Posts Tagged ‘Patent Royalties’

Patent Cases To Watch In 2015

January 6th, 2015 Alexander No comments

The U.S. Supreme Court will decide three patent cases involving claim construction, induced infringement and patent royalties in 2015, while the Federal Circuit grapples with the fallout from the high court’s recent patent-eligibility rulings and the standards for America Invents Act reviews.

Here are the patent cases attorneys will be watching in 2015:

Teva Pharmaceuticals USA Inc. v. Sandoz Inc.

The high court heard arguments in this case challenging the Federal Circuit’s rule that district court claim construction rulings must be reviewed afresh on appeal. If the justices discard that rule, it would mark a profound shift in patent law.

Teva is appealing a Federal Circuit decision invalidating its patents on the multiple sclerosis drug Copaxone after a district court found them valid. The company argues that claim construction, which is often dispositive in patent cases, involves factual findings that should be reviewed with deference on appeal.

The Federal Circuit has long held that claim construction is a question of law that must be reviewed de novo. As a result, it frequently reverses decisions by trial judges, and a Supreme Court decision requiring deference “could be a big, big change.”

Commil USA LLC v. Cisco Systems Inc.

The justices agreed to review a Federal Circuit decision that a defendant’s good faith belief that a patent is invalid can serve as a defense to induced patent infringement, in a case with significant implications for how difficult it is to prove inducement.

The ruling, which wiped out a $74 million damages award after a jury found that Cisco infringed a Commil wireless networking patent, created a defense to induced infringement that had never existed before.

The defense does not appear to have been used much since it was created, but that could change if it gets the high court’s blessing. It is easier for accused infringers to craft a defense that they believed a patent was invalid than to argue that they didn’t infringe. Permitting the defense would give another defense to inducement and make inducement harder to prove.

Kimble v. Marvel Enterprises Inc.

Also, the high court took on a case, in which it will review its own 50-year-old rule that royalty agreements cannot extend beyond the expiration of a patent, potentially opening the door to much longer licensing agreements.

The high court will consider an appeal by the inventor of a Spider-Man toy whose bid to collect royalties from Marvel Enterprises Inc. after his patent expired was denied by the Ninth Circuit.If the justices overrule that decision and end the ban on royalties for expired patents, “it will definitely make negotiations a bit more complicated and more interesting” by adding an entirely new aspect to licensing talks.

A win for the inventor may mean that licensees could conceivably end up paying royalties on patents in perpetuity, for a lower rate than they would currently pay during the limited life of the patent.

The case involves “a policy decision at the crossroads of antitrust and patent law,” DeVito said. “Antitrust cases have actually moved away from per se unenforceable rules, particularly in arms-length agreements where the parties have exercised their freedom to contract. This is a very important decision.”

Fallout from Alice and Myriad

While the justices busy themselves with new areas of patent law, the Federal Circuit, the Patent Trial and Appeal Board and the district courts will deal with the impact of the high court’s recent Alice and Myriad decisions on patent eligibility.

Many courts have cited those decisions to invalidate patents they say claim nothing more than abstract ideas or natural material.

“I call it the aftermath of Hurricane Alice,” Bart Showalter of Baker Botts LLP said. “Folks are very concerned about the scope of Alice. It’s a pretty fundamental case, and there is a concern among many companies that Alice has devastated a portion of their patent portfolio.”

In re: Cuozzo Speed Technologies LLC

By December, the Patent Trial and Appeal Board had issued just over 200 final written decisions in challenges to patents filed under America Invents Act proceedings. Although many have been appealed to the Federal Circuit, no appeals have yet been decided, and attorneys will be keeping tabs on how the court handles them and how often it upholds the board’s findings.

The court heard its arguments in an AIA case in November, and the decision in that appeal by Cuozzo could set important precedent on a key issue. Cuozzo argues that the board uses the wrong claim construction standard in reviews and should instead use the same standard as district courts, which makes it more difficult to invalidate patents.

If the court backs Cuozzo, the board would likely have to change the standard it issues in all future reviews. However the court rules, resolving the proper claim construction standard will make the system more stable.

“Clarity will be useful on either side,” he said. “It will make it more reliable for patentees and accused infringers.”

High Court To Reconsider Ban On Expired-Patent Royalties

December 18th, 2014 Alexander No comments

The U.S. Supreme Court agreed to review a 50-year-old rule barring royalty agreements that extend beyond the expiration of a patent, a standard the inventor of a Spider-Man toy argues is outdated and anti-competitive.

In 1990 Kimble invented a Spider-Man wristband toy that could shoot foam string and got Marvel to agree to compensate him if it used his idea. The company later created the Web Blaster toy, but Kimble never received any payments, and he filed a 1997 patent infringement and breach of contract suit.

Marvel and Kimble settled the suit in 2001 when the company agreed to purchase the patent for about $500,000 and pay Kimble a 3 percent royalty on product sales.

But in 2006, Marvel licensed the right to produce the Web Blaster to Hasbro Inc. A number of disagreements then arose between Marvel and Kimble concerning the royalty payments, resulting in the current breach of contract suit, filed in 2008.

The justices granted a petition for certiorari by inventor Stephen Kimble and the high court will review its own 1964 decision in Brulotte v. Thys, which held that licenses requiring royalty payments for the use of a patent after it expires are per se unlawful. The justices agreed to hear the case even though U.S. Solicitor General Donald Verrilli Jr. told the court in October that Brulotte remains good law and should not be reviewed.

Kimble’s attorney said that he and his client are gratified that the justices took the case and are looking forward to arguing that the Brulotte rule “should be resigned to the dust heap of history.”

“Brulotte’s per se rule has, for 50 years, damaged the American economy by forbidding licensing practices that would provide unique pro-competitive benefits,” Kimble’s attorney said.

The rule has suppressed innovation by hindering the commercialization of life-saving medical treatments by universities and research hospitals, he said.

“And it has been a trap for the unwary and an instrument of injustice when wielded by large, sophisticated licensees to deny small inventors their contractually guaranteed royalties under circumstances where those inventors had no actual market power, and had applied no coercion during contract negotiations,” he said.

According to Marvel, the “core bargain” of the patent system is that inventors must publicly disclose their invention in return for a limited period of exclusivity.

“Brulotte’s conclusion that permitting post-expiration royalties would upset this bargain is justified and is independent of antitrust principles,” Marvel said.

Likewise, Verrilli told the court in October that the Brulotte rule “fits comfortably within a line of precedents establishing that the federal patent laws are not indifferent to what happens when a patent’s prescribed term expires.”

“Rather, those laws reflect an affirmative congressional policy judgment that the patented invention should thereafter be freely available for exploitation by others and for enjoyment by the general public,” he said.

For more information, see Law360.

Categories: Intellectual Property