  So maybe this means that member states may adopt a regime of strict liability in favor of the excluded defendant, as long as they provide courts with some discretion to tailor the remedy in consideration of the circumstances of the case?  For example, let’s suppose that the patentee acted in the good faith belief its patent was valid and infringed, and the defendant launched at risk; maybe the compensation due to the defendant will be lower than if there were fault on the part of the patentee, or if the defendant (as here) was poised to enter the market but hadn’t yet sold any products.  That said, I’m still not sure that outcome is entirely coherent, since it means that in some cases the excluded defendant will recover something, but not full compensation, for the harm of being temporarily excluded, and that it may be penalized for launching at risk even if it ultimately prevails on the merits.  Moreover, for what it’s worth, I don’t see what would be so bad about awarding the excluded defendant full compensation in every case in which the patent is invalid or not infringed; why should the temporary exclusion on the basis of a patent that is invalid or not infringed be damnum absque injuria?  (As I have noted previously, some law-and-economics scholars agree with me on this.) 

Maybe another solution that will emerge, in countries where this isn’t the practice already, will be to require the patentee to post a bond in a sufficient amount to cover any resulting injury, as permitted under article 9(6) of IPRED and noted in Phoenix Contact; though that leaves open the question whether the amount of the bond can be increased as time goes on and circumstances change, and also whether, if the bond turns out to be inadequate, the defendant should recover damages for its losses in excess of the bond (which is not done, for example, in the U.S., but may be permitted in some countries.)  

1.  On Sufficient Description, Norman Siebrasse has (I think) completed his insightful multipart series on Nova v. Dow, the Canadian Supreme Court decision addressing the noninfringing alternative concept in the context of an accounting of the infringer’s profit.  The installments are available  here, here, here, here, here, here, here, here, here, and here.  He also published a post last week titled What Is the Evidentiary Threshold for Denying a Permanent Injunction on Public Interest Grounds?, discussing the Federal Court’s recent decision denying AbbVie an injunction against JAMP’s marketing of a generic version of a patented drug (previously noted here).  And, while I’m at it, I may as well noted a post he published in November that I overlooked at the time, titled The UK Approach to Electing an Accounting, in which he takes issue with a strand of U.K. case law that allows the patentee to opt for an accounting of profits if the quantum will be higher than an award of actual damages.  As Professor Siebrasse argues, awarding a supracompensatory remedy should be permitted only if there is some rational policy reason for doing so, e.g., the need to deter a type of infringement that otherwise might go undetected.   And yet another post I overlooked at the time is this one from September, titled What Causation Concept Is to Be Used in Allocating Fixed Costs?, which uses both Nova v. Dow and a recent Federal Court of Appeal case (GreenBlue Urban North America Inc. v. DeepRoot Green Infrastructure, LLC, 2023 FCA 184), to illustrate the difficulties in determining the appropriate way to deduct fixed costs, if such a deduction is required, when trying to calculate the infringer’s profit.

2. On the Kluwer Patent Blog, Chloe Dickson published a post titled Philip Morris v Nicoventures—e-cigarettes light up the doctrine of equivalents and Arrow declarations.  An Arrow declaration is a type of discretionary remedy, whereby the claimant seeks a declaration that a product the claimant has launched or is planning to launch lacks or would have lacked novelty or inventive step as of a particular date (and therefore, by implication, cannot infringe the opposing party’s pending patent(s)).  In the decision at issue, Justice Hacon sets out the following principles that are relevant for granting such a declaration:

(1) The court has a broad and flexible discretion to grant Arrow declaratory relief, Mexichem at [13].

(2) The circumstances in which an Arrow declaration will be justified are likely to be uncommon, Fujifilm at [95].

(3) The discretion should be exercised only where the declaration will serve a useful purpose, which requires critical examination by the court, Glaxo at [25]; Mexichem at [13].

(4) The requirement of a useful purpose will not be fulfilled solely because the respondent has pending patent applications and the applicant would like to know whether it will infringe any patents which may be granted pursuant to those applications, Fujifilm at [93] and [94(iv)) and (v)]; Glaxo at [25].

(5) The usual course envisaged by the statute is that the applicant should wait and see what, if any, patents are granted and where necessary use the remedy of revocation, Fujifilm at [93].

(6) Where it appears that the statutory remedy of revocation is being frustrated by shielding the subject-matter from scrutiny by the national court, this may be a reason for the court to intervene with a declaration, Fujifilm at [93].

(7) The court must guard against the application being used as a disguised attack on the validity of a granted patent, Fujifilm at [81]-[82] and [98(ii)].

(8) A declaration may be sought in relation to one or more features of a product or process, as opposed to a product or process in its entirety, Mexichem at [18]-[20].

(9) Where a declaration is sought in respect of only one feature or some features of a product or process, the level of generality of the proposed declaration may be relevant to whether it serves a useful purpose, Mexichem at [18].

(10) The court may take into account the possibility that a declaration is likely to be useful solely in arguments on obviousness in which it is deployed in an illegitimate step-by-step analysis of obviousness, although it may be difficult to know that this is likely to arise, Mexichem [22]-[25].

(11) The features in respect of which the declaration is sought must be defined with sufficient clarity, Glaxo at [30].

(12) Equally, the useful purpose said to justify the declaration must be clearly identified, Mexichem at [13]. . . .

(13) Subject always to the qualifications referred to in (7), (11) and (12) above, an Arrow declaration is likely to serve a useful purpose if the applicant can show that (a) the respondent's portfolio of patent applications and/or patents creates real doubt, likely to continue for a significant period, as to whether technical subject-matter which the applicant wishes to exploit can lawfully be used, (b) the applicant's reasonable intention to exploit that subject-matter would be of significant commercial advantage to it and (c) the declaration sought would, if granted, eliminate or significantly reduce the delay.

In this context "significant" means cumulatively sufficient to warrant the intervention of the court.

(14) The court will more readily find that there is a useful purpose where the respondent's behaviour has been consistent with an intent to prolong the doubt (paras. 190, 198).

 On the facts, the court declines to exercise its discretion to grant the declaration.

3. Of relevance to remedies but also broader issues of subject matter jurisdiction and procedure is an article by Ruixue Ran, Thomas Garten, and Justin Wang on Law360, titled A Comparison of Patent Dispute Resolution in US and China.

Judge Gilstrap reached the above conclusion in a decision earlier this week in G+ Communications, LLC v. Samsung Electronics Co., Civil Action No. 2:22-CV-00078-JRG.  The conclusion comes in response to a request by Samsung that the court “make the following determination of French law:  French law does not allow a SEP declarant to unilaterally discharge (and thus avoid) its irrevocable FRAND obligations, including its duty to negotiate in good faith and its obligation to license declared patents on FRAND terms” (p.5).  The court agrees that the commitment is irrevocable, as stated in Clause 6.1 of the ETSI IPR Policy, but that it can be suspended during the period of time, if any, that the opposite party fails to discharge its obligation to negotiate in good faith:

The Court is persuaded that the obligation to negotiate toward a FRAND license in good faith may be temporarily suspended. . . . First, G+ and Samsung are subject to reciprocal obligations of good faith during negotiations for a license to a FRAND-encumbered patent. The parties’ experts agree on this point. . . . Next, one party’s failure to fulfil its obligation to negotiate in good faith suspends the other’s. . . . Indeed, Samsung’s own expert, Professor Molfessis, testified that “[w]hen in presence of reciprocal obligations a party doesn’t perform its obligation, it’s possible for the other party to ask for the termination of the contract or to suspend its own obligation.” (Dkt. No. 552-1 at 49:3–7 (emphasis supplied).) . . .

SEP holders maintain an obligation to license its [sic] SEPs on FRAND terms and to negotiate toward such licenses in good faith. These obligations are irrevocable in the sense that SEP holders cannot withdraw them or take them back. However, their irrevocable nature does not mean they are static.

. . . It is both practical and logical that the obligations of a party acting in good faith be suspended when a counterparty to a negotiation for a FRAND license is acting in bad faith. If the counterparty is acting in bad faith, it is impossible for negotiations for a “fair” and “reasonable” and “non-discriminatory” contract to proceed. . . . To hold otherwise would strain logic and reason. However, when the counterparty ceases acting in bad faith, the barrier to consummation of the license on FRAND terms is removed and the negotiations can and must resume (in good faith). Further, holding that a party’s duty to negotiate in good faith is suspended while the counterparty is acting in bad faith prevents the party acting in good faith from being taken advantage of by the counterparty. Such a suspension can counter the effects of holding up and holding out. . . .

For the reasons and supporting sources noted herein, the Court makes the following determination of French law pursuant to FRCP 44.1:

Where a patent is contributed to an adopted standard established by a standard setting organization, such contribution contractually burdens the patent to thereafter be licensed on fair, reasonable, and non-discriminatory terms. This is known as the FRAND obligation. This obligation is irrevocable, and thereafter runs with the patent. However, if in negotiating for a license to a patent burdened by a FRAND obligation either the patent holder or the implementer of the adopted standard fails to act in good faith and thereby prevents a license from being granted, the other party’s obligation to continue negotiations is suspended. This does not remove the burden of the FRAND obligation from the patent, but avoids obliging a party acting in good faith to continue negotiating with a party who fails to do so. If the bad faith actor ceases its bad faith and begins acting in good faith, the good faith negotiations must also resume (pp. 6-11).

 Hat tip to my former student Michael Sikora, for calling this decision to my attention.

I have blogged twice recently about interim decisions in this case (see here and here).  This past Friday, the jury returned a verdict of $67.5 million for the patentee, G+.  There were three patents, and four claims altogether, in suit.  According to the verdict form, the jury found claim 10 of U.S. Patent No. 10,564,443 to be patent-ineligible.  For the two remaining patents in suit, the jury awarded $45,000,000 for the infringement of U.S. Patent No. 8,761,776, and half that much or $22,500,000, for U.S. Patent No. 10,736,130.  (Without delving into the record, I would guess that the awards for these two patents, both essential to 5G technology, reflects the more recent date of issue of the latter of the two.)  Both awards are said to be running royalties, so barring a settlement I would expect a hearing to set the amount of any ongoing royalty that may still be due.  The jury also concluded that neither party breached its FRAND obligation to act in good faith, so there are no further damages under that heading.  According to Law360, G+ withdrew its claim for willful infringement following the court’s decision earlier this month that Samsung could argue it was unaware that G+’s predecessor in interest, ZTE Corp., had not already licensed Samsung the patents in suit. 

The verdict form is available here.

The nonprecedential decision is SmartSky Networks, LLC v. GoGo Business Aviation, LLC, opinion by Judge Cunningham, joined by Judges Chen and Hughes.  The parties are “competitors as business aviation network providers, both offering air-to-ground (‘ATG’) networks that provide broadband in-flight internet connections to aircrafts” (p.2).  SmartSky filed suit, “alleging that GoGo’s 5G network infringes claims of” four patents relating “to technology that enables wireless in-flight internet connections” (id.).  SmartSky also moved for a preliminary injunction against GoGo’s manufacture, use, sale, or offering to sell its 5G network.  The district court denied the motion, concluding that SmartSky had not proven a likelihood of success on the merits or irreparable harm.  The Federal Circuit perceives no abuse of discretion and therefore affirms, finding it necessary to consider only the irreparable harm arguments.  From the opinion (which, though nonprecedential, does cover a lot of ground on how one might go about trying to prove irreparable harm):

SmartSky has the burden of establishing that it is likely to suffer irreparable harm absent a preliminary injunction and that there is a causal nexus between the alleged infringement and the alleged harm. . . . . Price erosion, loss of goodwill, damage to reputation, and loss of business opportunities are examples of possible grounds for finding irreparable harm. . . .

. . . We find SmartSky’s lost sales arguments unpersuasive as to Gogo’s 5G network. SmartSky itself concedes that Gogo’s 5G network has not been released. . . . Even accepting SmartSky’s argument that the district court should have relied on evidence that Gogo’s accused 5G network has been offered for sale since October 2021, Appellant’s Br. 50, the district court did not abuse its discretion in finding that any lost sales and service revenue through the date of trial is quantifiable because SmartSky’s own expert conceded to this conclusion. . . .

. . . SmartSky has not pointed us to any additional evidence in the record that suggests that any consumers who chose Gogo’s 5G network would have chosen SmartSky’s product rather than, for example, Gogo’s unaccused 4G product or a non-infringing product offered by another provider of in-flight connectivity service. Furthermore, although “the existence of a two-player market may . . . create[] an inference that an infringing sale amounts to a lost sale for the patentee,” Robert Bosch LLC v. Pylon Mfg. Corp., 659 F.3d 1142, 1151 (Fed. Cir. 2011), SmartSky’s argument fails because the district court never made a finding that SmartSky and Gogo are the only two competitors in the relevant market. . . .

SmartSky also argues that the district court erred in deeming its price erosion theory of irreparable harm speculative by ignoring testimony from SmartSky’s president alleging that customers used Gogo’s pricing to negotiate price reductions from SmartSky. Appellant’s Br. 55–56.

We find this argument unpersuasive. In previous cases, we have required concrete evidence of reduced price to find price erosion. . . . Such concrete evidence is not present in the testimony of SmartSky’s president. The cited testimony shows that a few potential customers requested a price decrease in light of Gogo’s 4G network pricing, not that SmartSky lowered its price because of the launch of Gogo’s 5G network. J.A. 9594, 9597–99, 9602–03. Furthermore, SmartSky’s president conceded that SmartSky set its prices before Gogo announced the prices of its 5G network. . . (pp. 6-10).

The court further agrees that SmartSky did not show any irreparable harm to its reputation or goodwill, or “irreparable harm based on past and future lost R&D and investments” (p.12); and that evidence that the two parties are competitors and that customers are “sticky” (tend to stick with the same provider) was insufficient.  Evidence, comparable to what has sufficed in other cases, “of the loss of a few important customers is not present in this case” (pp. 13-14).

I just heard the news that Professor Dan Burk has died.  Dan was one of the all-time greats in IP law, and my former colleague for a period of time when he taught at the University of Minnesota.  He will be missed.

A previously-planned Celebration of Professor Dan Burk's Scholarly Contributions will be held at UC-Irvine this coming Friday.

1. Maciej Padamczyk and Duncan Matthews posted a paper on ssrn titled Proportionality and Patent Injunctions, which also appears as a chapter in European Patent Law: The Unified Patent Court and the European Patent Convention (D. Matthews & P. Torremans, eds., De Gruyter 2023).  Here is a link to the paper, and here is the abstract:

This chapter assesses how the concept of proportionality might be applied in the context of rising concerns about the perceived undesirable outcomes of final injunctions in patent cases, especially before the newly established Unified Patent Court (UPC), authorized to issue injunctions covering the territories of all Contracting Member States. First, the chapter discusses the policy considerations underlying the issuance of injunctions in patent cases, including the problem of anticommons, royalty stacking, non-practicing entities and patent trolls. Then, it proceeds to explain the theoretical interpretations of the concept of proportionality and its application on the international, i.e., WTO and EU, and national level, with examples from the Unites States, United Kingdom and Germany. Subsequently, an attempts is made to predict how the concept of proportionality might impact the jurisprudence of the UPC. Finally, the chapter then discusses preliminary injunctions, underlining their specific character as compared to final injunctions. It concludes that the likely future use of proportionality in patent injunctions cases will depend on the general understanding of the role of the patent system and the society’s convictions as regards its utility.

2. Léon Dijkman published Verhältnismäßigkeit im Patentrecht:  Der dritte Weg ("Proportionality in Patent Law:  The Third Way"), 24/2023 GRUR 1737.  Here is the abstract, in my translation from the German:

The narrow perspective on proportionality in patent law, under which proportionality contributes nothing to the existing protections for infringers, is no longer sustainable, in view of economic, technological and legal developments, especially the European rights framework for the enforcement of patents.  Nevertheless, critics are right to assert that incorporating a balancing of interests into claims for injunctive relief, as the broad perspective advocates, would lead to legal uncertainty and arbitrary outcomes.  A proportionality test therefore must be developed, which I sketch out in this article.

The article summarizes some of the content set forth in greater detail in Dr. Dijkman’s new book The Proportionality Test in European Patent Law Patent Injunctions Before EU Courts and the UPC (Hart Publishing 2023) The Proportionality Test in European Patent Law, previously noted here.

1.  In September and October 2023, the Munich Local Division of the UPC decided two applications for preliminary injunctions, both filed by 10x Genomics, Inc. and the President and Fellows of Harvard College against NanoString Technologies Inc., NanoString Technologies Germany GmbH, and NanoString Technologies Netherlands B.V.  The decision in the first case, UPC CFI 2/2023, is available on the UPC’s website in the original German and in English.  I have previously noted other commentary on the first decision, which resulted in the granting of a preliminary injunction, here; the second decision, which denied the request for preliminary relief, has been noted here.

Matthias Lesitner has now published an article titled Einstweilige Unterlassungsverfügung des EPG wegen patentverletzung:  Die Lokalkammer München bohrt dicke Bretter (“Preliminary Injunctions in the UPC against Patent Infringement:  The Munich Local Division Tackles Some Hard Problems”), GRUR 22/2023, 1578-86.  (The idiom “bohrt dicke Bretter” literally means “drills thick boards.”)  Here is the abstract, in my translation from the German:

The first decision on the merits of the Munich Local Division of the UPC touches on numerous essential procedural and substantive questions:  the wording of the request and its relationship with the patent claims and the inquiry into validity; orders concerning validity in expedited proceedings and relatedly the burdens of pleading and proof; the need for legal protection and urgency; objections and proportionality—just to state the most important.  The Local Division is off to a good start.  In the following, the decision is analyzed for purposes of practice and discussed.

Dr. Leistner compares the decision to Hermione’s handbag in Harry Potter, in terms of the number of things that the court fit into one package.  More seriously, Dr. Leistner approves of the court's adoption of the "preponderant likelihood" (überwiegende Wahrscheinlichkeit) test for evaluating validity, as opposed to something more stringent, in view of the fact (also noted by the commentator below) that the UPC can call upon the expertise of technically qualified judges--though he also notes that in addition the UPC (correctly) considers the probability of infringement and validity as having some relevance to the overall balancing of the interests of the parties.  He also expresses concern that, if the defendant is excluded from the market on the basis of a patent that is subsequently invalidated and, under the CJEU's decision in Bayer v. Richter, is denied compensation ex post, the defendant's harm may turn out to be (unnecessarily) irreparable.  (It is to be hoped that the CJEU's somewhat surprising partial about-face in Mylan v. Gilead (see here) may help to alleviate this concern.)  Finally, the author argues that, although the court rejected the defendant's arguments that granting the preliminary injunction would be disproportionate, the fact that it gave careful consideration to those arguments may mean that in other (albeit uncommon) cases, on other specific facts, the facts that the accused product is a "complex" product or that the plaintiff is an NPE, could be relevant.    

2. Tilmann Müller-Stoy has published an article titled Prüfungsmaßstab für den Rechtsbestand bei einstweiligen Anordnungen vor dem Einheitlichen Patentgericht, (“Standards for Evaluating Validity in regard to Provisional Orders before the UPC”), Mitteilungen der deutschen Patentanwälte 11/2023, 486-89.  Here is the abstract, again in my translation:

The UPC finally commenced operations on June 1, 2023.  Among the first proceedings lodged were related motions requesting provisional measures.  This raises the practically significant question of what legal standard the UPC should adopt for evaluating validity in connection with motions for preliminary relief.  Above all, a new system for resolving patent disputes needs standards that are as clear and understandable as possible.  An overly flexible, necessarily vague standard undermines predictability and does not adequately conform to these requirements.  In consideration of the text of the provisions the UPC is to apply and especially in view of the fact, that aside from legally qualified judges technically qualified judges have been appointed, it should be decisive whether, after rigorous examination, validity is more probable than invalidity.  Remaining doubts can be taken into account relative to their weight and in combination with whatever other factors inform judicial discretion of how to balance the relevant interests. Thus are  justice and reasonableness served in the individual case.

Peter Picht has two papers out on the European Commission’s draft SEP regulation.  The first, available on ssrn, is The Draft EU SEP Regulation: Issue Spotting.  Here is a link to the paper, and here is the abstract:

The draft EU SEP Regulation has already triggered vivid debate. The purpose of this issue spotting paper is not to reflect on fundamental questions, such as whether there should be a Regulation at all and whether it should apply the main concepts of the current draft. The author will address such concerns elsewhere. Instead, the issue spotting accepts – as it were – the legislative concept as a given, looks at where the draft provisions seem not to implement this concept in a coherent and reasonable manner, and makes suggestions for improvement.

As the abstract indicates, this paper goes through the regulation, recital-by-recital and provision-by-provision, making numerous observations and suggestions.  The other paper is The Draft SEP Regulation:  Status and Issues, 2024 GRUR 83-95.  Here is the abstract:

The draft SEP regulation is a momentous, but also complex and ambitious undertaking.  One can question whether regulation along the draft’s lines should be undertaken at all.  In any case, key parts of the current concept need revision and improvement.

*                    *                 *

I will take a blogging break for the coming week, as I have a backlog of administrative work, among other matters, to catch up on.  I shall resume the week of February 26.

A post I published a few months ago titled Recent Patent Damages Decision of the Madrid Court of Appeal began as follows:

A few weeks back Adrián Crespo published a short post on the Kluwer Patent Blog titled Patent case: Judgment no. 18/2023 of Madrid Court of Appeals (Section32) of 23 June 2023, Spain.  The author writes that, as a result of the decision, “generic companies wishing to launch at risk” should be aware that “the first mover(s) will be held liable for triggering regulatory price reduction and thus for the damages arising from the price gap between the innovator and the generic, even if other third parties have launched at a later point in time.”  The post references a longer summary of the decision on Kluwer IP Law, to which I do not have access, but I was able to obtain a copy of the decision itself and will note a few things about it below.  (Here is a link to the decision in the original Spanish, and here is a link to a machine translation.)

More recently, Mr. Crespo and Josep Montefusco have published an article titled Madrid Court of Appeal Rules in Landmark Damages Case, 46 EIPR 65 (2024).  The abstract reads:

In a recent judgment, the Madrid Court of Appeal (Section 32) has ruled in the landmark raloxifene patent infringement case. The decision dealt inter alia with the allocation of liability among patent infringers for triggering regulatory price reduction. This comment considers the main implications of this precedent, which are likely to shape future damages claims in Spain (an important market for pharmaceutical products which, moreover, is not part of the Agreement on a Unified Patent Court).

The article provides a detailed analysis of the facts and the principal holdings.  It concludes, first, that one of the decision’s important holdings is that “patentees and/or their licensees may claim damages for losses suffered by their subsidiaries” (p.69).  (By way of comparison, I would note that U.S. law on this point is not altogether clear; for brief discussion and citations, see my post dated Oct. 26, 2016, noting Mark Lemley’s critique of Federal Circuit case law that generally precludes a patentee from recovering losses suffered by its exclusive licensee, and district court cases considering the “inexorable flow” doctrine, under which a parent may under some circumstances recover for losses suffered by a subsidiary.  In a somewhat related vein, see also my post dated Nov. 20, 2023, discussing some recent French and Canadian cases addressing  standing to sue of licensees and related companies. )  Second, the article notes the significance of the court’s holding that the first generic in the market can be liable for a subsequent price reduction even if other entrants follow, and considers its implications and possible nuances.

I just read this report on JUVE Patent about the UPC Court of Appeals' reversal of the Munich Local Division's much-discussed September 19, 2023 grant of a preliminary injunction in favor of 10x against Nanostring.  (For previous discussion on this blog, see here.)  Here is a link to the relevant UPC webpage, with links to the decision in German and in English.  The ground is likely invalidity of the patent in suit:

Further:

I'll be spending some time today and into the week reviewing the decision more carefully, and may have to more to say in due time. 

Update (2-29-2024):  Sarah Taylor and Julia Traumann have published an excellent summary and analysis of the Court of Appeals' decision on EPLaw.  Recommended!

Reports are coming in that the European Parliament has overwhelmingly approved the draft SEP Regulation that was proposed last spring.  Stay tuned as more news arrives.

I understand this was a first reading, and that the matter next goes to the European Council.  Story by Maura O'Malley on the Global Legal Post here.

I am a little late reporting on this one.  The case is UATP IP, LLC v. Kangaroo, LLC, decided on February 16, nonprecedential opinion authored by Judge Chen, joined by Judges Reyna and Taranto.  According to the opinion, the parties “are operators of ‘adventure parks’—indoor play facilities that includes trampolines, ziplines, ropes courses, and other attractions” (p.2).  UATP filed suit against Kangaroo for infringing U.S. Patent No. 10,702,729 (“Multi-level Play Equipment”) and also for infringing its trade dress; it moved for a preliminary injunction some ten months later.  The district court granted the preliminary injunction, “on the grounds that UATP was likely to succeed on the merits of both its patent and trade dress infringement claims, and that UATP was entitled to a rebuttable presumption of irreparable harm that Kangaroo failed to rebut” (p.3).      

The Federal Circuit reverses the order preliminarily enjoining patent infringement:

We find that UATP’s showing was legally insufficient to demonstrate likelihood of success on the merits of its patent infringement claim. “[W]hether performed at the preliminary injunction stage or at some later stage in the course of a particular case, infringement and validity analyses must be performed on a claim-by-claim basis.”Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239 F.3d 1343, 1351 (Fed. Cir. 2001). But neither UATP’s motion for preliminary injunction nor the Order ever identified any claim of the ’729 patent that Kangaroo allegedly infringes. Instead of comparing Kangaroo’s allegedly infringing equipment to any of the claims of the ’729 patent, UATP and the district court appear to have assumed that Kangaroo’s equipment infringes the patent because it was previously used in an Urban Air Adventure Park. But the district court never determined that Urban Air Adventure Parks practice a specific claim of the ’729 patent. By assuming that similarities between Kangaroo’s equipment and the equipment in an Urban Air Adventure Park constitute infringement without any discussion of the claims, the district court erred in finding a likelihood of success on the merits.

The district court likewise erred in failing to make any findings on irreparable harm, balance of the equities, or the public interest in its analysis relating to UATP’s patent infringement claim. See Fed. R. Civ. P. 52(a)(2) (“In granting or refusing an interlocutory injunction, the court must [] state the findings and conclusions that support its action.”) (pp. 4-5).

On the trade dress claim, “the district court failed to make any findings on whether UATP’s alleged trade dress was nonfunctional, inherently distinctive, or had acquired secondary meaning. Instead, the district court found that UATP’s “trade dress claim against Kangaroo is likely to succeed on the merits, because it has shown that Kangaroo substantially imitated Urban Air’s total image by using the same colors, attraction structures, and park layout.” . . .  The district court’s failure to explain how it arrived at this finding in view of the relevant trade dress likelihood of confusion factors . . . and failure to address the non-functionality or distinctiveness of UATP’s alleged trade dress, render its analysis too conclusory to permit meaningful appellate review” (p.6).  Further:

The district court’s findings relating to irreparable harm are also deficient. First, the district court erred in failing to address UATP’s ten-month delay in moving for a preliminary injunction. . . . Second, the district court erred in finding that UATP was entitled to a rebuttable presumption of irreparable harm under 15 U.S.C. § 1116(a). Section 1116(a) entitles a plaintiff seeking a preliminary injunction under 15 U.S.C. § 1125 to a rebuttable presumption of irreparable harm “upon a finding of likelihood of success on the merits for a violation.” Because the district court’s analysis was premised on a flawed likelihood of success finding, the court’s application of the presumption cannot stand. . . .

Finally, as with its analysis relating to the patent infringement claim, the district court’s analysis relating to the trade dress infringement claim failed to make sufficient findings on the balance of the equities or the public interest (p.7)

The court vacates and remands as to the trade dress claim.

As readers may recall from some of my previous posts, a ten-month delay in moving for a preliminary injunction would strongly weigh against granting the injunction under German law, which emphasizes Dringlichkeit (“urgency”).

My article with Professor Chung-Lun Shen, Destruction, Proportionality, and Sustainability: A Law-and-Economics Analysis, 32 Texas Intellectual Property Law Journal 111 (2024), has now been published.  It is available on Westlaw and SSRN, and should be available soon on TIPLJ’s website.  Here is the abstract:

This Paper undertakes a law-and-economics analysis of the remedy of destruction (and, subsidiarily, the related remedies of recall and removal) of products that infringe intellectual property (IP) rights. We begin with a brief survey of international, regional, and domestic law and practice, observing that (1) courts generally are believed to be more likely to order the destruction of copyright- and trademark-infringing goods than of patent-infringing goods, and (2) the frequency with which courts order the destruction of patent-infringing goods varies from one country to another. Our observations lead us to present two principal theses.

The first is that a comparative reluctance to order the destruction of patent-infringing goods, as opposed to copyright- or trademark-infringing goods, would be consistent with economic considerations. From an economic standpoint, destruction can be viewed both as a complement to injunctive relief and as a substitute (albeit an imperfect one) for ongoing monitoring of an infringer’s compliance with the terms of an injunction. The social benefits arising from substituting destruction for monitoring, however, are likely to be lower—on average, and perhaps subject to regional variation—for patent-infringing goods than for products that infringe other IP rights. In addition, although observers have long noted that the private and social costs of destruction provide a rationale for withholding that remedy when it would cause disproportionate harm to the defendant or third parties, these costs may be unusually high in patent cases—particularly that subset of cases in which the risk of patent holdup is substantial. In view of these factors, the social costs of ordering the destruction of patent-infringing goods are likely to outweigh the social benefits in a comparatively broader swath of cases.

In addition, I may as well note a paper I just came across in the preceding volume of TIPLJ, Deepa Sundararaman & Cleve B. Tyler, A Detailed Study of Court Decisions on Admissibility of Intellectual Property Damages Experts, 32 Tex. Intell. Prop. L.J. 45 (2023).  Here is a link to the paper, and here is the abstract:

Damages experts’ opinions in intellectual property litigation are routinely challenged for failing to reach standards set forth in the Supreme Court’s 1993 Daubert decision. Our study is the first of its kind, in performing a systematic and in-depth review of court decisions, including an analysis of the substantive reasons for challenge. We studied more than 400 Daubert orders covering nearly 1,300 decisions over a six-year period from 2015 through 2020.

Patent cases make up a significant majority of our dataset. Overall, we find an exclusion rate of 24%. While plaintiff experts are challenged more frequently than defendant experts, their exclusion rates are not significantly different. However, the type of analysis challenged appears to matter—in particular, lost profits analyses are excluded at lower rates than other types of analyses, and experts described as offering legal opinions are excluded at higher rates. Exclusion rates vary by district, with the Northern District of California (NDCA) having higher exclusion rates and the Eastern District of Texas (EDTX) having lower exclusion rates than the rest of the country. We study the impact of the Supreme Court’s Heartland decision on exclusion rates, which has reduced a plaintiff’s ability to engage in “venue shopping.” Overall, rates of exclusion in EDTX and Delaware declined following the decision, with a moderate increase in exclusion rates in NDCA.

Finally, we find substantial disparities in exclusion rates among judges. Among the top ten judges ranked by number of decisions, five have relatively “low” exclusion rates of less than 15% and four have relatively “high” exclusion rates greater than 30%. Variations such as these, along with differences by jurisdiction, raise questions about courts’ consistency in application of the Daubert standard—questions that are left for future researchers and policymakers to address.

This may be less consequential now than it may have seemed a couple of weeks ago, before the UPC Court of Appeals decision referenced here, but readers may recall that there was a second decision last fall in which the Munich Local Division considered a preliminary injunction against Nanostring.  As far as I can tell, the second decision (dated Oct. 10, 2023)—which, in contrast to the first (Sept. 19, 2023) decision involving a different patent, denied the claimant’s request for a preliminary injunction—is not available yet on the UPC’s website.  But it is excerpted in the 4/2024 issue of GRUR (pp. 199-205), and is the subject of a short article by Matthias Leistner and Sebastian Berns in the same issue (pp. 184-87).  As noted in this earlier write-up in English by Tilman Müller-Stoy and Kerstin Galler on the EPLaw Blog, in the second case the court was not persuaded that there was a sufficient probability of infringement, or of validity of the claims as granted (in contrast to the claims as amended pursuant to EPC article 105a), or of urgency (given that the patent in suit was, unlike the unitary patent in suit in the first decision, a “bundle” patent with effect in Germany, France, and the Netherlands, and the owner had not sought preliminary relief in France or the Netherlands).

The German Federal Supreme Court recently held that patentees can recover compensation for springboard convoyed goods and services.  If you have no idea what I'm talking about, read on.

The decision is BGH, Judgment of Nov. 14, 2023, I ZR 30/21—Polsterumarbeitungsmaschine.  It can be found in 2/2024 Mitteilungen der deutschen Patentanwälte pp. 75-79; you can also find a short write-up about the case by Dr. Matthias Meyer and Dr. Daniel Misch here, and an English-language machine translation courtesy of Dr. Tillman Müller-Stoy on LinkedIn, here.

The patent in suit, EP 776 760, claimed a cushioning conversion machine (described as “relating generally to a cushioning conversion machine which converts paper stock into cushioning material”).  The lower court held that two types of machines sold by the defendants infringed.  On the question of monetary recovery, however, there were more than a few wrinkles.  One such wrinkle is that, under German law, the general statute of limitations for a claim for damages is only three years, and here the plaintiff was seeking compensation for harms preceding that period of time.  German law also provides, however, that a claimant has up to ten years to recover a reasonable royalty or the defendant’s profit, under an unjust enrichment theory (for previous discussion on this blog, see here).  A second wrinkle is that the plaintiff was seeking discovery (information and access to accounts, in German Auskunft und Rechnungslegung) pertaining to sales of what in the U.S. would be referred to as “convoyed goods”:  supplies for the infringing machines (especially paper), as well as leasing and maintenance contracts.  As I have previously noted in my book (p.272 & n.195), German courts “may award profits earned on convoyed goods (Peripherigeräten) that are attributable to the sales of the infringing goods and not to other factors,” and the BGH reaffirms that principle here subject to the caveat that the profits must be tied to the sales of products or services that are used with the patented subject matter (para. 39).  The court states that the causal connection would not be sufficient in cases in which, for example, the plaintiff sought the recovery of income the defendant earned from reinvesting its ill-gotten gain, or from the fame the defendant derived from its infringement (para. 34).  (In the U.S., by way of comparison, the patentee can recover lost profits on sales of convoyed goods only if those goods “function together . . . in some manner so as to produce a desired end product or result,” in a manner “analogous to components of a single assembly or . . . parts of a complete machine, or . . . constitute a functional unit,” and are not merely sold together “as a matter of  convenience or business advantage.”  Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1550 (Fed. Cir. 1995) (en banc).  For discussion of the pros and cons of the U.S. rule, see my article with Roger Blair, Rethinking Patent Damages, 10 Tex. Intell. Prop. L.J. 1 (2001).)  Third, the plaintiff was seeking discovery on sales the defendant made of these convoyed goods after patent expiration, but which the plaintiff asserts were caused by sales of infringing machines that occurred during the term of protection.  The court concludes that such springboard damages (as they are referred to in English) are permissible under German law.  (Where proven, such “springboard” damages also are allowed in the U.S., though springboard injunctions and related remedies such as destruction are not, as they are in the U.K. and Germany.  For discussion, see my article with Chung-Lun Shen, Destruction, Proportionality, and Sustainabiltiy:  A Law and Economic Analysis, 32 Tex. Intell. Prop. L.J. 111, 123 n.53 (2024), and my article Extraterritorial Damages in Patent Law, 39 Cardozo Arts & Enter. L.J. 1, 32 (2021).)  Along the way, the court also reaffirms the principle (which I have previously noted and disagreed with, see here) that (as in the U.K.) the defendant’s ability to have earned the same profit by resorting to a noninfringing alternative is irrelevant.  

Presumably the amount of the recovery will be determined, as needed, in future proceedings, if the parties do not settle.

The case is In re California Expanded Metal Products Co., nonprecedential opinion by Judge Taranto, joined by Judges Dyk and Mayer.  According to the opinion, California Expanded Metal Products Co. (CEMCO) “is the current owner of the five patents at issue in this case,” which “generally describe and claim fire-retardant assemblies for the top of a wall, the assemblies including an intumescent strip that seals construction joints or gaps when exposed to heat” (p.2).  “At the time of trial, there were two dominant participants in the market for fire-retardant head-of-wall products that can be installed before construction of a wall is complete: CEMCO’s exclusive licensee, Clarkwestern Dietrich Building Systems LLC (ClarkDietrich), and Seal4Safti,” Inc. (id.).  In 2020 Seal4Safti filed an action for a declaratory judgment of invalidity and noninfringement; in turn, CEMCO asserted the infringement of the five patents in suit.  A jury concluded that the patents are valid, and that Seal4Safti had willfully induced their infringement, and awarded a reasonable royalty in the amount of $156,000 (equal to “12% of $1,300,000 in sales made by Seal4Safti,” p.3).  The “the district court set aside the jury’s damages award as a matter of law because it determined that the jury ‘had no basis to arrive at a reasonable royalty of 12%,’ so the award was ‘based on impermissible speculation,’” and it also denied CEMCO’s requested permanent injunction.  The Federal Circuit finds no abuse of discretion as to the vacatur of the damages award, but vacates and remands the denial of the injunction. 

As for the damages award:

At trial, CEMCO sought damages in the form of a reasonable royalty and adopted a hypothetical-negotiation approach incorporating a familiar recitation of facts courts have considered within that framework, set forth in Georgia-Pacific . . .  . CEMCO presented several pieces of evidence corresponding to several Georgia-Pacific considerations. See, e.g., J.A. 363 (testimony about Clark-Dietrich’s sales under its license); J.A. 1131–32 (total sales of Seal4Safti’s fire-retardant gasket products); J.A. 1147–50 (inventor’s declaration discussing the benefits, commercial success, and popularity of patent-covered products); J.A. 1172–90 (profitability of similar products). But the district court concluded that CEMCO did not provide adequate testimony tying this evidence to any particular royalty rate, and CEMCO has not identified such evidence on appeal. . . . CEMCO first presented its proposed royalty rate of 20% in its closing arguments, and its analysis of Georgia-Pacific considerations was limited to attorney argument. See, e.g., J.A. 293 (arguing ClarkDietrich’s dominance in the market would “drive[] up” the reasonably royalty); J.A.294–95 (arguing the commercial success of patent-covered products “is significant”).

“The burden of proving damages falls on the patentee.” Lucent, 580 F.3d at 1324. And when a party chooses to use a hypothetical-negotiation framework, “while mathematical precision is not required, some explanation of both why and generally to what extent the particular factor impacts the royalty calculation is needed.” Whitserve, LLC v. Computer Packages, Inc., 694 F.3d 10, 31 (Fed. Cir. 2012). We find no error in the district court’s conclusion that, as a matter of law, CEMCO failed to carry its burden to prove damages for lack of such explanation of the proper royalty rate in its evidence.

On Patently-O, Dennis Crouch has an informative write-up about this case, drawing in part on the district court record and arguing that "the answer to achieving a too large verdict award is not for the court to reset the award to zero. Rather, the typical approach is to either (1) hold a new trial on damages or (2) remittitur lowering the damages to an amount actually proven or admitted (such as the 3% royalty)" which had been proposed by the defendant.  Maybe he's right, though in other cases my sense has been that courts have sometimes been too permissive in allowing a damages do-over--though in some other recent cases, we have seen judges awarding nominal damages in the absence of acceptable proof.  For previous discussion on this blog, see, e.g., here. 

As for the injunction, however, the Federal Circuit concludes that the district court misconstrued ActiveVideo Networks, Inc. v. Verizon Communications, Inc., 694 F.3d 1312 (Fed. Cir. 2012), “as standing for the proposition that “[w]henever a patentee only stands to lose licensing fees for the sale of a product when the licensee is not joined in the case,” an injunction should be denied because “‘[s]traightforward monetary harm of this type is not irreparable harm.’” J.A. 51 (quoting ActiveVideo, 694 F.3d at 1338).  As the court notes, however, in ActiveVideo the patentee sought an injunction against defendant Verizon, which competed against ActiveVideo’s nonexclusive licensee, Cablevision.  On those facts, the court held that ActiveVideo would be adequately compensated by a reasonable royalty.  By contrast, the ActiveVideo “court did not conclude that, on different facts, particularly where a patentee has granted an exclusive license to a third party to sell patent-covered products, the patentee may not suffer irreparable harm from infringement. Such an exclusive-licensing patentee might well face harm beyond the simple loss of reliably measurable licensing fees, including price erosion, damage to intangible reputation, harm to brand loyalty, and permanent loss of customers” (p.7).  “Because the district court based its denial of injunctive relief solely on its erroneous conclusion that CEMCO stood only to lose licensing fees and thus failed to demonstrate an irreparable injury, the court did not make additional findings necessary for the injunctive-relief inquiry” (p.8), and the Federal Circuit therefore vacates and remands for reconsideration.  This seems like the right result to me, insofar as CEMCO through its exclusive licensee and Seal4Safti are effectively direct competitors.

1. Enrico Bonadio and Dyuti Pandya recently published a post on the Kluwer Patent Blogtitled China’s Supreme People Court decides FRAND dispute in ACT v Oppo.  The post links to several other sources discussing the SPC’s December 2023 decision in this case, previously noted here, including  MA Butian, Second-instance judgment in ACT v Oppo sheds light on comparable agreements and how to find fault in SEP licensing negotiations, Global Competition Review, Feb. 1, 2024; AFD China Intellectual Property Law Office, SPC Awards ACT over 15.39 Million Yuan in OPPO Patent Dispute, Rejecting its 342 Million Yuan Claim, China IP Magazine, Feb. 21, 2024; Olivia Rafferty, Exclusive: China’s Supreme People’s Court hands down first ever SEP infringement decisions in parallel Oppo and Vivo disputes, IAM, Jan. 16, 2024 (behind a paywall); Dragon Wang, Bing Wu, Yannan Li & Xiaolin Wang, Chinese Standard Essential Patents (SEPs) Licensing Negotiations and Dispute Resolution Practice – A Review of the ACT Lawsuit Against OPPO for Standard Essential Patent Infringement, SITAO Insight, Feb. 1, 2024; Christine You & Emma Ren, China's SEP case update - ACT v OPPO, Vivo, Bird & Bird, Feb. 27, 2024.  Long story short, there were six FRAND-committed SEPs in suit, and the court set a global FRAND rate of US$0.008 per unit amounting to RMB15,390,527 (about US$2.12 million).

2. China Patent & Trademarks No. 1, 2024, features three articles (presumably all in press before the SPC’s ACT v. Oppo decision) on FRAND topics:  Lv Lingrui, Studies on FRAND Commitments to SEP Licensing; Zhang Guangliang & Zheng Bang, Antitrust Regulation of SEP Abuse—Notion, Classification and Suggestions; and Gao Jiajia, Studies on Injunctive Relief for SEP.  The last of these goes into some detail concerning the proportionality concept, citing other Chinese scholarship for the proposition that proportionality involves four sub-principles, namely objective legitimacy, suitability, necessity and equity.

The decision is Brumfield v. IBG, LLC, opinion by Judge Taranto, joined by Judges Prost and Hughes.  The case involved four patents, relating to “improved graphical user interfaces for commodity trading and methods for placing trade orders using those interfaces” (p.3), owned by Trading Technologies International, Inc. (TT).  (They are now owned by a trust of which Mr. Brumfield, the appellant named in the caption, is the sole trustee.  The court refers to “TT” as the entity in interest throughout.)  TT alleged that IBG infringed various claims of these patents, and that “the instrument of the alleged infringement was the BookTrader module (trading tool) that is part of IBG’s Trade Workstation Platform (TWS), software that traders load onto their computers and use for buying and selling on exchanges, such as commodities exchanges” (p.11).  The district court found the asserted claim of two of the patents in suit invalid for lack of patentable subject matter, however, a conclusion that the Federal Circuit now affirms (and that I will omit for present purposes).  The matter went to trial on five method claims and one computer readable medium (CRM) claim of the ’304 Patent, and three method and two CRM claims of the ’132 Patent.  The jury found these claims infringed and not invalid, and awarded $6,610,985 in damages.  TT nevertheless challenges the judgment, on the ground that the district court improperly excluded TT’s expert’s damages theory as it related to foreign activities (in which case the damages awarded presumably would be undercompensatory.)  In particular, the district court, uncertain whether the Supreme Court’s decision in WesternGeco LLC v. ION Geophysical Corp., 485 U.S. 407 (2018), overrules the Federal Circuit’s decision in Power Integrations, Inc. v. Fairchild Semiconductor International, Inc., 711 F.3d 1148 (Fed. Cir. 2016), had excluded testimony that apparently would have at least partly based the reasonable royalty due for the domestic infringement of the claims in suit on the value the patentee would have expected to derive from foreign activity that was enabled by the domestic infringement.  WesternGeco specifically held that a U.S. patent owner can recover damages, where the defendant violates Patent Act § 271(f) by exporting components from the United States to be combined abroad, and the resulting extraterritorial combination deprives the patent owner of the profit it would have earned on extraterritorial sales it would have made but for the infringement; it did not expressly address the question of whether the analysis would the same or different when the act of domestic infringement is the (much more common) violation of § 271(a) (making, using, selling in the United States), although I and (some) others have argued that the reasoning of the opinion would apply in this context as well.

In what may prove to be a landmark opinion, the Federal Circuit concludes that WesternGeco overrules Power Integrations , and that a reasonable royalty  awarded for domestic infringement that enables further activity abroad may under some circumstances reflect the value to the infringer of that subsequent foreign activity.  So the district court was wrong on this issue; but unfortunately for TT, the court also concludes that because the expert’s model was premised on domestic manufacture, and the plaintiff hadn’t proven that any infringing domestic manufacture by the defendant actually caused the defendant to gain any foreign benefit, the expert’s testimony on this matter was correctly excluded.

In concluding, as it does, that “[f]or a determination whether patent damages are properly awarded in a particular case based partly on conduct abroad, the decision in WesternGeco established a framework of analysis that necessarily supersedes the analysis set forth in our earlier decision Power Integrations” (p.25), the court’s analysis is consistent with what I argued in my article Extraterritorial Damages in Patent Law, 39 Cardozo Arts & Enter. L.J. 1 (2021).  In particular:

            The first doctrinal issue before us is whether the WesternGeco framework applies when the direct infringement in question (either itself or as a component of indirect infringement) is one of the acts at issue here accused of infringing under § 271(a). We readily conclude that it does.

           Nothing about the WesternGeco analysis of § 284, the damages provision, or about § 281, the cause-of-action provision, is altered when “the infringement” at issue is infringement under § 271(a) rather than § 271(f). Under WesternGeco we must examine the particular acts alleged to constitute infringement under particular statutory provisions to determine if the allegations focus on domestic conduct. Section 271(a) provides that “whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.” 35 U.S.C. § 271(a) (emphases added). At least the making, using, offering to sell, and selling provisions are expressly limited to domestic acts. . . .

            If the exporting covered by § 271(f)(2) is a domestic act for purposes of the extraterritoriality analysis, as WesternGeco held, so too are the § 271(a)-covered acts at issue in this case. The WesternGeco extraterritoriality framework for damages under § 284 therefore applies to the infringement under § 271(a) here. . . .

           We also conclude that the WesternGeco framework applies to a reasonable-royalty award, not just a lost-profits award, under § 284, though its application must reflect the established differences in standards for the two types of awards. . . .

            This case involves a reasonable royalty, and repeatedly articulated standards frame how the particular issue presented here is properly formulated. . . .

            Those principles point to a minimum requirement for a patentee seeking reasonable-royalty damages based on foreign conduct that is not independently infringing. Under the foregoing principles, the hypothetical negotiation must turn on the amount the hypothetical infringer would agree to pay to be permitted to engage in the domestic acts constituting “the infringement.” 35 U.S.C. § 284. If the patentee seeks to increase that amount by pointing to foreign conduct that is not itself infringing, the patentee must, at the least, show why that foreign conduct increases the value of the domestic infringement itself—because, e.g., the domestic infringement enables and is needed to enable otherwise-unavailable profits from conduct abroad—while respecting the apportionment limit that excludes values beyond that of practicing the patent. This kind of causal connection, framed in terms of the agreement-to-pay aspect of a hypothetical negotiation, is a necessary beginning—we need not here say it is sufficient—for a foreign-conduct analysis in a reasonable-royalty case. Cf. Carnegie Mellon, 807 F.3d at 1307 (noting that defendant’s sales abroad were “strongly enough tied to its domestic infringement as a causation matter to have been part of the hypothetical-negotiation agreement,” before moving on to apply extraterritoriality standards based on Power Integrations, now superseded by WesternGeco) (pp. 33-37).

The court goes on to note, however, that there has to be proximate cause in addition to cause-in-fact, and that the proximate cause analysis as it relates to reasonable royalties may be tricky:

          The foregoing authorities [various Supreme Court decisions] raise questions about the proper approach to determining, based on “other doctrines, such as proximate cause,” WesternGeco, 585 U.S. at 417 n.3, when foreign conduct can properly play a role in calculating patent damages. One such question is whether the “reasonable, objective foreseeability” presumptive standard for lost profits, Rite-Hite, 56 F.3d at 1546, is applicable where the damages are for a (non-established) reasonable royalty, whose conceptual foundation is notably different from that of lost profits. Another question concerns the long-recognized general avoidance of extraterritorial reach that is an aspect of the statutory context. . . . What, if any, room is there to take that consideration into account in applying the proximate-cause requirement, itself not addressed in WesternGeco, without contradicting the Supreme Court’s ruling in WesternGeco? We need not and do not here suggest answers to, or further explore, those or other questions (pp. 39-40).

For my own ruminations on proximate cause and royalties in this context, see my article above at pp. 39-42, 51-52.

The reason the court doesn’t need to explore those issues for now is its factual conclusion that the expert had not shown “the needed causal relationship to the foreign conduct for which recovery is sought” (p.40).  The asserted infringement on which the expert relied was “Making the Accused Product,” but that (the court says) cannot refer to the method claims in suit, because you don’t “make” a method (p.41).  The expert’s analysis therefore would have had to refer to the CRM claims, but the expert did not focus on the defendant’s making of “an individual memory-device unit,” but rather its TWS BookTrader software—“software in the abstract”—which was not itself claimed in the patents in suit (pp. 41-42).  The expert’s analysis therefore didn’t start from an act of domestic infringement, i.e., “making a claimed CRM (or method)” (p.42).  Instead—if I am understanding this correctly—the expert sought to include the foreign use of copies of the TWS BookTrader software in the royalty base (see p.16), but without tying that use to a predicate act of infringing domestic manufacture.  At least, I think that’s the gist of it.  The court further observes:

          We may assume (without deciding) that IBG had to make early CRMs domestically (or practice the claimed method) as part of its process of developing its software and that the value of such development work to IBG might reflect prospective foreign-earned revenue for the resulting product. Cf. Carnegie Mellon, 807 F.3d at 1294, 1297, 1307 (referring to payment for domestic infringement that is part of development work that, when completed, would produce large foreign revenues). In this case, however, according to TT and Ms. Lawton, IBG’s development of its BookTrader product meeting all claim limitations occurred before TT’s patents issued: TT accused IBG of marketing its BookTrader product before July 20, 2004, which caused infringement to begin precisely when the ’304 patent issued. On that premise, IBG’s making of CRMs in the initial creation of a BookTrader product meeting all claim limitations was not infringing under § 271(a), and IBG therefore did not need to pay TT anything for that work, which could not properly be included in the calculation in the hypothetical negotiation held “just before” July 20, 2004. . . .   

         Later domestic making of BookTrader-containing CRMs (or practicing of the claimed methods) could be infringing, of course, and properly be subject to a royalty. But TT was permitted to introduce evidence that some foreign users of BookTrader obtained their copies from domestic acts of making a copy or selling. FRE 702 Opinion, 2021WL 5038754, at *2. The only disallowed proposal therefore had to involve making copies abroad for foreign users (and foreign sales).

           On TT’s and Ms. Lawton’s premise that pre-July 20, 2004 versions of TWS BookTrader met the limitations of the ’304 and ’132 patents’ claims, TT has not offered a concrete, coherent account of why, in the hypothetical negotiation, the royalty for new domestic acts of making claimed CRMs (or practicing claimed methods), starting July 20, 2004, would have properly been increased to reflect the prospective making and sale of CRMs abroad for use abroad. On the noted premise, IBG, even before the patents issued, already had CRMs containing TWS BookTrader that met the patents’ limitations. “[N]either export from the United States nor use in a foreign country of a product covered by a United States patent constitutes infringement.” Johns Hopkins University v. CellPro, Inc., 152 F.3d 1342, 1366 (Fed. Cir. 1998). And TT has not argued that the making of CRMs abroad would be infringing, even if the software installed abroad came from the United States, either under § 271(a), see Centillion Data Systems, LLC v. Qwest Communications International, Inc., 631 F.3d 1279, 1288 (Fed. Cir. 2011); Deepsouth, 406 U.S. at 527, or under § 271(f), see Microsoft, 550 U.S. at 449–50 (software itself is not a “component” under § 271(f)). . . .

          IBG might of course infringe by domestically making new CRMs containing upgraded versions of TWS BookTrader. But TT has not shown how value added by the upgrades would be properly added to the royalty in light of the apportionment requirement to avoid charging for value not attributable to the claimed invention. In particular, TT has not explained how such upgrade value would be anything but the value of features beyond what is required by the patent claims . . . . (pp. 43-45).

The case is Biomedical Device Consultants & Laboratories of Colorado, LLC v. ViVitro Labs, Inc., nonprecedential opinion published last Thursday and authored by Judge Lourie, joined by Judges Dyk and Stark.  Plaintiff BDC, which manufactures and sells heart valve durability testing devices, sued its competitor ViVitro for infringement of U.S. Patent 9,237,935, which is “directed toward accelerated rate fatigue testing devices for prosthetic valves” (p.2). The district court denied BDC’s motion for a preliminary injunction, “finding that it failed to establish a likelihood of success on the merits for two independent reasons,” namely substantial questions as to both infringement and validity.  On appeal, the Federal Circuit affirms on the basis that there is a “substantial question of validity,” and does not address the infringement issue (though toward the end of the opinion it "caution[s] that claim terms are generally not limited to the preferred embodiments"(p.14), which might be interpreted as expressing some possible discomfort with the district court's claim construction and hence infringement analysis).  Without rehashing the evidence before the court, I would note only that the opinion does not appear to break any new ground on the legal questions.  It cites Titan Tire Corp. v. Case New Holland, Inc., 566 F.3d 1372 (Fed. Cir. 2009), which is probably the leading opinion addressing the parties’ burdens when a defendant responding to a motion for preliminary injunction challenges validity, only in passing, but the analysis seems consistent with that case.  In particular, the court states that

At the preliminary injunction stage, a defendant may raise a substantial question of validity “on evidence that would not suffice to support a judgment of invalidity at trial.” Amazon.com, 239 F.3d at 1358. The question here is one of “vulnerability,” which “requires less proof than the clear and convincing showing necessary to establish invalidity itself.” Id. Furthermore, the district court’s assessment of prior art references is an issue of fact reviewed for clear error. . . (p.8).

Proceeding from these premises, the court concludes that “the district court did not make a clear error in its assessment of the prior art,” and “therefore did not abuse its discretion in finding that BDC failed to demonstrate that ViVitro’s anticipation defense lacked substantial merit.  See Titan Tire Corp. v. Case New Holland, Inc., 566 F.3d 1372, 1377 (Fed. Cir. 2009) (“[I]t is the patentee, the movant, who must persuade the court that, despite the challenge presented to validity, the patentee nevertheless is likely to succeed at trial on the validity issue.”)” (pp. 10-11).  The court also rejects BDC’s arguments that the district court did not address four of the eight claims in suit, finding that the district court did indeed conclude that there was a substantial question of obviousness as to those claims, and did not abuse its discretion in so concluding.

For anyone finding themselves in southeastern Spain on April 19, Alicante IP Colloquia is putting on an in-person event at noon titled «Hacia la cuantificación del daño» ("Toward the quantification of damages").  Panelists will be Judges Florencio Molina López and Gustavo Andrés Martin Martín.  The event is free, but registration is mandatory (link available here).  Judge Molina López is the author of a recent book on protective letters (see here).  I'm guessing the panelists will address the recent decision of the Madrid Court of Appeals in Eli Lilly v. Teva, previously noted on this blog here and here.

Multiple sources are reporting on a March 28, 2024 judgment of the Delhi High Court, awarding Ericsson the equivalent of approximately USD$30 million in a SEP dispute against a firm called Lava.  I have not yet succeeded in obtaining a copy of the judgment, which is said to be quite long, but recommend that readers take a look at Florian Mueller's discussion of it on his new site, ipfray.  I probably will have some comments on the decision after I obtain a copy, read it, and digest it, which might however take a while.

Lisa Van Dongen has posted a paper on ssrn titled Proportionality and Flexibilities in Final Injunctive Relief, forthcoming in The Unified Patent Court: Problems, Possible Improvements and Alternatives (Alain Strowel et al. eds., Ledizioni, 2023).  Here is a link to the paper, and here is the abstract:

          In 2006, the patent world was shaken to the core by eBay v MercExchange, a case that questioned several basic principles in patent enforcement that were considered well established. The US Supreme Court sent a clear signal that patent rights were not to be considered absolute, and courts should thus not enforce them in automated fashion with injunctive relief. This case has received considerable attention globally, with many patent scholars analysing it in meticulous detail and questioning the European approach. Even though there is no agreement in the field on the optimal balance in patent enforcement (and likely never will be), even the most adamant proponents of strong patent enforcement agree that there may be other interests that merit the denial or tailoring of final injunctive relief. Yet, the automated tendencies in patent enforcement in Europe - the finding of an infringement automatically leading to the (blanket) grant of a permanent injunction - remain not only as prevalent as they have been for several decades, but also without any clear departures by courts (apart from English judges) from such tendencies indicative of course changes. What is more, is that the possibility for Europe to break with automated tendencies in enforcement will soon be further complicated by the addition of another layer to Europe’s existing patent systems, namely by the creation of the Unified Patent Court (UPC) and the unitary patent. If this system takes off, decisions of this new court will carry significant weight in European patent enforcement due to several organisational and territorial aspects. The UPC has even been described as a potential judicial counterbalance to pro-patent tendencies in patent offices, particularly the European Patent Office (EPO). However, considering the strange construct of its creation, it is questionable that the UPC will be that judicial counterbalance and lead the way for other courts in Europe. Some of these aspects might also create some tension with other systems it will have to co-exist and interact with. A closer look is thus imperative. This paper aims to do just that, testing the hypothesis: The UPC will not bring about a change in the current automated tendencies in granting final injunctions, but rather cement them. This paper explains why there will be no push from the EU to try and do so based on the current status of EU harmonisation in patent enforcement, questions the UPC’s capability and willingness to break with the existing automated tendencies based on the UPCA’s formulations and organisational features of the UPC, and explores some legislative solutions at the European level to move Europe away from automated tendencies in patent enforcement.

This is an insightful paper, and I suspect that the author is correct in predicting that the UPC will not depart from the status quo in favor of near-automatic granting of injunctive relief to the prevailing patent owner.  Her recommendation that the EU consider legislation providing more detail on when and how proportionality might result in limitations on (tailoring) injunctive relief, or in some instances denying such relief altogether, seems to have merit.

I now have had the opportunity to read the relevant portions of the Delhi High Court’s recent Lava v.Ericsson decision, which (as previously noted by Florian Mueller) ordered Lava to pay Ericsson a global FRAND royalty, covering a portfolio of FRAND-committed SEPs for the period 2011-20, plus costs, totaling approximately USD $30 million (specifically, "1.05% of the net selling price of devices sold by Lava" from November 1, 2011 through May 8, 2020, amounting to Rs. 244,07,63,990, with postjudgment interest at 5% and costs).  In summary, the court considered Lava to be an unwilling licensee, because of its holdout behavior; relied on Ericsson’s proposed comparable licenses to come up with a FRAND rate; rejected Lava’s proposed comparable, and also its proposed top-down approach for lack of evidence on (among other things) the aggregate royalty burden; found no evidence that Ericsson had engaged in holdup or royalty stacking; rejected Lava’s argument that the appropriate royalty base would be the SSPPU, rather than the end product (smartphones); and also concluded that a FRAND license would be global in scope, even though Lava primarily sells phones in India.  All of this may be well-grounded in the law and the evidence (there are a lot of redactions concerning the comparables), but there are two things that, at least initially, I’m finding a bit confusing.

The first is the doctrinal basis for granting a global portfolio license.  Lava initiated the litigation, asking the court to declare inter alia that Ericsson “is bound to grant an irrevocable license under its standard essential patents, including patents which are essential and/or claimed to be essential by the Defendant to 2G and/or 3G standards, on fair, reasonable and non-discriminatory (FRAND) terms, to the Plaintiff herein,” and to “[d]eclare the fair, reasonable and non-discriminatory (FRAND) terms, including royalty rates, on which the Defendant should grant a license under its Indian patents and patent applications which are enforceable and essential to 2G and/or 3G standards, to the Plaintiff herein” (p.15).  In turn, Ericsson sued Lava for the infringement of eight specific (assertedly standard-essential) patents.  If I am understanding this correctly, though, by the time the case was litigated on the merits, Lava no longer wanted the above declaration, and instead proposed that the court limit its attention to the eight patents in suit.  The court nevertheless set the terms of a global portfolio license, stating in paragraph 635 that “[t]he issue the Court is adjudicating . . .  is whether Ericsson can obtain a declaration that the royalty rates offered by them to Lava in respect of their portfolio of SEPs, are indeed FRAND.”  So maybe the court understood Ericsson to be seeking a declaratory judgment of some sort permitted under Indian law.  (At p.16, the court states that Ericsson sought inter alia a declaration "that the rates offered by [Ericsson] qua its portfolio of Standard Essential Patents are FRAND in nature.")  But the resolution of the case seems to me somewhat different from the way these types of cases have been litigated elsewhere.  In the U.K., for example, a decision that the FRAND-committed SEPs in suit are valid and infringed may result in the court offering the defendant a choice between being enjoined from practicing those patents in the U.K. or accepting the terms of a court-determined global license (the so-called FRAND injunction).  But here, by 2020 there was no threat of injunction, because all of the patents in suit had expired.  Another possibility in some countries might be for the defendant to allege that it is a third-party beneficiary of the patentee’s FRAND commitment, and to sue for breach of contract and/or a declaratory judgment; the end result may be for the court to declare what the terms of a FRAND license would be, as in Microsoft v. Motorola.  Or maybe the patentee can seek a declaration that its offer is FRAND (and therefore that the patentee is not in breach of its obligations), as indeed Ericsson was doing here.  What I’m not sure I’ve seen before, however, is a court adjudicating a patent infringement suit involving a discrete number of SEPs and awarding, as past damages for the infringement, a FRAND royalty covering the entire portfolio, including patents not in suit.  Of course, in this case, if the defendant doesn’t sell any products outside of India, it isn’t paying a royalty on any non-Indian patents, even if the non-Indian patents affect the global royalty rate Ericsson charges; but it's not clear to me that the patents in suit are the only Indian SEPs Ericsson owns (see para. 725, in which Lava asserts that Ericsson has "about 30 Indian patents," though not specifying whether any of the other 22 or so are SEPs).  This seems unusual to me; again, if I’m understanding correctly, this case was litigated as a patent infringement suit, and the court is awarding damages for patent infringement, not merely declaring what the terms of a global license would be.  If, however, Ericsson has only eight Indian SEPs (one of which the court found to be invalid, thus reducing the number to seven), then maybe the global rate (based on Ericsson's global portfolio) multiplied by the number of products Lava sold in India is the correct measure of damages for the infringement of the seven valid Indian SEPs.  But this is not entirely clear to me from the decision, though it's possible I'm overlooking something.  (I need to check to see if any of the Chinese FRAND cases have followed this fact pattern; off the top of my head, I'm not sure.)  Or maybe it's simpler than I am making it out to be; perhaps the court is saying that to determine the damages for the infringement of the seven patents in suit, you need to take into account that the patentee would have conditioned the use of those seven patents on the defendant's agreement to a global license.  In other words, but for the infringement, the defendant would have agreed to a global license, so the damages needed to compensate the patentee for the infringement of the seven patents equal the defendant's turnover multiplied by the global rate.  I'm not sure that argument would fly under U.S. patent damages law--it sounds almost like a convoyed goods argument, and the U.S. approach to damages for convoyed goods is somewhat more restrictive than in some countries (see my recent post here)--but maybe it works in India, and that might be the correct interpretation of paras. 680 et seq. of the decision.  

The other thing that seems odd to me is the statute of limitations issue.  Apparently the general statute of limitations under Indian law is three years, but the court concluded that certain provisions of the Patent Act trumped this general provision: §§ 11A(7) and 45(3), which allow the patentee to recover damages covering the period of time beginning from the date of publication of the patent application, as long as the patent subsequently issues (a common provision in many countries’ patents laws), and § 111, which states that the patentee can sue for damages once the defendant knows or has reason to know of the existence of the patent (a common provision in some Commonwealth countries).  The court reads these provisions as allowing Ericsson to sue for damages beginning in 2011, which is when it put Lava on notice, even though Ericsson did not file suit for infringement until 2015.  If I am understanding correctly, the logic of the decision would seem to eliminate the statute of limitations altogether for patent infringement suits, by allowing the patentee to sue for damages at any time once it puts the defendant on notice (though perhaps subject to the equitable doctrine of laches?).  Maybe that is correct as a matter of Indian law—it’s not a matter on which I claim any expertise—but it strikes me as a somewhat unusual practice.