Those who take an interest in patents — inventors, litigants, lawyers, judges, pundits, trolls, and on and on — have been waiting with bated breath for the CAFC’s decision in In re Bilski. Is it a game changer for much-maligned “business method” patents? How far does it go in narrowing the patentability of business method processes? How will the courts apply it? How does it affect pending or contemplated cases? Is the Supreme Court likely to accept an appeal?
It seems that almost every patent lawyer in the country feels compelled to write about this decision. Tens of thousands of words will be written. Indeed, I would swear that some lawyers pulled all-nighters on Thursday night so they would be the first to write about this case by Friday morning, and get a jump on the competition.
To sort through the noise, my recommendation is that you go to the Patently-O blog. Start here, then search Patently-O for “Bilski”. I’m confident that this blog will collect most of the commentary on this case you are likely to need.
We’ve been following the lower courts’ interpretation and application of eBay v. MercExchangesince the case was decided by the Supreme Court in May 2006. In eBay the Court held that post-judgment injunctions were not “automatic” for successful patent plaintiffs, but rather that the trial court had to apply the traditional equitable test to determine whether an injunction or ongoing royalties were the appropriate remedy.
In June I gave a presentation at Massachusetts Continuing Legal Education on developments in this area in the two years since the decision. (Warning – the Powerpoint won’t make a lot of sense without the voice-over, but it gives some idea of the landscape).
As I discussed then, a constellation of issues was forming around the question of how to assess future royalties if it is determined that this was the appropriate remedy after final judgment. By then, of course, the jury has gone home. Was it up to the judge to determine the royalty? Would there be a new trial (jury or otherwise) on this issue alone? Would the pre-judgment royalty be used for future royalties (as some courts have done)?
Not surprisingly, a U.S. District Judge in the Eastern District of Texas has taken the first real “shot” at this issue. In early August Federal District Court Judge Clark issued an order in several cases, advising the parties that he expected the issue of future royalties to be tried with liability and past damages. He stated:
Should an injunction issue, a jury finding on a future royalty could be used to set a reasonable amount to be paid into escrow during the period of any stay which might be granted. If an injunction is not warranted, the jury verdict might be used by the parties as one factor in agreeing on a license, or by the court in arriving at an ongoing royalty rate for a compulsory license. In either case, time and expense can be saved by having the damages experts testify once, rather than hold a separate mini-trial on the issue of future damages post-verdict. This procedure would encourage the experts to keep their testimony about past and future damages logically consistent, and to give reasons for any differences.
Judge Clark explained that this procedure would not automatically result in an award of future damages in the amount advised by the jury (as described by the judge, the jury’s findings are not binding on the court), or be determinative in any way of the decision whether to issue an injunction or award future royalties.
Although this procedure would add another dimension of cost and complexity to a patent trial, it may make sense where there is a reasonable likelihood that future royalties (rather than a permanent injunction) will be the final remedy.
However, one would hope that a trial judge would not impose this procedure in cases where a preliminary determination concludes that the likelihood of future royalties is weak (for example, as in the case of direct competition between the patent holder and the defendant). It’s worth watching to see whether this approach catches on with other judges in the EdTX and in other districts, and if so how it evolves.
Damages experts must be sharpening their pencils and working overtime this summer ….
The Federal Trade Commission has asked for en banc review of the D. C. Circuit’s decision in the FTC’s Rambus proceeding. I expect this case to be appealed to the Supreme Court, and given the Court’s propensity to accept antitrust cases over the last several years and the importance of this case, the case stands a better-than-average chance of being accepted for review by the Court. Of course better-than-average is still difficult, so the FTC shouldn’t get its printing presses warmed up quite yet.
Whether a plaintiff states a claim under Section 2 of the Sherman Act by alleging that the defendant – a vertically integrated retail competitor with an alleged monopoly at the wholesale level but no antitrust duty to provide the wholesale input to competitors – engaged in a “price squeeze” by leaving insufficient margin between wholesale and retail prices to allow the plaintiff to compete.
The Ninth Circuit held that there was an antitrust duty, and Pacific Bell is appealing that ruling. The SCOTUS blog page for this case is here.
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I strongly recommend that patent and antitrust attorneys read Massachusetts U.S. District Judge Stearns’ recent decision in Hertz v. Enterprise Rent-A-Car. (Warning; non-lawyers should steer clear).
Hertz sued Enterprise under the Sherman Antitrust Act. At issue is Enterprise’s patent 7,275,038, an Internet-based computerized transaction system for the car rental business.
Hertz, threatened by the prospective (and then actual) issuance of this patent brought suit for declaratory judgment of non-infringement on a variety of grounds, each of which was considered by Judge Stearns in considering Enterprise’s motion to dismiss.
The difference between an “amended complaint” and a “supplemental complaint” and its relevance to jurisdictional issues in this case.
The level of specificity necessary to plead fraud-related claims arising in a patent context.
The pleading requirements for a claim of tortious interference with advantageous business relations under state law.
The pleading requirements under M.G.L. c. 93A where the complaint fails to allege that the anticompetitive effects of defendant’s actions were felt primarily and predominantly in Massachusetts.
Whether there is sufficient case or controversy to support a declaratory judgment action under the Supreme Court’s 2007 decision in MedImmune, Inc. v. Genentech, Inc., 127 S. Ct. 764 (2007), which supplanted the “reasonable apprehension of imminent suit” test with a more lenient standard for declaratory judgment actions in patent cases.
Whether the patent complaint stated “plausible claims” as required by the Supreme Court the 2007 antitrust decision in Bell Atlantic v. Twombly (and which Judge Stearns held applies to patent-based claims).
Enjoy, legal mavins …..
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When lawyers win a trial they like to publicize their efforts in a “war story” article. After all, one of the best parts of winning is the bragging rights.
These stories often are so self-serving they aren’t worth reading, but I have to recommend the article recently published on the ABA’s “Antitrust Source” website: Defending “The Last Man Standing”: Trench Lessons from the 2008 Criminal Antitrust Trial, United States v. Swanson. The defense lawyers in this case describe in detail how they took on a criminal price fixing conspiracy case brought by the government, and obtained a hung jury after an lengthy trial. The feds declined to retry the case, so this was a de facto win. The article describes all of the problems faced by the defense, which was representing an individual executive, Gary Swanson: witnesses who had pleaded guilty and were testifying for the government; an enormous volume of discovery materials, language issues (Korean), emails that were extremely damaging (at first sight), and more.
Yesterday’s decision in Quanta Computer, Inc. v. LG Electronics, Inc. is linked below (via scribd.com, which I am becoming quite enamored of as a place in the “cloud” to hold and link to documents or embed them in a web site or blog).
This is a very technical case, and probably is of little interest to non-patent/licensing-professionals. The holding is as follows:
The authorized sale of an article that substantially emboides a patent exhausts the patent holder’s rights and prevetns the patent holder from invoking patent law to control postsale use of the article.
Layman’s translation: once you license a patent to someone, your rights in the patented product or method are “exhausted.” You are not entitled to demand a patent royalty from subsequent purchasers “downstream” from your customer. This is analogous to the “first sale” doctrine in copyright law.
In both cases (patent and copyright) the exception is that you are able to restrict downstream uses by contract with your purchaser or licensee. However, negotiating contract rights that limit downstream use of a patented product or method is much more difficult than relying upon the operation of law; hence, the issue presented in this case.
The Supreme Court held that its ruling applied to “method patents” as well as utility patents. And, the exhaustion doctrine extends to include the sale of products that that do not fully practice the invention when the products include essential features of the patent and the “reasonable and intended use” of the product is to practice to patent.
The “Rambus litigation” in all its many permutations — Justice Department investigation, FTC proceedings and multiple civil cases — has been documented and commented upon widely. For a recap see Andy Updegrove’s article here. At the heart of the legal controversy is the allegation that during the 1990s Rambus, the owner of key DRAMpatents or pending patents that solved the CPU-memory chip “bottleneck” problem, failed to disclose these patents to JEDEC, an important standards-setting organization (“SSO”) to which Rambus belonged. JEDEC, uninformed of the existence of these patents, incorporated the Rambus technology in its standards, which were then widely adopted in the memory chip market.
Because Rambus withheld disclosure of its patents, JEDEC did not have the opportunity to exercise either of the two options open to it when a member disclosed proprietary technology: either choose another technology or negotiate industry-wide favorable licensing terms as a condition of adoption of the standard (so-called “reasonable and non-discriminatory” license fees, or”RAND” royalties). RAND royalties are negotiated and agreed-upon ex ante, that is, before the technology owner’s IP is adopted, and therefore before the technology owner acquires market power by reason of the adoption.
By the time Rambus announced its patents and began demanding royalties (and filing patent infringement suits against companies that refused to pay royalties), Rambus had achieved a technical “lock-in” that made it difficult for the memory chip industry to move to a different technology. Rambus’s lock-in allowed it to obtain a 90% market-share, and demand supracompetitive royalties from companies that were producing JEDEC-compliant memory devices. Rambus has earned several billion dollars in licensing fees to date, and by some estimates its total royalties could reach as high as $11 billion.
The FTC Decision
The Federal Trade Commission brought proceedings against Rambus, and issued a 120 page decision in 2006 holding that Rambus was guilty of monopolization in violation of Section 5 of the FTC Act. The FTC issued a remedial order mandating the maximum royalties that Rambus would be permitted to charge.
The FTC’s key conclusions were:
In the early 1990s Rambus engaged in a multi-year, intentional campaign to conceal its pending patents from JEDEC, in violation of JEDEC policies that required disclosure from members. Rambus’s actions constituted a “deliberate course of deceptive conduct” and were calculated to mislead JEDEC. Rambus even went to far as to tailor its patent claims to cover parts of the proposed standards. As a result, JEDEC was unaware of the patents and pending applications when it adopted the standard. The FTC emphasized that Rambus’s conduct occurred in the context of an industry standard-setting process, where members had a legitimate expectation of good faith and candor.
Rambus’s deception was material, and led to JEDEC adopting the Rambus IP in its standards.
“But for” Rambus’s deception, JEDEC would have either excluded Rambus’s technologies from the DRAM standards, or would have demanded assurances of reasonable royalties before adopting the technologies. The FTC specifically found that alternative technologies were available that would have provided an alternative to the Rambus technologies, had Rambus been unwilling to negotiate RAND royalties.
Once the standards were adopted and implemented by chip manufacturers the cost and technical obstacles to switching technologies were significant, and as a result the industry was “locked-in” to the Rambus technology.
As a result of Rambus’s actions, JEDEC’s adoption of the Rambus technology, and the lock-in effect, Rambus acquired monopoly power – a more than 90% market share in the relevant market. The FTC found that the legal requirement of a “causal link” between Rambus’s conduct and its achievement of monopoly power had been established.
Rambus’s actions allowed it to charge supracompetitive patent royalties, unconstrained by competition. This harm to competition led to reduced output and decreased overall social welfare.
The FTC rejected Rambus’s “inevitability/superiority” argument: that even in the light of full disclosure JEDEC would have standardized on Rambus’s technologies due to their superiority. The FTC also rejected Rambus’s argument that Rambus’s monopoly power was not enduring because there were no barriers to entry to rivals wishing to challenge its monopoly position. The FTC held that the DRAM industry was locked into the JEDEC/Rambus standards due to switching costs and issues of backward compatibility.
Rambus’s Appeal to the D.C. Circuit
Rambus appealed, and the D.C. Circuit reversed the FTC decision on April 22, 2008. However, the D.C. Circuit was severely constrained in its ability to review the FTC decision. While a federal appeals court has the authority, on appeal, to review, de novo, purely legal issues decided by the FTC, the FTC’s factual findings are conclusive if supported by “substantial evidence.” The FTC’s factual findings were extensive; therefore, the path of least resistance for the D.C. Circuit was to focus on “legal” issues.
Rambus and “Antitrust Injury”
The D.C. Circuit took a legally complex and circuitous path to get to what it concluded was the core issue in the case. That process is itself highly questionable — the D.C. Circuit appears to have misapplied the standard of proof for causation in a case of this sort. In essence, the FTC drew legal inferences in favor of Rambus based on the FTC’s inability to analyze Rambus’s conduct within the context of a hypothetical marketplace that never existed because of Rambus’s fraudulent actions.
Using this reasoning, the court narrowed the case to what it considered to be the key “legal” issue: whether Rambus’s deception caused “antitrust injury” by preventing JEDEC from negotiating RAND royalties before adopting the Rambus technology. The answer to this question is critical, since the Supreme Court has repeatedly warned that conduct evaluated under the rule of reason that harms competitors is not enough, alone, to violate the antitrust laws – the conduct must harm competition. However, what constitutes harm to competition, or “antitrust injury” is a perplexing question. Often, this mantra is simplified to mean harm to consumers, who are the beneficiaries of competition. However, this is an oversimplification — the distinction between harm to competitors and harm to competition is as much a question of economic theory as of law. As George Bernard Shaw famously noted, if all economists were laid end to end, they would not reach a conclusion. The idea of federal judges, who are self-taught in economics at best, applying economics wrapped in the suffocating folds of stare decisis would have left Shaw (and probably even Oscar Wilde) without a bon mot.
Here is the Court’s conclusion on this issue:
JEDEC lost only an opportunity to secure a RAND commitment from Rambus. But loss of such a commitment is not a harm to competition from alternative technologies in the relevant markets. . . . Indeed, had JEDEC limited Rambus to reasonable royalties and required it to provide licenses on a nondiscriminatory basis, we would expect less competition from alternative technologies, not more; high prices and constrained output tend to attract competitors, not to repel them.
The D.C. Circuit went on to reject the arguments that (a) “price raising deception” of the sort alleged against Rambus resulting in higher royalty payments to Rambus was competitive harm, and (b) Rambus’ patents put it in a position of monopoly power, and any conduct that permitted a monopolist to avoid restraints on that power must be anticompetitive. As the D.C. Circuit put it, “an otherwise lawful monopolist’s end-run around price constraints, even when deceptive or fraudulent, does not alone present a harm to competition in the monopolized marketplace.”
D.C. Circuit’s Misplaced Reliance on NYNEX v. Discon
In reaching the conclusion that Rambus’s actions did not present a “harm to competition,” the D.C. Circuit relied almost entirely on the Supreme Court’s 1998 decision in NYNEX Corp. v. Discon. However, the NYNEX decision was largely concerned with whether so-called “two firm boycotts,” which is a vertical arrangement (as opposed to a horizontal “group boycott”), should be reviewed under the rule of reason or put in the forbidden “per se” category of antitrust violations. Boycotts – two firm or multifirm — were not at issue in FTC/Rambus, and in its 90 page appellate brief opposing Rambus’ appeal, the FTC didn’t mention the Discon case at all. Indeed, Rambus itself touched on NYNEX v. Discon only in passing in its appeal brief and its reply brief.
The D.C. Circuit’s seized on NYNEX as if it were a drowning man reaching for a life preserver. A secondary issue in NYNEX was the allegation that the defendants were engaged in a complex kickback scheme, a “regulatory fraud,” that allowed them to perpetuate market power. The Supreme Court found that this conduct, although fraudulent and deceptive, did not create a basis upon which to apply the per se rule to an alleged boycott with no horizontal elements. Additionally, the Supreme Court noted that there was competition in the affected market, indicating that although there was harm to the plaintiff, Discon, there was no injury to competition, the sine qua non of an antitrust violation. The Supreme Court noted that “the complaint itself … suggests the presence of other or potential competitors, which fact … could argue against the likelihood of competitive harm . . . entry was easy, perhaps to the point where other firms . . . might have entered that business almost at will.”
The ease of entry by competitors that caused the Supreme Court to suggest the absence of antitrust injury in Discon was not present in FTC/Rambus. As noted above, the FTC found that the industry was “locked-in” to the Rambus technology, and therefore there were no alternatives that could act as a competitive restraint on Rambus’s ability to overprice its patent licenses. Also, as noted, the FTC expressly rejected Rambus’s argument that its monopoly was not “enduring” due to the potential entry of competitors. These “findings of fact” by the FTC were not challenged by the D.C. Circuit, and they distinguish the analysis of the “harm to competition” in NYNEX from the “harm to competition” in the Rambus DRAM market completely.
Finally, the D.C. Circuit’s finding that Rambus’s “price raising” conduct did not give rise to the sort of competitive harm addressed by the antitrust laws was presented without any economic basis or discussion, and appears faulty. By charging supracompetitive royalty rates Rambus raised the cost of a key component of the products the DRAM chips were used in. Under any rationale view of economic theory or antitrust precedent, the higher prices charged by Rambus, given the absence of entrants that could drive down prices, constituted harm to consumers, and therefore “antitrust injury.”
Appeal or Defeat?
The FTC has a number of options open to it: a request for rehearing en bank to the D.C. Circuit, a retrial of some issues at the FTC, a Supreme Court appeal, or no action at all, which would be an admission of defeat.
It appears that this case would be ripe for an appeal (recognizing, of course, that the Supreme Court has discretion to take appeals, and takes very few each year). An appeal, if granted, would allow the Supreme Court to clarify its views on antitrust injury in the context of patent disclosures to a standard-setting organization, something it has never done. An appeal might resolve the many questions that are now outstanding following the D.C. Circuit’s in Rambus. The importance of this to the health of the standards-setting process is almost impossible to overstate.
However, the FTC’s decision to appeal to the U.S. Supreme Court must be informed by the reality that the Supreme Court has overwhelmingly favored antitrust defendants since 2004, and therefore the mathematical odds alone disfavor success on an appeal. However, one would hope that a Supreme Court appeal would allow the Court to make it clear that a deceptive failure to disclose its technology to a standard setting organization, enabling the patentholder, as a result, to charge supracompetitive royalty rates and obtain monopoly power, is exactly the kind of economic behavior that the antitrust laws are designed to prevent.
A postcript on my last posting regarding the so-called “rocket docket” in the Eastern District of Texas. Our firm is counsel for a client in a patent suit filed in Marshall, Texas (the very heart of darkness for patent defendants, some would say) on November 2, 2007. To date (more than six months later), the Court has yet to schedule the initial case management conference which, under the local patent rules, is the “kick off” event for patent cases in EDtTx. To date, there has been almost no activity in the case apart from the filing of answers and a motion to dismiss (not yet acted on) by one of the defendants.
There are all kinds of bubbles – stocks, commodities, housing, tulip bulbs, and even litigation. The Eastern District of Texas (EDtTx) has been the scene of a patent law bubble for the last seven years. However, like all bubbles, it can’t last forever, and it’s only a matter of time before this one pops.
The patent litigation history of EDtTx and the causa sine qua non of its popularity in with the plaintiff’s patent bar, Judge T. John Ward, are described in detail is an excellent article in the March issue of the American Lawyer. The article, titled “Taming Texas” and written by Nate Raymond, describes how Judge Ward nurtured the patent practice in Texas with a “rocket docket” and the support of pro-plaintiff jurors who are strongly partial to the protection of property rights. Among the highlights of the story:
As of 2007, there had not been a defense win in a patent infringement case the district in three years. From 2001 to mid-2006 plaintiffs had won 90% of the district’s patent trials.
The flood of patent cases in EDtTx has created an economic boom in the services industries (hotels, restaurants), and of course in the legal profession. Many lawyers who formerly focused on “PI” (personal injury) now focus on “IP” (intellectual property).
Patent reform working its way through Congress would tighten the venue requirements for patent cases, and dramatically reduce the ability to file cases in ED Tex. The article has a sidebar titled “Waiting for the End of the World,” which describes the economic apprehension created by this proposed legislation. Of course, the local lawyers are nervous as well, and they are lobbying against any change.
860 patent cases have been filed in EDtTx since 2000, 350 in 2007 alone.
East Texas judges are disinclined to grant summary judgment (meaning that cases are more likely to go to trial).
Of course, no trend can continue forever, and the pendulum appears to be swinging the other way in the last year, with a number of defense verdicts. More importantly, lawyers from outside Texas have learned what it takes to win there:
First and foremost, it’s important to hire strong local counsel, and use them aggressively during trial. They can “talk Texan,” something that’s hard to do if you weren’t born and raised there. And local counsel doesn’t mean lawyers from Houston or Dallas – it means “country lawyers” from EDtTx.
Second, jury consultants are particularly helpful in helping lawyers streamline these cases, and make them comprehensible.
Of course, every bubble contains the seeds of its own destruction, and the very thing that made EDtTx so successful is now contributing to its downfall. With a huge number of case filings, the district cannot maintain its reputation as a “rocket docket” that moves cases quickly to trial (something that plaintiff’s lawyers, who are often on a contingent fee, appreciate – inevitably, the faster the case moves, the less money is spent on it). 350 patent cases were filed in the district in 2007, and EDtTx is now the busiest patent district in the nation. In terms of speed, however, it has fallen to 18th, according to LegalMetric, a litigation analysis firm.
The American Lawyer article ends with a sobering warning – even if Congress does tighten up the venue requirements, litigation in EDtTx will not come to a standstill – lawyers are filing cases aggressively to be sure to “grandfather” them in under the current rules. The cases being filed today will precede any changes in the law, and be with us for years to come.
Here’s a link to an interesting article in the May 5, 2008 issue of Forbes, that highlights the use of anonymous, ex parte requests for reexamination of issued patents to the Patent Office. The result of a reexamination is to stall enforcement of the patent.
The article highlights the plight of Anthony Brown, a lawyer who purchased the patent for compression of an electronic file for transmission over a communications line (think JPEG, this ubiquitous). Before Brown purchased this patent it had laid dormant (the fate of the vast majority of issued patents). After Brown purchased the patent and began a licensing/enforcement program –
“A petition filed in 2000 by parties unknown asked the U.S. Patent & Trademark Office to reexamine whether the processes the patent described were novel enough to deserve a patent. The feds agreed to the review, a common practice if the questions raised seem substantial. The catch is that during the review the holder of the patent can’t demand licensing fees, and the patent’s life doesn’t get extended accordingly. The reexam of the JPEG patent lasted seven years”
After the patent survived that challenge, Brown hit his next roadblock –
“But last year saw yet another anonymous challenge. This one was filed by Chicago patent attorney Vernon Francissen, who declines to identify his client. Francissen suggested the JPEG patent’s current version had slipped through an overburdened system and was being applied too broadly. In March the Patent Office agreed to a second reexam, again putting up a roadblock to Brown’s licensing campaign.”
As a result of the impact of a successful request for rexamination, reexamination requests have become an almost standard strategy for defendants in patent litigation.
One of the largest jury verdicts in the notoriously plaintiff- friendly Federal District Court for the Eastern District of Texas was the June 2006 $79 million jury award, enhanced for wilfulnes by $25 million by U.S. District Judge Ron Clark in the case of Finisar Corporation v. DirectTV. (Note: Texas judges often have nicknames as their legal first names. It’s a Texas thing. If he were Massachusetts bred, he’d be Ronald Harrison Clark, III). In addition to this award, the judge refused Finisar a permanent injunction (applying the USSC eBay decision), but ordered DirectTV to pay a compulsory license of $1.60/set-top box until expiration of Finsar’s patent.
This judgment is no more. On April 18th the Court of Appeals for the Federal Circuit held that Judge Clark had misconstrued the term “downloading into a memory storage device.” You would think that such a simple term would be easy to construe, but apparently that wasn’t the case in Beaumont, Texas. Result: infringement verdict of over $104 million (not including interest) vacated, case remanded for a new trial.
In addition to correcting the district court on the construction of the “memory storage” term, the Federal Circuit held that one of Finisar’s patent claims had been anticipated by prior art, and therefore was invalid. Moreover, the Federal Circuit ordered the district court to reconsider its holding of non-obviousness with respect to the surviving claims. Piling on, the Federal Circuit reversed the district court’s finding of wilfulness (the basis for the $25 million enhancement), finding that DirectTV had obtained a proper opinion of noninfringement. This, in the event the issue should arise upon a retrial of the case.
It must be a sad day in Sunnyvale. And, Finisar is in a far weaker position today than it was in 2006, given the Supreme Court’s 2007 KSR decision, which has made patents more difficult to enforce and easier to invalidate. In the process, perhaps the widely-feared Eastern District of Texas has lost a bit of its luster for plaintiffs.
This case illustrates the fragility of any patent infringement verdict. After the expenditure of millions of dollars in costs and fees, thousands of hours of attorney and executive time, stock market gyrations, careers made and destroyed, a case can be reversed simply because the Federal Circuit disagrees with the trial court’s interpretation of a few words found in the patent. In the patent context, more than almost any, id imperfectum dum confectum erit (or, it ain’t over until it’s over, for those of you whose Latin is rusty). For a losing plaintiff, an appeal is “baked into” the process.
There is much more to this important case than I’ve had time to discuss here (including discussion of structural disclosures in “means-plus-function” claims involving a general purpose computer) and Dennis Crouch at Patently-O has done such a fine job that I’ll refer you to two entries in which he discusses other aspects of this decision, here and here.
The Patent Statute states: The court in exceptional cases may award reasonable attorney fees to the prevailing party. 35 U.S.C. 285.
While finding no “willfulness” in the underlying infringment, Judge Harrington has imposed attorney’s fees of $10 million based on Medtronic’s trial conduct in the long-running Medtronic/Depuy Spine patent infringement litigation. Specifically, Judge Harrington concluded that Medtronic’s lawyers attempted to “mislead and confuse the jury in a manner inconsistent with the patent claim construction required by a decision of the Court of Appeals for the Federal Circuit (linked to above).
Judge Harrington imposed this sanction under the patent statute and the court’s inherent power.
However, context is everything. Believe it or not, this amount represents only 15% of plainitiff’s attorney’s fees during one phase the case (do the math – (15%x = $10 million)). And, the liability judgement against Medtronics was $226 million.
But, still, $10 million isn’t chump change, even to Medtronics. Can you spell a-p-p-e-a-l? In fact, the whole kit and caboodle (judgment, attorney’s fees, and more), has been appealed.
When you can prove that you likely are the victim of copyright or trademark infringement, or trade secret misappropriation, you have a good shot at getting a preliminary injunction (if you can afford the bond). That’s because there is a legal “presumption” of irreparable harm associated with these types of IP claims. Prove likelihood of success and you are well on your way to the promised land of “irreparable harm.”
But, this is not true in patent cases. It’s quite difficult to get a preliminary injunction in a patent infringement case. Its always been hard, and its getting harder. After all, in 2006 the Supreme Court issued a ruling the result of which is that injunctions are far from a sure thing, even if you win a patent infringement case on the full merits (for example, after trial). eBay v. MercExchange[link].
Many courts (although not the Federal Circuit Court of Appeals, which holds almost all of the big mojo when it comes to patent matters, trumpted only by SCOTUS), has not explicitly held that MercExchange applies to preliminary injunctions, but it would be illogical to conclude the holding in that case does not apply in the context of preliminary injunctions, and a number of district courts have so held.
Printguard, Inc. recently discovered how hard it is to get a preliminary injunction in a patent infringement case in a case it brought against Anti-Marketing Systems, Inc. in the District of Massachusetts. Our District’s newest addition to the federal bench, Judge F. Dennis Saylor, IV, rejected the motion on the ground that the defendant had raised a “substantial question” as to the validity of the patent – in this case due to obviousness. In a crisply written and thorough opinion Judge Saylor didn’t even reach the thorny question of irreparable harm, which might have provided an alternative basis altogether for denying the motion.
Of course, the case goes on, and Printguard has appealed Judge Saylor’s decision, so stay tuned.
Question by C. J. Roberts at oral argument in Quanta v. LG, earlier this week:
we’ve had experience with the Patent Office where it tends to grant patents a lot more liberally than we would enforce under the patent law. (Transcript, p. 49, January 16, 2008).
The issue in Quanta is whether the licensed sale of components used in a patented invention exhausts the patent owner’s patent rights. The comment by Chief Justice Roberts was a reference to the Supreme Court’s decision in KSR Int’l v. Teleflex, Inc., which has been widely understood to have made it more difficult to obtain new patents and defend existing patents.
The Patent Office has been widely criticized for issuing unworthy patents. Do you think anyone there is paying attention?
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