A recent blog post dealt with the question of what happens when the prevailing patentee in an infringement action is denied a permanent injunction and the infringer continues to infringe.
It now seems, based on an unbroken string of two (2) cases, that the court directs the parties to attempt to negotiate a royalty for future use of the patented invention. If the parties are unable to reach an agreement, the court – meaning the judge – can impose a royalty rate for any future use by the defendant-infringer (slimeball).
The second of these cases, Boston Scientific Corp. v. Johnson & Johnson, is particularly interesting (well, interesting to some of us) for several reasons. Firstly, the plaintiffs lost. The jury found its patent invalid. They then went on to find for the defendant in its counterclaim that the plaintiff had infringed its patents. Oops!
Secondly, the defendant, for some reason, did not call its damages expert at trial. Hence, the court was not able to award any damages to the defendant for the past infringement of its patents. (We have a hard time seeing this as anything other than a big boo-boo.) Oops, again. What now?
The court held that awarding the defendant “equitable relief in the form of an injunction or an ongoing royalty” would not contravene the plaintiff’s right to a jury trial. The court then opted for the ongoing royalty rather than the injunction. (The reasoning behind that decision, unfortunately, is unstated.) As noted above, the court ordered negotiations, which were unsuccessful. The defendant demanded an ongoing royalty rate of 6%, while the plaintiff offered .5%.
After hearing testimony from the damages experts from both sides (“experts” are the lawyers’ highly paid sidekicks), the court found, inter alia (a reminder that the writer is an attorney), that the patent in suit did not contribute to the popularity of the infringing product and that the design features of the patent in suit play a secondary role in the infringing products. None of this sounds good for the defendant (remember, in this case, the defendant is the party whose patents were infringed – confusing, isn’t it?). Nevertheless, the court awarded an ongoing royalty of 5.1% -- very near the rate sought by the successful counterclaimant and more than 10 times the rate offered by the infringer.
THE LESSONS TO BE LEARNED: (1) when suing a big corporation, expect counterclaims; don’t sue unless your own skirts are clean; (2) remember to put in ALL your witnesses; and (3) it once again appears that court damages decisions are generally more favorable to the party taking the less extreme position.