[Pharm-policy] Michael Pegues on setting royalties inpatent
litigation
James Love
love@cptech.org
Thu, 28 Sep 2000 12:39:47 -0400
Susan Finston wrote:
>
> Jamie: the actual standard for compensation for patent infringement is actually set forth in the first para of the article, which I have copied here (one would almost think that you have an agenda to which you seek to fit the facts):
Susan, of course there is a huge literature on setting compensation
for patents in infringement, government use or compulsory licensing
cases. I have posted URLSs for several cases, articles and laws, and I
welcome PhRMA to post its own citations as well. However, I think it is
rather unfair to suggest I have "an agenda to which you seek to fit the
facts." Like PhRMA, I have a point of view. However, I think we are
been quite happy to focus on what the law is. As a practical matter,
after publishing a URL, I often don't post every word in an article. I
can't see why what point your note below seeks to make. Our web pages
are full of examples of different arguments and outcomes in disputes
over royalty rates. And it is not even clear what the different
approaches would mean for different markets. For example, in the "lost
profits" approach, what would be the lost profits for an infringement or
use of a patent for a population that was unable to buy anything at the
world price? In the US government eminent domain cases, the "what the
patent owner has lost, not what the user has gained" outcomes have been
for lower compensation that what the patent owners have sought ---
compensation as if they government would have paid the commercial price
for every unit it used. But even here, you can find all sorts of cases
with different results.
Let me repeat my offer to PhRMA. Please post pointers to any cases,
academic papers model laws, or other authorities that you want, and even
better, let us know which methods PhRMA endorses, and what problems
PhRMA has with alternative approaches. Having made this offer, which
of course has been long-standing, I would expect PhRMA to present the
cases and arguments that it supports. I don't think it is my job to
make PhRMA's case on a particular point, but like everyone else, I am
always interested in knowing what PhRMA has to say. For example, I was
please that PhRMA has told USTR that 5 percent is the average royalty
for patents on pharmaceutical. That was useful information, and I
would appreciate seeing additional contributions to this list from
PhRMA.
Jamie
>
> Title 35, section 284 provides in part that, "upon a finding for the claimant the court shall award the claimant damages adequate to compensate for infringement...." The purpose of compensatory damages is not to punish the infringer, but to render the patent owner whole. See Aro Mfg. Co. v.
> Convertible Top Replacement Co., 377 U.S. 476, 507, 84 S. Ct. 1526 (1964) ("the question to be asked in determining damages is: 'Had the infringer not infringed, what would the patent holder . . . have made?'"); General Motors Corp. v. Devex Corp., 461 U.S. 648, 654, 103 S. Ct. 2058
> (1983)("damages adequate to compensate" means "full compensation for 'any damages' [the patent owner] suffered as a result of the infringement.") The amount of damages is a question of fact on which the plaintiff bears the burden of proof by a preponderance of the evidence. SmithKline
> Diagnostics, Inc. v. Helena Labs. Corp., 926 F.2d 1161, 1164 (Fed. Cir. 1991). While there are no statutory limitations on the elements of a damage award that will constitute "full compensation" in a particular case, two general measures are often considered: (1) a reasonable royalty between a
> willing licensee and a willing licensor in a hypothetical market as it would have developed absent the infringement; or (2) lost profits measured in such a hypothetical market. See King Instruments Corp. v. Perego, 65 F.3d 941, 947 (Fed. Cir. 1995), cert. denied, 517 U.S. 1188 (1996)("Section 284
> imposes no limitation on the types of harm resulting from infringement that the statute will redress.")
>
> >>> James Love <love@cptech.org> 09/27/00 02:21AM >>>
> http://www.hayboo.com/briefing/6_29_00Pegues.htm
> Protecting Patents, Trademarks, Copyrights:
> Remedies for Infringement
> For Presentation
> Houston, Texas: June 29-30, 2000 and September 14-15, 2000
> Dallas, Texas: July 6-7, 2000 and September 21-22, 2000
> The University of Houston Law Foundation: Corporate, Partnership and
> Business
> Law Seminar and Representing New Businesses and Startups Seminar
> Michael Pegues - Intellectual Property Litigation
>
> This is an interesting page with a lot of discussion of court set
> royalties in patent disputes. Here is an excerpt from one case
> mentioned.
>
> [snip]
>
> In the course of a bench trial, GPC sought damages for lost profits
> based on lost sales of GPC's food additive, price erosion, and
> accelerated market entry by AMP after the patent expired. GPC further
> claimed that for any of AMP's sales not covered by an award of lost
> profits, GPC was entitled to a 28% royalty on AMP's infringing sales.
> The district court held that a 3% reasonable royalty was adequate to
> compensate GPC, and denied recovery of lost profits entirely. (The
> district court held that the fourth process constituted an "available"
> non-infringing substitute sufficient to bar the recovery of lost
> profits, and this issue is discussed further below.) Id. at 1347.
>
> The Federal Circuit held that the district court had supported its
> royalty analysis with sound economic data and with actual, observed
> behavior in the market, and also commented:
>
> "The [district] court candidly stated that the 3% rate is its "best
> estimate," an honest observation that would apply to most reasonable
> royalty analyses, given the difficulty of determining a hypothetical
> agreement between parties which did not actually agree on anything at
> all."
>
> [snip]
>
> James Love, Consumer Project on Technology
> v. 1.202.387.8030, fax 1.202.234.5176
> love@cptech.org, http://www.cptech.org
>
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--
James Love mailto:love@cptech.org http://www.cptech.org
Consumer Project on Technology, P.O. Box 19367, Washington, DC 20036
voice 1.202.387.8030 fax 1.202.234.5176