ACTA and changes in global norms for damages and injunctions (for enforcement of intellectual property)

The Obama Administration, with the support of a Democrat-controlled U.S. Congress, is insisting the Anti-Counterfeiting Trade Agreement (ACTA) negotiations be conducted in secret. We know, from documents obtained in Europe and the summaries released in April 2009, that the draft ACTA has sections that deal with both injunctions and damages. We don’t have the current text. Earlier versions proposed ramped up damages, and significant changes in global norms for injunctions.

[This is a work in progress and will be updated next week with more examples, including several outside of the U.S., and with additional commentary]

The April 2009 summary of ACTA had only this to say regarding damages and injunctions:

CHAPTER TWO – LEGAL FRAMEWORK FOR ENFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS
Section 1: Civil Enforcement
Civil enforcement refers to providing courts or other competent authorities with the authority to order/take specific actions when it is established that a party has violated intellectual property laws, and the rules on when and how to use those powers. The issues under discussion in this section include:
* scope of the section – which intellectual property rights would be covered by the provisions of this section; 2
* the definition of adequate damages and the question of how to determine the amount of damages, particularly when a right holder encounters difficulties in calculating the exact amount of damage it has incurred;
* the authority of the judicial authorities to order injunctions which require that a party desist from an infringement;

The portions of the text that were leaked several months ago included this text on injunctions.

Article 2.7: Injunctions
Each Party shall ensure that, where a judicial decision is taken finding an infringement of an intellectual property right, the judicial authorities may issue against the infringer an injunction aimed at prohibiting the continuation of the infringement. Where provided for by domestic law, non-compliance with an injunction shall, where appropriate, be subject to a recurring penalty payment, with a view to ensuring compliance. The Parties shall also ensure that right holders are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe an intellectual property right.

Neither the EC nor the USTR has elaborated on the last sentence, concerning intermediaries and third parties, which has far-reaching consequences. In this note I focus on the requirement that “Each Party shall ensure . . . judicial authorities may issue against the infringer an injunction aimed at prohibiting the continuation of the infringement.”

While it seems normal that a judge would have the authority to issue an injunction to enforce a patent, copyright or other intellectual property right, national laws sometimes provide exceptions to the general rule, including in cases of considerable public interest and economic importance. The flexibility to eliminate the possibility of injunctions in certain cases is provided for in Article 44.2 of the TRIPS, for cases where national law provides for renumeration or compensation to patent owners when patents are used without authorization.

KEI is concerned that USTR and DG-Trade and attemping to create a new global norm for injunctions that would eliminate or reduce this flexibility. The key U.S. negotiator on this issue is Kira Alvarez, who as recently as last October was Vice-President for Global Policy at Time Warner, and in 2008 was Director of International Government Affairs for Eli Lilly, the pharmaceutical company.

USTR maintains the ACTA will not change US law. That certainly is not true if the ACTA text requires giving judges the authority to issue injunctions in all cases.

The following are a few examples from US law.

CASES IN U.S. PATENT LAW WHERE COURTS CANNOT ISSUE INJUNCTIONS

The Safe Harbour infringement exception for generic medicines: 28 USC 271 (e) (3)

This is also known by different names, including “the Bolar amendment,” and the Waxman Hatch Infringement Provisions. It concerns the use of patented inventions for purposes of registering generic medicines with the FDA.

28 USC 271 (e) (3)
In any action for patent infringement brought under this section, no injunctive or other relief may be granted which would prohibit the making, using, offering to sell, or selling within the United States or importing into the United States of a patented invention under paragraph (1).

Patent infringement involving medical practitioners: 35 USC 287 (c)(1)

A short but informative history of this exception is provided by Robert Gunderman and John Hammond, The Limited Monopoly: Under the Knife – Patenting Surgical Procedures, in the February 2009 issue of The Rochester Engineer. In short, the American Medical Association and many of its member were alarmed by efforts to sue doctors for infringements of patents when preforming surgical procedures. A number of legislative approaches were considered to address the issue. In the end, Congress allowed the patents to be issued, but eliminated any remedies against a licensed medical practitioner who infringed the patents while providing care.

35 U.S.C. 287 Limitation on damages and other remedies; marking and notice.
(c) (1) With respect to a medical practitioner’s performance of a medical activity that constitutes an infringement under section 271(a) or (b) of this title, the provisions of sections 281, 283, 284, and 285 of this title shall not apply against the medical practitioner or against a related health care entity with respect to such medical activity.

(2) For the purposes of this subsection:
(A) the term “medical activity” means the performance of a medical or surgical procedure on a body, but shall not include (i) the use of a patented machine, manufacture, or composition of matter in violation of such patent, (ii) the practice of a patented use of a composition of matter in violation of such patent, or (iii) the practice of a process in violation of a biotechnology patent.
(B) the term “medical practitioner” means any natural person who is licensed by a State to provide the medical activity described in subsection (c)(1) or who is acting under the direction of such person in
the performance of the medical activity.

Nuclear power 42 USC 2184

According to 42 USC 2184, in certain cases involving patents on nuclear energy, “no court shall have jurisdiction or power to stay, restrain, or otherwise enjoin,” the use of patented inventions.

TITLE 42 > CHAPTER 23 > Division A > SUBCHAPTER XII § 2184. Injunctions; measure of damages
No court shall have jurisdiction or power to stay, restrain, or otherwise enjoin the use of any invention or discovery by a patent licensee, to the extent that such use is licensed by section 2183 (b) or 2183 (e) of this title. If, in any action against such patent licensee, the court shall determine that the defendant is exercising such license, the measure of damages shall be the royalty fee determined pursuant to section 2187 (c) of this title, together with such costs, interest, and reasonable attorney’s fees as may be fixed by the court. If no royalty fee has been determined, the court shall stay the proceeding until the royalty fee is determined pursuant to section 2187 (c) of this title. If any such patent licensee shall fail to pay such royalty fee, the patentee may bring an action in any court of competent jurisdiction for such royalty fee, together with such costs, interest, and reasonable attorney’s fees as may be fixed by the court.

Use of patents by or for the government. 28 USC 1498 (a)

In cases involving the use of a patented invention “by or for” the U.S. federal government, no court can issue an injunction. The sole remedy for the patent owner is a claim for compensation. This includes:

Whenever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or manufacture the same, the owner’s remedy shall be by action against the United States in the United States Court of Federal Claims for the recovery of his reasonable and entire compensation for such use and manufacture. . . .
For the purposes of this section, the use or manufacture of an invention described in and covered by a patent of the United States by a contractor, a subcontractor, or any person, firm, or corporation for the Government and with the authorization or consent of the Government, shall be construed as use or manufacture for the United States.

This provision in U.S. law is widely used by the U.S. Department of Defense, but also by NASA, the Department of Energy, the National Institutes of Health (NIH), and other federal agencies.

CASES IN U.S. COPYRIGHT LAW WHERE COURTS CANNOT ISSUE INJUNCTIONS

Use of copyrighted works by or for the government. 28 USC 1498 (b)

(b) Hereafter, whenever the copyright in any work protected under the copyright laws of the United States shall be infringed by the United States, by a corporation owned or controlled by the United States, or by a contractor, subcontractor, or any person, firm, or corporation acting for the Government and with the authorization or consent of the Government, the exclusive action which may be brought for such infringement shall be an action by the copyright owner against the United States in the Court of Federal Claims for the recovery of his reasonable and entire compensation as damages for such infringement . . .

The “Orphan Works” Problem and Proposed Legislation

Limits on injunctions and damages are at the center of U.S. proposals to expand access to copyrighted works for which it is difficult or impossible to locate the owner of the copyright.

Statement of Marybeth Peters
The Register of Copyrights
before the Subcommittee on Courts, the Internet, and Intellectual Property, Committee on the Judiciary
United States House of Representatives
110th Congress, 2nd Session
March 13, 2008

The “Orphan Works” Problem and Proposed Legislation
Finally, we note that injunctive relief is limited under our proposal. If a user has added significant new expression, we do not support the availability of an injunction, provided, however that the user pays reasonable compensation. If the user has not added significant new expression, we support the availability of an injunction with the caveat that a court be instructed to account for any harm to the extent practicable, in order to mitigate the harm resulting from the user’s reliance.

TRADEMARK CASES

Innocent infringement by printers and publishers: 15 USC 1114

Remedies; infringement; innocent infringement by printers and publishers. 15 USC Chapter 22, Subchapter III, Section 1114.

(2) Notwithstanding any other provision of this chapter, the remedies given to the owner of a right infringed under this chapter or to a person bringing an action under section 1125 (a) or (d) of this title shall be limited as follows:

(A) Where an infringer or violator is engaged solely in the business of printing the mark or violating matter for others and establishes that he or she was an innocent infringer or innocent violator, the owner of the right infringed or person bringing the action under section 1125 (a) of this title shall be entitled as against such infringer or violator only to an injunction against future printing.

(B) Where the infringement or violation complained of is contained in or is part of paid advertising matter in a newspaper, magazine, or other similar periodical or in an electronic communication as defined in section 2510 (12) of title 18, the remedies of the owner of the right infringed or person bringing the action under section 1125 (a) of this title as against the publisher or distributor of such newspaper, magazine, or other similar periodical or electronic communication shall be limited to an injunction against the presentation of such advertising matter in future issues of such newspapers, magazines, or other similar periodicals or in future transmissions of such electronic communications. The limitations of this subparagraph shall apply only to innocent infringers and innocent violators.

(C) Injunctive relief shall not be available to the owner of the right infringed or person bringing the action under section 1125 (a) of this title with respect to an issue of a newspaper, magazine, or other similar periodical or an electronic communication containing infringing matter or violating matter where restraining the dissemination of such infringing matter or violating matter in any particular issue of such periodical or in an electronic communication would delay the delivery of such issue or transmission of such electronic communication after the regular time for such delivery or transmission, and such delay would be due to the method by which publication and distribution of such periodical or transmission of such electronic communication is customarily conducted in accordance with sound business practice, and not due to any method or device adopted to evade this section or to prevent or delay the issuance of an injunction or restraining order with respect to such infringing matter or violating matter.

PLANT BREEDER RIGHTS

Use of plant variety by or for the government. 28 USC 1498 (d)

Hereafter, whenever a plant variety protected by a certificate of plant variety protection under the laws of the United States shall be infringed by the United States, by a corporation owned or controlled by the United States, or by a contractor, subcontractor, or any person, firm, or corporation acting for the Government, and with the authorization and consent of the Government, the exclusive remedy of the owner of such certificate shall be by action against the United States in the Court of Federal Claims for the recovery of his reasonable and entire compensation as damages for such infringement . . .

PROTECTION OF TOPOGRAPHY OF SEMICONDUCTOR CHIPS

Protection of Semiconductor Chip Products 17 USC Chapter 9

Article 37 of the TRIPS (Acts Not Requiring the Authorization of the Right Holder) provides a mandatory exception from injunctions in cases involving the protection of semiconductor chip products, “where the person performing or ordering such acts did not know and had no reasonable ground to know, when acquiring the integrated circuit or article incorporating such an integrated circuit, that it incorporated an unlawfully reproduced layout-design.” The relevant provision in US law follows:

Limitation on exclusive rights: innocent infringement § 907.


(a) Notwithstanding any other provision of this chapter, an innocent purchaser of an infringing semiconductor chip product —

(1) shall incur no liability under this chapter with respect to the importation or distribution of units of the infringing semiconductor chip product that occurs before the innocent purchaser has notice of protection with respect to the mask work embodied in the semiconductor chip product; and

(2) shall be liable only for a reasonable royalty on each unit of the infringing semiconductor chip product that the innocent purchaser imports or distributes after having notice of protection with respect to the mask work embodied in the semiconductor chip product.

(b) The amount of the royalty referred to in subsection (a)(2) shall be determined by the court in a civil action for infringement unless the parties resolve the issue by voluntary negotiation, mediation, or binding arbitration.

(c) The immunity of an innocent purchaser from liability referred to in subsection (a)(1) and the limitation of remedies with respect to an innocent purchaser referred to in subsection (a)(2) shall extend to any person who directly or indirectly purchases an infringing semiconductor chip product from an innocent purchaser.

(d) The provisions of subsections (a), (b), and (c) apply only with respect to those units of an infringing semiconductor chip product that an innocent purchaser purchased before having notice of protection with respect to the mask work embodied in the semiconductor chip product.


ACTA and the US Supreme Court Decision in eBay v. MercExchange, L.L.C.


Aside from the areas where U.S. Statutes eliminate the possibility of a judicially imposed injunction, there are the cases where judges can issue injunctions, but only after considering a four factor test to determine if the injunction is the best alternative. In such cases, in order to obtain an injunction, a plaintiff must demonstrate:

(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.

Since the May 15, 2006 U.S. Supreme Court decision in eBay v MercExchange, it has become more difficult to obtain injunctions in a wide range of cases involving patents and copyrights. A number of large firms, such as Microsoft, Johnson & Johnson, Abbott, Direct TV and Toyota have benefited from the flexibility to withhold injunctions, and allow infringement, when the infringing company pays an “ongoing” or “running” royalty to compensate the patent owner.

In the Microsoft case, a small firm named z4, Inc. had sued Microsoft (and Autodesk) for infringement patents on digital rights management technologies used to protect Microsoft Windows and Microsoft Office from unauthorized use. Microsoft was found to willfully infringe, but allowed to continue using the infringing patents. As stated by Judge Davis:[fn1]

z4 has not demonstrated that it will suffer irreparable harm in the absence of a permanent injunction. Any harm z4 might suffer can be adequately remedied through the recovery of monetary damages. The balance of the hardships, although speculative, weighs in favor of Microsoft. And certain sectors of the public could suffer some negative effects if the Court were to grant z4’s proposed permanent injunction. Accordingly, a permanent injunction should not issue, and z4’s motion is DENIED.

Another example is the January 17, 2008 decision of the U.S. Court of Appeals for the Federal Circuit (CAFC), in Innogenetics, N.V. v. Abbott Laboratories.

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.fn8

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.fn9

If the ACTA does not in fact change U.S. law, it must allow courts to reject injunctions in favor of forward looking compulsory licenses involving reasonable royalties (rather than punitive penalties designed to stop infringement).


Notes
[1] z4 Technologies, Inc. vs. Microsoft Corporation and Autodesk. Inc. Case No. 6:06-CV-142. Memorandum opinion and order.,” June 14, 2006, http://www.patentlyo.com/patent/injunctionDenied.pdf; Steve Seidenberg, “Troll Control: The Supreme Court’s eBay Decision Sets Back Pesky ‘Patent Trolls’ or American Innovation, Depending Upon Which Side You’re On,” ABA Journal (September 2006), http://www.abajournal.com/magazine/troll_control/; Dennis Crouch, “Court finds software patent wilfully infringed but refuses to enjoin the infringement,” Journal of Intellectual Property Law Practice 1, no. 13 (December 1, 2006): 821-822.

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