Beware the US jury: two $1 billion dollar patent damage awards in August

PatLit is delighted to host a second guest piece by Marian T. Flattery (Finnegan), following the warm reception of her first post, on pay-to-delay, here.  Following the flood of comment on the Apple/Samsung damages award, Marian felt it only right and proper to let readers know that smartphone technology and design is not the only field of patent infringement in which billion-dollar awards are being made. She explains:

By now, everyone knows about the $1.05 billion patent infringement damage award Apple won against Samsung in the latest verdict in the smartphone wars (see IPKat here and here). Since transgenic crops are not as “cool” as the iPhone®, the $1 billion dollar damage award to Monsanto against DuPont/Pioneer earlier this month received less popular press coverage and analysis. But, the underlying facts and issues in Monsanto v DuPont and Pioneer raise some quite interesting questions. Particularly noteworthy is the fact that Pioneer did not sell even one infringing product.

Monsanto and Pioneer are fierce competitors in the crop seed business and Monsanto is known for relentlessly enforcing its transgenic crop patents, even against its own customers. Monsanto has also widely licensed its transgenic crop patents, including to competitors. Many of Monsanto’s transgenic crop patents relate to technology which makes the crops resistant to the herbicide glyphosate. In 2002, Monsanto and Pioneer entered into non-exclusive, royalty-bearing licenses which gave Pioneer the right to manufacture and sell soybean and corn seed with Monsanto’s patented glyphosate-resistance traits (RR). Pioneer subsequently developed its own glyphosate-resistant trait technology (OGAT), based on a different gene than Monsanto’s, and began to combine or “stack” Monsanto’s traits with OGAT in soybean and corn seed products. 

Monsanto filed suit, in its home forum - U.S. District Court for the Eastern District of Missouri, against Pioneer in 2009 for breach of contract, patent infringement, inducement to infringe and unjust enrichment based on Pioneer’s production of RR/OGAT stacked seeds. Pioneer counterclaimed for a declaratory judgment that the licenses allowed it to stack OGAT with RR and also asserted a number of antitrust counterclaims. In 2010, the judge ruled that the licenses did not permit stacking of a non-RR trait with Monsanto’s RR trait, although there was no explicit language prohibiting it, and the case proceeded to trial on the patent issues. 

On 1 August, after a three week trial, the jury took less than an hour to return a verdict that Pioneer had willfully infringed Monsanto’s US Patent No. RE 39,247, that the ‘247 patent was not invalid, and awarding reasonable royalty damages in the amount of $1 billion. Unlike the jury in Apple v Samsung, which awarded damages of $1,049,343,540 based on infringement of six patents by 28 Samsung devices, the jury in Monsanto v Pioneer did not have to calculate reasonable royalty damages based on sales because Pioneer never sold any OGAT/RR stacked seed. According to Monsanto, Pioneer expected to generate $3 billion revenue from the sale of OGAT/RR stacked seeds prior to expiry of the ‘274 patent in 2014. In fact, Pioneer made no such sales. In the absence of any infringing sales upon which to calculate royalties or lost profits, Monsanto argued that the unlicensed use of the OGAT/RR stacked products for research and field testing gave Pioneer an unfair head start in producing these seeds prior to patent expiration. There is only a de minimis research use exemption in the U.S. and this case shows that patent damages for research use can be significant.

DuPont/Pioneer immediately announced that it would appeal to the U.S. Court of Appeals for the Federal Circuit and this damage award will be closely scrutinized. Prior to August 2012, there had been only three patent damage awards of over $1 billion in the U.S. The two biggest awards, $1.67 billion against Abbott Laboratories in 2009 and $1.52 billion against Microsoft in 2007, were overturned by the Federal Circuit on appeal. The only other $1 billion+ award was $1.2 billion in 1993 against Honeywell in a case that ultimately settled for $440 million.

Monsanto v Du Pont and Pioneer: more information here

Here comes The Patent Lawyer Magazine

The Patent Lawyer Magazine is a new title from Legal Business Media. You can read about it here and click here to take a look at the pilot issue. Sadly, Angelina Jolie's contribution is largely limited to the front cover -- she hasn't written any articles for the new journal and isn't even on the editorial board (though she does briefly reappear on page 17). But that's no reason not to take any further interest in it.  As the publishers explain:

"The Patent Lawyer Magazine is a special focus international legal publication that focuses solely on the patent industry, patent lawyers and patent law firms.

The magazine is packed full of information, special features, interviews, case comments, special country focus, patent litigation roundup, service provider focus, patent people moves, company press releases, recruitment, inventor section and a dedicated patent directory of services.

The aim of The Patent Lawyer Magazine is to fill the gap in the market for a dedicated magazine that exclusivly focuses on patent law, patent lawyers, inventors and those specialist companies that provide patent related services.

The Patent Lawyer Magazine will be sent via hardcopy and online to over 10,000 recepients including in-house Patent Lawyers, Private Practice Patent Lawyers, C Suite Executives within large pharmaceutical and technology companies around the world.

The launch issue will be published in September 2012 ...".

Transferring a revocation action to a junior court: ERT

Environmental Recycling Technologies plc v Stillwell, Rodlsburger and Upcycle Holdings Ltd is a decision of Mr Justice Warren (Patents Court, England and Wales) of 13 July which has not really hit the headlines (the full text is not on BAILII, though this is hardly surprising since the judgment was extempore). Fortunately the decision was briefly noted on the Lawtel subscription-only service.  Despite its relative obscurity, this decision reflects on when it is appropriate to transfer an action for revocation of a patent from the [more formal and expensive] Patents Court to the [cheaper and more cheerful] Patents County Court (PCC) on account of (i) the parties' financial positions, (ii) the simplicity of the case and (iii) the low value of the dispute.

Essentially, Stillwell and Rodlsburger owned a patent for a process for moulding plastic articles. ERT issued proceedings in the Patents Court for revocation. Stillwell and Rodlsburger assigned the patent to a company, Upcycle, which ERT joined to the proceedings. After some delay, Stillwell and Rodlsburger applied to transfer proceedings to the PCC. ERT was not enthusiastic about this. But what did the court say? Granting both the applications sought, Warren J noted that, while the financial position of the parties was an important factor to take into account it didn't determine by itself whether to transfer the action to the PCC -- and the mere fact that a party could afford to pay any High Court costs that might arise didn't mean that the action had to heard in the High Court.

He also noted that there were often competing and irreconcilable matters in relation to costs. In court cases the winner got their costs -- and in tribunal hearings each party had to bear its own. Although cost-capping in the PCC was the middle ground between the two approaches, it was no more right or wrong than shifting the costs to one party or another.

In Warren J's view, access to justice did not mean that it was right to keep a case in the Patents Court because one party felt that it would be denied justice due to on account of costs-capping in the PCC. Regardless of whether Stillwell and Rodlsburger had transferred the patent to Upcycle for the purpose of tax avoidance was neither here nor there: their actions had not been unlawful and the case could not be retained in the Patents Court on that basis.

Ultimately, in the judge's opinion, neither Stillwell nor Rodlsburger could afford High Court costs -- despite the loans made and overseas properties which ERT demonstrated to exist -- and it should be appreciated that an application to transfer a patent revocation dispute from a more costly forum to a cheaper one was not intended to be a trial of the parties' assets.

In reality, held Warren J, this case was not a complex one; the only issue to be decided was revocation, and in light of the case management conference that had already taken place, the need for lengthy discussion was questionable and the PCC would likely deal with the case in two days. The value of the claim was low, being valued at £10,000, which also pointed to a PCC trial.

Significantly, the applicants had to accept that the costs to date would have to be on the higher High Court scale and that their application for transfer should have been made more promptly.

Finally, there was no reason for  Stillwell and Rodlsburger to remain party to the action. Since they had passed the patent on to its new owner, Upcycle, no relief was actually being sought against them -- though, in the event that ERT won the trial and became entitled to costs, it could apply to join Stillwell and Rodlsburger at that stage.

Pharmaceutical, Biotechnology, and Chemical Inventions: a book review

A while back, PatLit posted a notice to the effect that Pharmaceutical, Biotechnology, and Chemical Inventions, edited by Duncan Bucknell, had been published by Oxford University Press -- but it wasn't really a review. That omission has now been made good by Darren Smyth (EIP), who has kindly given this work a rather closer, practitioner-oriented inspection.  This is what Darren has to say:

"This is a most useful and welcome book that is crammed with the sort of comparative information that the internationally-minded patent practitioner (and client thereof) often seeks.

When presented with this – well – it can only be described as a magnum opus in both senses and with an emphasis on the magnum, my first thought was to paraphrase Dorothy Parker “four two volumes, neatly boxed bound, suitable for throwing purposes”. The rupture factor is huge – the pages of a novella at least (comprising the contents, and tables of cases and legislation) before we get to the page which mendaciously purports to be “1”. Then each of the two volumes has around 1,100 pages of real content before wearily giving way to the indices.

Yet the appearance is doubly deceptive. First, each chapter (of which there are 100) is of a perfectly accessible length, not off-putting at all. And secondly, the tomes turn out to be very little restricted to the fields of the title, and are actually a review of patent and related law in general. Much of it (bearing titles of such topics – hardly specialist - of “novelty”, “inventive step”, “technology transfer arrangements”) would be of interest to, and completely accessible to, practitioners in any field of technology.

Naturally, there are chapters which are more specifically focused on the stated field – chapters on drafting bioscience patents and pharmaceutical patents respectively; on patent term extensions and supplementary protection certificates; and extensive sections on regulatory approval and data exclusivity.

The approach taken in this work is that the 15 sections (including: obtaining patent rights, the period of monopoly, patent validity, amendment, invalidity proceedings and strategy, infringement, defences to infringement, patent litigation strategies, regulatory approval, data exclusivity, competition law, and other IP rights) are each divided into chapters. For example, the infringement section has chapters called Infringing Acts and “Literal Infringement”, Infringement by Equivalents/Non-Literal Infringement, Indirect Infringement, Infringement Proceedings, Remedies for Patent Infringement, and Restrictions on Remedies. Each chapter then consists of an essay on that topic for each jurisdiction of Australia, Canada, China, India, Japan, United States, Europe (overview), France, Germany, Italy, Netherlands and the United Kingdom. Each national essay is written by a contributor from that country, and the individual voices of the different authors are clearly maintained. The essays on the same topic in respect of different countries adopt a different internal structure (presumably originating from the contributor). While this is inevitable in view of the way the work was created, it does mean that a piece of information which is supplied in respect of one jurisdiction is not necessarily supplied in respect of another, and, even if supplied, is not always easy to locate. The list of contributors is lengthy and impressive, and the mere creation and assembly of this work is of itself a monumental exercise. Duncan Bucknell is therefore credited as “Editor” rather than “Author”.

Surprisingly given the OUP pedigree, the book is not completely free from typographical errors. However, this is a minor quibble. A more significant quibble is that the writing style of some of the authors can sometimes be difficult to follow, and the sections written by non-native English speakers could often have benefitted from greater editorial intervention.

Books of this type, compiling comparative expositions of the law from multiple jurisdictions, are familiar in loose-leaf format, and it is perhaps surprising that a non-updatable conventionally hardbound presentation has been chosen. It goes without saying that some of the content of the work is already out of date.

I do not expect that the editors or contributors expected that anyone would sit down (or for that matter adopt any posture) and read the whole work cover to cover. This is a work to dip in and out of, and to consult. For the purposes of consultation, however, the index is not as extensive as would be helpful – it is suspiciously short for a reference work of this length, and key terms (such as “diagnosis”) are missing. Some parts of the book have been a joy to read and were clearly set out. Some parts were rather clunky (for example the treatment of the exclusion from patentability under Art 53(c) EPC in Europe Overview on page 514 ff, which was also unduly influenced by the pre-EPC 2000 formulation of this exclusion as relating to industrial applicability. It was also surprising that this section did not reference the seminal decision G1/04 in the discussion of diagnostic methods, referring to it instead in the Netherlands section).

Overall, this is an impressive book with an expansive coverage which is jolly handy to have around, but could have done with more work on the detail".

Further details of this massive work can be found on its web page here.

Pay-to-delay: settlements can cause litigation too

PatLit is delighted to welcome Marian T. Flattery to its readers. Marian is a seasoned patent practitioner at the distinguished practice of Finnegan; she has also guest-blogged for the PharmExec weblog.  You can read all about her here.

Marian has been invited to do some guest blogging for PatLit. Her first piece is on a topic which brings together strands of patent law and the regulation of competition: pay-for delay.  Marian writes:

Pay-For-Delay Patent Settlements Back in the News 

The legality of “pay-for-delay” patent settlements between name brand drug companies and generic drug makers is making news on both sides of the Atlantic. A pay-for-delay settlement is a patent litigation settlement in which a name brand drug company pays a generic drug maker to delay market entry. The European Commission has brought two pay-for-delay cases in recent days. While in the U.S., one U.S. circuit court expressly declined to follow an earlier sister court decision on two such settlements, thereby creating a split among the circuits as to what test to apply to evaluate the legality of pay-for-delay settlements.

In In Re: K-Dur Antitrust Litigation (3rd Cir., July 16, 2012), the 3rd Circuit rejected the “scope of the patent test” for analyzing the legality of pay-for-delay patent settlements. Under a new test announced in In Re: K-Dur, any payment from a drug company patent holder to a generic patent challenger who agrees to delay market entry must be treated as prima facie evidence of an unreasonable restraint of trade, which could be rebutted by showing that the payment (1) was for a purpose other than delayed entry or (2) offers some pro-competitive benefit.

Over seven years ago, the same two patent settlement agreements at issue in In Re: K-Dur were held not to be an illegal restraint of trade in Schering-Plough Corp. v. FTC, 402 F. 3d 1056 (11th Cir. 2005), cert. denied, 548 U.S. 919 (2006) under the “scope of the patent” test adopted by the 2nd, 11th and Federal Circuits. The scope of the patent test permits reverse payments from a drug company patent holder to a generic patent challenger so long as (1) the exclusion does not exceed the patent’s scope, in time or subject matter; (2) the patent holder’s claim of infringement was not objectively baseless; and (3) the patent was not procured by fraud on the USPTO.

In Re: K-Dur is the first time the 3rd Circuit has weighed in on the legality of pay-for-delay patent settlements and represents a significant break from prior decisions of its sister courts. It also creates a new plaintiff-friendly forum for private parties and the FTC to challenge the legality of pay-for-delay patent settlements between name brand drug companies and generic challengers. This 3rd Circuit decision is a victory for the FTC, which has long advocated that reverse payment or pay-for-delay settlements are illegal agreements in restraint of trade, and likely sets the stage for the U.S. Supreme Court to address the legality of such settlements.