Pineguin (ymb) legal opinion
What the eBay case means (6 Ratings) 29-Dec-06 10:49 am
The following comments are personal opinion.
It appears that, historically, injunctions to enforce patent rights were easier to come by than in other fields of law. Patent lawyers would get a trip on
having them issued as they are the ultimate sanction. They are now mostly upset at the eBay decision as it will likely limit their ability to make outrageous amounts of money.
This was so because the Patent Act states that "patents shall have the attributes of personal property" including the right to "exclude others from using the invention".
The lower courts (district courts and Court of Appeals)found that this wording meant that the Patent Act granted special status to enforce patent rights by way of injunctions.
In the eBay case, the supreme court stated that the Patent Act does not provide for any special status, special rule or legal presumption that might facilitate the issuance of an injunction in patent cases. It stated that patent cases are no different than any other cases and the district court must apply the standard criteria for determining whether to grant an injunction.
The standard criteria are a four factor test based on the principles of equity.
1- whether the patent holder has or has not suffered an irreparable injury;
2-whether the remedies available at law, such as monetary damages, are inadequate to compensate for the irreparable injury (if suffered);
3- the balance of hardships between plaintiff and defendant;
4-whether the public interest would be disserved by a permanent injunction.
This principle must be followed by the district court.
In the eBay case, the Supreme Court was addressing a situation where the plaintiff was a patent troll. The eBay case is relevant to Insmed but not in the way many of you have professed. It is not a knock out punch against the issuance of an injunction against Insmed.
The eBay case sets the direction for courts to evaluate whether an injunction should issue. It also implicitely suggests that injunctions in favor of patent trolls should not be issued.
Genentech/Tercica are NOT patent trolls. They are not patent holders with no intent of manufacturing their invention. They are not out to blackmail society and commerce into giving them money to license their patent.
What can Insmed do with the eBay case?
1-It should clearly state in its written arguments that the burden of proof lies with the plaintiff. The burden is a standard burden and may not mean much in the outcome. However, in a close call, it can tip the balance and Insmed needs all the ammo it has.
2-It should state that the principles of equity apply with equal force. That is that the four factors are to be weighed equally. The court must consider all four factors. Insmed has nothing to lose by clearly stating what is implicit. Why say this? The answer will become clear when I post my next memo dealing with irreparable injury.
3-It should go outside patent cases to try to find cases that can be particularly helpful;
4-State that the rights created by the issuance of a patent are DISTINCT from the legal remedies available at law. Specifically, an injunction is a remedy, it is not a right. It is accessory, not inherent.
5- Acknowledge and state in the written arguments the statement of the Supreme Court that "the decision to grant or deny permanent injunctive relief is an act of equitable discretion by the district court, reviewable on appeal for abuse of discretion". Lawyers will undrstand why.
The eBay decision sets the Appeals Court back on a straight line. It does not tip the scale in favor of Insmed.
Later, if my family gives me the time, I will address the four factors as they apply to Insmed and Tercica, as they have been applied in recent cases and comment on Tercica's motion for permanent injunction.
Insmed has a lot of work cut out for it
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irreparable injury explained (1 Rating) 1-Jan-07 11:24 am Happy New Year. Before I get started, I would like to correct two mistakes I made in my eBay post when I suggested some ideas for Insmed's written arguments. The first correction is that the plaintiff must prove all four of the four-factor test conditions. There is no need to state that they all have equal weight. The other correction is that a reference to appeal is not strategically relevant since
Insmed will have to file a motion to stay the injunction pending appeal if it is issued (I will deal with this motion in a subsequent post). In my neck of the woods, the comparative legal principles differ. I based my suggestions on legal principles that don't apply to the Insmed case. However, my analysis of the eBay case is sound. I have now read eight recent (post eBay) cases dealing with permanent injunctions and summaries of a few others.
Note that I have not read the Patent Act, I have not read the Federal Rules of Civil Procedure and I do not know the relevant facts and details of the
Genentech patents and Insmed's Iplex. I am not a patent lawyer. My background is commercial litigation.
This post and the subsequent parts have two purposes. The first is to inform interested parties of the legal issues involved in deciding whether there will be an injunction. The second is to suggest legal strategies or ideas that may be of use to Insmed. The information given will be sound. The ideas may not be
applicable as I do not have all the relevant facts that are essential to forming a proper strategy. The folowing is personal opinion.
Firstly, let me mention that injunctions to enforce patent rights were common before the eBay case and they will continue to be common after the eBay case.
The right to exclude seems to be at the core of the notion of a patent and is probably one of the first concepts taught to future patent lawyers. Over the years, the injunction has been nurtured by patent lawyers and the courts into becoming the expression of this right. To suggest or imply the contrary is
virtually an assault on the mindset of the patent lawyer. It is the idea of the severance of the injunction from the right to exclude that is objectionable to the patent establishment.
Justice Kennedy (with three other judges concurring) in the eBay case stated "the existence of a right to exclude does not dictate the remedy for a violation of that right". In normal legal speak, this means that the right to exclude can be enforced by remedies other than an injunction.
Insmed will address each of the four-factor tests but I believe that in so doing, they should address arguments that furhter the thought process of Justice Kennedy. An opportunity is present to establish new precedents to furhter sever the injunction from the right to exclude. So what did I just say? I said raise substantive legal issues that will interest the Court of Appeals and the Supreme Court in case Insmed needs to appeal.
(to be continued on next post)
(continued from previous post)
So let's look at Genentech's motion. They are mixing up the grounds of the second and third requests with the grounds for an injunction intentionally so as
to color the injunction determination. Although they are separate issues, this is standard strategy. Insmed should direct the court to the four-factor test which does not make reference to willful infringement.
Genentech raises strongly the right to exclude principle. They even refer to the United States Constitution. You can tell that the lawyers are personally committed to their case. They are throwing everything they have in their arsenal. They are arguing the pre-eBay arguments because they don't like the
implications of the eBay decision. All they really need do is address the four-factor test.
Fact: in the post eBay cases I have read, not one decision refers to the Constitution.
The right to exclude is worthy of mention because Genentech is arguing that it deliberately chose to grant an exclusive license. The fact that it refused to grant a license to Insmed can be used as an element in its favor.
Side note: the agressive posturing of Genentech must be countered by Insmed's lawyers in their written arguments but more importantly when they will plead in front of the court (if they do plead). Countering the intimidation is done not by losing one's temper but by clear communication of the law. Insmed's lawyers need to grab the attention and respect of the court. Genentech's agressive behaviour may be used against them. Insmed does not need a jury crooner but a solid legal mind who can communicate easily with a judge. It was sloppy to state in public that the decision of the jury was to be expected. This shows disrespect to the jury and that the lawyer's ego comes before his commitment to the client. Now his statement is being used against his client.
Genentech is pleading that the determination of infringement creates a legal presumption that there is an irreparable injury. This is old school. This is wrong. The Supreme Court stated that it is a four-factor test not a three factor test. The plaintiff has the burden of proof without any legal presumptions bestowed on patent cases(see Paice LLC v. Toyota, August 16, 2006, Eastern district of Texas and Voda v. Cordis, September 5, 2006 Western District of Oklahoma) Genentech knows that the presumption no longer applies and continues to plead its irreparable harm case.
Before I get into the nitty-gritty of irreparable injury, it is now important to explain key principles so that investors can understand how the decision will be taken. The judge must apply the four-factor test. The judge is given a lot of discretion to evaluate the situation. Usually a judge decides and then justifies with a reasoning. Each case is different and is to be evaluated independently. Often there is one or two factors that convince the judge. There are a myriad of old principles that still apply that are not necessarily logical and are sometimes incompatible with each other. The judge can use any one of
these principles to justify her position on one of the tests. It is difficult to find consistency in the decisions of the courts. There is a lot of cookie cutting (blindly applying principles used in the past to justify a determination, cut and paste). What does all this mean. It means that the judge will have a lot of wiggle room to grant a permanent injunction if she wants to. Hopefully, sound arguments can be communicated to her and convince her otherwise.
My next post will deal with key points on irreparable injury. Competition, loss of market share, reputation, who suffers? Genentech or Tercica, limits to proprietary exclusiveness, long live the Voda case (I think, since I only have a summary
(continued)
As I mentioned previously, Genentech must prove that all four conditions are met and not a majority (side note: this is theoritically good for Insmed but may
not be a significant advantage in practice because of the way these decisions are made). A legal presumption of irreparable injury by reason of a
determination of infringement should not apply.
Genentech raises the following arguments to justify irreparable injury: 1- their right to grant an exclusive license for which they received millions of
dollars ; 2-competition suffered by Tercica; 3-lost opportunity because of millions invested that could otherwise have been invested elsewhere;4- competition
from Insmed in the European market;5-the validity of Insmed's patents is blocking Tercica from improving its product;6- Tercica's reputation (as a monopoly).
With respect to point one, there are cases that recognise this argument. My current knowledge does not allow me to comment other than I find it slightly
illogical and monetary damages should be adequate compensation. But what I or you might find illogical is not relevant. When I previously referred to cookie
cutting, I was referring to a method of rendering a judgement. This method serves two types of judges. First, the judge that is intellectually lazy or in a
hurry to get the file off his desk and applies precedent rulings without really looking at the particular facts of the case before him. Second, the judge
that believes that the less said, the less to appeal.
I do not think that Insmed would be well served by a cookie cutting judge. That is one reason why I suggest that Insmed's lawyers challenge the court
intellectually. Force her to give a detailed reasoning and look at the logic and reasoning of past decisions. Let's see what Insmed's lawyers have to say.
Point two is one of the important issues that judges look at. Direct competition, proof of loss of market share are key considerations for finding that a
patent holder suffers irreparable injury. If the suffering of Tercica is viewed as Genentech's suffering, then condition one is probably proven.
I have identified a case (Jan K. Voda v. Cordis Corporation, W. D. Okla, September 5, 2006, Justice Tim Leonard) that apparently states that alleged harm to
the patent holder's exclusive licensee is irrelevant. He apparently states that as patents have the atributes of personal property, the person seeking a
permanent injunction must demonstrate harm from infringement of those rights that are personal as well. Aparently, the judge also decided that damage to the
plaintiff's relationship with its exclusive licensee was insufficient to establish that money damages were inadequate. I have not read this case. I am
relying on a review by a patent lawyer. One point to settle, in the Voda case, the licensee was not party to the claim. In our case, Tercica is a party. I do
not know if this difference is key or what Tercica's rights are in this claim.
(part 4 to follow)
(continued)
I will be looking forward to reading Insmed's opposition response on the issue of whether Tercica can actually ask for an injunction as it is not the owner
of the patents.
Point no 3- I have not read cases dealing clearly with opportunity costs. I don't know what the judge will do here. I would say that the plaintiff has the
burden of proof to show what opportunity it lost. If you spend hundreds of millions dollars to create a product that has limited profit potential, then you
should assume that the investment in research was not worthwhile. Similarly, use of the funds as an investment in another product does not guaranty its
financial success. In any event, Genentech's loss or profit is the difference between its development costs and other costs and its royalty revenues (i.e.
compensation by monetary damages seems appropriate).
Point no 4 is very interesting. Genentech decided to file evidence of the European situation. Is it not true that Genentech did not get a patent for Europe?
Is it not true that Insmed is free to pursue that market without having to worry about a patent infringement suit? If so, then I believe that the Genetech
lawyers made a strategic mistake and Insmed better ram a truck through the hole, tactfully.
Let me start by quoting the Federal Circuit:"an injunction cannot impose unnecessary restraints on lawful activity" (Riles v. Shell, 298 F. 3d 1302, 1311,
2002).
By way of affidavit Genentech is bringing new evidence with a double edged blade. When is a blueberry pink? When a party says so and it's not contested and
the judge doesn't know better. Does the judge not already know that Genentech has no patent in Europe? Genentech has stated that Insmed will likely receive
approval before Tercica and exclude it from the market. So let Insmed not contradict this statement, whether true or false.
Genentech is now asking the court to issue an injunction to block Insmed's legal and legitimate rights to market its product in Europe by way of injunction.
Genentech wants to use the injunction to get ahead of Insmed in Europe (now you may say that I am getting ahead of myself). Zip has been deriding Genentech's
past behaviour. Sorry Zip, but the past is not relevant to this case. Genentech is now showing their intent. They have been claiming that Insmed has dirty
hands and trying to tarnish Insmed's conduct. Well, their motion shows dirty intent and I would question whether principles of equity should go in favor of a
clear intent to attack a lawful activity and right. This intent is clear when reading the motion and affidavit. Let me quote the motion (page 6) "If IPLEX is
approved first, it may well gain Orphan Drug rights that will block the sale of Increlex in Europe. Again, an injunction will prevent such an injustice".
Insmed will have the right to manufacture and sell Iplex in Europe once it gets its regulatory approvals. Genentech wants to prevent Insmed from this
probable right by hurting it economically. If it wasn't for money, Insmed could manufacture the drug in Europe. An injunction is not to issue against a
lawful activity.
In Europe, Genentech recognizes that Insmed is in the driver's seat. Genentech has no patent in Europe. Tercica has no sales, no reputation and no prospects
by its own admission unless it bankrupts Insmed. This not only deals with condition no 1 but also with respect to the hardship conditon. Ill intent is clear,
Genentech has dirtied its hands.
Genetech's fifth argument simply reinforces their ill intent.
I would ask the court to distinguish the American market from the European market when looking at the injunction issue and argue that there are no grounds to
issue an injunction for maunfacturing for the European market. A compulsory license is appropriate.
(part 5 to follow)
AI
