Monday, February 09, 2009

It's about damages stupid

Further to an IPBiz comment on the Rooklidge paper ["S.1145 stumbled over apportionment of damages. That's the issue. The other stuff was window-dressing. Yes, the courts changed some things. But the real issue remains."], note text in a Reuters report on February 9:

A bill to overhaul the U.S. patent system with an eye to reducing the number of lawsuits, and the amount of damages paid, is likely to be revived this year its chief sponsor said on Monday [Feb. 9].


Big high-tech companies such as Cisco (CSCO.O) and Hewlett-Packard (HPQ.N) began pushing for legislation years ago to cut the number of patent infringement lawsuits and the amount of damages paid.

The bill stalled on vocal opposition from drug maker Eli Lilly (LLY.N), seed and herbicide company Monsanto Co (MON.N), and smaller tech companies, which feared lower damages would leave them vulnerable to infringers.

Major tech companies, which sell devices that can have many patented elements, want to reduce damage awards to deter people from filing what tech companies say are unwarranted lawsuits.

The pharmaceutical industry, whose drugs often have just one or two patents, says it needs the threat of high damages to protect its intellectual property.

See the earlier IPBiz post:

Rooklidge's "Reform of a Fast-Moving Target"

***Also on Feb. 9

An amicus brief by several companies (including Exxon Mobil) was filed on behalf of Lucent in the Lucent v. Micosoft case. It included a cite to Lincoln's fire of genius speech.

***UPDATE on March 16.

Note a March 15 post on Patently-O: Rooklidge: Patent Reform Damages Provision Violates Seventh Amendment which contains the text:

Fact-finding and the Seventh Amendment. The Supreme Court coined the term “gatekeeper” in Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993), to describe the trial court’s obligation to “ensure that any and all scientific testimony or evidence admitted is not only relevant, but reliable.” In addition to rulings on Daubert motions, courts also fulfill their gatekeeper role by ruling on motions for summary judgment and judgment as a matter of law, motions in limine, evidentiary objections, and jury instructions. The bills’ damages section would enhance the courts’ gatekeeper role, but in doing so unconstitutionally invade the jury’s province as fact finder.

The bills would add to 35 U.S.C. §284 paragraph (c)(1), which would require the court to select from three methods for calculating a reasonable royalty “based on the facts of the case and after adducing any further evidence the court deems necessary.” A procedural rule requiring the court to weigh evidence to select from alternate theories would be void for depriving the patentee of its right to jury trial. See Fidelity & Deposit Co. of Maryland v. United States, 187 U.S. 315, 320 (1902). A genuine issue of material fact, that is, a dispute over facts that might affect the outcome, requires the issue to go to the jury. See generally Anderson v. Liberty Lobby, 477 U.S. 242 (1986). Similarly, the trial court’s exclusion of the entire market value rule under paragraph (c)(1)(A) for the patentee’s failure to make “a showing to the satisfaction of the court,” would violate the Seventh Amendment in a jury trial in which the patentee presents enough evidence to create a genuine issue of material fact. See Minks v. Polaris Indus., Inc., 546 F.3d 1364, 1372 (Fed. Cir. 2008) (vacating because trial “court necessarily engaged in an independent review of the evidence and substituted its conclusion for that of the jury on the factual issue of compensatory damages”).

Separately, note from Rooklidge's paper titled Reform of a Fast-Moving Target:
The Development of Patent Law Since the 2004 National Academies Report :

Rather than arguing for a change or clarification in the law on the standard for applying the entire market value rule, however, Apple and Oracle urge the Federal Circuit to issue a “clear mandate” that district judges must fulfill their gatekeeper role in this regard:

But district courts are tasked as gatekeepers to prevent parties from receiving windfall judgments despite such failures of proof. See, e.g., Kumho Tire Co. Ltd. v. Carmichael, 526 U.S. 137, 147-49 (1999) (holding that the district courts' gate-keeping function requires the rigorous requirement that expert testimony be relevant and reliable). Indeed, judges are the only ones who can play the vital gate-keeping role of ensuring that patent holders establish damages with a valid nexus to the proven infringement. District courts must ensure that a patent holder relies only on reliable and tangible, not speculative or conjectural, evidence of damages tied to actual use and value of an accused feature. A clear mandate from this Court to that effect is the best hope for accused infringers that they will not be subject to unwarranted massive payouts - either in a settlement or after trial.

Amici Apple and Oracle do not seek a change in the law; only that the law be applied.


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