[Ip-health] Abbott's 2008 compulsory license on the Innogenetics HCV patents

Jamie Love james.love at keionline.org
Mon Jul 21 09:03:10 PDT 2014


Anne Mira Guha and others have written about this case before, but I
thought it would be useful to review, in the context of our KEI memo on USA
HCV patent issues.  (http://keionline.org/node/2058)

Note that in this 2008 case, where Abbott received a compulsory license to
Innogenetics HCV patents, the royalty of the 5-10 Euros per genotyping
assay kit clearly anticipated the export of the test.

Also, as an interesting footnote, in November 2000, Innogenetics had asked
the European Commission to use competition law to force a license to Chiron
HCV patents for HCV diagnostic tests.


Jamie
-------------------------

Abbott's 2008 compulsory license on the Innogenetics HCV patents


United States Court of Appeals,Federal Circuit.
INNOGENETICS, N.V., Plaintiff-Cross Appellant, v. ABBOTT LABORATORIES,
Defendant-Appellant.


Nos. 2007-1145, 2007-1161.
Decided: January 17, 2008

Before BRYSON, Circuit Judge, CLEVENGER, Senior Circuit Judge, and MOORE,
Circuit Judge. John S. Skilton, Heller Ehrman LLP, of Madison, Wisconsin,
argued for plaintiff-cross appellant. With him on the brief were
Christopher G. Hanewicz, David L. Anstaett, and Randy J. Kozel; and Shannon
M. Bloodworth, of Washington, DC. Of counsel on the brief was Colin G.
Sandercock, Proskauer Rose LLP, of Washington, DC. Of counsel was Sarah C.
Walkenhorst. Adrian M. Pruetz, Pruetz Law Group LLP, of Manhattan Beach,
California, argued for defendant-appellant. With him on the brief was Erica
J. Pruetz. Of counsel on the brief was Scott B. Kidman, Quinn Emanuel
Urquhart Oliver & Hedges LLP, of Los Angeles, California.

Abbott Laboratories (Abbott) appeals on a multitude of grounds the judgment
entered against it by the United States District Court for the Western
District of Wisconsin for infringement of Innogenetics, N.V.'s
(Innogenetics) U.S. Patent No. 5,846,704 (the ′704 patent). We reverse and
remand for a new trial the district court's judgment as a matter of law
that claim 1 of the ′704 patent was not anticipated by U.S. Patent No.
5,580,718 (the Resnick patent). We also vacate the permanent injunction
granted against Abbott. As for the whole host of other issues that Abbott
raises on appeal, we find no reversible error and affirm the lower court's
judgment in those respects. Innogenetics cross-appeals the district court's
judgment as a matter of law that Abbott's infringement was not willful.
Under the standards recently articulated in In re Seagate Technology, LLC,
497 F.3d 1360 (Fed.Cir.2007) (en banc), we also affirm that aspect of the
lower court's judgment.


BACKGROUND

The technology in this case pertains to diagnostic tools that not only
detect but also classify hepatitis C virus (HCV) genotypes in a biological
sample, which facilitates tailoring the treatment of patients with
different genotypes. The ′704 patent claims a method of genotyping HCV
based on distinct genetic sequences that can be found in the 5 prime
untranslated region (5′ UTR) of the HCV genome. This method teaches
specifically hybridizing probes, or short strands of nucleic acids, to a
target sequence in the 5′ UTR via complementary base pairing principles,
and then detecting the formation of any complexes formed between the probes
and the nucleic acids of the 5′ UTR.

Abbott's genotyping assay kits, like the method claimed in the ′704 patent,
also involve specifically hybridizing probes to the nucleic acids of the
HCV's 5′ UTR. The kits then detect the successful formation of any
specifically hybridized complexes using the process of Realtime polymerase
chain reaction (PCR). Through this process, dye molecules attached to
Abbott's probes are released and observable as fluorescent signals after
polymerase enzymes destroy the hybridized probe-target complexes.

Innogenetics sued Abbott, asserting that Abbott's genotyping assay kits
infringe claims 1, 2, and 3 of the ′704 patent. Claim 1, the only
independent claim on appeal, reads in its entirety as follows:

A method of genotyping HCV present in a biological sample comprising
hybridizing nucleic acids in a biological sample with at least one probe
and detecting a complex as formed with said probe and said nucleic acids of
HCV, using a probe that specifically hybridizes to the domain extending
from the nucleotides at positions -291 to -66 of the 5′ untranslated region
of the HCV.


    [snip]

Post-trial, the district court denied Abbott's motion for a new trial on
infringement and invalidity and for judgment as a matter of law or a new
trial on damages. However, the district court did grant Abbott's motion for
judgment as a matter of law that infringement was not willful. The district
court also granted Innogenetics' motion for a permanent injunction.

    [snip]

IV. PERMANENT INJUNCTION

We review the district court's decision to grant the permanent injunction
for abuse of discretion. Joy Techs., Inc. v. Flakt, Inc., 6 F.3d 770, 772
(Fed.Cir.1993). We may find an abuse of discretion on a showing “that the
court made a clear error of judgment in weighing relevant factors or
exercised its discretion based upon an error of law or clearly erroneous
factual findings.” Id. An injunction does not necessarily follow a
determination that a patent has been infringed. eBay, Inc. v. MercExchange,
LLC, 547 U.S. 388, 126 S.Ct. 1837, 1840, 164 L.Ed.2d 641 (2006). Rather,
whether an injunction is warranted in a patent case is to be determined, as
in other cases, according to the well established four part test. Id. at
1839.

Abbott contends that the district court clearly erred in its finding that
Innogenetics had been irreparably harmed and was not adequately remedied by
the $7 million award of damages for Abbott's infringement. It argues that,
because the jury included a market entry fee of $5.8 million in its
calculation of damages, Innogenetics has been fully compensated for both
Abbott's past infringement and possible future sales of its accused
products.

At the damages phase of trial, the jury was instructed to calculate a
reasonable royalty for Abbott's infringement of the ′704 patent starting
from “just before the infringement began (in June 2003).” Docket No. 359
(Jury Instructions 3). Nowhere did the jury instructions state the
reasonable royalty would be limited to a period from the start of
infringement to the date of judgment. In fact, the jury was told that a
reasonable royalty could “include both an up-front payment and an ongoing
royalty payment.” Docket No. 359 (Jury Instructions 1) (emphasis added).

Innogenetics conceded at oral argument that the final amount of damages
awarded by the jury included both a market entry fee of $5.8 million and an
ongoing royalty payment amount of $1.2 million. The jury's damage award
exactly tracked damages proposed by Innogenetics' expert, John Jarosz, at
trial-$7 million, which included an upfront payment that equated to
approximately $5.8 million and a running royalty of 5 to 10 Euros per test
on the 190,000 tests Abbott had sold up to that point. Docket No. 340
(Trial Tr. vol. 2, 9:15-10:8, Sept. 5, 2006). Contrary to Innogenetics'
contentions, the jury verdict of $7 million was not a royalty for Abbott's
past infringement only.7 The record is replete with references to the
market entry fee as an amount paid in anticipation of Abbott's long-term
license to sell its products. For example, Mr. Jarosz, testified that the
hypothetical negotiation upon which he was basing his proposed amount of
damages was not capped by the date of the jury award, but would have
involved looking at “what, over a longer term, would be a sensible
license.” Docket No. 340 (Trial Tr. vol. 2, 18:21-22, Sept. 5, 2006.)
Having used Innogenetics' licensing agreement with Roche as a template for
his calculations for this case, Mr. Jarosz also testified that one of the
reasons Roche entered a deal for an upfront market entry fee of $6 million
plus a running royalty is that “the long run is what drove its licensing
perspective.” Docket No. 340 (Trial Tr. vol. 2, 18:22-19:2, Sept. 5, 2006).
See also Docket No. 223 (Jarosz Video Dep. 115:12-116:25, July 27, 2006)
(explaining that the damage award contemplates an upfront fee, the
calculation of which is based upon projected sales until 2019, and a
running royalty); Docket No. 229 (Jarosz Expert Rep. 34-35) (explaining
that his $5.8 million market entry fee was based upon “projected sales of
its HCV genotyping tests through 2019”).

The reasonable royalties awarded to Innogenetics include an upfront 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. Moreover, this factor greatly outweighs the other eBay factors in
this case. As a result, the district court's grant of an injunction
prohibiting future sales of Abbott's genotyping assay kits was an abuse of
discretion and must be vacated.8 While the market entry fee was based upon
the projection that Abbott could sell its product through 2019, even Abbott
acknowledges that such future sales would be subject to the running
royalty, a compulsory license. We remand to the district court to delineate
the terms of the compulsory license, such as conditioning the future sales
of the infringing products on payment of the running royalty, the 5-10
Euros per genotyping assay kit.9


CONCLUSION

For the foregoing reasons, the judgment of the United States District Court
for the Western District of Wisconsin is affirmed-in-part,
reversed-in-part, and vacated-in-part. The case is remanded for further
proceedings in accordance with this opinion.

AFFIRMED-IN-PART; REVERSED-IN-PART; VACATED-IN-PART; and REMANDED

COSTS

No costs.

FOOTNOTES


. . .

7.   It is hard to believe that a hypothetical negotiation between
Innogenetics and Abbott would result in a royalty of $7 million that
included a market entry fee of $5.8 million to sell licensed products for a
three year period only, Abbott's total revenue during the period of
infringement was just $13 million. State Contr. & Eng'g Corp. v. Condotte
Am., Inc., 346 F.3d 1057, 1072 (Fed.Cir.2003) (“[A]n actual infringer's
profit margin can be relevant to the determination of a royalty rate in a
hypothetical negotiation.”) (citing Interactive Pictures Corp. v. Infinite
Pictures, Inc., 274 F.3d 1371, 1385 (Fed.Cir.2001)).

8.   In its order granting the permanent injunction, the district court
stated that “[i]t would denigrate the value of plaintiff's patent rights to
allow defendant to continue to sell plaintiff's invention as its own in
exchange for the same fee it would have paid without a lawsuit.” Injunctive
relief ought not to act as a form of “extra damages” to compensate for
litigation costs. See Amstar Corp. v. Envirotech Corp., 823 F.2d 1538, 1549
(Fed.Cir.1987) (remarking that injunctions may not be punitive in any
case). Cf. Mahurkar v. C.R. Bard, Inc., 79 F.3d 1572, 1581 (Fed.Cir.1996)
(finding that awarding “kickers” on top of a reasonable royalty to
compensate for heavy litigation costs or expenses is abuse of discretion).
If litigation costs were a factor, injunctive relief would be warranted in
every litigated patent case. Cf. eBay, 126 S.Ct. at 1840 (noting that
permanent injunctions are not to be granted as a matter of course in patent
litigation).

9.   An injunction delineating the terms of the compulsory license would
permit the court to retain jurisdiction to ensure the terms of the
compulsory license are complied with.


MOORE, Circuit Judge.



-- 
James Love.  Knowledge Ecology International
http://www.keionline.org, KEI DC tel: +1.202.332.2670, US Mobile:
+1.202.361.3040, Geneva Mobile: +41.76.413.6584,   twitter.com/jamie_love



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