Opinion ID: 765605
Heading Depth: 3
Heading Rank: 4

Heading: Award of a 1% Royalty Rate for Past Infringement and Future Practice of

Text: 34 the '861 Patent 35 Both Cambridge and appellants moved for summary judgment on the issue of infringement of the '861 patent. The bankruptcy court held that claims 1-4 were not invalid and were infringed by sales of Cambridge's HIV-1 diagnostic kit. See Pasteur I, 186 B.R. 19-22. The bankruptcy court enjoined Cambridge from making, using, or selling its HIV-1 Western Blot kits for the remainder of the life of the patent, see Pasteur I, 186 B.R. at 22, although the bankruptcy court stayed the injunction pending its determination of Cambridge's rights under the 1987 Settlement Agreement, see Pasteur II, slip op. at 2. The bankruptcy court held a trial to determine the royalty rate which Cambridge was obligated to pay for future practice of the '861 patent under the 1987 Agreement, as well as the damages to which appellants were entitled for Cambridge's past infringement. Significantly, the parties did not dispute that Cambridge was entitled to a license of the '861 patent under the 1987 Agreement. See id. at 7. 36 The bankruptcy court first determined the appropriate royalty rate that Cambridge was obligated to pay Institut Pasteur for future practice of the '861 patent. The bankruptcy court noted that, contrary to Cambridge's assertion, 3 of 2 of the 1987 Agreement did not squarely apply to this case, because that provision covers a scenario in which a licensor decides to license improvement technology to an existing licensee, and as part of that license, the licensor reduces the royalty payments that the licensee already pays for existing technology. See id. at 8. In contrast, in this case, Genetic (the licensee) pays Institut Pasteur (the licensor), via PSD, one royalty rate (6%) for all of Institut Pasteur's technology, both existing and improvement. See id. at 8-9. The bankruptcy court further observed that the 1987 Agreement contains no provision expressly covering the facts of the present case. 37 The bankruptcy court nevertheless concluded that the best indication of how to determine the portion of the 6% attributable to improvement technology alone, such as the '861 patent, was to follow the procedure set forth in 3. The bankruptcy court therefore subtracted the existing royalty rate of 6 (5%), from the aggregate royalty percentage (6%) to arrive at a 1% royalty rate for the improvement technology. See id. at 9-10. The bankruptcy court noted that while one might argue that the '861 patent is only part of the improvement technology, and thus that the royalty rate should be less than 1%, no evidence suggested otherwise how to allocate the charges for the various improvement technologies. See id. at 10. Accordingly, the bankruptcy court concluded that Institut Pasteur charged Genetic a 1% royalty for the '861 patent, see id. at 10, and that Cambridge was entitled under the 1987 Agreement to pay the same amount. 38 The bankruptcy court then calculated the damages owed by Cambridge for its past infringement. The bankruptcy court concluded that since appellants had failed to establish lost profits, appellants should be entitled under 35 U.S.C. 284 to a reasonable royalty, which the bankruptcy court had previously calculated as 1% of net sales. See Pasteur II, slip op. at 15-16. Applying this 1% rate, the bankruptcy court awarded appellants $29,601.17. See Pasteur 2, slip op. at 16; see also Institut Pasteur v. Cambridge Biotech Corp. (In re Cambridge Biotech Corp.), No. 94-43054-JFQ, at 1 (Bankr. D. Mass. Jan. 5, 1996) (judgment). The bankruptcy court terminated the injunction and declared a nonexclusive license of the '861 patent (with a royalty rate of 1% of Cambridge's net sales of its Western Blot kits), to be in effect between Institut Pasteur and Cambridge commencing January 1, 1996. See Pasteur II, slip op. at 16, 18-19; see also Institut Pasteur v. Cambridge Biotech Corp. (In re Cambridge Biotech Corp.), No. 94-43054-JFQ, at 1-2 (Bankr. D. Mass. Jan. 5, 1996) (judgment); Institut Pasteur v. Cambridge Biotech Corp. (In re Cambridge Biotech Corp.), No. 94-43054-JFQ, at 1-2 (Bankr. D. Mass. Feb. 12, 1996) (amended judgment). 39 The district court affirmed the bankruptcy court's grant of summary judgment of infringement and validity of the '861 patent. See Pasteur III, 212 B.R. at 15. Reviewing the bankruptcy court's damages determination under the clearly erroneous standard, the district court affirmed, concluding that it had no compelling reason to interpret the agreement other than as did the Bankruptcy Court. See id. at 20. Likewise, the district court concluded that the bankruptcy court did not clearly err in its declaration of a license between Institut Pasteur and Cambridge. See id. at 21.