Penn Law by liaoqinmei


									  Patent Remedies

Class Notes: April 1, 2003

Law 677 | Patent Law | Spring 2003
        Professor Wagner
                   Today‟s Agenda

1. Cleanup: Experimental Use

2. Patent Remedies

  a) Damages: Lost Profits

  b) Damages: Reasonable Royalty

  c) Exceptional Cases & Enhanced Damages

  d) Injunctions

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                Experimental Use
35 U.S.C. § 271(a)
. . .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 therefore
   infringes the patent.

  Why have an experimental use exception? (In
  what cases would you find an exception to

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             Experimental Use
Roche v Bolar (Fed. Cir. 1984)
• What was the accused infringer doing?
• Why might this argue for an experimental use
• How does the Federal Circuit define the
  exception? (What are the pros and cons of this

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             Experimental Use
             Congressional Response

Hatch-Waxman Act (1984): key features
1. Limited experimental use exception
2. Automatic infringement in FDA approval

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                  Experimental Use
Experimental Use (271(e)(1)): “reasonably related to the
  development and submission of information” under Food
  & Drug laws
   • What if you infringe to develop a new drug or medical product,
     but also demonstrate the (infringing product) at shows, etc.

Automatic Infringement (271(e)(2))
   • What is an ANDA? (Why have it?)
   • Why make the filing of an ANDA an infringement?
   • What is important about the automatic stay of processing by the
     FDA upon filing a lawsuit related to an ANDA application?

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                Patent Remedies

1. Injunctions awarded as a matter of course
  a) Preliminary injunctions are common

2. Damage awards defined by statute (35 USC §
  a) Lost profits due to infringement, or
  b) Reasonable royalty for infringing sales (if LPs can‟t
     be proved)
  c) Willful infringement: may increase award up to 3x
     based on judge‟s discretion

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                 Remedies: Lost Profits
General points:
  • What do we mean by lost profits? (What is it we‟re
    trying to do by awarding them?)
  • How do you show lost profits?

Panduit Corp. (1978)
  • Consider why each of the following must be shown:
      1.     Demand
      2.     Absence of noninfringing substitutes
      3.     Capacity to meet demand
      4.     Profits “would have made” given 1-3

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                   Remedies: Lost Profits
              Components of Lost Profits Calculations

1. Demand for the good
   a) How can you show demand? (Is this analytically correct?)

2. Absence of acceptable substitutes
   a) Why include this factor?
   b) Do similar goods provide noninfringing substitutes?
       •      Isn‟t there always a substitute? (What is a substitute for my
              better mousetrap?)
   c) Does the substitute have to exist on the market?
   d) Can duly-licensed versions of the patented good be substitutes?
   e) In what circumstances might you ignore this prong altogether?
      (Why?) (See note 6, pp. 1231-32)

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                Remedies: Lost Profits
             Components of Lost Profits Calculations

1. Capacity to Exploit Demand
  a) Why include this factor? (Does it simply mean manufacturing

2. Profits “would have made”
  a) Basic formula: Profits = Revenues - Incremental Costs
  b) Why exclude fixed costs from this calculation?
  c) Who bears the burden of proof? (What if the figures are
     relatively uncertain -- who bears the risk of error?)
  d) Can you use the infringer‟s costs as proof?

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                  Remedies: Lost Profits
                     Lost Profits & Price Erosion

Consider circumstances of infringement:

   •   The patentee is charging $10 per unit, sells 100
   •   The infringer is charging $10 per unit, sells 100

   •   What revenues can the patentee claim as „lost‟?
       •      $1000 ($10 x 100)? More? Less?
       •      What would you want to know to determine this?

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               Reasonable Royalty
• What do we mean by „a reasonable royalty‟?

Georgia Pacific (1970)
  • Note the array of factors relevant to a reasonable
      o Which of the factors seems most helpful?
  • What is the „willing buyer and seller‟ rule? (Is it
    analytically helpful?)
  • How does the GP court apply the rule? (How does it
    come up with the $50/1000 feet number?)

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             Reasonable Royalty
TWM Mfg. Co. v Dura Corp. (1986)
  • What is the “analytic method” of calculating a
    reasonable royalty?
  • What information is needed to make the calculation?
  • Is this method more analytically straightforward than
    the „hypothetical negotiation‟ method? (Is it more
    likely to be correct?)

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             Modern Patent Damages
Rite-Hite Corp. v. Kelley (1995)
• Framework: RH sells three devices
  1. MDL-55 (covered by the patent)
  2. ADL-100 (not covered by the patent, primary product,
     competitor of infringing device)
  3. Dock-levelers (complementary products, sold with above, not
     covered by patent)
• Questions:
  1. Can RH get „lost profits‟ on sales of ADL-100s? (Why or why
     not?) What is the test for when sales of goods not covered by
     the patent can be remedied?
  2. Can RH get „lost profits‟ on the dock-levelers it would have sold
     with MDL-55s and ADL-100s? What is the test here? What
     evidence is probative?

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 Attorney’s Fees & Enhanced Damages
Attorney’s Fees & Costs
   • General rule: each side pays costs
   • In “exceptional cases”, loser may be required to pay fees &
   • Two “exceptional” circumstances:
       o Willful infringement
       o „vexatious litigation‟
   • Willful infringement:
       o Actual notice + failure to exercise due care
       o How do you show notice?
       o How can you exercise „due care‟?

Enhanced Damages
   • In cases of willful infringement, may increase damages up to 3x

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             Next Class

   The Subject Matter of Patents I

04/01/03      Law 677 | Spring 2003   16

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