Ongoing Royalties in Patent Litigation The Evolving Case Law on Damages for Post-Verdict Infringement: Procedural Issues Nicole D. Galli February 15, 2011 F ELDMAN G ALE INTELLECTUAL PROPERTY LAW F ELDMAN G ALE INTELLECTUAL PROPERTY LAW

F ELDMAN G ALE INTELLECTUAL PROPERTY LAW Questions in the Wake of eBay Source of the court’s authority to grant ongoing royalties; Whether there is a Seventh Amendment right to a jury trial; Appropriate procedural mechanism for determining the relief; Factors to be considered in assessing such relief; The complete scope of the relief (e.g., the products to which the royalty should be applied and/or the scope of the terms of the license/remedy); Remedies available to address a violation of an order of an ongoing royalty

F ELDMAN G ALE INTELLECTUAL PROPERTY LAW Federal Circuit Guidance Three Federal Circuit decisions since eBay have addressed post-judgment royalties: Paice LLC v. Toyota Motor Corp., 504 F.3d 1293 (Fed. Cir. 2007). Innogenetics, N.V. v. Abbot Labs., 512 F.3d 1363 (Fed. Cir. 2008). Amado v. Microsoft Corp., 517 F.3d 1353 (Fed. Cir. 2008). Each have answered some but not all of these questions, at least in part

F ELDMAN G ALE INTELLECTUAL PROPERTY LAW Federal Circuit Guidance Paice: Award of ongoing royalties has its basis in a court’s power to grant equitable relief in patent cases (See 35 U.S.C. § 283). Accordingly, jury trial is not required. Innogenetics: Injunction not available where a jury award includes an ongoing royalty payment for post-verdict infringement Amado: Whether post-judgment rate should be higher than pre- judgment rate

F ELDMAN G ALE INTELLECTUAL PROPERTY LAW Federal Circuit Guidance Key remaining issues How, exactly, the royalty should be calculated, no matter the procedure used What is the procedural mechanism for calculating royalties Jury decides (in an advisory opinion) Parties negotiate it themselves Judge after briefing and/or evidentiary hearing New case just on post-verdict infringement Sever post-judgment royalty issue from main case

F ELDMAN G ALE INTELLECTUAL PROPERTY LAW Evolving District Court Caselaw Strongest proponent of leaving the issue to the jury is Judge Clark in EDTX E.g., Cummins-Allison Corp. v. SBM Co., 584 F. Supp.2d 916 (E.D. Tex. 2008); Ariba, Inc. v. Emptoris, Inc., 567 F. Supp.2d 914 (E.D. Tex. 2008). Judge Clark has the jury advise on the appropriate rate, although he affirms that the parties should have a post- verdict opportunity to negotiate the issue and the final decision is the court’s Thus distinguishes Innogenetics – there the plaintiff automatically received amount determined by the jury

F ELDMAN G ALE INTELLECTUAL PROPERTY LAW Evolving District Court Caselaw At the other end of the spectrum are courts that have ordered the plaintiff to file a new complaint to address the post-verdict infringement Originated by Judge Davis (EDTX) in 2006 in z4 Technologies, Inc. v. Microsoft Corp., 434 F. Supp.2d 437 (E.D. Tex. 2006). More recently adopted by Judge Ward (EDTX) in 2008 in Saffran v. Boston Scientific Corp., Case No. 2:05-cv TJW (E.D. Tex. Feb. 14, 2008).

F ELDMAN G ALE INTELLECTUAL PROPERTY LAW Evolving District Court Caselaw At least one other case has severed the post-judgment damages issue from the main case Voda v. Cordis Corp., No. CIV , 2006 WL (W.D. Okla. Sept. 5, 2006). allows that part of the case to remain alive as a continuing action; thus allowing for continued monitoring of the ongoing royalty payments.

F ELDMAN G ALE INTELLECTUAL PROPERTY LAW Evolving District Court Caselaw Most used approach has been to order the parties to first negotiate the post-judgment royalty rate, and then hold an evidentiary hearing if the parties fail to arrive at an agreement on the rate. See, e.g., Boston Scientific Corp. v. Johnson & Johnson, 550 F. Supp.2d 1102 (N.D. Cal. 2008). This approach is consistent with Federal Circuit’s observation in Paice that a process on remand that included conducting an evidentiary hearing would also have the benefit of allowing the parties an opportunity to set their own rate (advocated by Chief Judge Rader)

F ELDMAN G ALE INTELLECTUAL PROPERTY LAW Evolving District Court Caselaw In at least two cases, however, the court appears to have held hearings on the appropriate rate, and it does not appear that the parties were explicitly given an opportunity to negotiate the rate first: Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., No. CV PHX-MHM, 2009 WL (D. Ariz. Mar. 31, 2009). Joyal Prods. Inc. v. Johnson Elec. Inc., Civ. A. No (JAP), 2009 WL (D.N.J. Feb. 27, 2009).

F ELDMAN G ALE INTELLECTUAL PROPERTY LAW Evolving District Court Caselaw Most recently, one court ordered the parties to brief the issue of whether they should be given an opportunity to negotiate the rate first or whether the court should impose a rate. Presidio Components Inc. v. American Tech. Ceramics Corp., No. 08-CV-335-IEG (NLS), 2010 WL (S.D. Cal. Apr. 13, 2010).

F ELDMAN G ALE INTELLECTUAL PROPERTY LAW Evolving District Court Caselaw Since the parties could not even agree on this issue, the court went ahead and imposed a rate without giving the parties an opportunity to negotiate. Presidio Components Inc. v. American Tech. Ceramics Corp., No. 08-CV-335-IEG (NLS), 2010 WL (S.D. Cal. Aug. 5, 2010). Defendant wanted court to order negotiations Patent owner said parties were not likely to agree so court should order rate Court took supplemental briefing on proposed rates, and since so divergent, decided to order rate

F ELDMAN G ALE INTELLECTUAL PROPERTY LAW Thank you! Nicole D. Galli, Esquire Feldman Gale, P.A Market Street, Suite 3130 Philadelphia, PA (267)