U.S. Compulsory licensing of medical inventions as a limit on remedies under eBay v MercExchange

In 2006 the Supreme Court paved the way for, in effect, judicial compulsory licensing by holding in eBay v. MercExchange 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 instances 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)

*When compulsory licensing is done in this manner, as a limitation on the remedies for infringement, the rules of Part III of the TRIPS apply, specifically Articles 44 and 45 of the TRIPS, relating to injunctions and damages. The norms here are different from those that apply when a compulsory license is issued under Part II of the TRIPS.