Friday, 31 August 2012

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

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