Philip Brooks' Patent Infringement Updates

Calculating Damages Arising from Design Patent Infringement

I just received my print Summer 2009 issue of the ABA Intellectual Property Litigation newsletter.  The following is excerpted from the above-titled article by Mark Gallagher and Kelly Caputo of Duff & Phelps:

So, what would you like in your hand now—a utility patent or a design patent? The answer may surprise you. This article compares and contrasts the calculation of damages for utility patents and design patents.

As one court noted, “[a]lthough the design patent is not as popularly known as its counterparts, the utility patent and the copyright, design patents perform a distinct function in the federal scheme of legal protection for creative works.” Indeed, damages resulting from infringement of a design patent are recoverable under § 284 or under § 289. Therefore, having a design patent in hand opens alternative, and possibly more advantageous, avenues to explore when calculating damages.

...a court can consider at least three theories when determining the appropriate damages award in connection with design patent infringement: (1) the infringer’s profits pursuant to § 284; (2) lost profits pursuant to § 289; and (3) a combination of lost profits and reasonable royalty pursuant to § 284 and § 289.

Read the full article here (ABA Section of Litigation membership required).

Invotex Damages Expert Testifies in Internet Advertising Patent Infringement Trial against Yahoo

From a May 19, 2009 press release at PR Newswire:

In the internet advertising patent infringement suit brought against Yahoo, Inc. by Acacia Research Corporation's subsidiary, Creative Internet Advertising Corp., Invotex(R) Group damages expert Michele M. Riley, CPA, testified on behalf of plaintiff Creative that the amount of total damages adequate to compensate for the claimed infringement was approximately $6.6 million. A damage expert from FTI Consulting, Inc. testified on behalf of the defendants that the total amount of damages adequate to compensate for infringement was approximately $300,000. On Friday, May 15, 2009, the jury unanimously decided that the patent asserted against the defendant was valid and infringed and awarded damages of $6.6 million before pre-judgment interest.

See the full press release here.

Estimating Damages of Patent Infringement

IncreMental Advantage is hosting the above-titled seminar:

Patent damages are outlined in the 35 USC § 284 statute and state that a patent holder is entitled to at least a reasonable royalty as damages. This code also defines the compensatory nature of patent damages and allows for any damages necessary to adequately compensate the patent holder. The compensatory damages can include lost profits, price erosion, harm to company’s reputation, harm to company’s relationships with its customers and suppliers, and so on (besides a reasonable royalty).

This course is designed to address the issues that arise in the determination of reasonable royalty damages. We start with the basics of how to determine a reasonable royalty including:

* The Georgia-Pacific factors

* Cost of next best alternatives

* Milestone payments

This course will also discuss how to determine the lost sales and associated lost profits using incremental costs approach. It will look into methods used to assess price erosion and other economic harms to the patent holder. Note, patent damages do not allow for disgorgement of the infringer’s profit unless it is a design patent.

This course will be held on June 9, 2009 in Washington, DC and as a Live Webinar.  Learn more and register here.

In Case Your IPR is Infringed

The Office of Intellectual Property Protection of Japan's Ministry of Economy, Trade and Industry wrote the above titled article about possible remedies in the case of patent infringement.

In regard to civil remedies from the court for patent infringement, it is possible to seek an injunctive order against the infringement, demand damages, demand restitution for unjust enrichment, or seek measures for recovery of reputationon such infringement. Further, if the infringement case turns criminal, the alleged infringer may be found punishable as a result of court criminal procedures.

The introduction to the discussion on Demanding Damages states:

You may demand damages from the person who manufactures, sells, or imports counterfeits infringing on the patent at issue.While it is necessary to prove various facts and issues in order to demand damages, such activities to provide evidence might more often than not involve significant difficulties. Therefore, provisions regarding the calculation of damages are set forth in the statute (Patent Law Article 102). And, the infringer's intent or negligence, a prerequisite for demanding damages, will be presumed to exist in such infringement (Patent Law Article 103). Thereby, the Patent Law makes it easier for the patentee to bring suit for damages against the infringer.

Read the full article here.

Calculating Patent Damages

Law Seminars International presents the above-titled workshop on legal and economic developments in the area on April 20, 2009 in San Francisco, CA.

The following sessions are scheduled:

• Trends In Patent Litigation: Update on Cases Affecting Enforceability, the Value of Patents, Damages, and Other Remedies

• The Role of Non-Infringing Alternatives and Design-Arounds in Calculating Damages

• Apportionment of Profits Earned on a Product that Incorporates a Patent

• Avoiding (or Getting) an Injunction After eBay and the Problem of Post-trial Royalties

• Abuse of Standards, Patent Pools and the Fair Royalty Rate

• Issues in Calculating Lost Profits and Reasonable Royalties: Gross Margin, Operating Margin, Comparables and Rules of Thumb?

• Getting the Jury to Award Your Number

More details and registration are available here.

Rambus Wins Patent Battle With Hynix

The following is excerpted from a March 10, 2009 article by Melinda Peer at Forbes:

Following a patent dispute that lasted nearly a decade, memory chip designer Rambus and chip maker Hynix Semiconductor settled on terms for a compulsory license with a proposed final judgment of at least $349.0 million.

After deeming nine Rambus patents valid and infringed upon by Hynix Semiconductor, the U.S. District Court for the Northern District of California ordered the companies to negotiate license terms so that Hynix can continue to make, use and sell memory products that incorporate certain Rambus patents. The court denied Rambus' request for an injunction that would force companies to stop making memory chips that use its technology.

Late Monday, Rambus said proposed damages for infringement on the company's U.S. patent that total $349.0 million, plus an estimated $48.0 million in interest, which won't be determined until the final judgment is entered.

In a separate statement from Hynix on Monday, the South Korea-based chip maker said it has yet to agree to the payment which hasn't yet been finalized and a Hynix spokesman indicated that the company is planning to appeal the final judgment.

See the full article here.

Damages Key to Patent Reform Debate

Rick Merritt writing on March 3, 2009 at EE Times states:

A heated debate over how courts determine damages in patent infringement cases could make or break the latest attempt to reform the U.S. patent system. All sides signaled they are willing to negotiate to get a bill passed, but it's unclear whether they can overcome their differences.
 
Five Democrats and four Republicans introduced the Patent Reform Act of 2009 in Congress Tuesday (March 3.). They will hold a one-day hearing broadcast over the Web on March 10.

Big computer and communications companies back the bill as a way to limit the number of patent infringement cases and damages they pay on them.

"We find ourselves in a situation with more patent infringement suits than ever before and each one costs as much as $4 million," said John Thompson, chief executive of software developer Symantec, another member of the coalition [Coalition on Patent Fairness].  
 
Opponents claim the mechanism called apportionment the new bill uses to determine damages won't work outside the computer and communications industries where hundreds of patents go into a single system.

Read the full article here.

Lincoln National Life Insurance Wins Variable Annuity Patent Infringement Case

The following article appeared on February 19, 2009 at WGAN's Channel 2 News website:

A Cedar Rapids-based insurance company has been ordered to pay about $13 million in a patent infringement case.

A federal jury in Cedar Rapids returned the judgment recently against Transamerica Life Insurance Co., a subsidiary of Aegon.

Transamerica had asked that a patent held by Pennsylvania-based Lincoln National Life Insurance Co. be declared invalid.

The patent involves a computerized method for administering a variable annuity benefit plan. It was issued in August 2006.

The jury found the patent valid and ordered Transamerica and another Aegon company, Ohio-based Western Reserve Life Assurance Co., to pay 0.11 percent of $11.9 billion. The amount was based on assets in the companies' variable annuity products during the infringement period.

I found the damage methodology of interest, as I was an expert in a case a couple of years ago involving copyright infringement damages related to variable annuity software.

NERA Releases Report on Intellectual Property Litigation and Damages Trends in China

The following is excerpted from a February 13, 2009 NERA press release appearing at Business Wire:

Though intellectual property rights (IPR) infringement damage awards continue to be small in China, the number of IPR awards appear to be increasing and foreign firms seem to be faring better in Chinese courts than Chinese firms, according to a report released today from NERA Economic Consulting.

Intellectual Property Rights Protection in China: Trends in Litigation and Economic Damages analyzes the changing role of Intellectual Property Rights enforcement in China and examines trends in damages awards in IPR cases in China, using a proprietary database, developed by NERA, of cases filed in China between 2002 and 2008.

The authors of the report, NERA Senior Vice President Dr. Alan Cox and Senior Consultant Kristina Sepetys, found that while there has been a marked increase in IPR infringement cases being brought before Chinese courts and, consequently, in the frequency of damage awards over the past decade, the damages both claimed and awarded tended to be very small compared to those in other jurisdictions and compared to the likely degree of harm caused.

The full release and a link to the report (in English and Chinese) are available here.

Legal Ruling on Design Patents Favors Consumer Goods Companies

The following is excerpted from an October 28, 2008 Brinks Hofer Gilson & Lione press release appearing at PR Newswire:

According to Kelly Burris, an attorney with Brinks Hofer Gilson & Lione, one of the largest intellectual property law firms in the U.S., the legal standard for design patent infringement has changed. In a recent decision by the Federal Circuit in Egyptian Goddess v. Swisa, Inc., (decided September 22, 2008), the more recent "Point of Novelty" test was eliminated in favor of exclusive application of the long-established "Ordinary Observer" test. Previously, with the Point of Novelty test, an accused product only constituted infringement if it incorporated the element or elements of the patented design that distinguished the patented design from prior art. Using the Ordinary Observer test, when an ordinary observer (purchaser) is deceived into confusing the accused product with the patented design, an infringement has occurred.

The Egyptian Goddess decision favors design patent holders and strengthens their ability to prove infringement. The ruling comes at a time when interest in design patents is on the rise.

Ms. Burris notes that a utility patent, (commonly referred to as "a patent") protects the way something works or how it is constructed, while a design patent protects only the aesthetic appearance of a product.

The United States leads the world in the number of design patents sought, with more than 25,500 filed and 11,691 issued in 2006. In addition to the branding emphasis, Ms. Burris cites several factors behind the increasing popularity of design patents.

Design patents are issued more quickly than utility patents and are less expensive. They also offer the right to exclude others from using the design, allow use of the "patent pending" statement upon filing, and can supplement other forms of intellectual property. Often, a product can be protected by a utility patent, a design patent and a trademark, making protection much stronger. Further, design patents offer unique financial protection for the patentee. For example, Nike is currently engaged in a design patent battle with Wal-Mart over a shoe design. When Nike sued Wal-Mart in 1996 in a similar patent case, Nike won more than $5 million. That's because with design patents, one can get the infringer's profits, lost profits and a reasonable royalty. Only the latter two are available for utility patents.

Read the full press release here.