Transcript Document

Texas International Law Journal Symposium
February 18, 2011
David Healey
Fish & Richardson, Houston
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DISCLAIMER FOR OUR GC
This presentation, accompanying speech,
and any recording, are to promote academic
discussion only and are not legal advice or
legal opinions of Mr. Healey or of Fish &
Richardson
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Jury v. Judge: Law v. Equity
In a patent case, if the issue were one that
would have been tried to a jury at common
law at the time of the founding of our
country, or analogous to such an issue,
the Seventh Amendment requires a jury
trial on that issue.
Markman v. Westview Instr., 517 U.S. 370 (1996).
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Some Damages Are Equitable Relief
Trial court’s future ongoing royalties were
an equitable remedy in lieu of an
injunction.
Actions that seek only injunctive relief,
attorneys’ fees, costs, or other solely
equitable relief do not give rise to Seventh
Amendment protection.
Paice LLC v. Toyota Motor Corp.,
504 F.3d 1293 (Fed. Cir. 2007),
cert. denied, 128 S.Ct. 2430 (2008).
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If Only Equitable Remedies –No Jury
Actions that seek only injunctive relief,
attorneys’ fees, costs, or other solely
equitable relief do not give rise to
Seventh Amendment protection.
Tegal Corp. v. Tokyo Electron Am., Inc., 257 F.3d 1331 (Fed. Cir. 2001).
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Damages at Law
1790 patent act all claims for patent infringement
were actions at law and the statute explicitly
required the jury to set the damages.
Federal Courts had no equity jurisdiction prior to
1819.
To bring an action in equity, for an injunction and
accounting, the case had to be filed in a state
court.
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The Seventh Amendment Jury Is Gone
Seventh Amendment preserves the right to jury trial as it
existed in England at time of U.S. Independence.
But current jury practice is not the same now as then:
– Then, Commercial cases would be tried to a “special jury” of
merchants
– Then, Certain other cases would be tried to special juries, e.g.,
Matron’s jury to determine pregnancy.
– Then, civil juries in U.K. and U.S. were white men:
• No women, no blacks
See generally Trial By Jury, James Oldham, NYU Press 2006 (Mr.
Oldham is a Professor at Georgetown Univ. Law School)
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1819-1870 Law v. Equity
1870 Patent Act, patentee could elect to proceed in
equity and recover infringer's profits and an injunction, or
to proceed in law and recover “as damages,
compensation for pecuniary injury he suffered by the
infringement.” Birdsall v. Coolidge, 93 U.S. (3 Otto) 64,
68-69, 23 L.Ed. 802 (1876).
– However, patentee was required to choose
between these paths of recovery.
– See, Nike v. Wal-Mart Stores, 138 F.3d 1437 (Fed.
Cir. 1997) for a history of patent act amendments and
their impact on law and equity.
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Damages at Law
Prior to merger of law and equity, recovery in
law was limited to patentee’s actual loss, such
as lost profits or a mathematical formula for
damages or loss of an established royalty where
patentee had licensees.
In an action at law, if no actual loss could be
proven according to legal standards, then jury
had to be instructed to find nominal damages.
Coupe v. Royer, 155 U.S.565, 583 (1895).
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Reasonable Royalty
Equity statute in 1870 permitted concept of what
became reasonable royalty, R.S. 4921.
The U.S. S.Ct. endorsed “reasonable royalty”
where no damages could be shown.
The Court explicitly relied on principles in equity
in adopting this remedy.
Dowagiac Mfg. Co. v. Minnesota Moline Plow, Co., 235 U.S. 641 (1915).
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Reasonable Royalty is Equity
In Dowagiac Mfg. Co., the Court relied on
equitable principles to endorse reasonable
royalty damages:
“As was said in Tilghman v. Proctor, 125 U.S. 136, 145, 31 L. Ed.
664, 667, 8 S. Ct. 894: ‘It is inconsistent with the ordinary
principles and practice of courts of chancery, either, on the one
hand, to permit the wrongdoer to profit by his own wrong, or, on
the other hand, to make no allowance for the cost and expense of
conducting his business, or to undertake to punish him by obliging
him to pay more than a fair compensation to the person
wronged.’”
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Reasonable Royalty is Equity
U.S. S.Ct. cases that endorsed a reasonable
royalty concept were brought under Equity
Statute, R.S. 4921 and its predecessors:
– Dowagiac Mfg. Co. was an equity case under R.S. 4921
– Garretson v Clark, 111 U.S. 120 (1884) (cited in Lucent)
– Westinghouse Co. v. Wagner Mfg. Co., 225 US 604, 615 (1912)
(cited in Lucent)
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Hypothetical & Speculative Damages
Not Permitted At Law
“The actual damages which will sustain a judgment
must be established …. by facts from which their
existence is logically and legally inferable. The
speculations, guesses, estimates of witnesses, from
no better basis of recovery than the speculations of
the jury themselves. Facts must be proved, data
must be given which form a rational basis for a
reasonably correct estimate of the nature of the legal
injury….”
– Central Coal & Coke Co. v. Hartman, 111 F. 96, 98 (8th Cir.
1901).
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Merger of Law and Equity Turns
Reasonable Royalty on its Head
After the 1938 merger of law and equity in the
Federal Courts,
– If any damages at law could be proven, even if minimal,
then equitable remedy of a reasonable sum was not
available:
– No equitable damages could be awarded in the unified
system when there was a legal damages remedy.
– This was so even if damages at law were less than what
could have been sought in equity.
• UCLA Journal of Law & Technology, Vol. 13, Issue 2, Erick S. Lee, at page 7
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1952 Act Consolidated Law and
Equity Remedies from 1870 Act
January 10, 1950, House Judiciary Committee Report to what is
now 28 U.S.C. Section 284
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1952 Act Combined Damages
Statutes from Law and Equity
Former Equity Damages Statute R.S. 4921 (Excerpted in
relevant part):
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1952 Act Combined Law and Equity
Damages into One Statute
Former Damages Statute for Action at Law
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1952 Act Combined Statutes
May 12, 1953 House Report, p. 29, H. 82-2.7
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35 U.S.C. 284
Upon finding for the claimant the court shall award the
claimant damages adequate to compensate for the
infringement but in no event less than a reasonable
royalty (4921) for the use made of the invention by the
infringer, together with interest and costs as fixed by the
court.
When the damages are not found by a jury (4919), the
court shall assess them (4921). In either event the court
may increase the damages up to three times the amount
found or assessed.
The court may receive expert testimony (4921)….[Jury
would not receive expert testimony on damages at law]
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Georgia-Pacific
The Second Circuit opinion in Georgia-Pacific
cited the 1952 legislative history and also
described “reasonable royalty” in classic equity
terms:
– “The whole notion of a reasonable royalty is a device in aid of
justice, by which that which is really incalculable shall be
approximated, rather than that the patentee, who has suffered
an indubitable wrong, shall be dismissed with empty hands.”
Georgia-Pacific Corp. v. US Plywood-Champion Papers Inc.,
446 F. 2d 295, at fn. 5 (2d Cir. 1971)
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Apportionment Derives from Equity
Lucent, 580 F.3d 1301, at 1332, for example:
– “Factor 13 is “[t]he portion of the realizable profit that should
be credited to the invention as distinguished from non-patented
elements, the manufacturing process, business risks, or
significant features or improvements added by the infringer.”
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Reasonable Royalty: 284 Today v. 4921 Then
[T]he objective of the Court’s
concern has been two-fold:
determining the correct (or at least
approximately correct) value of
the patented invention, when it
is but one part or feature among
many, and ascertaining what the
parties would have agreed to in the
context of a patent license
negotiation.
Lucent, 580 F.3d 1301, 1337, citing RS
4921 caselaw:
–
–
Garretson v Clark, 111 U.S. 120 (1884);
Westinghouse Co. v. Wagner Mfg. Co., 225
US 604, 615 (1912)(Under 4921)
When a patent is for an
improvement…He must separate
its results distinctly from those
of the other parts, so that the
benefits derived from it may be
distinctly seen and appreciated.
… "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 the
unpatented features, and such
evidence must be reliable ….
Garretson v Clark, 111 U.S. at 120
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Trend to Award Future Damages is Equity
In Innogenetics v. Abbott Labs, 512 F.3d 1363,
1380 (Fed Cir. 2008), the court vacated an
injunction because the damages included at least
partial payment for future use.
IP Innovation v Red Hat (E.D. Tex. 2010), Judge
Radar allowed jury to award fully paid up, lump sum
royalty for past and future use.
Paice teaches that the future portion at least is
equitable.
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Why hasn’t this come up before?
2010 PriceWaterhouseCoopers study:
– Prior to 2000, few patent trials had juries
• Less than 100 trials per year in patent cases
• Less than 15% to jury prior to 1990
• Less than 25% to jury from 1990-2000
– After 2000, most patent trials have juries
– After May 2006, eBay eliminates injunction:
Damages are only remedy in most cases.
– Since 2000, median jury award has
increased 10X
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Conclusion
The civil jury as it existed in 1790 does not exist today
The1952 Patent Acts’ “reasonable royalty” in section
284 derives from equity: R.S. 4921
Paice shows future royalties are equitable and no right to
a jury trial under Seventh Amendment.
Innogenetics, IP Innovation, allowed damages for future
use
Lucent’s rule on apportionment and EMV is from
Equitable Cases under R.S. 4921
Common law definition of “damages” would not allow for
hypothetical negotiation model.
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