Innogenetics: Forward Looking Damages Approved

ScreenShot002The injunction decision in Innogenetics deserves a second look. In that case, the Federal Circuit closely examined the Wisconsin District Court’s award of both injunctive relief and $1.2 million in forward looking damages.

The $7 million total damage award was divided into two parts by the jury: a $5.8 million “market entry fee” and a $1.2 million “ongoing royalty payment.”*  This award “exactly tracked” the damage award proposed by the patentee’s expert and also fit within the jury instructions, which called for “both an up-front payment and an ongoing royalty payment.” 

In addition to receiving a lump-sum to cover ongoing royalties, the District Court also awarded an injunction to stop ongoing infringement.  On appeal, the CAFC rejected this double-dipping. In her opinion, however, Judge Moore, was careful to cast the reversal in the language of eBay v. MercExchange.  Thus, the appellate panel held that a patentee who asked for and received future licensing royalties has no standing to complain of irreparable harm.

The reasonable royalties awarded to Innogenetics include an up-front entry fee that contemplates or is based upon future sales by Abbott in a long term market. When a patentee requests and receives such compensation, it cannot be heard to complain that it will be irreparably harmed by future sales.

Although the court did not use the words, the rule here appears to be akin to that of equitable estoppel.  This is a simple case for the appellate panel because the patentee asked for the forward looking damages.  However, the panel also implicitly accepts forward looking damages as an adequate substitute for injunctive relief.  The collection of damages negates irreparable harm — the most important eBay factor.**

On remand, the CAFC also appears to have vacated the lump-sum future sale damages. Without discussion, the appellate panel ordered that the district court instead implement a compulsory license with a running royalty payment. The only clue to the court’s reasoning lies in Footnote 9, which notes that the shift to a running royalty would allow the district court to retain jurisdiction to “ensure the terms of the compulsory license are complied with.” 

Notes:

6 thoughts on “Innogenetics: Forward Looking Damages Approved

  1. Equitable estoppel? Sounds like a compulsory defense or counterclaim to a well pled complaint asking for injunctive relief. Did the 4 factor test obviate the Fed.R.Civ.P too? Notice, due process?

  2. Thank you, Prof. Crouch, for focusing on this injunction issue, which I think is the biggest part of the opinion.
    Can you please post the briefs as well?

    Is this not the first post-eBay case where the Fed. Cir. actually reversed a district court grant of an injunction?
    Can anyone confirm?

    The Paice case was bad enough; but there the FC just affirmed the lower court’s compulsory license.
    Here, the FC itself decided to substitute such a license for the injunction.

    If you read the district court’s opinion, they handle all four of the eBay factors thoroughly, per the Supreme Court mandate.
    In contrast, the FC does not use the four factor analysis, seemingly defying the SC.
    Judge Moore’s opinion here is a poorly written one.
    Prof. Crouch’s suggestion that this is really equitable estoppel is charitable to Judge Moore, but may be the best way to view the case.
    One hopes that this case will be cited for equitable estoppel and not for injunctions.

  3. That’s my point. Where does the Court get the authority to order a compulsory license with a court-determined future royalty? All it is doing is condoning wilful infringement, without providing the compensation for wilful infringement due to the patentee.

    This case may have bad facts where the patentee invited a compulsory license. My concern is more with the typical case where the patentee wants an injunction, doesn’t get it and gets a court-determined continuing royalty forced on it. Shouldn’t the court simply say, we won’t enjoin the infringer, but he continues at his own risk of being found a wilful infringer? Wouldn’t that maintain the right to exclude that the statute confers on the patentee? The right to exclude is meaningless if the court orders a compulsory license.

  4. Dennis wrote, “On remand, the CAFC also vacated the lump-sum future sale damages.”

    Where does the opinion state that? The opinion states that the award tracked 5.8 for the “entry fee” and 1.2 for a royalty for the infringing products sold to date.

  5. poster: It’s hard to imagine that it wouldn’t be willful in most cases, or at a minimum, insane. Definition of insanity: repeating same actions (i.e., producing same infringing product), but expecting a different result (i.e., not infringing).

    The real issue in this case is that plaintiff’s expert opined as to a market entry fee that was inflated because it assumed use beyond judgment. The Feds didn’t want the plaintiff to get the benefit of that inflated market entry fee and also the injunction. But just because the plaintiff doesn’t deserve an injunction does not mean that the defendant deserves a compulsory license. Why reward the defendant? Just force the plaintiff to sue again and offset its damages from what it already received.

  6. In the typical infringement litigation that the patentee “wins,” the infringer has been found to infringe by making, using or selling the accused device, and the Court has agreed by issuing a judgment to that effect that has not been been overturned on appeal or the period for appeal has expired. If the infringer continues to infringe, why is that not willful infringement that warrants an award of treble damages?

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