In a recent post on the University of Houston Law Center Faculty Blog (another LexBlog site), Ray Nimmer asks whether the Supreme Court's recent eBay v. MercExchange permanent injunction decision will lead to compulsory licensing. Nimmer discusses two alternatives when a permanent injunction is not granted after a patent infringement finding:
One response is simply to assess damages as to past infringement, leaving any future use of the patent for a voluntary agreement of the parties (a license) or a subsequent infringement suit for the subsequent infringements. That is clearly the preferable option, although it does raise limited issues of judicial economy.
A second alternative is to permit subsequent use by the defendant subject to the payment of a reasonable royalty imposed by the court. This is a form of compulsory licensing that rewards the wrongdoer, unless the remedy has been requested by the patent owner. Nevertheless, a panel of the Federal Circuit indicated that such a remedy may be appropriate. One wonders why.
Nimmer concludes that courts should not impose compulsory licensing for future infringement absent substantial public policy reasons:
The preconditions should be both an opportunity to negotiate a license and, failing a bargain, a request by both parties for the court to impose a royalty as part of the remedy for infringement. A patent creates a right to exclude and, where the patent owner prefers to exercise that right, it should not be forced into a licensing arrangement resulting from a case in which it prevailed on the infringement claim. There may be some cases in which vital public policy interests justify this result, but those cannot be grounded simply in the fact that the court denied a permanent injunction or the parties have not agreed to license terms. A remedy should not penalize the person to whom the remedy is awarded.
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RRK Holding Co. v. Sears, Roebuck & Co., No. 04 C 3944, Min. Order (N.D. Ill. Sep. 10, 2007) (Coar, J.).*
Judge Coar denied the parties' damages motions in limine.* First, the Court held that defendant Sears, Roebuck & Co. ("Sears") could have its damages expert Catherine Lawton testify regarding her analysis of a hypothetical September 2001 negotiation between the parties. Plaintiff RRK Holding ("RRK") argued that the misappropriation began in March 2000, not when Sears began selling its product in September 2001. As a result, Sears contended that Lawton's September 2001 hypothetical negotiation should not be allowed into evidence. But the Court held that the timing of the misappropriation was a question of fact for the jury and, therefore, allowed Lawton's testimony.
Second, the Court held that Sears could introduce the 2003 sale of some of RRK's assets for $17M as part of Sears's damages case. The Court held that the value of the sale was relevant to RRK's alleged injury based upon the alleged misappropriation.
Third, the Court held that RRK could introduce damages calculations including periods beyond the "head start" period (the time it would have taken for Sears to reverse engineer RRK's combination tool). The head start period was disputed, preventing the Court from fixing a time for the period, and any alleged harm would be resolved by a jury instruction explaining how the jury should calculate damages relative to the head start period.
Finally, the Court denied RRK's motion for sanctions pursuant to 28 U.S.C. § 1927. RRK argued that Sears's March 2007 production, two years after fact discovery closed, of documents dated 1999 was "unreasonable and vexatious" and should be sanctioned. But the Court held that Sears's explanation that the documents were found when it replaced its litigation counsel and new counsel ran additional searches rendered the delay "negligen[t] and reckless," but not in bad faith. The Court, therefore, did not impose sanctions.
* Click here for a copy of the opinion and click here for more about this case in the Blog's archives.
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Ball Aerosol & Specialty Container, Inc. v. Limited Brands, Inc., No. 05 C 3684, 2007 WL 2570351 (N.D. Ill. Sep. 4, 2007) (Der-Yeghiayan, J.).
Judge Der-Yeghiayan granted plaintiff Ball Aerosol & Specialty Container ("BASC") summary judgment on the issue of patent damages, held that the case was exceptional and then doubled some of the damages and trebled the remainder. The Court previously construed the claims of BASC's patent for a candle tin with a cover that can be used as a base and granted plaintiff summary judgment of infringement. In this opinion, the Court weighed the Georgia Pacific factors and held that they warranted a royalty rate of 20%. This rate represented an increase over the 17% rate BASC argued it would have granted in an arms-length negotiation to compensate BASC for the compulsory license. The Court then found that the case was exceptional because, among other reasons, defendants continued selling infringing product after the Court granted summary judgment of infringement. Based on the exceptional case holding, the Court doubled the damages from sales before the Court granted BASC summary judgment of infringement and trebled the damages for all sales after summary judgment.
Summary judgment of damages is a fairly rare occurrence. A quick review of the docket does not suggest that the parties waived their right to a jury. So, the facts in this case must have been very strong.
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Lorillard Tobacco Co. v. Montrose Wholesale Candies & Sundries, Inc., No. 03 C 5311 & 4844, 2007 WL 2580491 (N.D. Ill. Sep. 10, 2007) (Cole, Mag. J.).
Judge Cole recommended awarding plaintiff $2.5M in statutory damages. The Court had previously entered a Fed. R. Civ. P. 37(b) default judgment against defendants for sales of counterfeit Newport cigarettes in violation of the Lanham Act.* The Court recommended that a damages hearing was not necessary because of defendants' four year pattern of avoiding discovery obligations leading to a default judgment, including failing to produce damages documents. Having actively avoided producing the information for four years, defendants were not now entitled to seek opportunities to present evidence in their defense. Furthermore, the Court reported that a $2.5 M award was reasonable. $2.5M was half of plaintiff's estimate of defendants' infringing sales and it was half of the potential $1M statutory award for each of the five marks defendants infringed.
* For more on this case, see the Blog's archives.
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