patent remedies class notes: april 1, 2003 law 677 | patent law | spring 2003 professor wagner

Patent RemediesPatent Remedies

Class Notes: April 1, 2003Class Notes: April 1, 2003

Law 677 | Patent Law | Spring 2003Law 677 | Patent Law | Spring 2003Professor WagnerProfessor Wagner

04/01/0304/01/03 22Law 677 | Spring 2003Law 677 | Spring 2003

Today’s AgendaToday’s Agenda

1.1. Cleanup:Cleanup: Experimental Use Experimental Use

2.2. Patent RemediesPatent Remedies

a) Damages: Lost Profits

b) Damages: Reasonable Royalty

c) Exceptional Cases & Enhanced Damages

d) Injunctions


Experimental UseExperimental Use35 U.S.C. § 271(a) 35 U.S.C. § 271(a) . . .whoever without authority makes, uses, . . .whoever without authority makes, uses,

offers to sell, or sells any patented invention, offers to sell, or sells any patented invention, within the United States or imports into the within the United States or imports into the United States any patented invention during United States any patented invention during the term of the patent therefore infringes the the term of the patent therefore infringes the patent.patent.

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


Experimental UseExperimental UseRoche v BolarRoche v Bolar (Fed. Cir. 1984) (Fed. Cir. 1984)• What was the accused infringer doing?What was the accused infringer doing?• Why might this argue for an Why might this argue for an

experimental use exception?experimental use exception?• How does the Federal Circuit define the How does the Federal Circuit define the

exception? (What are the pros and cons exception? (What are the pros and cons of this approach?)of this approach?)


Experimental UseExperimental UseCongressional ResponseCongressional Response

Hatch-Waxman Act (1984): key featuresHatch-Waxman Act (1984): key features1.1. Limited experimental use exceptionLimited experimental use exception2.2. Automatic infringement in FDA Automatic infringement in FDA

approval processapproval process


Experimental UseExperimental UseExperimental UseExperimental Use (271(e)(1)): “reasonably (271(e)(1)): “reasonably

related to the development and submission of related to the development and submission of information” under Food & Drug lawsinformation” 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))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?


Patent RemediesPatent RemediesOverviewOverview

1.1. Injunctions awarded as a matter of Injunctions awarded as a matter of coursecoursea) Preliminary injunctions are common

2.2. Damage awards defined by statute (35 Damage awards defined by statute (35 USC § 282)USC § 282)a) Lost profits due to infringement, orb) 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


Remedies: Lost ProfitsRemedies: Lost ProfitsGeneral points: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.Panduit Corp. (1978) (1978)• Consider why each of the following must be

shown:1. Demand2. Absence of noninfringing substitutes3. Capacity to meet demand4. Profits “would have made” given 1-3


Remedies: Lost ProfitsRemedies: Lost ProfitsComponents of Lost Profits CalculationsComponents of Lost Profits Calculations

1.1. Demand for the goodDemand for the gooda) How can you show demand? (Is this analytically

correct?)

2.2. Absence of acceptable substitutesAbsence of acceptable substitutesa) 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)


Remedies: Lost ProfitsRemedies: Lost ProfitsComponents of Lost Profits CalculationsComponents of Lost Profits Calculations

1.1. Capacity to Exploit DemandCapacity to Exploit Demanda) Why include this factor? (Does it simply mean

manufacturing capacity?)

2.2. Profits “would have made”Profits “would have made”a) Basic formula: Profits = Revenues - Incremental

Costsb) 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?


Remedies: Lost ProfitsRemedies: Lost ProfitsLost Profits & Price ErosionLost Profits & Price Erosion

Consider circumstances of infringement:Consider circumstances of infringement:

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

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

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


Reasonable RoyaltyReasonable Royalty• What do we mean by ‘a reasonable What do we mean by ‘a reasonable

royalty’?royalty’?

Georgia PacificGeorgia Pacific (1970) (1970)• Note the array of factors relevant to a

reasonable royaltyo 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?)


Reasonable RoyaltyReasonable RoyaltyTWM Mfg. Co. v Dura Corp.TWM Mfg. Co. v Dura Corp. (1986) (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?)


Modern Patent DamagesModern Patent DamagesRite-Hite Corp. v. KelleyRite-Hite Corp. v. Kelley (1995) (1995)• Framework:Framework: RH sells three devices 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: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?


Attorney’s Fees & Enhanced Attorney’s Fees & Enhanced DamagesDamages

Attorney’s Fees & CostsAttorney’s Fees & Costs• General rule: each side pays costs• In “exceptional cases”, loser may be required to pay fees

& costs• Two “exceptional” circumstances:

o Willful infringemento ‘vexatious litigation’

• Willful infringement:o Actual notice + failure to exercise due careo How do you show notice?o How can you exercise ‘due care’?

Enhanced DamagesEnhanced Damages• In cases of willful infringement, may increase damages

up to 3x


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patent remedies class notes: april 1, 2003 law 677 | patent law | spring 2003 professor wagner

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