Source: https://patentlyo.com/patent/license
Timestamp: 2019-04-21 08:53:21+00:00

Document:
The case focuses on Sanofi’s patent covering clopidrogrel bisulfate tablets sold under the trade name Plavix. ($4.5 billion in annual sales). In 2001, the generic drug manufacturer Apotex filed an abbreviated new drug application (ANDA) with the FDA – requesting that it be allowed to manufacture a generic version on the drug and alleging that Sanofi’s patent was invalid. Sanofi sued for infringement.
If the litigation results in a judgment that the ‘265 patent is not invalid or unenforceable, Sanofi agrees that its actual damages for any past infringement by Apotex, up to the date on which Apotex is enjoined, will be 50% of Apotex’s net sales of clopidogrel products . . . . Sanofi further agrees that it will not seek increased damages under 35 U.S.C. § 284.
Apotex subsequently began marking its generic product before being stopped a few weeks later by a preliminary injunction. After Sanofi won the infringement trial, the judge set damages for that infringement at 50% of net sales plus interest. In dollar figures, damages were $442 million and the interest charge was $107 million. The district court had agreed that it should be bound by the prior agreement between the parties, but held that the agreement only limited damages and did not limit interest.
Contract Specification: Of course the contract could have spelled-out whether the limitation applied to interest charges, and the parties most certainly considered that issue during negotiations. But, for whatever, reason, they chose not to specify in the contract whether interest charges should be limited. Thus, the court was forced to consider the proper default rule for this situation.
Because prejudgment interest is a form of compensatory damages, the district court erred by awarding additional prejudgment interest pursuant to 35 U.S.C. § 284.
An award of interest from the time that the royalty payments would have been received merely serves to make the patent owner whole, since his damages consist not only of the value of the royalty payments but also of the forgone use of the money between the time of infringement and the date of judgment.
Gen. Motors Corp. v. Devex Corp., 461 U.S. 648, 655 (1983).
Patent Act Damages: As usual, the language of the Patent Act is somewhat ambiguous on the meaning of damages. The first paragraph of Section 284 calls for an award of “damages adequate to compensate for the infringement but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court.” One view of this provision would require damages to be, at a minimum, a combination of a reasonable royalty plus interests and costs. In my view, however, the better plain meaning interpretation of Section 284 is that a court is required to award damages (minimum of reasonable royalty) and in addition must award interest and costs.
The appellate panel rejected the parties’ analysis of the language of the patent act as irrelevant – holding instead that “actual damages” was a contract term and that the interpretation therefore does not depend upon any statutory language.
While interesting, these arguments neither illuminate nor resolve the issue before us – the meaning of “actual damages” in the May 2006 agreement. The agreed upon “actual damages” are a creature of contract and not of the Patent Act. By entering into the May 2006 agreement, the parties decided that the agreement itself – not § 271(e)(4)(C) or § 284 – would govern the appropriate measure of damages from Apotex’s infringement.
Writing in Dissent, Judge Newman would have applied the usual background rule that interest is different from damages as a primary driving factor in interpreting the contract. In that framework, the contractual limitation on damages would not apply to limit interest as well.
Interval Licensing v. AOL, Apple, eBay, Facebook, Google, etc.
Interval Licensing LLC v. AOL, Apple, eBay, Facebook, Google, Netflix, Office Depot, OfficeMax, Staples, Yahoo!, and YouTube (W.D. Wash. 2010).
Microsoft co-founder Paul Allen started Interval Research in 1992. During the 1990’s, the company filed for several user-interface related patents that were primarily intended to improve a computer user's online experience. The patents focus on what I might call “lightweight” usability ideas such as a occupying the peripheral attention of a user; organizing audio/visual for display in a browser; and alerting users to items of current interest.
When Interval closed its doors, the patents were transferred to Vulcan Patents LLC (presumably another Paul Allen company) and then to Interval Licensing which remains a Paul Allen company.
The patents are well drafted. Of course, even excellent drafting cannot cure obviousness problems. I suspect that the litigation will focus primarily on whether these inventions were obvious back when the patents were filed? In addition to arguing in court, I expect that the defendants will also appeal to the US Patent Office — asking the agency to take a second look at the patents via reexamination.
Take claim 1 of asserted Patent No. 6,757,682 (filed in 2000) as an example.
a database, associated with the computer, configured to store data relating to the item.
Of course, the system embodied in claim 1 above represents an important core feature of services provided by all of the listed defendants. (A similar story can be told of the other asserted patents.) Thus, if the patents are valid, the damage award could be quite large.
It may be important to note that the complaint does not suggest that any of the defendants copied the invention from Paul Allen's company or that the defendants even knew about the patents before today. Of course, a patentee does not have to show copying in order to prove patent infringement and back-damages can still be available even when the infringement occurred without knowledge of the patent. (Additional punitive damages may be awarded if the infringement was willful).
In KSR v. Teleflex, the Supreme Court raised the patentability standard of nonobviousness — making it more likely that these patents will be held invalid as obvious.
In Bilski v. Kappos, the Supreme Court held that certain business method inventions are not patentable. Some of the claims in the patents-in-suit may be susceptible to a similar attack. However, most of the asserted claims appear to be tied closely to a technological implementation in a way that may avoid problems under Bilski.
In EBay v. MercExchange, the Supreme Court made it more difficult for patent holding companies (such as the plaintiff here) to obtain an injunction to stop ongoing infringement. Of course, it is unlikely that Interval actually wants to stop infringement — rather, the company is looking for a large license fee.
Final point: The vast majority of patent cases settle. Here, however, all of the parties have large amounts of cash-on-hand. In addition, some of the defendants are repeat patent infringement defendants. Those factors tend to make settlement less likely.
Comments on Patently-O: I have updated the commenting software. Now there are threaded comments, so it is easier to reply directly to a prior comment. If you sign-up for a free Typepad account then you can personalize the image associated with your moniker.
Tivo v. DISH and EchoStar: $190 million.
Update Your PTO Registration Data Online: Link. Before you can use the system, the OED will first send a letter to you with a User ID. After you respond, you will be sent a password.
At issue in this case is the impact of a corporate merger/buyout on a settlement agreement that included a promise to not challenge a patent’s validity.
Lumileds and Epistar have signed at least two prior settlement agreements involving the patent at issue here. In those agreements, Epistar agreed to pay a licensing fee for certain products, but reserved its right to challenge the patent if Lumileds asserted the patent against other patents. A third company, UEC, agreed that neither it nor its successors would later challenge the validity of the Lumileds patents.
Subsequently, Epistar purchased UEC, and the patentee argued that UEC’s agreement should also bind Epistar. On appeal, the Federal Circuit partially rejected that argument – holding that the UEC settlement continues to bind the parties, but only “as understood and intended by them, according to its ordinary terms.” Thus, even though Epistar took on all the legal obligations of UEC, Epistar can still challenge the Lumileds patent if the case does not involve UEC related products.
UEC’s settlement agreement has preclusive effect upon Epistar only “to the same extent as upon [UEC it]self.” Restatement (Second) of Judgments § 43 (1982). The preclusive effect of that agreement, if any, is limited to UEC’s pre–Epistar product lines. To paraphrase this court in International Nutrition v. Horphag Research, Epistar’s acquisition of UEC does not have the effect of limiting Epistar’s rights that are unrelated to the product lines it acquired from UEC. Accordingly, this court overturns the Commission’s final determination that Epistar is estopped from challenging validity of the ’718 patent when asserted against its own products, separate from the UEC–Lumileds settlement agreement.
Corebrace’s patent covers an earthquake-resistant brace for steel framed buildings. The original rights-holder (the inventor, Benne Murthy Sridhara from Bangalore) first licensed patent rights to Star. Later, the patent rights were assigned to Corebrace.
The question on appeal is whether the license grants Star the right to use third-party contractors to manufacture licensed products for its own use. The Federal Circuit answered in the affirmative – holding that absent a clear disclaimer, a patent license includes a right to use a third party manufacturer.
Often, exclusive licensees are implicitly granted greater rights than their non-exclusive counterparts. In the non-exclusive setting – allowing the licensee to subcontract undercuts the patent-holder’s rights; while in an exclusive licensee scenario, the patentee is presumed to have fully exploited its patent rights in that one contract. In this case, however, the Federal Circuit ruled that the implicit right to sub-contract manufacturing does not depend on any exclusive license status.
Fairchild originally licensed 3D's US and Chinese patents – agreeing to a royalty for all Fairchild products "covered by" a 3D patent. However, after analyzing the patents, Fairchild decided that it need not pay any royalties and then sued for a declaratory judgment that it owed no royalties and that none of its products are covered by 3D's patents.
Restraining License Termination: In a preliminary ruling, the district court granted Fairchild's request for a preliminary injunction prohibiting 3D from terminating the license agreement. The ongoing license serves as a defense to charges of patent infringement by 3D. As the district court held, "termination of the agreement does create irreparable harm in depriving Fairchild of its primary defense to 3D patent infringement litigation.
The threat of such litigation is not speculative: 3D has already filed a complaint in the United States District Court for the Eastern District of Texas and has promised to file an infringement case in China based on the Chinese patents otherwise licensed by the Agreement. Without the Agreement as an affirmative defense to those suits, Fairchild could be forced to endure years of litigation in those other forums despite this Court eventually ruling that Fairchild did not breach the Agreement.
The preliminary injunction is now on appeal to the Federal Circuit. In a recent order, the appellate panel rejected 3D's motion to stay the district court proceedings pending outcome of the appeal. 3D argued that the appeal divested the district court with jurisdiction over the matter. That argument was regarded "without merit."
Briefing in the appeal will begin in April.
Dennis Crouch, Enforcing Foreign Patents in the US: Distinguishing Voda, Patently-O (Dec. 12, 2008) at https://patentlyo.com/patent/2008/12/enforcing-forei.html.
In an interesting decision, the CAFC held that open source license conditions are enforceable under the copyright laws. Jacobson’s open source license at issue here allowed anyone to use his software so long as his conditions are met (such as making any modified code freely available).
Copyright holders who engage in open source licensing have the right to control the modification and distribution of copyrighted material. As the Second Circuit explained in Gilliam v. ABC, 538 F.2d 14, 21 (2d Cir. 1976), the “unauthorized editing of the underlying work, if proven, would constitute an infringement of the copyright in that work similar to any other use of a work that exceeded the license granted by the proprietor of the copyright.” Copyright licenses are designed to support the right to exclude; money damages alone do not support or enforce that right. The choice to exact consideration in the form of compliance with the open source requirements of disclosure and explanation of changes, rather than as a dollar-denominated fee, is entitled to no less legal recognition. Indeed, because a calculation of damages is inherently speculative, these types of license restrictions might well be rendered meaningless absent the ability to enforce through injunctive relief.
The clear language of the Artistic License creates conditions to protect the economic rights at issue in the granting of a public license. These conditions govern the rights to modify and distribute the computer programs and files included in the downloadable software package. The attribution and modification transparency requirements directly serve to drive traffic to the open source incubation page and to inform downstream users of the project, which is a significant economic goal of the copyright holder that the law will enforce. Through this controlled spread of information, the copyright holder gains creative collaborators to the open source project; by requiring that changes made by downstream users be visible to the copyright holder and others, the copyright holder learns about the uses for his software and gains others’ knowledge that can be used to advance future software releases.
This decision is based on the court’s interpretation of 9th Circuit law. However, its impact on patent law may be a reminder that the court will allow patent infringement actions even when the infringement is based on violation of an intricate or exotic licensing contract.
In 2001, Lawler and Bradley settled a patent infringement lawsuit and entered into a contractual license agreement. Bradley was given the right to practice Lawler’s plumbing valve patents in exchange for a 10% royalty. The license included a combination royalty provision. The royalty licensed parts sold in combination would be charged at a separate (likely lower) royalty rate.
De Novo Construction: Looking much like a claim construction opinion, the CAFC reviewed the contract language de novo (following Indiana law) and reversed the lower court interpretation. In particular, the court found that the “such as” language of the contract limited the combination royalty to only a limited set of combinations. The CAFC found its interpretation necessary to give meaning to the such as clause. As with Federal Circuit claim construction law, Indiana contract law has a preference for giving meaning and effect to all written terms.
Over the past few weeks, we have directed some focus on the protection of industrial designs. Why? (1) the law surrounding protection of industrial designs is in disarray; (2) I expect that protection of industrial designs will become more important as utility patent protection becomes more difficult and more costly; and (3) if well protected, industrial designs & fashion rights may well be worth more than the value of all non-pharmaceutical utility patents.

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