[Ip-health] Peter Zura on Toyota's $25 per car compulsory license on Paice transmission patents

[James Packard Love]

http://271patent.blogspot.com/2007/04/what-hath-scotus-wrought-
willful.html

Peter Zura's 271 Patent Blog

Wednesday, April 11, 2007
What Hath the SCOTUS Wrought? Willful Infringement In a Post-Ebay World

In the case of Paice LLC v. Toyota Motor Corporation, the E.D. Texas
found that Toyota willfully infringed Paice's patent. Since Ebay,
permanent injunctions are no longer granted as a matter of course,
and the district courts must use the four-factor test to determine a
proper equitable remedy.

In Paice, the district court decided that, since Paice did not
produce products that competed with Toyota, an injunction was not an
appropriate remedy. Instead, the court ordered that each future sale
of a subject vehicle by Toyota would require a $25 per vehicle
royalty to Paice. This number was based off of a reasonable royalty
that the jury determined would have been agreed upon by the parties
in a hypothetical negotiation at a time just prior to first
infringement.

The problem here is that the Ebay court provided no guidance on what
types of remedies are appropriate for the court to consider, and how
the remedies are applied.

According to Paice, the reasonable royalty may have been acceptable
for "regular" infringement, but it is not appropriate for ongoing,
willful infringement. Since the district court's royalty is
tantamount to a compulsory license, Paice argues that such a remedy
is contrary to judicial precedence and 35 U.S.C. =A7 283. Also, Paice
argues that since a compulsory license relates to damages, Paice is
entitled to a jury trial under the 7th Amendment to determine the
appropriate number for future damages:

-------------

     Toyota erroneously asserts that once Paice made a request for
equitable relief, the district court was free to fashion any remedy
it chooses, including entry of a compulsory license for future
infringement . . . If this position were correct, there would be no
limitation on the remedies available because virtually all patent
cases include a request for some equitable remedy. The right to a
damages trial before a jury would not exist, and yet the law is clear
that the Seventh Amendment requires that a district court submit
damages to a jury.

     ***

     Toyota's argument assumes that Paice is only entitled to the
same reasonable royalty rate the jury calculated for past damages.
That amount is what the jury found a willing licensor and willing
licensee would have agreed upon in a hypothetical negotiation from
the time infringement began to trial . . . It cannot, and should not,
be used for calculating a future royalty rate in a prospective
compulsory license. This standard fails to take into account the
potential for future lost profits, loss of potential value in
granting an exclusive license, and the ongoing willful infringement
that would occur by Toyota. Though an injunction has not been
entered, Toyota's decision to commit ongoing willful infringement of
a valid United States patent, because it is so essential to the
success of its product, should be considered in setting a royalty
rate. A district court may find that it should not permanently enjoin
an adjudged infringer from selling infringing goods. However, the
infringer should still have to account for its choice to continue
willfully infringing if it chooses to do so.

-------------

In response, Toyota argues that the license was appropriate under
section 283, which authorizes courts to award patentees prospective
injunctive relief "in accordance with the principles of equity . . .,
on such terms as the court deems reasonable." Since the equitable
jurisdiction of the court was properly invoked for injunctive
purposes, "[t]he court has the power to decide all relevant matters
in dispute and to award complete relief even though the decree
includes that which might be conferred by a court of law [i.e.,
monetary damages]."

Because the prospective damages were awarded as part of the equitable
jurisdiction of the court, Toyota argues that Paice is not entitled
to a jury trial.

Oral Arguments are scheduled for May 7, 2007 (2006-1610)

See Paice's Brief here.
http://www.mediafire.com/?0mmvnhycmam

See Toyota's Brief here.
http://www.mediafire.com/?ajonint1mny

Posted by Two-Seventy-One Patent Blog at 8:11 AM


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James Packard Love
Knowledge Ecology International
http://www.keionline.org
james.love@keionline.org
Washington, DC +1.202.332.2670

"If everyone thinks the same: No one thinks." Bill Walton"