[Ip-health] CAFC Approves Compulsory License (but calls it an "ongoing royalty")

[James Love]

At some point, the technical assistance community needs to start reading
(carefully) Article 44 of the TRIPS, including the very last sentence of
Article 44.2.  In the meantime, this is the CAFC approving one of the
many US compulsory licenses issued under Article 44 of the TRIPS.  Jamie


http://www.patentlyo.com/patent/2007/10/cafc-approves-c.html

Oct 19, 2007
CAFC Approves Compulsory License (but calls it an "ongoing royalty")
Paice v. Toyota (Fed. Cir. 2007)

A jury found that Toyota infringed Paice=E2=80=99s hybrid engine patent onl=
y
under the doctrine of equivalents. In a post-verdict decision, the Texas
district court denied injunctive relief =E2=80=94 finding that a $25 per en=
gine
compulsory license rate was sufficient. On appeal, the CAFC affirmed the
infringement decision =E2=80=94 holding that the jury had sufficient eviden=
ce to
both (1) find infringement under the doctrine of equivalents and (2)
deny literal infringement.

The major question at issue in this appeal, however, is the ongoing
royalty. (The CAFC majority refused to call the ongoing royalty a
compulsory license =E2=80=94 Judge Rader, concurring, noted that the two ar=
e
identical).

No Relief and No License: Denial of injunctive relief does not equate
with issuance of a compulsory license.  Here, the CAFC recognizes that
after denying injunctive relief, a district court may choose simply to
wait for the parties to either negotiate a license or stop infringing.
In fact, the court noted that an ongoing royalty should not be
determined simply as a matter of course. Rather, such an extreme form of
relief should be used only as =E2=80=9Cnecessary.=E2=80=9D

[A]warding an ongoing royalty where =E2=80=9Cnecessary=E2=80=9D to effectua=
te a remedy =E2=80=A6
does not justify the provision of such relief as a matter of course
whenever a permanent injunction is not imposed. In most cases, where the
district court determines that a permanent injunction is not warranted,
the district court may wish to allow the parties to negotiate a license
amongst themselves regarding future use of a patented invention before
imposing an ongoing royalty. Should the parties fail to come to an
agreement, the district court could step in to assess a reasonable
royalty in light of the ongoing infringement.


Calculating the Reasonable Ongoing Royalty: In this case, the district
court held that the ongoing royalty should be the same royalty rate as
determined by the jury for past damages. On appeal, the CAFC found that
much more should go into the determination of an ongoing royalty. And,
of course, future royalties would likely be different than past
royalties if only because of a shift in timing of the hypothetical
negotiation.

Power to Order Compulsory License: Although settlement is preferred, the
CAFC made clear that a district court judge has the power to declare an
=E2=80=98ongoing royalty=E2=80=99 rate.  Further, because ongoing royalties=
 are a form
of equitable relief, there is no Seventh Amendment right to a jury
decision.

Remanded for a recalculation of the ongoing royalty.