No, this is not the Black Friday topic column. My only feeling on this front is that we should all support local businesses to the extent possible. Aside from this shopping proposal, I want to focus this week on the very interesting recent Federal Circuit decision on one of my favorite topics, patent damages. I always look to the Federal Circuit handle damages cases, just because torts is still a lagging area of patent law in relation to its relevance to most disputes between litigants. Part of the reason for this, of course, is that very few patent cases actually reach trial and judgment, making damages appeals uncommon.
Fortunately, at least some damages disputes make their way into the Federal District. And when they do, they tend to present interesting, realistic conditions. In our case this week, Vectura Limited v. GlaxoSmithKline LLC (Opinion Here), The parties had some history of prior authorization that largely ended up resolving the appeal. The case reached the Federal District from Delaware, where Vectura won a jury verdict of nearly $ 90 million, based on 3% of the equity on sales of GSK’s inhalers containing lactose particles coated with magnesium stearate. On those coated particles particles of the active ingredient are deposited according to Vectura’s confirmed patent. The presence of magnesium stearate helps disperse the drug into a patient’s lungs, making the technology a staple of GSK’s inhalers, which itself produced nearly $ 3 billion in the damage period by the trial. Overall, the $ 90 million compensation award represents a significant judgment, both in terms of the value of the case and the relevance of the patented technology for the products in question.
On appeal, the Federal Circuit confirmed the outcome of the infringement before referring to the two compensation questions presented. First, GSK argued that a new compensation trial was warranted because Vectura’s theory of damages was legally flawed. This theory was based on an alleged “similar license” that Vectura and GSK had previously entered into in 2010 for a similar use to magnesium stearate in inhalers. During the trial, Vectura’s damages expert felt that – based on a 2010 license – GSK would have agreed to an unspecified royalty rate of 3% applied to GSK’s total sales of inhalers. Having a 2010 license as a comparable license was critical, because without it, using the GSK’s total sales as a proprietary base would be inappropriate without the accompanying distribution analysis. With reference to the “somewhat unusual circumstance” in this case, the Federal Circuit endorsed Vectura’s compensation expert testimony about comparability of licenses, eliminating the need for distribution.
Furthermore, the Federal Chamber also credited Vectura’s damages expert on the question of whether the royalty rate should be determined, and found that “by 2016, the accused inhalers had already become hugely successful, which would have increased Vectura’s influence in hypothetical negotiations.” ” Accordingly, although the 2010 license between the two parties had a ceiling royalty rate (with no outstanding fees on GSK sales in excess of £ 500m), the colossal success of the accused products lent credence to the jury’s decision not to apply the compensation ownership cap Granted to Vectura.
Next, the Federal Chamber tackled a common case in expensive patent cases, the alleged damaging effect of jury hearing of references to the infringer’s huge total revenue. While this case is usually the subject of pre-trial motions In Limen, GSK only requested that its overseas sales numbers be excluded in this case. At trial, however, it contested the Vectura compensation expert’s mention of $ 3 billion in US sales in question. These arguments gained some traction with the trial judge, who expressed dissatisfaction with the use of $ 3 billion in total sales, particularly regarding the “pennies on the dollar” argument as the basis for Vectura’s damages. But since “the total revenue was an appropriate basis the jury needed to hear to understand the plaintiff’s expert analysis of damages,” there was no reason to overturn the jury judgment according to the trial judge. The Federal Circuit did not find “a basis for speculation in the judgment of an experienced trial judge in this regard.” The ruling was fully upheld, even when the Federal Circuit agreed in principle that “pennies on the dollar” type compensation claims were incorrect, just as references to the defendant’s total revenue when the “total amount of accused product sales” was not an adequate ownership rule.
In the end, the The vector The case provides some important context for assessing the comparability of licenses as part of the analysis on distribution. They indicate, at a minimum, that prior licenses involving the same parties may support the creation of comparability even when there are differences in the scope of the license or in the patents that are licensed. As the number of well-capitalized NPEs targeting the same group of wealthy defendants increases again and again, the odds of prior licenses increase among litigants in a subsequent trial on different patents day in and day out. Here, this dynamic ended up slicing against GSK, even after it had successfully negotiated a suitable maximum royalty in the previous license that both the District Court and Federal Circuit had found “comparable”. Basically, the defendants should probably assume that comparing shopping with previous licenses at trial would not result in less damages. Hence, in such cases, a pre-trial settlement may be the real deal.
Feel free to send comments or questions to me at email@example.com or via Twitter: gkroub. Any topic suggestions or ideas are very welcome.
Gaston Krupp lives in Brooklyn and is a co-founder of Krupp, Silbershire and Kolmykov PLLCAnd boutique for intellectual property lawsuits, and Markman Consultants LLC, A leading patent advisory firm for the investment community. Gaston’s practice focuses on intellectual property litigation and related advice, with a strong focus on patent matters. You can reach him at firstname.lastname@example.org Or follow him on Twitter: gkroub.