[Ip-health] U.S. Compulsory licensing of medical inventions as a limit on remedies under eBay v MercExchange

Anne Mira Guha anne.mira at gmail.com
Mon Jun 7 10:24:09 PDT 2010

Source URL: http://keionline.org/node/862

U.S. Compulsory licensing of medical inventions as a limit on remedies
under eBay v MercExchange
By Anne Guha Created 7 Jun 2010 - 10:42am

In 2006 the Supreme Court paved the way for, in effect, judicial
compulsory licensing by holding in eBay v. MercExchange [1] that,
contrary to wide-scale practice at the time, permanent injunctions
should not automatically issue upon a finding of patent infringement.
It held that principles of equity required that the plaintiff in
infringement cases satisfy a four-factor test before a court may issue
a permanent injunction: (1) that it has suffered an irreparable
injury; (2) that remedies available at law, such as monetary damages,
are inadequate to compensate for that injury; (3) that, considering
the balance of hardships between the plaintiff and defendant, a remedy
in equity is warranted; and (4) that the public interest would not be
disserved by a permanent injunction. Following this case, there have
been several instances when courts have responded to instanced of
infringement of medical patents by denying injunctive relief, instead
granting monetary damages, often in the form of royalty rates.

The following are four examples from the medical technology field.

2006: Voda v. Cordis Corporation

In a 2006 case, Dr. Jan K. Voda alleged that three patents concerning
an angioplasty guide catheter were infringed by Cordis (a Johnson and
Johnson company). A jury found for Dr. Voda on infringement (though it
did not find willfulness), and determined that he was entitled to a
reasonable royalty of 7.5% of Cordis’ gross sales of the infringing
catheters. Finding that Dr. Voda failed to demonstrate either
irreparable injury or that monetary damages would be inadequate, the
court denied his request for a permanent injunction. The denial of the
injunction was affirmed on appeal (536 F.3d 1311).

2007: Innogenetics, N.V. v. Abbott Labs

In 2007, Innogenetics brought suit in Wisconsin against Abbott
Laboratories alleging that Abbott had infringed its patent for a
method of genotyping the hepatitis C virus, marketed in the form of
diagnostic test kits. The jury found that the patent had indeed been
infringed, and, based on a consideration of a hypothetical negotiation
for a license, it determined that Abbott should pay $7 million, which
included a running royalty of 5 to 10 euros per test sold up until
that time. The court evaluated Innogentic’s motion for injunctive
relief by evaluating the eBay factors, finding that the public
interest favored the denial of a permanent injunction, but that all
other factors cut in favor of granting it. The court therefore granted
the injunction. On appeal in 2008, however, the Federal Circuit
vacated this injunction. Additionally, it found that the $7 million
verdict was not a royalty limited only to Abbott’s past infringement,
saying: “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.”

2009: Bard Peripheral Vascular, Inc. v. W.L. Gore & Associates

In a 2009 case, patentee Bard Peripheral Vascular, Inc. sued W.L. Gore
& Associates in Arizona for infringement of a patent for a prosthetic
vascular graft. Finding infringement, the jury awarded Bard
$185,589,871.02, accounting for both lost profits and including a 10%
reasonable royalty rate. The court denied Bard’s motion for a
permanent injunction, holding that a compulsory license was
appropriate compensation; it wrote: “The Court is satisfied that a
fair and full amount of compensatory money damages, when combined with
a progressive compulsory license, will adequately compensate
Plaintiffs' injuries, such that the harsh and extraordinary remedy of
injunction-with its potentially devastating public health
consequences--can be avoided” (emphasis in original).

2009: Medtronic Somafor Danek USA, Inc. v. Globus Med., Inc.

The fourth example was in a 2009 Pennsylvania infringement action
between patentee Medtronic Sofamor Danek USA, Inc. and Globus Medical,
Inc. concerning a dispute over patents pertaining to devices and
methods used by spinal surgeons to stabilize bony structures,
manufactured and marketed by Medtronic in a commercial embodiment
called the “Sextant System,” and by Globus as the “Pivot System.” A
jury found the patents infringed. Following unsuccessful settlement
discussions, the parties agreed to a bench trial on the matter of
damages and injunctive relief. The court refused to grant an
injunction, and determined that a royalty rate of 15% of Globus’ sales
would be applied to a royalty base of $13,901,795, resulting in a
reasonable royalty of $2,085,269.20, plus prejudgment interest.

Case Citations:
Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., 2009 U.S. Dist.
LEXIS 31328 (D. Ariz. 2009)
Innogenetics, N.V. v. Abbott Labs., 512 F.3d 1363 (Fed. Cir. 2008)
Innogenetics, N.V. v. Abbott Labs., 578 F. Supp. 2d 1079 (W.D. Wis. 2007)
Medtronic Somafor Danek USA, Inc. v. Globus Med., Inc., 637 F. Supp.
2d 290 (E.D. Pa. 2009)
Voda v. Cordis Corp., 2006 U.S. Dist. LEXIS 63623 (W.D. Okla. 2006)

Anne Mira Guha
JD/MA candidate (2011)
The George Washington University Law School
The Elliott School of International Affairs (International Science and
Technology Policy)
http://www.linkedin.com/in/anneguha [2]

Source URL: http://keionline.org/node/862

[1] http://www.supremecourt.gov/opinions/05pdf/05-130.pdf
[2] http://www.linkedin.com/in/anneguha

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