2017 was a busy year for patent remedies. Except for the Supreme Court decision on laches, most of the action happened in the Federal Circuit. The graph below shows how many times each decision has been cited by another court. It’s updated as to January 26, 2018.
1. Laches cannot bar damages for a suit brought within the statutory period.
Under Section 286 of the Patent Act, “no recovery shall be had for any infringement committed more than six years prior to the filing of the complaint.”
In SCA Hygiene v. First Quality, the Supreme Court held that laches cannot bar damages for a suit brought within the statutory limitations period. Section 286 provides a six-year window for recovering patent damages. And because laches is not codified in the Patent Act, it may not override Congress’s express intent to provide a limitations period. The Court, however, noted that equitable estoppel may bar damages where an unscrupulous patentee induced investments in the accused product. SCA Hygiene harmonizes patent law and copyright law. In Petrella v. MGM, the Supreme Court similarly held that laches is no defense to a copyright infringement suit brought within the Copyright Act’s statutory limitations period.
2. The Federal Circuit explains when reasonable royalty and lost profit damages are available.
Under Section 284 of the Patent Act, upon finding infringement, “the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty.”
The Federal Circuit elaborated on proper reasonable royalty methodologies. Rembrandt v. Samsung held that an expert may calculate the incremental value (the price premium) associated with the infringing feature by comparing the prices the defendant paid for two products: one with the claimed feature, and the other without. Asetek Danmark v. CMI USA held that an expert may rely on the patentee’s per-unit profit margin in a third-party license. And in so relying, the patentee need not show (unlike with lost profits) that it would have made the infringer’s sales but for the infringement. And in Prism v. Sprint Spectrum, the court held that a settlement license was admisible despite that the earlier license included other patents; and that the earlier case settled while validity and infringement were open issues. The settlement license was admissible because (1) the earlier license attributed values to the particular patents involved; (2) the earlier defendant and the present defendant would likely use the patented technology comparably; and (3) the earlier license was reached after all discovery was complete and the trial was finished, except for closing arguments and jury deliberations.
Notwithstanding § 284’s guarantee of a reasonable royalty, a patent holder may waive its rights to royalty damages. Promega v. Life Technologies. In Promega, the Federal Circuit held the plaintiff waived its rights to a reasonable royalty from counsel statements at trial, and by only seeking lost profit damages. Further, the plaintiff waived its right to seek lost profit damages based on a subset of defendant’s worldwide sales. On JMOL, the plaintiff did not contest the defendant’s argument that the record contained no evidence for a jury to calculate lost profits based on a subset of the sales. Plaintiff thus had to pursue a lost profit theory based on all of defendant’s worldwide sales, and could not get a new trial on damages when this theory was rejected.
To recover lost profits under Panduit, the patentee must show (1) demand for the patented product; (2) an absence of acceptable, non-infringing substitutes; (3) manufacturing and marketing capability to exploit the demand; and (4) the amount of profit that would have been made. Mentor Graphics v. EVE-USA held that the Panduit factors apportion damages by requiring proof of demand for the patent product, and of the absence of non-infringing alternative. Thus a district court does not need to further apportion a jury lost profit award based on Panduit. Moreover, when defending against a lost profits claim under the second Panduit element, a defendant need not show that a non-infringing substitute was on the market or was advertised. Presidio v. American Technical Ceramics. The Federal Circuit found a non-infringing substitute was available (thus precluding lost profit damages) where 88,000 units of the substitute was sold to a single customer.
3. The Federal Circuit explains irreparable harm.
Under Supreme Court law, a patentee seeking an injunction must show: (1) irreparable harm; (2) that monetary damages are inadequate; (3) that the balance of hardships favor the injunction; and (4) that the public interest would not be disserved. eBay Inc. v. MercExchange. To show irreparable harm with multi-component products, the patentee must also show that a causal nexus relating the alleged harm and infringement. Apple v. Samsung.
In proving irreparable harm, the patentee may rely on evidence that occurred before the patent issued. Tinnus v. Telebrands. In Tinnus, the Federal Circuit affirmed a finding of irreparable harm based on evidence of consumer confusion, harm to reputation, and loss of good-will predating the patent’s issuance. Such circumstantial evidence demonstrates the possibility of identical harm once the patent issues. In Metalcraft of Mayville v. Toro, the Federal Circuit upheld an injunction, holding that the loss of a potential lifelong customer may be irreparable. Evidence showed that some relevant customers preferred to purchase an entire line of products from the same manufacturer. The loss of these customers was irreparable. Sales lost were difficult to quantify due to ecosystem effects where one company’s customers will continue to buy that company’s products and recommend them to others.
For multi-component products, proving a causal nexus only requires showing some connection between the patented feature and the demand for the accused product. Genband v. Metaswitch. The patentee need not show that the patented feature is the sole reason consumers purchased the accused product. In Mylan v. Aurobindo, the Federal Circuit affirmed a finding of causal nexus. The defendant could not achieve the product purity described in its ANDA without infringing plaintiff’s patent. The generic drug thus would not be on the market if the defendant had not obtained FDA approval for a product that “will likely be found to be covered by the patent.”
4. The Federal Circuit elaborates on attorney fees.
Under Section 285 of the Patent Act, “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.”
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As an initial matter, factual disputes underpinning the attorney fees inquiry do not require a jury trial. AIA America v. Avid. The Seventh Amendment preserves the right to a jury trial for suits in which only legal – not equitable – rights and remedies are at issue. Although § 285’s attorney fees is monetary, it is an equitable remedy because the fees raise issues collateral to and separate from the decision on the merits. The attorney fees inquiry thus does not require a jury trial even when it involves considerations of a party’s state of mind, intent, and culpability.
In determining whether a case is exceptional under § 285, the court may consider the following non-exclusive factors: subjective bad faith, exceptionally meritless claims, frivolessness, motivation, objective unreasonableness of a case’s factual or legal components, and the need to advance the considerations of compensation and deterrence. University of Utah v. Max Planck. A party need not engage in sanctionable conduct under Rule 11 for a district court to award attorney fees. Rothschild v. Guardian. The Federal Circuit mostly affirmed the lower court’s attorney fees determinations in 2017. The cases in which the attorney fees determination was reversed are more instructive.
The Federal Circuit reversed the district court in three cases involving serial plaintiffs – plaintiffs bringing multiple suits. In AdjustaCam v. Newegg, the Federal Circuit reversed the district court’s denial of attorney fees because the plaintiff’s case became baseless after the Markman claim construction order. Notwithstanding, the plaintiff continued to press its infringement contentions in the lower court. Further, the plaintiff asserted nuisance-value damages against many defendants, and settled with them for widely varied royalty rates. In Rothschild v. Guardian, the Federal Circuit similarly reversed a denial of attorney fees. There, the plaintiff made an inadequate pre-suit investigation, and asserted its patent in 58 cases against various technologies, settling the vast majority of these cases for significantly below the average cost of defending an infringement lawsuit.
However, in Checkpoint v. All-Tag, the Federal Circuit reversed the award of attorney fees against a serial plaintiff. The Checkpoint plaintiff had a large market share, and had lawsuits against other asserted infringers. The record did not evince improper motive because the plaintiff obtained two infringement opinions from counsel, previously obtained judgments against the defendant for infringement in Switzerland, and had infringement evidence sufficient to survive summary judgment motions and a Daubert challenge.
5. The patentee has the burden to show no duty to mark, and cannot obviate its duty by disclaiming the feature.
Under Section 287 of the Patent Act, “[i]n the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter.”
An alleged infringer has the initial burden of production to articulate products it believes are unmarked patented articles. Arctic Cat v. Bombadier. The alleged infringer need not produce claim charts, or otherwise prove that the unmarked products are covered by the asserted patents, to meet its initial burden of identifying products. Once this “low bar” is satisfied, the patentee has the burden to prove that the named products do not practice the asserted patents, and thus that there was no duty to mark.
A patentee cannot bypass the marking statute by disclaiming the unmarked feature. Rembrandt v. Samsung. The patentee there withdrew a claim from its infringement allegations, and then filed a disclaimer at the USPTO disclaiming the specific claim in order to avoid the duty to mark. A disclaimer, however, cannot serve to retroactively dissolve the marking requirement for a patentee to collect pre-notice damages. The marking statute protects the public’s ability to exploit an unmarked product’s features until a patentee provides either constructive notice or actual notice.
6. A court need not analyze the Read factors in deciding whether to enhance damages.
Under Section 284 of the Patent Act, the district “court may increase the damages up to three times the amount found or assessed.” A court may enhance damages after finding the defendant’s infringement willful.
In Presidio v. American Technical Ceramics, the Federal Circuit held that a district court does not err as a matter of law by failing to address each Read factor when deciding whether to enhance damages. The Supreme Court in Halo v. Pulse did not require the Read factors to be part of the enhancement analysis. Halo merely requires the district court to consider the particular circumstances of the case to determine whether it is egregious.
Conclusion
2017 was a busy year for patent remedies at the Federal Circuit. The court decided cases on disparate yet important issues. The new year is looking promising. In NantKwest v. Matal, decided in 2017, a panel of the Federal Circuit held that § 145 permits awarding the USPTO’s attorney fees as “expenses” incurred while defending § 145 appeals from the PTAB to a district court, regardless of the outcome of the appeal. In a sua sponte order, the Federal Circuit vacated the decision and ordered en banc review of the fee shifting rule. Briefs have been filed and oral arguments are set for March 8, 2018.
The Supreme Court also has an important remedies case on the docket. On January 12, 2018, the Supreme Court granted certiorari in WesternGeco v. ION Geophysical. The Federal Circuit held in 2015 that a patentee cannot collect lost profits stemming from foreign sales because U.S. patent law does not apply abroad. The question presented to the Supreme Court is whether a patentee, having proven domestic infringement, may recover lost profits that it would have earned outside of the United States if the infringement had not occurred. The whole patent world will be watching.