Tuesday, April 07, 2015

The CAFC discusses damages, Brulotte in AstraZeneca v. Apotex

Damages were at issue in this installment of the CAFC review of the omeprazole litigation:

Apotex Corp., Apotex Inc., and TorPharm Inc., (collectively,
“Apotex”) appeal from a final judgment entered
against them by the United States District Court for the
Southern District of New York. We previously affirmed
the district court’s decision in an earlier phase of the same
litigation holding that Apotex had infringed certain
patents held by AstraZeneca AB and related parties
(collectively, “Astra”). In re Omeprazole Patent Litig., 536
F.3d 1361 (Fed. Cir. 2008). In the portion of the proceeding
now under review, the district court awarded damages
to Astra on a reasonable royalty theory of recovery. We
affirm in part, reverse in part, and remand.

The argument of Apotex:

Apotex first contends that the district court’s damages
award overcompensated Astra because the court “lost
sight of the essential purpose of the exercise: to compensate
Astra for harm actually suffered.” According to
Apotex, the court’s analysis (1) improperly discounted
evidence that by November 2003 the market for omeprazole
was “well on its way to full genericization”; (2) placed
undue emphasis on Astra’s ability to keep Apotex temporarily
off the market by refusing to grant a license; and (3)
gave “short shrift to contemporaneous licensing agreements
that Astra entered with other companies” for
royalty rates lower than 50 percent

Lost profits vs. reasonable royalty:

Moreover, Apotex’s focus on what it refers to as “the
harm that Astra actually suffered” is more suited to a
case involving lost profits. Apotex argues, for example,
that “if Apotex’s entry caused Prilosec sales to implode,
that would be evidence of significant harm for which
Astra would be entitled to a higher royalty.”

That argument would be relevant in a lost profits
case. The reasonable royalty theory of damages, however,
seeks to compensate the patentee not for lost sales caused
by the infringement, but for its lost opportunity to obtain
a reasonable royalty that the infringer would have been
willing to pay if it had been barred from infringing.
Lucent Techs., 580 F.3d at 1325. In determining what
such a reasonable royalty would be, the district court was
required to assess Astra’s injury not according to the
number of sales Astra may have lost to Apotex, but according
to what Astra could have insisted on as compensation
for licensing its patents to Apotex as of the
beginning of Apotex’s infringement, in November 2003.

As to the entire market rule:

A threshold question arose below regarding the applicability
of the entire market value rule in this case. As
an initial matter, the district court noted that “there is
little reason to import [the entire market value] rule for
multi-component products like machines into the generic
pharmaceutical context.” While we do not hold that the
entire market value rule is per se inapplicable in the
pharmaceutical context, we concur with the district court
that the rule is inapplicable to the present case.
The entire market value rule is derived from Supreme
Court precedent requiring that the patentee “must in
every case give evidence tending to separate or apportion
the defendant’s profits and the patentee’s damages between
the patented feature and unpatented features, and
such evidence must be reliable and tangible, and not
conjectural or speculative.” LaserDynamics, 694 F.3d at
67 (quoting Garretson v. Clark, 111 U.S. 120, 121 (1884)).
We recently reiterated that principle, holding that even
when the accused infringing product is “the smallest
salable unit,” the patentee “must do more to estimate
what portion of the value of that product is attributable to
the patented technology” if the accused unit is “a multicomponent
product containing several non-infringing
features with no relation to the patented feature.” VirnetX,
Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1327 (Fed.
Cir. 2014). Thus, the entire market value rule applies
when the accused product consists of both a patented
feature and unpatented features; the rule is designed to
account for the contribution of the patented feature to the
entire product.

The matter of "all inventions as improvements" arises

In practice, “all inventions are for improvements; all
involve the use of earlier knowledge; all stand upon
accumulated stores of the past.” Cincinnati Car Co. v.
N.Y. Rapid Transit Corp., 66 F.2d 592, 593 (2d Cir. 1933).
Yet it has long been recognized that a patent that combines
“old elements” may “give[] the entire value to the
combination” if the combination itself constitutes a completely
new and marketable article. Westinghouse Elec. &
Mfg. Co. v. Wagner Elec. & Mfg. Co., 225 U.S. 604, 614
(1912) (citing Hurlbut v. Schillinger, 130 U.S. 456, 472
(1889)); see also Seymour v. Osborne, 78 U.S. 516, 542
(1870) (“Improvements in machines protected by letters
patent may also be mentioned, of a much more numerous
class, where all the ingredients of the invention are old,
and where the invention consists entirely in a new combination
of the old ingredients, whereby a new and useful
result is obtained, and many of them are of great utility
and value, and are just as much entitled to protection as
those of any other class.”).

There is discussion of Brulotte:

Apotex contends that the district court’s award of
damages for the period after the expiration of Astra’s
patents runs counter to the Supreme Court’s decision in
Brulotte v. Thys Co., 379 U.S. 29 (1964). In that case, the
Court held that a royalty agreement that projects beyond
the expiration date of the patent is unlawful per se. Id. at

We do not agree with Apotex that Brulotte controls
the outcome in this case. In Brulotte, the Supreme Court
barred a patentee from using a licensing agreement to
extract royalties after the patent had expired because the
Court deemed such a practice to be a wrongful leverage of
the patent monopoly, “analogous to an effort to enlarge
[that] monopoly” beyond its lawful duration. Brulotte, 379
U.S. at 32-33. The Court’s analysis in Brulotte, however,
does not apply to a situation such as this one, in which
Congress, by creating the pediatric exclusivity period,
explicitly authorized additional market exclusivity to be
granted to the patent owner beyond the life of the patent.
In Brulotte, anyone was free to use the patented technology
after the patent expired. In this case, by contrast,
absent a waiver from Astra the FDA was not free to
authorize the sale of a generic drug using the patented
technology until the end of the pediatric exclusivity period.
Thus, Astra’s demand for royalty payments for postexpiration
sales does not rest on its patent monopoly; the
demand is based on the fact of Astra’s legal entitlement to
a pediatric exclusivity period. T


The problem that arose in this case resulted from the
timing of the district court’s infringement ruling. If the
liability determination had been made before the expiration
date of the patents, the FDA would have revoked the
approval of Apotex’s ANDA in time so that Apotex would
have been barred from selling its generic product during
the entire pediatric exclusivity period. However, because
the district court’s ruling was issued after the expiration
date of the patent, there was a two-month period during
which Apotex was authorized to sell its generic products
before the FDA withdrew its approval of Apotex’s ANDA.
Although the sales that Apotex was authorized to make
during that two-month period may have benefited Apotex
and injured Astra, section 284 is not designed to compensate
for those post-expiration sales.
Given that section 284 fails to support Astra’s claim
for royalty payments on Apotex’s post-expiration sales, we
reverse the portion of the district court’s damages award
relating to the pediatric exclusivity period, and we remand
for a recalculation of damages.

link: http://www.cafc.uscourts.gov/images/stories/opinions-orders/14-1221.Opinion.4-2-2015.1.PDF


Post a Comment

<< Home