Law 677 Patent Law Spring 2002 Defenses & Counterclaims II: Antitrust & Patent Misuse Remedies: The Calculation of Patent Damages
Antitrust Violation Antitrust & Patent Misuse An affirmative violation of antitrust laws (I.e., Sherman Act, Clayton Act) Remedies include fines, injunctions against certain behaviors, perhaps criminal sanctions. Typically requires intent to monopolize Patent Misuse A defense to patent infringement; the claim is the bad use of the patent grant. It may not rise to the level of an antitrust violation; generally no need for a significant mental state or market power Remedy: refusal to enforce the patent Note: you can purge misuse by changing your practices Does this distinction make any sense?
Morton Salt (1942) Antitrust & Patent Misuse The license for the patented device was conditioned on use of specified (the patentee s) salt pellets. Why does the court think this is impermissible? Is there a good economic reason to write a license like this? ( Metering?) What would happen if Morton Salt priced its salt pellets unreasonably? (Before the patent expires? After?) Brulotte v Thys (1964) License royalties extended beyond the term of the patent. Why does the court think this is impermissible? Is this correct? Consider last of the opinion on page 1143. Is this correct as a matter of economics? Of logic?
Antitrust & Patent Misuse Aronson v Quick Point Pencil (1979) License had different royalty levels, depending upon whether the patent was granted. Is there a meaningful distinction between: [1] negotiating under the guise of an issued patent, and [2] negotiating under the guise of a patent application Patent License Restrictions (pre-1988) Bad Behavior Tie-Ins of Unpatented Materials Private Term Extensions Tie-Outs / Refusals to Deal forced package licenses Differential royalties Good Behavior Royalties on Unpatented Materials Resale Price Maintenance unforced package licenses Territorial restrictions Field of use restrictions Can you discern a trend? A theory?
Antitrust & Patent Misuse 35 U.S.C. 271(d) No patent owner otherwise entitled to relief for infringement or contributory infringement of a patent shall be denied relief or deemed guilty of misuse or illegal extension of the patent right by reason of his having done one or more of the following:.... (4) refused to license or use any rights to the patent; or (5) conditioned the license of any rights to the patent or the sale of the patented product on the acquisition of a license to rights in another patent or purchase of a separate product, unless, in view of the circumstances, the patent owner has market power in the relevant market for the patent or patented product on which the license or sale is conditioned. 1. What changes? Tie-ins / probably tie-outs Note the legislative history suggests 271(d)(5) doesn t apply to staple articles 2. How does 271(d)(5) address the antitrust/misuse distinction. Requires a market power calculation yet may retain staple/nonstaple dist.
What are patent pools? Antitrust & Patent Misuse Patent Pools What are the economic benefits to consumers? May break roadblocks cased by patents. May increase / induce standardization. May reduce transaction costs from licensing What are the potential harms? Might restrain competitors from entry to market Might allow for division of sales and other cartel behavior Might reduce incentives for pool members to innovate How to distinguish?
Remedies and Calculation of Damages General rule: injunctions follow a finding of infringement The more interesting question: calculating patent damages Rite-Hite v Kelley (Fed. Cir. 1995) (en banc) RH wins its infringement suit for device securing vehicles to a loading dock RH sells three devices: [1] the MDL 55 [2] the ADL 100 [3] dock levelers What is the relationship between these and the patent? The accused device? MDL 55 : embodies the patent claims ADL 100: not patented was the device Kelley competed with Dock levelers: not patented sold with the patented devices
Remedies and Calculation of Damages Question 1: can a patentee recover damages based on lost sales of similar/competing devices (ADL 100) not covered by the litigated patents? Why would we want to allow this? Why not? What test is established by the court? reasonable foreseeability proximate cause How is this distinct from leveraging / antitrust? Question 2: can a patentee recover damages based on lost sales of complementary devices (dock levelers)? What is the entire market value rule? Why does it not apply here? Better choice of words: complementary product rule Question 3: what is the relationship between lost profits and reasonable royalties? Statute requires reasonable royalty even if there is no proof that the patentee would have made the sale
Remedies and Calculation of Damages Grain Processing Corp. (ND IA 1997) (Easterbrook) D.Ct. denied the claim for lost profits. Why? Why the reversal? Who s right? Hypotheticals: Disk Drives {1} The old disk drive uses spinning platters and an arm to read magnetic information. Cost: $.10 per MB {2} The new system uses lasers to read and write holographic data in crystal lattices. Cost: $.06 per MB What is the maximum lost profits if you infringe the new system? Gasoline Production: the patent covers the cheapest way of making a staple product. What is the maximum in lost profits? In Grain Processing, GPC had a patent on a particular version of a staple product. What does Easterbrook conclude? Did the Federal Circuit get Rite Hite wrong?