apportion this! the state of ip damages · licensee —who desired, as a business proposition, to...
TRANSCRIPT
Damages
35 U.S.C. § 284: “the court shall award the claimant damages
adequate to compensate for the infringement, but in no event
less than a reasonable royalty”
Reasonable Royalty
Lost Profits
Combination of both
Typical subject of expert reports/testimony
35 U.S.C. § 284: “the court may increase the damages up to
three times the amount found or assessed.”
Enhanced damages, up to treble (often less)
Usually briefed post-verdict on a finding of willful infringement
Damages
Supplemental Damages
A way to account for the timeframe between when discovery
ends verdict/judgment/patent expiry/date injunction
begins/etc.
Sometimes needed post-verdict if no injunctive relief granted
and patent remains in effect
Sometimes determined on briefs, sometimes requires
supplemental trial with fact and expert testimony
Attorneys’ Fees
35 U.S.C. 285: “The court in exceptional cases may
award reasonable attorney fees to the prevailing party.”
Recent Supreme Court cases Octane Fitness & Highmark
arguably lower standard
Motions for fees can happen at all stages of litigation (following
frivolous motion practice, discovery abuses, litigation
misconduct, etc.)
Alleged infringers can request fees, too
Costs & Interest
Costs (not fees)
FRCP 54(d)(1)
Awarded to the “prevailing party” in litigation
Regional circuit law governs award of costs and timing of motion for costs
Costs include copying, necessary transcripts expenses
Alleged infringer gets costs if it prevails
Pre and Post Judgment Interest
Awarded in addition to damages
Typically topic of supplemental expert reports
Typically quite low (in comparison to damages award)
Provisional Rights
8
Under 35 U.S.C. § 154(d), provisional rights provide the patentee the right to obtain a reasonable royalty from any person who:
(i) makes, uses, sells, or offers for sale the invention claimed in the published application; and
(ii) had actual notice of the published application
Grants rights to obtain the reasonable royalty from the date of publication to the date the patent issued
But the published claims must be substantially identical to the issued claims
Reasonable Royalty
Robyn Bowland – Akerman LLP
Trevor Copeland – Brinks, Gilson & Lione
Karina Wong – Brinks, Gilson & Lione
Q: When must you address the Georgia-Pacific factors in
a reasonable royalty analysis?
(a) Always, the Federal Circuit requires it
(b) When the factor(s) are relevant to the facts of the case
(c) Never, the Federal Circuit ended the use of the Georgia-
Pacific factors
(d) When your case involves paper products
Reasonable Royalty: Quiz
10
Q: When must you address the Georgia-Pacific factors in
a reasonable royalty analysis?
(a) Always, the Federal Circuit requires it
(b) When the factor(s) are relevant to the facts of the case
(c) Never, the Federal Circuit ended the use of the Georgia-
Pacific factors
(d) When your case involves paper products
Reasonable Royalty: Quiz
11
Q: When is use of the Nash Bargaining Solution
appropriate?
(a) Never
(b) Always, it best models all negotiation situations
(c) When your damages expert sufficiently shows it is relevant
to the facts at hand
(d) When Crosby and Stills are busy
Reasonable Royalty: Quiz
12
Q: When is use of the Nash Bargaining Solution
appropriate?
(a) Never
(b) Always, it best models all negotiation situations
(c) When your damages expert sufficiently shows it is relevant
to the facts at hand
(d) When Crosby and Stills are busy
Reasonable Royalty: Quiz
13
Reasonable Royalty: Basic Principles
Reasonable royalty determined based on applying Georgia-Pacific
factors:
14
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 licensee,
such as, whether they are competitors in the same territory in the
same line of business; or whether they are inventor and promotor.
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 advantages 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 of the selling price that may be customary in the particular business or in comparable businesses to allow for the use of the invention or analogous inventions.
13. The portion of 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.
14. The opinion testimony of qualified experts.
15. 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 desired, 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.
Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F.Supp.
1116 (S.D.N.Y. 1970).
Reasonable Royalty: Basic Principles
15
Royalty may be running or lump sum
Running royalty determined by selecting appropriate royalty base and rate (Royalty Rate x Royalty Base = $ Damages)
Date of hypothetical negotiation is date infringement began – LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51 (Fed. Cir. 2012).
There must be a basis in fact to associate royalty rates used in prior licenses to the particular hypothetical negotiation at issue in the case. Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292 (Fed. Cir. 2011).
Issues related to expert analysis of comparability of licenses and factual assumptions and considerations go to weight of evidence, not admissibility of testimony – Activevideo Networks, Inc. v. Verizon Comms., Inc., 694 F.3d 1312 (Fed. Cir. 2012).
Reasonable Royalty: Basic Principles
16
Royalty Base Apportionment
Supreme Court precedent directing apportionment based upon patented features – Garretson v. Clark, 111 U.S. 120 (1884)
Even when apportioning, one can’t cure overly large base by using lower rate – Uniloc USA v. Microsoft, 632 F.3d 1292 (Fed. Cir. 2011)
May be able to start with the “smallest salable patent practicing unit” – LaserDynamics, Inc. v. Quanta Computer, 694 F.3d 51 (Fed. Cir. 2012) (still requiring apportionment of infringed patented value)
Court must limit damages testimony, including for apportionment, to “firm scientific or technical ground” – VirnetX v. Cisco Systems, 767 F.3d 1308 (Fed. Cir. 2014).
Reasonable Royalty: Recent Cases
17
Ericsson, Inc. v. D-Link Sys., Inc., Case Nos. 2013-1625, -1631, -1633 (Fed. Cir. Dec. 4, 2014). District Court allowed expert opinion on reasonable royalty based on
previous licenses applying rate to value of entire electronic device rather than just infringing Wi-Fi chips
Federal Circuit held it was appropriate to use entire value of devices where the licenses evaluated by expert applied rate to entire value of electronic devices and some basis for determining the license rates reflected an apportionment of the value of the patented chips existed
Federal Circuit also held it was improper to instruct jury on all of the Georgia-Pacific factors when some were irrelevant or misleading based on the issues of the particular case Here, the Federal Circuit found GP factors 4, 5, 8, 9, and 10 were irrelevant or
misleading to Ericcson’s patents encumbered by a RAND commitment
Federal Circuit declined to outline new reasonable royalty factors for RAND cases
Reasonable Royalty: Recent Cases
18
VirnetX, Inc. v. Cisco Sys., Inc., 767 F.3d 1308 (Fed. Cir. 2014).
Accused products:
Apple’s servers that run “FaceTime” on iPhone, iPod, iPad and Macs
Apple’s iPhone, iPad, and iPod Touch that include “VPN on Demand”
Federal Circuit rejected application of Nash Bargaining Solution where an expert has not sufficiently shown the Solution is applicable to the facts at hand.
Nash Bargaining Solution assumes that bargaining parties would agree to a solution where both bargaining parties would receive the same money profit (i.e. the parties would split the incremental profit evenly amongst themselves)
Reasonable Royalty: Apportionment
19
Garretson v. Clark, 111 U.S. 120 (1884)
The patentee “must in every case give evidence tending to
separate or apportion the defendant’s profits and the
patentee’s damages between the patented feature and the
unpatented features and such evidence must be reliable and
tangible, and not conjectural or speculative; or he must show,
by equally reliable and satisfactory evidence, that the profits
and damages are to be calculated on the whole machine, for
the reason that the entire value of the whole machine, as a
marketable article, is properly and legally attributable to the
patented feature.”
Reasonable Royalty: Apportionment
20
When is apportionment NOT required in determining a
reasonable royalty?
(a) The accused product is the smallest salable unit containing
the patented feature
(b) The patented feature allows you to use your phone to time
travel
(c) The accused infringer’s sales model does not allow an
accurate accounting for apportionment
(d) The patented feature creates the basis for demand for the
entire product
(e) The patented feature is valuable, important or essential to
the use of the overall product
Reasonable Royalty: Apportionment
21
When is apportionment NOT required in determining a
reasonable royalty?
(a) The accused product is the smallest salable unit containing
the patented feature
(b) The patented feature allows you to use your phone to time
travel
(c) The accused infringer’s sales model does not allow an
accurate accounting for apportionment
(d) The patented feature creates the basis for demand for the
entire product
(e) The patented feature is valuable, important or essential to
the use of the overall product
Reasonable Royalty: Apportionment
22
VirnetX, Inc. v. Cisco Sys., Inc., 767 F.3d 1308 (Fed. Cir. 2014)
Patent owner’s expert erroneously relied on the entire market
value of accused products by:
Failing to subtract unpatented elements from the base, e.g.,
touchscreen, camera, processor, speaker, and microphone
Failing to separate software from hardware
Failing to separate accused software from other valuable software
components
Relying on accused infringer’s sales model to avoid the task of
apportionment
Reasonable Royalty: Apportionment
23
VirnetX, Inc. v. Cisco Sys., Inc., 767 F.3d 1308 (Fed. Cir. 2014)
The lower court’s jury instructions were legally erroneous:
“In determining a royalty base, you should not use the value of the entire apparatus or product unless either: (1) the patented feature creates the basis for the customers' demand for the product, or the patented feature substantially creates the value of the other component parts of the product; or (2) the product in question constitutes the smallest saleable unit containing the patented feature.”
The Federal Circuit found that “this instruction inappropriately created a second exception that would allow a patentee to rely on the entire market value of a multi-component product so long as that product is the smallest salable unit containing the patented feature.”
Reasonable Royalty: Apportionment
24
VirnetX, Inc. v. Cisco Sys., Inc., 767 F.3d 1308 (Fed. Cir. 2014)
“[W]hen claims are drawn to an individual component of a multi-component product, it is the exception, not the rule, that damages maybe based upon the value of the multi-component product.”
“Where the smallest salable unit is, in fact, a multicomponent product containing several non-infringing features with no relation to the patented feature . . . the patentee must do more to estimate what portion of the value of that product is attributable to the patented technology. To hold otherwise would permit the entire market value exception to swallow the rule of apportionment.”
Reasonable Royalty: Apportionment
25
VirnetX, Inc. v. Cisco Sys., Inc., 767 F.3d 1308 (Fed. Cir. 2014)
“It is not enough to merely show that the [patented feature] is viewed as valuable, important, or even essential to the use of the [overall product].” (citing LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51 (Fed. Cir. 2012))
Instead, “[a] patentee may assess damages based on the entire market value of the accused product only where the patented feature creates the basis for customer demand or substantially creates the value of the component parts.” (citing Versata Software, Inc. v. SAP Am., Inc., 717 F.3d 1255 (Fed. Cir. 2013) In the absence of such a showing, principles of apportionment apply.
Design Patent Damages: 35 USC § 289
27
Disgorgement of Infringer’s Total Profit Catalina Lighting, Inc. v. Lamps Plus, Inc., 295 F.3d 1277 (Fed. Cir. 2002) A patent
owner can’t double-dip for utility+design infringement, but disgorgement damages may exceed reasonable royalty damages;
For example: in Bernhardt L.L.C. v. Collezione Europa USA, Inc., 436 F. Supp. 2d 739 (M.D.N.C. 2006), the court used disgorgement damages the court, taking the infringer’s profits rather than imposing a burden on patentee to determine determining reasonable royalty under Georgia Pacific factors or lost profits;
No apportionment of profits to “patented features,” so design patents can be a useful tool for leverage Consider Pacific Coast Marine Windshields Limited v. Malibu Boats, LLC, (M.D. Fla.,
1/2012-10/2014), which settled on the eve of trial where an allegedly infringed windshield design patent could have resulted in disgorgement of profits on entire luxury boats retailing for $50k-100k, and Apple v. Samsung design patent appeals of an initial $1B jury verdict (basis not clearly provided/documented);
Lost Profits
Mark Feldman – DLA Piper
Don Rupert – Marshall, Gerstein & Borun LLP
Sara Horton – Jenner & Block
28
Lost Profits: Definition
29
Lost profits consists of the additional profits that a patent
owner would have made if there had been no infringement by
the defendant. 35 U.S.C. § 284 (2006); Rite-Hite Corp. v. Kelley
Co., 56 F.3d 1538, 1545-46 (Fed. Cir. 1995) (en banc). A patent
owner must prove:
A reasonable probability that, but for the defendant’s infringement,
the patent owner would have made additional profits through the
sales of all or some of the patented product or process that the
defendant made.
The amount of profit the patent owner would have made on those
additional sales.
The defendant reasonably should have foreseen that the patent
owner would have lost profits.
Approaches to Proving Lost Profits
30
Panduit Factors (575 F.2d 1152 (6th Cir. 1978))
Two Supplier Market
Multiple Supplier Market/Market Share
Panduit Factors
31
There was a demand for the patented product or process.
There was no acceptable, non-infringing substitute for the patented product or process.
The patent owner was capable of satisfying the demand.
The amount of profit the patent owner would have made.
Two Supplier Market
32
The patent owner and defendant are the only suppliers
for the product or process in the market.
The patent owner was capable of making all of the sales
made by defendant.
If the patent owner proves these things, it is entitled to recover
its lost profits on all of the sales made by defendant unless the
defendant proves that the patent owner would not have made
some or all of the sales.
Multiple Supplier Market/Market Share
33
When there are multiple suppliers in the market, if the patent owner proves that it is reasonably probable that it would have made additional sales of the patented product/process, the patent owner can obtain its lost profits relating to those sales. There are two proof requirements:
The patent owner would have made some portion of defendant’s infringing sales if defendant’s infringing product had not been available.
The patent owner was capable of making all of the sales made by defendant.
For the market share approach, the patent owner will need to prove its
market share and the market share of the defendant. The market share is then used in the calculation of the lost profits.
Other Types of Lost Profits Damages
34
Damages flowing from the loss of collateral sales
The unpatented, collateral product and the patented product
are shown to be part of a complete machine or constitute a
single functional unit.
Damages flowing from the patent owner’s price erosion
Damages flowing from the patent owner’s increased costs
to meet defendant’s competition
Lost Profits: Apportionment
35
Does apportionment have a role in lost profits?
(a) Yes
(b) No
(c) Maybe
(d) Only on Thursdays
Lost Profits: Apportionment
36
Does apportionment have a role in lost profits?
(a) Yes
(b) No
(c) Maybe
(d) Only on Thursdays
Lost Profits: Apportionment
37
The Supreme Court’s decision in Garretson v. Clark (1884) appears to require apportionment in every case unless the entire market value rule applies:
The patentee “must in every case give evidence tending to separate or apportion the defendant’s profits and the patentee’s damages between the patented feature and the unpatented features . . .”
Versata Software, Inc. v. SAP America, Inc., 717 F.3 1255 (Fed. Cir. 2013)
“The Panduit factors do not require showing demand for a particular embodiment of the patented functionality . . . Nor does it require any allocation of consumer demand among the various limitations recited in a patent claim.”
Lost Profits: Apportionment
38
DePuy Spine Inc. v. Medtronic Sofamor Danek, Inc., 567 F.3d
1314, 1330 (Fed. Cir. 2009)
The Federal Circuit held that the requisite demand first Panduit
factor is not limited to demand for a patented feature. Instead,
the first Panduit factor requires only demand for the patented
product.
“[T]he focus on particular features corresponding to individual
claim limitations is unnecessary when considering whether
demand exists for a patented product under the
first Panduit factor. Rather, the elimination or substitution of
particular features corresponding to one or more claim
limitations goes to the availability of acceptable noninfringing
substitutes under the second Panduit factor . . .”
Lost Profits: Apportionment
39
Plantronics, Inc. v. Aliph, Inc., No. C 09-01714 WHA
(N.D. Cal. Feb. 21, 2014) (order denying motion to strike
expert damages studies)
The district court found that the patent owner’s lost profits
expert had no duty to apportion consumer demand for
allegedly infringing features, differentiating over reasonable
royalty cases cited by the accused infringer.
Enhanced Damages &
Attorney’s Fees
Michelle Marek – Kaye Scholer LLP
Shane Delsman – Godfrey & Kahn (Milwaukee)
Enhanced Damages & Attorney’s Fees
Question
Which of the answers below is a similarity between
enhanced damages and attorney’s fees in patent cases?
A. They require the same evidentiary standard.
B. They can be sought by an accused infringer or patentee.
C. The Federal Circuit test for each was determined by the
same underlying case.
D. You have to be a dorky patent litigator to have to deal with
either.
Enhanced Damages & Attorney’s Fees
Question – Raise your hand for:
Which of the answers below is a similarity between
enhanced damages and attorney’s fees in patent cases?
A. They require the same evidentiary standard.
B. They can be sought by an accused infringer or patentee.
C. The Federal Circuit test for each was determined by the
same underlying case.
D. You have to be a dorky patent litigator to have to deal with
either.
Enhanced Damages & Attorney’s Fees
Question – Raise your hand for:
Which of the answers below is a similarity between
enhanced damages and attorney’s fees in patent cases?
A. They require the same evidentiary standard.
B. They can be sought by an accused infringer or
patentee.
C. The Federal Circuit test for each was determined by the
same underlying case.
D. You have to be a dorky patent litigator to have to deal with
either.
Enhanced Damages & Attorney’s Fees
Question – Raise your hand for:
Which of the answers below is a similarity between
enhanced damages and attorney’s fees in patent cases?
A. They require the same evidentiary standard.
B. They can be sought by an accused infringer or patentee.
C. The Federal Circuit test for each was determined by
the same underlying case.
D. You have to be a dorky patent litigator to have to deal with
either.
Enhanced Damages & Attorney’s Fees
Question – Raise your hand for:
Which of the answers below is a similarity between
enhanced damages and attorney’s fees in patent cases?
A. They require the same evidentiary standard.
B. They can be sought by an accused infringer or patentee.
C. The Federal Circuit test for each was determined by the
same underlying case.
D. You have to be a dorky patent litigator to have to
deal with either.
Enhanced Damages & Attorney’s Fees
Question – Correct answer is:
Which of the answers below is a similarity between
enhanced damages and attorney’s fees in patent cases?
A. They require the same evidentiary standard.
B. They can be sought by an accused infringer or patentee.
C. The Federal Circuit test for each was determined by the
same underlying case.
Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc.,
508 U.S. 49 (1993), See J. O’Malley dissent in Halo Electronics, Inc. v.
Pulse Electronics, Inc., 769 F.3d 1371(Fed. Cir. 2014).
D. You have to be a dorky patent litigator to have to deal with
either.
Enhanced Damages & Attorney’s Fees
Question – Wrong Answers:
Which of the answers below is a similarity between
enhanced damages and attorney’s fees in patent cases?
A. They require the same evidentiary standard.
Entitlement to attorney’s fees need only be proven by a
preponderance of the evidence. Octane Fitness, LLC v. ICON Health &
Fitness, Inc., 134 S. CT. 1749, 1758 (2014).
B. They can be sought by an accused infringer or patentee.
C. The Federal Circuit test for each was determined by the
same underlying case.
D. You have to be a dorky patent litigator to have to deal with
either.
Enhanced Damages & Attorney’s Fees
Question – Wrong Answers:
Which of the answers below is a similarity between
enhanced damages and attorney’s fees in patent cases?
A. They require the same evidentiary standard.
B. They can be sought by an accused infringer or patentee.
“[A]n award of enhanced damages requires a showing of willful
infringement.” In re Seagate Tech., LLC, 497 F.3d 1360, 1368 (Fed. Cir.
2007). Therefore, only a successful patentee can seek enhanced
damages.
C. The Federal Circuit test for each was determined by the
same underlying case.
D. You have to be a dorky patent litigator to have to deal with
either.
Enhanced Damages & Attorney’s Fees
Question – Wrong Answers:
Which of the answers below is a similarity between
enhanced damages and attorney’s fees in patent cases?
A. They require the same evidentiary standard.
B. They can be sought by an accused infringer or patentee.
C. The Federal Circuit test for each was determined by the
same underlying case.
D. You have to be a dorky patent litigator to have to deal with
either.
At least one Court has found that the holdings in Octane Fitness apply
to § 35(a) of the Lanham act in trademark matters. Fair Wind Sailing,
Inc. v. Dempster, 764 F.3d 303 (3d Cir. 2014).
Enhanced Damages
“[T]he court may increase the damages up to three
times the amount found or assessed.” 35 U.S.C. § 284
Enhanced Damages
“[T]he court may increase the damages up to three
times the amount found or assessed.” 35 U.S.C. § 284
“[A]n award of enhanced damages requires a showing of
willful infringement.” In re Seagate Tech., LLC, 497 F.3d 1360,
1368 (Fed. Cir. 2007).
Enhanced Damages
“[T]he court may increase the damages up to three
times the amount found or assessed.” 35 U.S.C. § 284
“[A]n award of enhanced damages requires a showing of
willful infringement.” In re Seagate Tech., LLC, 497 F.3d 1360,
1368 (Fed. Cir. 2007).
To establish willful infringement, a patentee must satisfy,
by clear and convincing evidence, a two pronged test that
includes and objective and subjective test. Id. at 1371.
Enhanced Damages
Objective: The infringer acted despite “an objectively high
likelihood that its actions constituted infringement of a
valid patent.” Id. at 1371.
Enhanced Damages
Objective: The infringer acted despite “an objectively high
likelihood that its actions constituted infringement of a
valid patent.” Id. at 1371.
Question of law, which the court must decide before sending
to the trier of fact (reviewed de novo). Bard Peripheral Vascular,
Inc. v. W.L. Gore & Assocs., Inc. 682 F. 3d 1003, 1006-07 (Fed. Circ.
2012); Powell v. Home Depot U.S.A., Inc., 663 F.3d 1221, 1236 (Fed.
Cir. 2011).
Enhanced Damages
Objective: The infringer acted despite “an objectively high
likelihood that its actions constituted infringement of a
valid patent.” Id. at 1371.
Question of law, which the court must decide before sending
to the trier of fact (reviewed de novo). Bard Peripheral Vascular,
Inc. v. W.L. Gore & Assocs., Inc. 682 F. 3d 1003, 1006-07 (Fed. Circ.
2012); Powell v. Home Depot U.S.A., Inc., 663 F.3d 1221, 1236 (Fed.
Cir. 2011).
Subjective: The objectively high risk was “either known or
so obvious that it should have been known” to the
infringer. Seagate, 497 F. 3d at 1371.
Enhanced Damages
Notes
Enhanced damages, up to treble (often less)
Usually briefed post-verdict on a finding of willful infringement
Enhanced Damages
Interesting Cases
“[A] competent opinion of counsel concluding either that [the accused infringer] did not infringe the [asserted] patent or that it was invalid would provide a sufficient basis for [the accused infringer] to proceed without engaging in objectively reckless behavior with respect to the [asserted] patent.” Finisar Corp. v. DirecTV Group, Inc., 523 F.3d 1323, 1339 (Fed. Cir. 2008).
“[N]o affirmative obligation to obtain opinion of counsel.” In re Seagate at 1371.
In a concurrence, two circuit judges suggest that enhancement be revisited by the Federal Circuit in light of Octane Fitness and Highmark because the current test for enhancement is similar to the test that was overturned for attorney’s fees in those cases. Halo Electronics, Inc. v. Pulse Electronics, Inc., 769 F.3d 1371, 1383-86 (Fed. Cir. 2014).
Enhanced Damages
Interesting Cases
“[A] competent opinion of counsel concluding either that [the accused infringer] did not infringe the [asserted] patent or that it was invalid would provide a sufficient basis for [the accused infringer] to proceed without engaging in objectively reckless behavior with respect to the [asserted] patent.” Finisar Corp. v. DirecTV Group, Inc., 523 F.3d 1323, 1339 (Fed. Cir. 2008).
“[N]o affirmative obligation to obtain opinion of counsel.” In re Seagate at 1371.
In a concurrence, two circuit judges suggest that enhancement be revisited by the Federal Circuit in light of Octane Fitness and Highmark because the current test for enhancement is similar to the test that was overturned for attorney’s fees in those cases. Halo Electronics, Inc. v. Pulse Electronics, Inc., 769 F.3d 1371, 1383-86 (Fed. Cir. 2014).
Enhanced Damages
Interesting Cases
“[A] competent opinion of counsel concluding either that [the accused infringer” did not infringe the [asserted] patent or that it was invalid would provide a sufficient basis for [the accused infringer] to proceed without engaging in objectively reckless behavior with respect to the [asserted] patent.” Finisar Corp. v. DirecTV Group, Inc., 523 F.3d 1323, 1339 (Fed. Cir. 2008).
“[N]o affirmative obligation to obtain opinion of counsel.” In re Seagate at 1371.
In a concurrence, two Federal Circuit judges suggested that enhancement be revisited by the Federal Circuit in light of Octane Fitness and Highmark because the current test for enhancement is similar to the test that was overturned for attorney’s fees in those cases. Halo Electronics, Inc. v. Pulse Electronics, Inc., 769 F.3d 1371, 1383-86 (Fed. Cir. 2014) (O’Malley, J., concurring).
Attorney’s Fees
“The court in exceptional cases may award reasonable attorney fees to the prevailing party.” 35 U.S.C. 285
An “‘exceptional’ case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. CT. 1749, 1756 (2014).
District Courts should determine whether a case is “exceptional” “in the case-by-case exercise of their discretion, considering the totality of the circumstances.” Id.
“Entitlement to fees” need only be established by a preponderance of the evidence (not clear and convincing as previously required). Id. at 1758.
Attorney’s Fees
“The court in exceptional cases may award reasonable attorney fees to the prevailing party.” 35 U.S.C. 285
An “‘exceptional’ case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. CT. 1749, 1756 (2014).
District Courts should determine whether a case is “exceptional” “in the case-by-case exercise of their discretion, considering the totality of the circumstances.” Id.
“Entitlement to fees” need only be established by a preponderance of the evidence (not clear and convincing as previously required). Id. at 1758.
Attorney’s Fees
“The court in exceptional cases may award reasonable attorney fees to the prevailing party.” 35 U.S.C. 285:
An “‘exceptional’ case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. CT. 1749, 1756 (2014).
District Courts should determine whether a case is “exceptional” “in the case-by-case exercise of their discretion, considering the totality of the circumstances.” Id.
“Entitlement to fees” need only be established by a preponderance of the evidence (not clear and convincing as previously required). Id. at 1758.
Attorney’s Fees
“The court in exceptional cases may award reasonable attorney fees to the prevailing party.” 35 U.S.C. 285:
An “‘exceptional’ case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. CT. 1749, 1756 (2014).
District Courts should determine whether a case is “exceptional” “in the case-by-case exercise of their discretion, considering the totality of the circumstances.” Id.
“Entitlement to fees” need only be established by a preponderance of the evidence (not clear and convicting as previously required). Id. at 1758.
Attorney’s Fees
Notes
Motions for fees can happen at all stages of litigation (following
frivolous motion practice, discovery abuses, litigation misconduct,
etc.)
Alleged infringers can request fees, too
Interesting Cases
At least one Court has found that the holdings in Octane Fitness and
Highmark apply to § 35(a) of the Lanham act in trademark matters.
Fair Wind Sailing, Inc. v. Dempster, 764 F.3d 303 (3d Cir. 2014).
There has been some discussion as to whether a fee award can be
entered against an attorney. One district court has answered the
question - no. Rates Technology Inc. v. Broadvox Holding Company, LLC, et
al., 13-CV-00152, Doc. No. 181 (S.D. N.Y. Oct. 7, 2014).
Attorney’s Fees
Notes
Motions for fees can happen at all stages of litigation (following
frivolous motion practice, discovery abuses, litigation misconduct,
etc.)
Alleged infringers can request fees, too
Interesting Cases
At least one Court has found that the holdings in Octane Fitness and
Highmark apply to § 35(a) of the Lanham act in trademark matters.
Fair Wind Sailing, Inc. v. Dempster, 764 F.3d 303 (3d Cir. 2014).
There has been some discussion as to whether a fee award can be
entered against an attorney. One district court has answered the
question - no. Rates Technology Inc. v. Broadvox Holding Company, LLC, et
al., 13-CV-00152, Doc. No. 181 (S.D. N.Y. Oct. 7, 2014).
Attorney’s Fees
Notes
Motions for fees can happen at all stages of litigation (following frivolous motion practice, discovery abuses, litigation misconduct, etc.)
Alleged infringers can request fees, too
Interesting Cases
At least one Court has found that the holdings in Octane Fitness apply to § 35(a) of the Lanham act in trademark matters. Fair Wind Sailing, Inc. v. Dempster, 764 F.3d 303 (3d Cir. 2014).
There has been some discussion as to whether a fee award can be entered against an attorney. One district court has answered the question - no. Rates Technology Inc. v. Broadvox Holding Company, LLC, et al., 13-CV-00152, Doc. No. 181 (S.D. N.Y. Oct. 7, 2014).
Attorney’s Fees
Notes
Motions for fees can happen at all stages of litigation (following frivolous motion practice, discovery abuses, litigation misconduct, etc.)
Alleged infringers can request fees, too
Interesting Cases
At least one Court has found that the holdings in Octane Fitness apply to § 35(a) of the Lanham act in trademark matters. Fair Wind Sailing, Inc. v. Dempster, 764 F.3d 303 (3d Cir. 2014).
There has been some discussion as to whether a fee award can be entered against an attorney. One district court has answered the question - no. Rates Technology Inc. v. Broadvox Holding Company, LLC, et al., 13-CV-00152, Doc. No. 181 (S.D. N.Y. Oct. 7, 2014).
Rule 68. Offer of Judgment
70
(a) Making an Offer; Judgment on an Accepted Offer. At least 14 days before the date set for trial, a party defending against a claim may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued. If, within 14 days after being served, the opposing party serves written notice accepting the offer, either party may then file the offer and notice of acceptance, plus proof of service. The clerk must then enter judgment.
(b) Unaccepted Offer. An unaccepted offer is considered withdrawn, but it does not preclude a later offer. Evidence of an unaccepted offer is not admissible except in a proceeding to determine costs.
(c) Offer After Liability Is Determined. When one party's liability to another has been determined but the extent of liability remains to be determined by further proceedings, the party held liable may make an offer of judgment. It must be served within a reasonable time--but at least 14 days--before the date set for a hearing to determine the extent of liability.
(d) Paying Costs After an Unaccepted Offer. If the judgment that the offeree finally obtains is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made.
Question for Audience
71
In the context of a Rule 68 Offer of Judgment,
attorney’s fees are likely to be included as “costs” in
which type(s) of IP case?
A) Patent
B) Trademark
C) Copyright
D) All of the above
Rule 68. Offer of Judgment
72
In the case of patents, attorney’s fees are unlikely to be
included as “costs” for Rule 68 purposes since the
relevant statute does not designate fees as such and
reserves an award of fees for “exceptional cases.” 35
U.S.C. § 285.
Similarly with trademarks, an award of attorney’s fees is
reserved for “exceptional cases,” whereas a prevailing
plaintiff is normally entitled to recover costs. 15 U.S.C. §
1117(a).
Rule 68. Offer of Judgment
73
Offer of judgment in a copyright case may include attorney’s fees as “costs” since 17 U.S.C. § 505 defines costs to include attorney’s fees. Harbor Motor Co. v. Arnell Chevrolet-Geo, Inc., 265 F.3d 638 (7th Cir. 2001) (“... prevailing parties can receive attorney’s fees pursuant to Fed. R. Civ. P. 68.”).
However, in the majority of Circuits, including the 7th Circuit, defendants cannot recover attorney’s fees under Rule 68, regardless of what the relevant statute says about attorney’s fees as costs. Poteete v. Capital Eng’g, Inc., 185 F.3d 804, 807-08 (7th Cir. 1999) (explaining that “[Rule 68] applies only to a defendant who loses” and “the statutes and common law principles that sometimes entitle a party to recover his attorneys’ fees limit that entitlement to prevailing parties.”).
Trademarks
75
The Lanham Act 15 U.S.C. § 1117(a) provides trademark
owners five different types of monetary relief as compensation
for infringement:
an accounting of an infringer’s profits (i.e., money the infringer
made from the infringement)
the actual damages the trademark owner sustained, which can
be increased by the court up to treble the amount (i.e., money
diverted from the mark owner to the infringer)
a reasonable royalty representing a measure of the trademark
owner’s damages
attorney’s fees in exceptional cases
costs
Trademark Quiz
76
Which party bears the burden of proving the infringer’s
profits and any applicable deductions?
A) Plaintiff bears the entire burden;
B) Defendant bears the entire burden; or
C) Plaintiff bears burden of proving Defendant’s sales
only; Defendant must prove all elements of cost or
deduction claimed.
Counterfeiting
77
A plaintiff in a case involving the use of a counterfeit mark
may elect to receive statutory damages of “not less than
$1,000 or more than $200,000 per counterfeit mark per
type of goods or services sold, offered for sale, or
distributed, as the court considers just.” 15 U.S.C. §
1117(c)(1).
When the counterfeiting is found to be willful, the statute
provides for statutory damages of up to “$2,000,000 per
counterfeit mark per type of goods or services sold,
offered for sale, or distributed, as the court considers
just.” 15 U.S.C. § 1117(c)(2).
Copyright: Actual Damages,
Profits & Statutory Damages
Bill McGrath
Davis McGrath LLC
John Marshall Law School
78
Copyright: Quiz #1
79
Who wrote: “If General Motors were to steal your
copyright and put it in a sales brochure, you could not
just put a copy of General Motors’ corporate income tax
return in the record and rest your case for an award of
infringer’s profits.”
A) Honorable James Holderman
B) Honorable Richard Posner
C) Melville Nimmer, copyright guru
D) Michael Moore, creator of the film “Roger & Me”
Copyright: Answer #1
80
Who wrote: “If General Motors were to steal your
copyright and put it in a sales brochure, you could not
just put a copy of General Motors’ corprate income tax
return in the record and rest your case for an award of
infringer’s profits.”
A) Honorable James Holderman
B) Honorable Richard Posner
Taylor v. Meirick, 712 F.2d 1112 (7th Cir. 1983)
C) Melville Nimmer, copyright guru
D) Michael Moore, creator of the film “Roger & Me”
Copyright: Quiz #2
81
Who wrote: “It is too much to ask the plaintiff who has
proved infringement also to do defendant’s cost
accounting.”
A) Honorable James Holderman
B) Honorable Richard Posner
C) William Patry, copyright guru
D) Honorable Richard Linn
Copyright: Answer #2
82
Who wrote: “It is too much to ask the plaintiff who has
proved infringement also to do defendant’s cost
accounting.”
A) Honorable James Holderman
B) Honorable Richard Posner
Taylor v. Meirick, 712 F.2d 1112 (7th Cir. 1983)
C) William Patry, copyright guru
D) Honorable Richard Linn
Copyright: Quiz #3
83
Who wrote: [In calculating profits of the infringer]
“Costs that would be incurred anyway should not be
subtracted, because by definition they cannot be avoided
by curtailing the profit-making activity.”
A) Honorable Richard Posner
B) Anyone else in the world
Copyright: Damages
84
§504 -- A copyright infringer is liable for:
Actual Damages
AND
Profits of the Infringer
OR
Statutory Damages
Copyright: Actual Damages
85
Actual Damages = The extent to which the market value
of a work has been diminished by the infringement.
Examples:
Reasonable license fee based on fair market value. On
Davis v. The Gap, Inc., 246 F.3d 152 (2d Cir. 2001) McRoberts
Software v. Media 100, 329 F.3d 557 (7th Cir. 2003)
Gaylord v. U.S., 2015 WL 449192 (Fed. Cir. 2015) (discussing
hypothetical negotiations)
Plaintiff ’s lost profits from lost sales as a result of the
infringement.
Taylor v. Meirick, 712 F.2d 1112 (7th Cir. 1983)
Copyright: Profits of the Infringer
86
§504(b) allows a copyright owner to recover profits of
the infringer:
The profits must be “attributable to the infringement” --
i.e., a causal nexus.
Taylor v. Meirick
Polar Bear Prod. v. Timex Corp., 384 F.3d 700 (9th Cir. 2004)
No double counting -- the profits must not be taken into account in
determining actual damages.
Bucklew v. Hawkins Ash Baptie & Co., 329 F. 3d 923 (7th Cir. 2003)
McRoberts Software v. Media 100, 329 F.3d 557 (7th Cir. 2003)
Copyright: Profits of the Infringer
87
§504(b) allocates the burden of proof
Plaintiff need only show the infringer’s gross revenues, but they
must be “reasonably related to the infringement.” On Davis v. The Gap, Inc., 246 F.3d 152 (2d Cir. 2001)
Defendant must prove deductible expenses
Can deduct direct costs of creating and selling the infringing product
(cost of goods sold)
Can deduct variable costs
Cannot deduct fixed costs (that would have been incurred even if
defendant had not infringed)
Copyright: Statutory Damages
88
Available only if plaintiff has complied with §412 (requiring
registration prior to infringement or within grace period for
published works).
Range is $750 - $30,000.
Innocent – as low as $200; willful – as high as $150,000
The award is “for all infringements, involved in the action, with
respect to any one work . . .” §504(c).
Make 10,000 posters and 1,000 T-shirts from plaintiff ’s photo = 1
award
Download 100 different songs = 100 awards
Plaintiff can make the election “at any time before final judgment
is rendered”
90
Trade Secrets: Potential for Large Damages
DuPont v. Kolon Indus. E.D. Va 2011
$919.M 4th Cir. vacated
Pacesetter, Inc. v. Nervicon Co. Cal. Sup. Ct. 2011
$2.3 B reduced to $947 M
Seagate Tech. LLC v. Western
Digital Corp. Minn. Ct. App. 2013
$630 M arbitration award
Lexar Media Inc. v. Toshiba Corp. Cal. Sup. Ct. 2005
$465.4M award settled for $288 M
91
Trade Secrets: Damages Overview
Injunction
Damages
Actual Loss, e.g. Lost Profits
Unjust Enrichment
Reasonable Royalty (as an alternative)
Exemplary Damages (Discretionary)
Attorney Fees
92
Trade Secrets: U.T.S.A.* Damages
Uniform Trade Secrets Act §3(a) § 3( “actual loss caused by the misappropriation”
“unjust enrichment caused by the misappropriation that is
not taken into account in computing actual loss”
OR
“in lieu of damages measured by any other methods … a
reasonable royalty for a misappropriator’s unauthorized
disclosure or use of a trade secret”
*MA and NY have not adopted the U.S.T.A.
93
Trade Secrets: Unjust Enrichment
Measures?
Increased revenues and resulting profits
Reduced production costs and resulting profits
Avoided cost of development and head start
When accounting period starts?
filing of suit OR
a prior date
94
Trade Secrets: “Head Start”
Limits duration of unjust enrichment damages to the time defendant saved in getting a product to market by virtue of its misappropriation
In some jurisdictions
Where misappropriation permitted defendant to develop a product sooner than it would have without the misappropriation.
See, e.g. Russo v. Ballard Med. Prods., 550 F.3d 1004, 1020 (10th Cir. 2008)
95
Trade Secrets: Reasonable Royalty
Evidence of royalties charged in an actual licensing
agreement => most persuasive measure
Hypothetical negotiation between the parties occurring at
the time infringement begins (like patent cases)
Georgia-Pacific factors
96
Trade Secrets: Reasonable Royalty
State Variation
“in lieu of damages measured by any other methods” See, e.g., 6 Del. C. §2003 (2010) (Majority View)
Only if neither damages nor unjust enrichment are provable See, e.g. Cal. Civ. Code § 3426.3 (2010)
Only if neither damages nor unjust enrichment are proved by a
preponderance of the evidence See, e.g. 765 ILCS 1965/4 (2011).
Damages “shall not be less than a reasonable royalty.” See ORS §646.45 (2009)
If plaintiff is unable to prove an amount of damages that exceeds a
reasonable royalty by other methods” See, e.g., Wis. Stat. §134.90 (2010)
Silent on reasonable royalty. See, e.g., Rev. Code Wash, (ARCW) §19.108,030
97
Trade Secrets: Quiz
OnlyInsurance LLC misappropriates SellOnlyInsurance Co.’s proprietary computer
code for an automated system to deliver multiple insurance products on a high
volume basis through large employer relationships. Can SellOnlyInsurance Co recover
damages under an actual loss, unjust enrichment or reasonable royalty theory?
A) Under any or all theories. OnlyInsurance LLC is a thief!
B) Not under any theory. These companies sell insurance policies, not computer
software programs.
C) Only under a reasonable royalty theory. It’s just too hard to figure out direct
losses as a result of the use of the software.
D) Only under an actual loss or unjust enrichment theory because there’s just
nothing on which to base a royalty.
98
Trade Secrets: Quiz
OnlyInsurance LLC misappropriates SellOnlyInsurance Co.’s proprietary computer
code for an automated system to deliver multiple insurance products on a high
volume basis through large employer relationships. Can SellOnlyInsurance Co recover
damages under an actual loss, unjust enrichment or reasonable royalty theory?
A) Under any or all theories. OnlyInsurance LLC is a thief!
B) Not under any theory. These companies sell insurance policies, not computer
software programs.
C) Only under a reasonable royalty theory. It’s just too hard to figure out direct
losses as a result of the use of the software.
D) Only under an actual loss or unjust enrichment theory because there’s just
nothing on which to base a royalty.
Member Services, Inc. et al. v. Security Mut. Life Ins. Co. of New York.
2011 U.S. Dist. LEXIS 56910, *11-12 (N.D.N.Y. 2011)
99
Trade Secrets: Quiz
After a falling out, DATACo, a data storage and recovery
software developer, fires a director, Joe. Ticked off, Joe shares
the source code, on which DataCo’s products, depend with a
rival. The rival does not hire or pay Joe. It does quickly come
out with a competing software surprisingly similar to DataCo’s.
A jury awards DataCo $2.92M based on estimate of what a
reasonable royalty would be for use of the misappropriated
trade secrets. On appeal, Joe argues the award is excessive
because DataCo did not offer proof that he profited or that the
rival made commercial use of the source code. Is his appeal
successful?
StorageCraft Tech Corp. v. Kirby, 744 F.3d 1183 (10th Cir. 2014)
100
Trade Secrets: Other Damage Measures
Obligation to pay for what has been wrongfully obtained.
In re Cross Media Marketing Corp.
Defendants stole customer list and unsuccessfully attempted to
auction it.
Damages calculated by determining how much each lead on
the customer list cost plaintiff to develop, and multiplying that
cost by the amount of leads on the customer list to arrive at a
result that most closely approximated plaintiff ’s losses. 2006 U..S. Dist. LEXIS 56112, *15-16 (S.D.N.Y. 2006)
101
Trade Secrets: Don’t forget other theories
Wayman Fire Protection, Inc. v Premium Fire & Security, LLC
Remedies available despite lack of a non-compete or
misappropriation of trade secret
Former employee used former employer’s information to
compete directly with employer by bringing employees to his firm
who had taken proprietary information, used it to win a bidding
war.
Court dismissed claims for tortious interference and
misappropriation but found violations of Delaware Misuse of
Computer System Information Act and breach of fiduciary duty
to employer. 2014 Del. Ch. LEXIS 33 (Del. Ch. 2014)
102
Trade Secrets: U.T.S.A. Other Damages
Court may award exemplary damages for willful and
malicious misappropriation not exceeding twice §3(a)
damages. U.T.S.A. §3(b)
Court may award reasonable attorney fees if
Willful and malicious misappropriation
Claim of misappropriation made in bad faith
Motion to terminate an injunction made in or resisted in bad
faith
U.S.T.A. § 4
See., e.g., Tradesman Intl. Inc. v. Black, 724 F.3d 1004 (7th Cir. 2013)(IL Law).