Sunday, January 11, 2009

Unfortunately "but we infringed only because their product is inferior" and "if you don't allow us to infringe patients will suffer" don't work....

[Click on Post Title for Link to External Article]

In case you are wondering what we are talking about here, we are dealing with Acumed Vs. Stryker. Once you are done here, you can easily tell that a few people who will not be mentioned here (yeah, right) need to go back to law school and pay attention this time around...

Let us see, all this could also be clubbed under "Much Ado about a screw" (and no, don't you start getting any ideas about the slant of this post :p ).

Medical device companies suing the other's head off is not new. As I have blogged here before, Medtronic and Kyphon were at each other's throats till their marriage ended like one of those kisses between the boy and girl who fight till they fall for each other in one of those corny high school musicals. And, you know who actually made money in all that Medtronic Vs. Kyphon madness.

Some industry veterans I have come to know and respect told me ages ago that the "Big Boys" would come down on smaller start ups with teams of lawyers and run them over. Mind you, Acumed is no small company. On their website, they boast of an enviable 90,000 square foot manufacturing facility and the ability to call themselves a global company - rightly so.

However, this particular judgment is not about a match of purse sizes. It is a pithy lesson on what you should know about patent laws, infringement and other intellectual property issues.

"Infringe first, settle later" is a strategy, but a really bad one. If someone in your company is suggesting you go down this path, you know what you might want to ....

I like reading Dennis Crouch's Patently-O. Reading the blog gives you a good picture of various IP issues and is much more cost effective than all those business school case studies you could buy. That said, Acumed Vs. Stryker is a good one for medical device related IP struggles between companies.

As one of the commenters in the Patently-O posting has questioned, "Why not use a different screw?", as a development team or a business you might have to consider various strategies, including:

1. Hiring a good law firm. Listen to them and watch for pitfalls in strategies and implementation. After all, you are paying an arm and a leg sometimes to get the work done.

2. Do appropriate due diligence. Some "clever" lawyers have suggested don't even look at prior art, lest you might have to testify about it in court - well, that's just stupid. When was the last time you had an absolutely spontaneous idea about which you had hitherto never read or heard of...

3. If something looks like it could come back and hurt your company, it probably will. So, pay attention to your IP Strategy? Do you have one? Is it good? Are there people in your company who think "IP Strategy" is just hogwash - maybe something turned them off?

Now, on to what happened in this case. If you read the other blog, it talks about the "4-factor test for injunctive relief" . What is that?

Take a look at this document:

The plaintiff must demonstrate that:

1. It has suffered irreparable damage
2. Remedies available at law are insufficient to repair the damage (a monetary damage of a few million dollars is a good remedy)
3. Considering the balance of hardships between the plaintiff and the defendant, a remedy in equity is warranted, and,
4. Public Interest would not be caused a disservice by a permanent injunction


The blog also keeps mentioning "eBay". Where does "eBay" head into all this?

Read this:

The idea is that in 2006, the Supreme Court declared that whenever the district or federal courts consider a permanent injunction against the defendant, they have to perform the "4-factor test for injunctive relief" on a case by case basis.

eBay and Acumed Vs. Stryker Deadline

If you have been keeping your head above the water on this one so far, you would realize that Acumed sued Stryker in 2004, and the district court came back with a permanent injunction for a decision.

Based on the "eBay" decision handed down by the Supreme Court, the Federal Court dismissed the injunction judgment and sent it back to the district court.

Following a lot of huffing, puffing and blowing, the District Court has once more awarded permanent injunction in this case.

"Licensing Agreements and Permanent Injunctions"

This is probably the most exciting hair-splitter for the legal folks arising out of this case. Read this:

Let's go back to our friends MercExchange and eBay. Originally, the problem was that MercExchange existed only to patent "stuff" i.e., business methods and license them out to companies actually "practicing the inventions". In short, to use a derogatory sense, MercExchange is a "patent troll".

So, the jury handed down a permanent injunction while the district court turned it down stating that since MercExchange solely existed to license out patents, it could not suffer irreparable damage from infringement.

To muddle this, the Federal Circuit agreed with MercExchange and stated that "infringement does not exist only for those who practice" and reinstated the original infringement decision.

The Supreme Court decided that they do not want to be left out of all this fun, and decided to jump in. And then like the inscrutable parent, it scolded everyone around.

It first said, yes "just licensing without practicing" can be bad, but what would "Universities, individual inventors and others like them do"?

Then it came back and downloaded the now oft-repeated "four factor test for permanent injunction" - with the note that courts could still make "rare" excpetions.

Sadly, it appears that the "Big Boys" of eBay were able to walk back to the district court and prove that MercExchange still did not suffer irreparable damage. It all depends on whether or not you like trolls and whether or not you are or you respect the "individual inventor".


It's been a long night, so let's recap - Acumed did suffer irreparable damage as has now been proved many times over. A strong IP strategy is necessary, and a stronger defense strategy is also necessary:

1. Claiming that you infringed on someone else's patent after you deduced that their product resulting from the patent is "inferior" to yours, is basically, admission of guilt.

2. Claiming that now that you have infringed anyway and have patients to treat (and retrofit with squeaky hips - no that's not going away, not for Stryker or those who have to live with noisy hippiness), that calls for "damage to public interest" is just ridiculous.

Still want to say "Much Ado about a screw"?


Michael Caputo said...

I am writing to correct you blog. As an employee of Mercexchange, I am offended every time the uninformed label our company a patent troll. Under your definition, a major research university (MIT, Stanford, Princeton) would be a patent troll. Think about it.

Our founder Thomas Woolston invented Internet auction technology in 1994, patented the ideas in 1995, and opened three Web auction businesses in 1998. We employed over 40 people and were active in the international arena. Not based in Silicon Valley, we were not successful at raising money. eBay approached us in 2000 with the stated intent to research and buy out patents outright. We invited them into our offices, they stayed for several hours and dug deeply into boxes of records and reams of computer code. When they left, we heard nothing for months. Finally, they informed us they lost interest and they moved into direct infringement.

As a small company in Virginia, we had a choice: compete and surely die when the money runs out, or vindicate our rights as patent owners in court. We did not have the funds to do both, so we made the obvious choice - life.

77 months later, found guilty of willful infringement and all out of legal options, eBay settled in 2008.

Please keep the facts straight. We are not patent trolls; we are a company who was targeted and destroyed by a Goliathan competitor. We have the 40 laid off employees two years of Web competition to prove it.

Srihari Yamanoor said...

To clarify, I personally did not call MercExchange a "troll", I meant to paraphrase from one of the references I posted.

"MercExchange appealed and the Federal Circuit reversed in March 2005, emphasizing that
“injunctions are not reserved for patentees who intend to practice their patents, as opposed to
those who choose to license.”"

To do some more research, I went to the horse (fondly called the Supreme Court) and got this from it's mouth, "Most notably, it concluded that a “plaintiff’s willingness to license its patents” and “its lack of commercial activity inpracticing the patents” would be sufficient to establish that the patent holder would not suffer irreparable harm if an injunction did not issue."

Page 4 here:

So, I don't know where this is coming from. This is something for MercExchange to prove for itself, however, as someone who was pointlessly laid off two times, I do sympathize with their former employees if this was true!

And, to the medical device companies, it proves, that the "Big Boys" can and will try to get you, so you do need a sound strategy for your IP (which by itself might not be enough)