digital business - hoehn - iplf 2007 - post ebay
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2007 Leadership Forum
Irreparable Harm and InjuctionsFebruary 16, 2007
Sarah Columbia, Choate, Hall & Stewart [email protected], 617.248.5053
Edward Gold, PricewaterhouseCoopers [email protected], 202.414.1330
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February 16, 2007Slide 2
Current Situation
What have judges decided post-Ebay regarding injunctions?
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February 16, 2007Slide 3
eBay Inc. v. MercExchange, LLC, 126 S.Ct. 1837 (2006)
Patent holder must show that:
(1) it has suffered irreparable injury;
(2) remedies at law (money) are inadequate to compensate
for injury;(3) considering the balance of the hardships, an injunctionis equitable;
(4) public interest would not be disserved by an injunction.
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February 16, 2007Slide 4
Early Indications Post eBay: Patent Holders who arecompeting with infringer will still get a permanent injunction;
those who are not will not
Permanent/Preliminary Injunctions Granted:
- Black & Decker Inc. v. Robert Bosch Tool Corp. (N.D. Ill.)
- Rosco, Inc. v. Mirror Lite Co (E.D.N.Y.)
- Smith & Nephew, Inc. v. Synthes (U.S.A.), et al. (W.D. Tenn.)- 3M v. Avery Dennison (D. Minn)
- TiVo Inc. v. Echostar Communications Corp. (E.D. Tex) (Folsom)
- Telequip Corp. v. The Change Exchange, et al. (N.D.N.Y.)
- Wald v. Mudhopper Oilfield Servs., Inc. (W.D. Okla.)
- Am. Seating Co. v. USSC Group Inc. (W.D. Mich.)- Litecubes LLC v. Northern Light Products (E.D. Mo.)
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February 16, 2007Slide 5
Early Indications Post eBay: Patent Holders who arecompeting with infringer will still get a permanent injunction;
those who are not will not
Permanent/Preliminary Injunctions Granted (Continued):
- Floe Int'l, Inc., et al. v. Newmans' Mfg. Inc., et al. (D. Minn)
- Christiana Indus. v. Empire Elec., Inc. (E.D. Mich.)
- Canon Inc. v. GCC Int'l Ltd., et al. (S.D.N.Y.)- Visto Corp. v. Seva Networks Inc. (E.D. Tex.)
Permanent Injunctions Denied:
- Voda v. Cordis Corp. (W.D. Okla.)
- Paice LLC v. Toyota Motor Corp. (E.D. Tex.)- Z4 Techs., Inc. v. Microsoft Corp. (E.D. Tex.)
- Finisar Corp. v. DirecTV Group, Inc. (E.D. Tex.)
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February 16, 2007Slide 6
Irreparable Harm
Competition from infringer shown to inhibit patent-holders ability to develop
new products and relationships with customers (Smith & Nephew)
Court will not disturb patent holders determination to litigate rather than
license (3M)
Loss of market share in this nascent market is a key consideration in
finding that Plaintiff suffers irreparable harm - losing market share that it
will not have the same opportunity to capture once the market matures
(Tivo)
Loss of market share and brand name recognition incalculable andirreparable (Smith & Nephew)
Loss of market share and loss of opportunity to maintain the industry
standard and reputation for innovation (MudHopper)
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February 16, 2007Slide 7
Adequacy of Remedies at Law ($$)
Damages due to lost sales might theoretically be proven withlesser or greater degree of certainty, but intangible losses,such as the loss of goodwill, can never be ascertainedaccurately (Smith & Nephew)
It is true that the jury awarded a large damages verdict.Those damages, however, are designed to compensate Vistofairly and reasonably for its past injury. Although futuredamages may compensate Visto for its approximateloss, thatdoes not make them adequate in the sense that they aresuitable proxy for injunctive relief. (Visto)
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February 16, 2007Slide 8
Balance of Hardships
Patent holder has been barred from exercising its right toexclude conveyed by the patent for 20% of the limited life ofthe patent (3M)
Patented product is plaintiffs primary product; infringingproducts do not form the core of Defendants business (Tivo)
if no permanent injunction is entered, [plaintiff] will losegoodwill, potential revenue, and the very right to exclude thatis the essence of the intellectual property at issue. (Visto)
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February 16, 2007Slide 9
Public Interest
The public maintains an interest in protecting the rights ofpatent holdersa permanent injunction will further consumeraccess to more competitive products from the patent holder(Smith & Nephew)
The products are not related to any issue of public health orother key interest they are related to entertainment (Tivo)
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February 16, 2007Slide 10
Irreparable Harm
When does irreparable harm occur?
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February 16, 2007Slide 11
Preliminary Injunction(patent case, pre-eBay)
Request for
PreliminaryInjunction
Harm and observationof events (lost sales,
price movements, etc.)
Trial with
Injunction
Harm ended and noobservation of events
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February 16, 2007Slide 12
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PERIOD
REVENUE
What makes a good PI case?
Infringement
Preliminary Injunction
But for V2
But for V1
Actual
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February 16, 2007Slide 13
What factors help an irreparable harm argument?
Emerging market / technology
New product(s) launched
Rapidly changing technology
Market leader position First move advantage
Very long sales cycles
Very few, but large dollar, sales
Reputation at risk Customer relationships at risk
Intellectual property at issue is small part of whole
Price erosion
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February 16, 2007Slide 14
Permanent Injunction(patent case, post-eBay)
Beginning ofinfringement
Harm and observationof events (lost sales,
price movements, etc.)
Trial
Harm withoutinjunction,
observation of events?
Appeal
Injunction?Observation of events?
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February 16, 2007Slide 15
Post Trial:Compulsory License
Finisar Corp. v. DirecTV Group, Inc.
The court grants a compulsory license.
Defendants are ordered for the remaining life of the patent topay a quarterly royalty.
$1.60 per set-top box through April 2012.
The court maintains jurisdiction to enforce this portion of the
Final Judgment.
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February 16, 2007Slide 16
Post Trial:Compulsory License
z4 can be compensated for any harm it suffers in the way
of future infringement at the hands of Microsoft by calculating
a reasonable royalty
An efficient method for z4s recovery post-verdict isneeded.
Court severs z4s action for post-verdict infringement
Court orders z4 to file an appropriate complaint
Microsoft is required to file quarterly sales reports to preserve
z4s rights to future monetary damages.
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February 16, 2007Slide 17
Post Trial:Escrow Account
Voda v. Cordis
As our defendant has indicated, it will continue to infringe, the
court must fashion a remedy for the continuing, harm
Defendant to pay future royalties into escrow account at rate set
by jury.
The court ordered quarterly filing of sales reports until final
resolution of this action.
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February 16, 2007Slide 18
Footnote in Paice v. Toyota
The Court notes that monetary relief could result in lower
licensing rates than plaintiff would desire. The Court also
recognizes that, if an injunction were to issue, Plaintiff would
have a more impressive bargaining tool. This consideration,however, does not replace the four-factor test that must be
satisfied for equitable relief.
No injunction, but no order regarding future royalties
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February 16, 2007Slide 19
If Permanent Injunction is NotAwarded, What is the Remedy?
Compulsory license?
Escrow in anticipation of future damages?
Require filing of successive infringement actions?
Automatic finding of willfulness?
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February 16, 2007Slide 20
Implications of Ebay to damages trends
Shift in bargaining power may reduce number of patent
infringement lawsuits filed
Defendants may be more willing to go to trial.
Compulsory license becomes extension of hypothetical
license
- Did judge / jury consider all relevant future damage issues
when deciding past damages? New potential infringer may prefer to allow jury to set rate
rather than negotiate with patent holder.
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February 16, 2007Slide 21
Questions suggested by Ebay:
Should Plaintiff counsel leave some components out of
damages to argue irreparable harm post trial?
Should damages expert be prepared to say these components
left out are not calculable but components left in are? If either competitor / patent holder is only requesting royalties
as compensation, then should injunction issue?
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February 16, 2007Slide 22
MedImmune v. Genentech (S. Ct. Opinion January 9, 2007)
HOLDING: A patent licensee may seek a declaratoryjudgment of invalidity or non-infringement even though it ispaying the license fee and enjoying the benefits of the license(i.e. protection from an infringement action)
Questions/Implications:
- New Landscape for Licensee: pay royalties under protestand challenge patent
- Impact on express prohibitions in licenses against validitychallenges esp. in settlement agreements
- Incentives: for patent holder to be paid up front; for licenseeto pay running or deferred royalties
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2007 PricewaterhouseCoopers LLP. All rights reserved. "PricewaterhouseCoopers" refers toPricewaterhouseCoopers LLP (a Delaware limited liability partnership) or, as the context requires, other memberfirms of PricewaterhouseCoopers International Ltd each of which is a separate and independent legal entity P w C