USA Law and Practice Contributed by: Rob Cerwinski, Michael Johnson, Heather M Schneider and Michael B Cottler, Gemini Law LLP
To recover lost profits, a patent owner must dem ‑ onstrate that, but for the infringement, it would have made the infringer’s sales. The “Panduit” framework requires proof of (i) demand for the patented product, (ii) absence of acceptable non-infringing alternatives, (iii) the patentee’s manufacturing and marketing capa ‑ bility to meet demand, and (iv) the amount of profit the patentee would have made. Rite-Hite Corp. v Kelley Co ., 56 F.3d 1538, 1545 (Fed. Cir. 1995) (en banc). If lost profits cannot be established, damages are a reasonable royalty, which is the amount that would have been agreed upon in a hypothetical negotiation between a willing licensor and a willing licensee at the time infringement began. Courts determine such a royalty using the factors set out in Georgia-Pacific Corp. v US Plywood Corp. , 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970), including the nature of the patented invention, comparable licence agreements, and the commercial relationship between the parties. In phar ‑ maceutical cases, courts frequently examine existing licence agreements covering similar technologies, considering regulatory risk and market exclusivity. Enhanced damages may be awarded in egregious cases of wilful infringement. Under Halo Elecs., Inc. v Pulse Elecs. , Inc. , 579 US 93, 102–04 (2016), district courts have discretion to award up to treble damages, but such awards are reserved for conduct that is wil ‑ ful, wanton, or in bad faith. Damages are generally limited to infringement occur ‑ ring within six years prior to the filing of the com ‑ plaint. 35 USC 286. Pre-judgment interest is ordinarily awarded to fully compensate the patent owner and typically accrues from the date of first infringement. Post-judgment interest is governed by statute and accrues from the date of judgment. In Hatch-Waxman and BPCIA litigation, damages are unavailable absent a commercial launch. The filing of an ANDA with a Paragraph IV certification does not give rise to damages unless the accused product is commercially marketed. Similarly, under the BPCIA, damages may be limited to a reasonable royalty where a suit is not timely filed following an NCM. 42 USC 262 (l)(8)–(9).
Damages must be determined by a jury if requested, consistent with the Seventh Amendment to the US Constitution. Courts have discretion to bifurcate liabil ‑ ity and damages or to try them together. Execution of a damages judgment is generally stayed for 30 days after entry unless the court orders otherwise. FRCP 62 (a). If a party is wrongfully enjoined, recovery is typically limited to the amount of the injunction bond posted under FRCP 65 (c). Claims by third parties for pat ‑ ent damages are uncommon and generally limited to exclusive licensees that have standing to bring suit as discussed in 1.1 Claimants/Plaintiffs to an Action . 5.5 Legal Costs Under the American Rule, each party generally bears its own legal costs. However, courts may award reasonable attorneys’ fees to the prevailing party in “exceptional cases” under 35 USC 285, as clarified by the Supreme Court in Octane Fitness, LLC v ICON Health & Fitness, Inc. , 572 US 545, 554 (2014). An exceptional case is one that stands out based on the substantive strength of a party’s litigating position or the unreasonable manner in which the case was liti ‑ gated. Even where attorneys’ fees are awarded, other costs such as expert fees are generally not recover ‑ able absent specific statutory authority. 5.6 Relevance of Claimant/Plaintiff Conduct to Relief US courts may withhold or limit relief based on ineq ‑ uitable conduct or other bad-faith behaviour by the patent owner. Inequitable conduct before the USPTO may render a patent unenforceable. GS Cleantech Corp. v Adkins Energy LLC , 951 F.3d 1310, 1325 (Fed. Cir. 2020). Equitable relief may also be denied under the doctrine of unclean hands, which bars relief where a party has engaged in misconduct directly related to the asserted patent rights. Precision Instrument Mfg. Co. v Auto- motive Maint. Mach. Co. , 324 US 806, 814 (1945). In addition, unreasonable litigation conduct may support a finding that a case is exceptional, resulting in fee shifting under 35 USC 285. Octane Fitness , 572 US at 554.
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