Damages for Indirect Patent Infringement

In many patent infringement cases, the only practical way that the plaintiff can obtain relief is on a theory of secondary liability, which is generally referred to as indirect infringement. The remedy in patent cases frequently includes damages for past infringement. Because jury verdicts in patent cases can amount to hundreds of millions of dollars, patent damages have become a hotly litigated issue. Nevertheless, much to the frustration of the litigants in these high-stakes lawsuits, the courts continue to struggle to clarify how damages for indirect infringement should be determined. The Court of Appeals for the Federal Circuit, which has exclusive appellate jurisdiction over patent cases, has deepened the confusion over calculating damages. Two opinions from the Federal Circuit have made contradictory pronouncements on the issue of accounting for proven acts of primary (i.e., direct) infringement in determining damages for indirect infringement. Lucent Technologies, Inc. v. Gateway, Inc. held that the extent of directly infringing use of the patent should be viewed as one of many pieces of evidence for measuring the extent of damages (“the evidentiary approach”). In contrast, Cardiac Pacemakers, Inc. v. St. Jude Medical, Inc. endorsed a rule that enables trial judges to limit damages as a matter of law to proven, enumerated acts of direct infringement of the asserted patents (“the atomistic approach”). The conflict between the two approaches raises fundamental, unanswered questions concerning the relationship between patent infringement and ordinary torts. This Article fills a gap in the literature by identifying, and working toward unraveling, one of the puzzles of indirect infringement. Specifically, it examines what the legal fiction of formally imputing an act of one entity to another—an important tenet of secondary liability in tort—means for patent damages. The answer is surprising: the atomistic approach is consistent with the principles of tort law, but is at odds with well-established, general rules for determining patent damages. Conversely, the evidentiary approach seems to ignore tort law’s imputation principle and embodies the pragmatic, patent-specific damages rules that the atomistic approach eschews. This Article resolves the tension in favor of the evidentiary approach and explains that considerations of policy, logic, and precedent support a damages analysis that reflects fundamental differences between patent law and tort law

Enhancing Patent Damages

Many policymakers, judges, and scholars justify patent law on economic-utilitarian grounds. It is therefore unsettling that when it comes to damages for patent infringement in excess of the compensatory baseline, courts have followed an approach that reflects primarily moral, rather than economic, considerations. In order to obtain enhanced damages, the prevailing plaintiff must show — among other things — that the defendant actually knew of the patent-in-suit. This subjective standard stems from pre-industrial tort actions designed to punish egregious interpersonal behaviors such as assault, piracy, libel, and seduction, and to preserve public tranquility. But as the law developed to cover “depersonalized” torts committed by corporate defendants and expanded from its moral foundations to embrace economic reasoning to a greater degree than before, the range of cases in which punitive damages could be awarded broadened significantly. Specifically, courts relaxed the culpability standard by making it less subjective, allowing punitive damages for generalized reckless disregard for the rights of others. The recklessness framework is now dominant in the fields of negligence and products liability, which typically allow for punitive damages without actual knowledge of a specific victim or defect, and in other civil actions — including copyright and trademark infringement. Patent law, however, continues to be an outlier by requiring actual, subjective knowledge of the plaintiff’s patent and, in so doing, in effect clings to the old moral-opprobrium model of punitive damages.Not surprisingly, this standard has led to anomalous results. For one thing, the actual-knowledge approach to enhanced damages discourages firms from searching for and reading relevant patents, an unfortunate result given the widely recognized notion that disclosure is a core function of the patent system. Moreover, this rule errantly treats potential infringers who make good-faith attempts to ascertain the nature of the patent landscape in the fields in which they operate worse than those that decide to bury their heads in the sand and do no patent searching whatsoever. But there is a prospect for improvement in the law. A recent Supreme Court decision, Halo Electronics v. Pulse Electronics, arguably pushed a reset button on the jurisprudence of enhanced damages in patent cases. Although it accepted the pre-industrial, subjective conception of punitive damages in its discussion of “deliberate” and “wanton” infringements, the Court also pointed to the modern trend when it referred to recklessness as an acceptable standard of culpability for enhanced patent damages. I argue that, in failing to heed this guidance, the lower courts are making a mistake. I contend that installing recklessness toward patent rights of others as the threshold level of culpability for enhanced damages is consistent with the modern conception of punitive damages in tort — which, at least to some degree, reflects a shift away from the moral grounding of this remedy and toward economic analysis. Accordingly, I propose a recalibration of the willfulness doctrine to include reckless failures to search for patents as a route to making infringers eligible for enhanced damages. If applied properly, the new standard will mitigate the current doctrine’s perverse effect of discouraging reading of patents, promote cost-effective patent searches, and take account of significant differences in patent landscapes between various industries

The Completeness Requirement in Patent Law

This Article argues that courts have created a de facto extra-statutory condition of patentability, herein termed the “completeness” requirement. This requirement bars patents on certain inventions whose chief value lies in their function as inputs into downstream research. The Article contends that the notion of completeness explains doctrinal innovations that are difficult to rationalize any other way. Although it reflects an important policy of limiting unduly preemptive patent claims on foundational, building-block inventions, the completeness requirement in its current form fails to implement this policy in a way that is coherent and consistent with patent law’s utilitarian goals. In addition, courts’ attempts to develop the completeness requirement based on existing statutory provisions have resulted in controversial interpretations of the Patent Act, generating legitimacy costs. The Article argues that these problems are best addressed by explicitly recognizing completeness as a separate requirement of patentability and modifying the doctrinal tools used to enforce this requirement. To determine whether a patent claim passes completeness, the Article proposes a new test that focuses on the generality and unpredictability of a claimed invention’s applications. Further, it argues that an amendment to the Patent Act codifying the requirement of completeness is the most effective way to implement the proposal. Finally, the Article explores the possibility of awarding a limited patent right, which it terms “Research Patent,” to claims that satisfy existing requirements of patentability, but fail completeness. This right would provide the intellectual property incentives that are likely needed to develop and commercialize foundational inventions, and also help decrease the potential for stifling downstream innovation created by granting full patent protection to such inventions

Nonobviousness: Before and After

The requirement of nonobviousness, codified in 35 U.S.C. § 103, has been called “the ultimate condition of patentability” because of its crucial function of keeping technically trivial inventions out of the patent system. The obviousness determination must be made based on the state of the invention’s field at a particular point in time—in the Patent Act’s current version, the date that the patent application was effectively filed with the U.S. Patent and Trademark Office (“PTO”).However, in spite of the critical role of time in patent law and the danger that hindsight bias could distort § 103 analysis when patentability is evaluated long after the relevant date (as it usually is), the seminal Supreme Court obviousness opinion in Graham v. John Deere said little about temporal considerations. Instead, Graham’s lasting contribution was to suggest that the § 103 inquiry is to be divided into two stages based on the source of the proffered evidence. The Court said that as an initial matter, the PTO or a court should look to pre-patent publications and other materials in the public domain and determine the differences between those disclosures and the patent claim at issue. Further, should the parties introduce additional evidence that the Court called “secondary considerations,” such as commercial success of the patented product or failure of others to come up with the claimed invention, decision-makers would need to continue the analysis to determine the relevance and weight of this evidence before making a final judgment on validity. Although courts and commentators disagree vigorously about the relative roles of these two aspects of the nonobviousness calculus, the primary-secondary framework has a central place in the law of § 103.This Article shows that Graham’s apparent creation of two tiers of obviousness evidence has caused confusion and error, and should be rejected in favor of a different approach that is focused on time. First, the rigid segmenting of the patentability inquiry into two steps, which is seen in some lower-court decisions interpreting Graham, has caused certain evidence to be arbitrarily discounted or bolstered depending on whether it falls into the primary or secondary silo. Second, and more pernicious, these evidentiary tiers have obscured the significance of time for patentability. This Article argues that, instead, the filing date of the patent application as the default dividing line between the pre- and post-invention state of the relevant field provides a more logical fulcrum around which to organize the § 103 analysis. Accordingly, obviousness evidence should be classified based on whether it came into existence independently of the patent and generally prior to filing (ex ante) or, instead, whether it appeared in response to the invention or during its further, post-filing, development (ex post). This Article demonstrates that the proposed scheme would pave the way to a more rational approach to § 103 by helping decision-makers determine the relevance and weight of various obviousness evidence with greater accuracy

Photocopies, Patents, and Knowledge Transfer: \u27The Uneasy Case\u27 of Justice Breyer\u27s Patentable Subject Matter Jurisprudence

One aspect of Justice Stephen Breyer’s discomfort with patents, as expressed in his opinion for the Supreme Court in Mayo v. Prometheus and his dissent from the order dismissing certiorari in LabCorp v. Metabolite, is strikingly similar to one of his critiques of copyright law in The Uneasy Case for Copyright, a well-known article he wrote as Professor Breyer more than forty-five years ago. In The Uneasy Case, Breyer argued that the burdens on duplication of technical articles imposed by copyright law restrict the flow of information and prevent scientists from enjoying spillover benefits of published research. His patent opinions on the Supreme Court, too, talk of diminished access to information resulting from intellectual property protection. In this Article, I contend that the parallel that Justice Breyer implicitly draws between the harms of copyright and patent is a questionable one. In particular, Justice Breyer’s opinions on patentable subject matter do not address the notion that inducement of disclosure and dissemination of information is one of the very purposes of patent law, nor the idea that there are many noninfringing uses of information contained in patents. I argue that these omissions may provide an insight into Justice Breyer’s patent law jurisprudence — particularly, the recent reinvigoration of limits on patentable subject matter in his opinion for the Court in Mayo. To be sure, Justice Breyer’s position can be defended. For even though patent law does not generally place barriers on access to information, claims like those at issue in Mayo and LabCorp may create narrow, subtle information-flow problems through recitation of mental steps at the point of the invention’s novelty. I argue, however, that these problems can be solved by applying correspondingly narrow rules of novelty or claim construction to invalidate such patents or to limit their scope, making resort to the overbroad rule announced in Mayo unnecessary

The More Things Change: Improvement Patents, Drug Modifications, and the FDA

Pharmaceutical companies often replace prescription drugs that are already on the market with modified versions that have the same active pharmaceutical ingredient. On the surface, such activity seems benign and perhaps even salutary. Nonetheless, antitrust litigation has revealed that firms sometimes modify existing drugs not because new formulations would demonstrably improve health outcomes, but principally because so-called secondary patents covering the new version of the drug enable them to maintain some effective market power over the active ingredient for which original, primary patent protection has expired. This “product-hopping” strategy runs counter to the goal of the legislative framework for regulating branded and generic drug approvals, which is to create appropriate incentives for discoveries that raise the quality of patient care and human health by providing a period of reward for the brand followed by timely and effectual generic entry. In this Article, I explain that the rules and institutions involved in determining the validity of patents on chemical inventions, certain features of drug regulation under the Federal Food, Drug, and Cosmetic Act, and unique market forces in the pharmaceutical sector combine to allow strategic product hopping. To address this problem, I propose a novel regulatory scheme that would empower the Food and Drug Administration (FDA) to induce pharmaceutical companies to generate comparative data indicative of therapeutic distinctiveness between related versions of drugs. I explain that the FDA is institutionally well-positioned to serve as and information intermediary that can help increase transparency with respect to drug changes, and show that the relevant information can be presented in a manner that is useful to patients, prescribers, and payers. The proposed framework would then enable these market participants to identify and reject strategic drug product changes, reducing the manufacturer’s incentive to pursue such modifications. Ultimately, the FDA’s new authority for comparative data development could lead to improvements in patient care and promote downstream clinical research based on scientific evidence gathered under the directives of the proposed scheme

Photocopies, Patents, and Knowledge Transfer: The Uneasy Case of Justice Breyer\u27s Patentable Subject Matter Jurisprudence

One aspect of Justice Stephen Breyer\u27s discomfort with patents, as expressed in his opinion for the Supreme Court in Mayo v. Prometheus and his dissent from the order dismissing certiorari in LabCorp v. Metabolite, is strikingly similar to one of his critiques of copyright law in The Uneasy Case for Copyright, a well-known article he wrote as Professor Breyer more than forty-five years ago. In The Uneasy Case, Breyer argued that the burdens on duplication of technical articles imposed by copyright law restrict the flow of information and prevent scientists from enjoying spillover benefits of published research. His patent opinions on the Supreme Court, too, talk of diminished access to information resulting from intellectual property protection. In this Article, I contend that the parallel that Justice Breyer implicitly draws between the harms of copyright and patent is a questionable one. In particular, Justice Breyer\u27s opinions on patentable subject matter do not address the notion that inducement of disclosure and dissemination of information is one of the very purposes of patent law, nor the idea that there are many noninfringing uses of information contained in patents. I argue that these omissions may provide an insight into Justice Breyer\u27s patent law jurisprudence-particularly, the recent reinvigoration of limits on patentable subject matter in his opinion for the Court in Mayo

Divided Infringement, Economics, and the Common Law

This essay responds to and builds on Economic Theory, Divided Infringement, and Enforcing Interactive Patents, an article published by Professor Keith Robinson. In his article, Professor Robinson analyzed liability under various tests courts have developed to address the so-called divided infringement problem, which arises when multiple entities perform the steps of a method patent claim, under the three leading economic theories of patent law — reward theory, prospect theory, and rent-dissipation theory. In particular, Professor Robinson concluded that imposition of liability for divided infringement of method claims under joint enterprise principles is consistent with all three of these theories. This essay surveys recent developments in the law of divided infringement and shows how they have complicated the liability landscape that Professor Robinson described in his article. Furthermore, the essay applies Professor Robinson\u27s approach to imposition of liability for divided infringement under the principles of causal responsibility, which I described in an earlier article, Causal Responsibility and Patent Infringement. The essay concludes that liability based on causal responsibility — which, like joint enterprise, has deep roots in the common law — is also consistent with reward theory, prospect theory, and rent-dissipation theory. In addition, the essay considers broader implications of relying on common-law attribution principles in patent cases