Senate Patent Reform Bill on Damages

The Intellectual Property Owners Association "believes Sen. Patrick Leahy (D-VT) will attempt to pass a revised version of S. 1145 in the Senate in February. Major amendments likely will not be available more than a few days in advance of Senate consideration. It is unclear whether the Senate has the votes to pass a bill. If the Senate does pass a bill, it likely will be sent to the House for swift passage by the House without amendments, eliminating the need for a Senate-House conference."

However, "patent reform fatigue has set in, with people tiring of debating the complex bills and hoping radical changes will not be made because reforms already have been made by recent Supreme Court decisions." So, thanks to Kevin E. Noonan at Patent Docs for recently posting his analyses of the 106-page draft report of the Senate Judiciary Committee on the Patent Reform Act of 2007 (S. 1145) which, would amend 35 U.S.C. § 284, the patent damage statute, as follows:

The court shall award the claimant damages adequate to compensate for the infringement but not less than a reasonable royalty, together with interest and costs. The court may receive expert testimony to assist it in determining damages. In determining a reasonable royalty, the court shall determine which of the following methods should be used, and should identify the factors that are relevant thereto:

(A) entire market value - the royalty may be based upon the entire market value of the larger apparatus / process, that incorporates the infringing product / process, if the claimed invention's specific contribution over the prior art is the predominant basis for the market demand of the larger apparatus / process;

(B) established royalty based on marketplace licensing - the royalty may be based on other nonexclusive licenses of the patented invention if the claimed invention has been the subject of a nonexclusive license to a number of persons sufficient to indicate a general marketplace recognition of the reasonableness of the licensing terms, if the license was secured prior to the filing of the case, and if the infringer's use is of substantially the same scope, volume and benefit of the rights granted under such license.

(C) If showings under (A) and (B) have not been made, the court shall conduct an analysis to ensure that a reasonable royalty is applied only to the portion of the economic value of the infringing product or process properly attributable to the claimed invention's specific contribution over the prior art. In the case of a combination invention whose elements are present individually in the prior art, the contribution over the prior art may include the value of the additional function resulting from the combination, as well as the enhanced value, if any, of some or all of the prior art elements as part of the combination, if the patentee demonstrates that value.

In determining a reasonable royalty, where appropriate, the court may also consider (or direct the jury to consider) any other relevant factors under applicable law.
The methods set forth in this subsection shall only apply to calculation of damages based on a reasonable royalty.

Willful infringement – § 284 is amended by adding subsection (e) to codify, and change, the doctrine of willful infringement:

A court may increase damages by up to three times based on a finding of willful infringement. A determination of willful infringement shall be made without a jury. To prove willful infringement, a patentee must prove by clear and convincing evidence that:

(A) the infringer received written notice from the patentee (i) alleging acts of infringement in a manner sufficient to give the infringer an objectively reasonable apprehension of suit on such patent, and (ii) identifying with particularity each claim of the patent, each allegedly infringing product or process, and the relationship of such product or process to such claim, the infringer, after a reasonable opportunity to investigate, thereafter performed one or more acts of infringement;

(B) after receiving such notice and after a reasonable opportunity to investigate, the infringer intentionally copied the patented invention with knowledge that it was patented; or

(C) after having been found by a court to infringe a patent, the infringer engaged in conduct that was not colorably different from the conduct previously found to have infringed the patent, and which resulted in a separate finding of infringement of the same patent.

The doctrine of willful infringement has the following limitations:

(i) “good faith” - A court may not find that an infringer has willfully infringed a patent for any period of time during which the infringer had an informed good faith belief that the patent was invalid or unenforceable, or would not be infringed. An informed good faith belief may be established by (a) reasonable reliance on advice of counsel; (b) evidence that the infringer sought to modify its conduct to avoid infringement once it had discovered the patent; or (c) other evidence a court may find sufficient to establish good faith. The decision of the infringer not to present evidence of advice of counsel is not relevant to a determination of willful infringement.

(ii) pleadings - a patentee may not plead (and a court may not determine) willful infringement before the date on which a court determines that the patent in suit is not invalid, is enforceable, and has been infringed by the infringer.

Subsection (c) – Marking and notice – is added to provide that, for patented inventions not covered under subsection (a)(1), past damages shall be limited to 2 years prior to the filing of a complaint (or counterclaim) except upon proof that the infringer was notified of infringement by the patentee. In no case shall liability for past damages exceed 6 years.

Subsection (d) – Subsection (b)(6) of § 273 is amended to also allow “affiliates” of the person who performed the necessary prior user rights acts to assert the defense.