Source: https://www.hoffmanclark.com/news/injunctive-and-damages-remedies-available-in-a-patent-infringement-case/
Timestamp: 2019-04-26 15:57:27+00:00

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It can be argued that technology has never been as vital to the success of an enterprise as it is today. Thus, in the current age of sweeping e-commerce, high-tech telecommunications and biotechnology, businesses that neglect to consider a patent strategy to protect their important products and methods that distinguish them from their competition are destined to fail.
While vital, however, patents do not assure commercial success and the assertion of patent infringement with a claim for damages carries with it a number of requirements, considerations and proofs peculiar to this form of intellectual property.2 Given the dependence of many businesses upon their patents and the high stakes and large sums of money that frequently attend patent disputes, failure to appreciate certain of the unique concepts embodied in patent infringement remedies law will, similarly, result in failure.
Patent infringement remedies are meted out in the federal district courts because patent rights derive from federal statutes and, thus, give rise to issues of federal question.3 Although patent issues may be appealed as high as the United States Supreme Court, and while Supreme Court precedent certainly governs many of the most import issues affecting patents, the practical court of last resort in patent matters is the Court of Appeals for the Federal Circuit (“CAFC” or “Federal Circuit”). Having limited jurisdiction and specially created in 1982 to, among other things, decide patent appeals, the CAFC has exclusive jurisdiction over all appeals from patent cases in federal district courts.4 Thus, much of the precedent for patent infringement remedies and damages issues is founded upon Federal Circuit authority.
Given the complexity of the subject matter, numerous books, articles and treatises have been written on patent infringement remedies and damages. As such, it is not possible to thoroughly address all aspects of the remedies and damages theories that pertain to patent infringement in the context of this limited space. Rather, the purpose of this article is to lay a groundwork on the subject of patent infringement remedies and damages, introduce the reader to the prevailing theories of legal redress and, at the same time, provide the reader with an appreciation for the complexity of the analysis that typically characterizes a claim for patent infringement damages.
Two basic remedies exist for patent infringement; namely: 1) injunctive relief; and 2) damages.
While an injunction may no doubt be the most valuable remedy sought by a patentee in a case of infringement, the same standards are applied in hearing and granting injunctive relief in patent cases as are applied in other federal cases.8 For this reason, and because many are at least somewhat familiar with these standards, the balance of this article focuses on the lesser known damages component of patent infringement and certain of the unique concepts that distinguish a patent damages claim from other intellectual property damages claims and tort damages claims generally.
The patent owner’s actual losses, measured as the loss of profits, is one possible measure of “damages adequate to compensate for the infringement.” Proof of lost profits must include two elements: (1) a showing of causation, i.e. that the patent owner would have made additional sales “but-for” the infringement, and (2) evidence for the computation of the loss of profits.13 Lost profits damages may be measured based upon the causation factors set forth in Panduit Corp. v. Stahlin Bros. Fibre Works, Inc.14 Under the Panduit test, the patentee must prove four factors to establish lost profits. The four factors are: (1) a demand for the products covered by the patent; (2) an absence of acceptable non-infringing substitutes to the patented product or process; (3) that the patentee possessed the manufacturing and marketing capabilities to exploit the demand; and (4) the amount of profit the patentee would have made had the infringement not occurred.
However, in Grain Processing v. American Maize-Products16 — a case decided last summer by the Federal Circuit, the court upheld the district court’s decision denying lost profit damages to Grain Products Corporation (“GPC”) on the basis of a non-infringing alternative product made by a method American Maize-Products (“AMP”) first introduced in the last year of the term of GPC’s patent despite the fact of infringement years earlier. Thus, “with proper economic proof of availability [emphasis added], as American Maize provided the district court in this case, an acceptable substitute not on the market during the infringement may nonetheless become part of the lost profits calculus and therefore limit or preclude those damages.”17 Thus, there is now precedent for the proposition that an accurate reconstruction of the hypothetical “but for” market takes into account any alternatives availableto the infringer not just those that were actually produced and sold during the infringement.
When more than two suppliers exist in the relevant product market, the Federal Circuit held in State Industries, Inc. v. Mor-Flo Industries, Inc. that a patent owner may satisfy the second Panduit element by substituting proof of its market share for proof of the absence of acceptable non-infringing substitutes.18 Under this “market share” approach, the patentee substitutes proof of its market share for proof of the absence of acceptable non-infringing substitutes, calculating damages based upon its market share.
As used in Section 284 ‘reasonable royalty’ is handy shorthand for damages. As the statute provides, the royalty is ‘for the use of the invention by the infringer.’ Thus the calculation is not a mere academic exercise in settingsome percentage figure as a ‘royalty.’ The determination remains one of damages to the injured party.
The amount that a licensor (such as the patentee) and a licensee (such as the infringer) would have agreed upon at the time the infringement began if both had been reasonably and voluntarily trying to reach an agreement; that is, the amount which a prudent licensee ­ who desires, as a business proposition, to obtain a license to manufacture and sell a particular article embodying the patented invention ­ would have been willing to pay as a royalty and yet be able to make a reasonable profit and which amount would have been acceptable by a prudent patentee who was willing to grant a license.
1) The royalties received by the patentee for the licensing of the patent in suit, proving or tending to prove an established royalty.
2) The rates paid by the licensee for the use of other patents comparable to the patent in suit.
3) The nature and scope of the license, as exclusive or non-exclusive; or as restricted or non-restricted in terms of territory or with respect to whom the manufactured product may be sold.
4) The licensor’s established policy and marketing program to maintain his patent monopoly by not licensing others to use the invention or by granting licenses under special conditions designed to preserve that monopoly.
5) The commercial relationship between the licensor and the licensee, such as, whether they are competitors in the same territory in the same line of business; or whether they are inventor and promoter.
6) The effect of selling the patented specialty in promoting sales of other products of the licensee; the existing value of the invention to the licensor as a generator of sales of his non-patented items; and the extent of such derivative or convoyed sales.
7) The duration of the patent and the term of the license.
8) The established profitability of the product made under the patent; its commercial success; and its current popularity.
9) The utility and advantage of the patent property over the old modes or devices, if any, that had been used for working out similar results.
10) The nature of the patented invention; the character of the commercial embodiment of it as owned and produced by the licensor; and the benefits to those who have used the invention.
11) The extent to which the infringer has made use of the invention; and any evidence probative of the value of that use.
12) The portion of the profit or selling price that may be customary in the particular business to allow for the use of the invention or analogous inventions.
13) The portion or the realizable profit that should be credited to the invention as distinguished from non-patented elements, the manufacturing process, business risks, or significant features or improvements added by the infringer.
When considering lost profits or reasonable royalty measures of patent infringement damages, courts have recognized that “the economic value of a patent may be greater than the value of the sales of the patented part alone.” Under this rule, courts have allowed recovery of lost profits or a reasonable royalty based not only on the profit from the patented part, but also on non-patented parts.34 This concept is referred to as the “Entire Market Value Rule.” In order to fully compensate a patentee for his loss due to infringement, a number of supplemental damage theories have emerged under the Entire Market Value Rule. Recognized examples of supplemental damage theory claims include: i) price erosion; ii) convoyed sales; and iii); accelerated market entry damages. These supplemental theories are discussed below.
Accelerated market entry damages (sometimes referred to as “accelerated re-entry damages”) may be applicable when an infringed patent is close to expiration or has expired. These damages measure and compensate the patentee for his future loss of profits caused by the patent infringement. The infringement causes the patentee to experience reduced sales and profits in the future as a result of the head start that the infringer will enjoy after the patent monopoly expires. The theoretical premise behind this element of damage is that the infringer impermissibly obtained market share before the patent monopoly expired, thus giving him an unlawful competitive head start prior to the expiration of the patent. The infringer thereby starts from an established customer base, rather than starting at zero where he otherwise would have started had the infringement not occurred.
Remedies for patent infringement in the United States include injunctive relief (both preliminary and permanent) and damages. Damages can be proven either by establishing a patentee’s lost profits or by resort to a hypothetical market analysis of the patented device wherefrom a reasonable royalty can be determined.
Under a principle known as the “Entire Market Value Rule,” several supplemental damages theories exist which are designed to compensate the patentee for the total harm done by virtue of the infringement. To recover under any of the supplemental damages theories, however, the claimed damages must not be speculative. Thus, in addition to recovering actual damages based upon the fact of infringement, a patentee may, for example, also recover damages for the erosion in price that has occurred to his product, his lost profits on unpatented products or components sold in conjunction with the patented product and based on the competitive advantage gained by the infringer in developing market share prior to the expiration of the patent.
Enhanced damages are statutorily provided (up to three times proven actual damages) and, within the discretion of the court, are awarded to a patentee based upon a number of factors used to gauge the egregiousness of the infringement. Attorney’s fees and costs can also be recovered in “exceptional cases” where the conduct of the infringer so warrants.
For purposes of this article, all references to patent(s) will be to utility patents statutorily provided for under 35 U.S.C. § 100 et. seq. and not design or plant patents which, although interesting in their own right, are outside the purview of this article.
Intellectual Property traditionally comprises the law governing patents, trademarks, trade secrets, copyrights and unfair competition.
Under 28 U.S.C. § 1338 (a), federal district courts have original jurisdiction over cases “arising under” the patent laws.
See 28 U.S.C. § 1295.
35 U.S.C. § 100 et. seq.
Reebok Int’l Ltd. V. J. Baker, Inc., 32 F.3d 1552, 1555 (Fed. Cir. 1994).
Carborundum Co. v. Molten Metal Equip. Innovations, Inc., 72 F.3d 872, 881 (Fed. Cir. 1995).
Atlas Powder Co. v. Ireco Chems., 773 F.2d 1230, 1233 (Fed. Cir. 1985).
Aro Mfg. v. Convertible, 377 U.S. 476 (1964).
See, for example, Kori Corp. v. Wilco, 761 F.2d 649 (Fed. Cir. 1985), cert. denied, 474 U.S. 902 (1985) and Beatrice Foods v. New England Printing, 899 F.2d 1171 (Fed. Cir. 1990).
Standard Havens Products v. Gencor Industries, 953 F.2d 1360, 1374, 21 U.S.P.Q. 2d 1321 (Fed. Cir. 1991), cert. denied, U.S. 113 S Ct. 60, 121 L. Ed. 2d 28 (1992).
Standard Havens Products v. Gencor Industries, 953 F.2d 1360, 21 U.S.P.Q. 2d 1321 (Fed. Cir. 1991), cert. denied, U.S. 113 S Ct. 60, 121 L. Ed. 2d 28 (1992).
Standard Havens Products v. Gencor Industries, 953 F.2d 1360, 1372, 21 U.S.P.Q. 2d 1321 (Fed. Cir. 1991).
Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152 (6th Cir. 1978).
See, for example, Minn. Mining and Mfg. v. Johnson Orthopaedics, 976 F.2d 1559, 1577 (Fed. Cir. 1992).
Grain Procesing Corporation v. American Maize-Products Company, 108 F.3d 1392 (Fed. Cir. 1999).
State Industries, Inc. v. Mor-Flo Industries, Inc., 883, F.2d 1573, 1578 (Fed. Cir. 1989).
Rite-Hite Corp. v. Kelly Co., 56 F.3d 1538, 1554, 35 U.S.P.Q. 2d 1065 (Fed. Cir 1995).
Fromson v. Western Litho Plate & Supply Co., 853 F.2d 1568, 1572-73, 7 U.S.P.Q. 2d 1606, 1610-11 (Fed. Cir. 1988).
Panduit Corp. v. Stahlin Bros. Fibre Works, 575 F.2d 1152 (6th Cir. 1978).
Hanson v. Alpine Valley Ski Area, Inc., 718 F.2d 1087 (Fed. Cir. 1983).
Rude v. Wescott, 180 U.S. 152, 165, 9 S.Ct. 463, 468, 32 L.Ed. 888 (1889).
Panduit Corp. v. Stahlin Bros. Fibre Works, 575 F.2d at 1164, n. 11, 197 U.S.P.Q. at 736, n. 11. (6th Cir. 1978).
Tektronix, Inc. v. United States, 213 Ct. Cl. 257, 552 F. 2d 343, 347, 193 U.S.P.Q. 385, 390 (1977), cert. denied, 439 U.S. 1048, 99 S. S.Ct. 724, 58 L.Ed. 707 (1978).
Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1157-58 (6th Cir. 1978).
Georgia-Pacific Corp. v. U.S. Plywood-Champion Papers, 318 F. Supp. 1116, (S.D.N.Y. 1970), modified, 446 F.2d 295 (2d Cir. 1971).
Panduit Corp. v. Stahlin Bros. Fibre Works, 575 F.2d, 1159 (6th Cir. 1978).
Panduit Corp. v. Stahlin Bros. Fibre Works, 575 F.2d, 1158 (6th Cir. 1978).
Marhurkar v. C.R. Bard, 79 F.3d 1572 (Fed. Cir. 1996).
Maxwell v. J. Baker, 86 F.3d 1098, 1109-10 (Fed. Cir. 1996), cert. denied _U.S._, 137 L.Ed. 2d 377, 117 S. Ct. 1244 (1997).
Civil Nos. 87-4847, 88-1624 (D.N.J. Jan. 28, 1992, jury instruction, at 69).
King Instruments v. Perego, 65 F.3d 941, 950, note 4 (Fed. Cir. 1995), cert. denied, _U.S._, 134 L.Ed. 2d 778, 116 S. Ct. 1675 (1996).
Minnesota Mining and Manufacturing Co. v. Johnson & Johnson Orthopaedics, Inc., 976 F.2d 1559, 1578-79 (Fed. Cir. 1992).
Kalman v. Berlyn Corp., 914 F.2d 1473, 1485, 16 U.S.P.Q. 2d 1093, 1102 (Fed. Cir. 1990).
Brooktree Corp. v. Advanced Micro Devices, Inc., 977 F.2d 1555, 1578-81, 24 U.S.P.Q. 2d 1401, 1417-19 (Fed. Cir. 1992).
State Industries, Inc. v. Mor-Flo Industries, Inc., 883, F.2d 1573, 1580 (Fed. Cir. 1989).
Rite-Hite Corp. v. Kelly Co., 56 F.3d 1538, 1550, 35 U.S.P.Q. 2d 1065, 1073 (Fed. Cir 1995).
See 35 U.S.C. § 284.
Johns Hopkins University v. CellPro, Inc., 152 F.3d 1342, 1364, 47 U.S.P.Q. 2d 1705 (Fed. Cir. 1998).
Procter & Gamble Co. v. Paragon Trade Brands, Inc., 989 F. Supp. 547, 618 (D. Del. 1997).
See 35 U.S.C. § 285.
Cybor Corp. v. Fas Tech., Inc., 138 F.3d 1448, 1460 46 U.S.P.Q. 2d 1169 (Fed. Cir. 1998).

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