EXPOST LIABILITY RULES IN MODERN PATENT LAW
EXPOST LIABILITY RULES IN MODERN PATENT LAW
Rosa Castro Bernieri
Antwerp – Oxford – Portland
Ex-Post Liability Rules in Modern Patent Law Rosa Castro Bernieri
© 2010 Intersentia
Antwerp – Oxford – Portland www.intersentia.com
ISBN 978-94-000-0105-3 D/2010/7849/98
NUR 827
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Intersentia v
ACKNOWLEDGMENTS
My sincere recognition to my supervisors: Professor Marco Lamandini who has supported my academic and professional career; Professor Roger Van den Bergh for his guidance throughout this EDLE journey and Professor Michael Faure for his warmth encouragement and support. My gratitude also goes to the members of the Inner Committee, Professors Vincenzo Denicolò, Willen Van Boom and Klaus Heine, and to the Plenary Committee conformed by Professors Luigi Franzoni, Anselm Kamperman and Alessio Pacces, who have kindly accepted to assess my thesis.
I am also grateful to Professors and staff of the University of Bologna and Erasmus Rotterdam University and I acknowledge the fi nancial support of a Ph.D. scholarship from the University of Bologna and fi nancial support from the Max Planck Institute for Intellectual Property, Competition and Tax Law for a research visit.
I am also indebted to several scholars and Professors who gave me their feedback on previous draft s, among others, to Professors Hans-Bernd Schäfer, Rochelle Dreyfuss, Lawrence Lessig, Tim Wu, Stefan Bechtold, Uma Suthersanen, Lilla’
Montagnani, Gertrui Van Overwalle, Alessandra Arcuri and Andrea Renda. I further want to acknowledge my fellow colleagues from the EDLE as well as Ph.D. students of Bologna and Hamburg for their comments. Needless to say, all errors remain my own.
My recognition goes to my friends and family for their unconditional help, especially to Franca, Jorge A., Jorge A.R., Fiorella and Andrea, to whom I am indebted for any achievement.
While acknowledging the support received from every person would be impossible, my gratitude goes to all the people that directly or indirectly facilitated me to reach this step in my academic career.
Intersentia vii
CONTENTS
Acknowledgments . . . v
List of Abbreviations . . . xi
Introduction . . . 1
Chapter I. Property and Liability Rules: Implications for Patent Rights . . . 13
1. Introduction . . . 13
2. Economics of patent protection . . . 15
2.1. Th e economic rationale of patents . . . 18
2.2. Th e economics of patent enforcement . . . 21
2.3. Th e interface between substantive and enforcement patent law . . . 22
3. Property rules and liability rules . . . 26
3.1. Property rules and liability rules in IP . . . 34
3.1.1. Descriptive studies. . . 36
3.1.2. Critics against IP liability rules . . . 43
3.1.3. Privately organized liability rules . . . 46
4. Property and liability rules in patent law . . . 47
4.1. Th e case against liability rules for patent rights . . . 49
4.2. Th e case for patent liability rules: Transaction costs . . . 50
4.2.1. Strategic behavior and patent hold-ups . . . 52
4.2.2. Patent hold-ups . . . 54
5. Th e modern patent landscape . . . 56
5.1. Multi-parties negotiation: Th e anti-commons . . . 58
5.2 Network externalities . . . 61
5.3. Uncertainty over rights . . . 62
5.4. Patent quality problems . . . 62
6. Conclusions . . . 63
Chapter II. Ex-Post Liability Rules: A Historical View . . . 65
1. Introduction . . . 65
2. Compulsory licensing in international history. . . 66
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2.1. Early patent times . . . 66
2.2. Th e fi rst compulsory licensing provisions . . . 68
2.3. Origins of the principal national patent systems . . . 73
2.3.1. U.K. . . . 73
2.3.2. U.S. . . 77
2.3.3. France . . . 79
2.3.4. Germany . . . 80
3. Ex post liability rules in the TRIPS Agreement . . . 82
3.1. Article 31 of the TRIPS Agreement . . . 86
3.2. Article 44 of the TRIPS Agreement . . . 88
4. A post-TRIPS landscape . . . 91
5. Remedies for patent infringement . . . 94
5.1. Common law countries . . . 95
5.2. Civil law countries . . . 99
5.2.1. Creation of rights and choice of remedies . . . 103
5.2.2. Th e inibitoria in the industrial property context . . . 106
5.3. Th e European landscape with respect to IP remedies . . . 111
6. Conclusions . . . 116
Chapter III. Ex-Post Liability Rules: A Comparative Legal View . . . 119
1. Introduction . . . 119
2. Ex-post liability rules . . . 121
3. U.S. ex-post liability rules . . . 125
3.1. Th e eBay case . . . 127
3.2. Post eBay interpretation of the four-factor test . . . 132
3.2.1. Irreparable harm . . . 133
3.2.2. Inadequate remedies . . . 134
3.2.3. Balance of hardships . . . 136
3.2.4. Public interest . . . 137
3.3. Th e post eBay decision landscape . . . 138
3.4. Willful v. inadvertent infringement . . . 141
3.5. Preliminary Injunctions . . . 142
3.6. Other liability rules in the U.S. . . 143
4. U.K. . . . 144
4.1. Injunctions as an equitable remedy . . . 144
4.2. Discretion to award damages in lieu of injunctions . . . 146
4.3. Th e rationale of ex-post liability rules in the U.K. . . 149
4.4. Other ex-post liability rules: Compulsory licenses . . . 150
5. Italy . . . 154
5.1. Property rules: Final injunctions . . . 156
Contents
Intersentia ix
5.2. Judicial discretion: How much space? . . . 158
5.3. Preliminary injunctions . . . 161
5.4. Willful and Inadvertent infringement . . . 164
5.5. Other ex-post liability rules: Compulsory licenses . . . 165
6. Conclusions . . . 169
Chapter IV. Ex-Post Liability Rules: When Should Th ey Be Used? . . . 173
1. Introduction . . . 173
2. Patent hold-ups: Economic theory . . . 174
2.1. Economics of patent hold-ups: Th e Lemley and Shapiro model . . . 179
2.1.1. Refi nements and critics . . . 184
2.1.2. Assumptions of the models . . . 186
2.2. From patent hold-ups to patent strategic behavior . . . 191
3. Strategic behavior and ex-post liability rules . . . 192
3.1. Problems put forward by eBay v. MercExchange . . . 193
3.1.1. Strategic behavior . . . 195
3.1.2. Multi component patents . . . 195
3.1.3. Dubious quality patents . . . 196
4. Th e landscape of strategic behavior in Europe . . . 199
4.1. Incidence and eff ects of strategic behavior . . . 201
4.2. A case study: the European pharmaceutical sector . . . 205
4.2.1. Patent strategies in the European pharmaceutical sector . . . 208
4.2.2. Policy suggestions of the Final Report . . . 211
4.2.3. Beyond the European pharmaceutical sector . . . 213
5. Patent strategic behavior: Towards a broader framework . . . 215
5.1. Actors: Non-manufacturing entities, trolls, ambushes and others . . . 216
5.1.1. Defi nition and business models . . . 217
5.1.2. Evolution of patent strategic behavior . . . 224
5.2. Th e conduct: Trolling behavior. . . 228
6. Conclusions . . . 231
Chapter V. Ex-Post Liability Rules: Towards an Effi cient Design . . . 233
1. Introduction . . . 233
2. Th e Effi cient implementation of ex-post liability rules . . . 234
2.1. How could courts effi ciently apply ex-post liability rules? . . . 234
Th e balancing test in post-eBay cases . . . 235
3. A monetary substitute for a property rule . . . 237
3.1. TRIPS: Adequate compensation and adequate remuneration . . . 238
3.2. Determining the level of compensation: An impossible task? . . . 241
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3.3. Remuneration for compulsory licenses aft er the TRIPS Agreement . . 243
3.4. Patent infringement: Th e goals of damages substituting injunctions . . . 245
3.4.1. Post-eBay application . . . 247
3.4.2. Law and economics of damage remedies . . . 252
4. Other costs of patent liability rules . . . 253
4.1. Interference with bargaining outcomes . . . 253
4.2. Ex-post liability rules and legal uncertainty . . . 253
5. Cost-benefi t analysis of the rules . . . 254
5.1. A comparative overview of costs and benefi ts of rules . . . 255
6. Conclusions . . . 258
Chapter VI. Conclusions . . . 261
1. Th e research question . . . 262
2. Findings of the research . . . 263
2.1. Chapter I . . . 263
2.2. Chapter II . . . 264
2.3. Chapter III . . . 266
2.4. Chapter IV . . . 267
2.5. Chapter V . . . 268
3. Impact and applications of this research . . . 269
3.1. Lessons from the entitlements literature to the patent fi eld . . . 269
3.2. Patent policy: Effi ciency and other goals of public interest . . . 270
3.3. Intellectual property as property . . . 272
3.4. Rules of interpretation: Th e role of courts and agencies . . . 278
3.5. Th e design of patent liability rules . . . 279
4. Future research . . . 282
4.1. Other IP rights: Copyright, trademarks and unfair competition law . . . 282
4.2. Public choice applications . . . 283
4.3. Antitrust and IP interface . . . 284
4.4. Further national, international and European harmonization . . . 286
List of References. . . 289
Appendix . . . 309
Intersentia xi
LIST OF ABBREVIATIONS
ACTA Anti-Counterfeiting Trade Agreement
BIRPI International Bureaux for the Protection of Intellectual
Property
CAFC U.S. Court of Appeals for the Federal Circuit
CC (Italian) Civil Code
CPC (Italian) Civil Procedural Code
CPI (Italian) Industrial Property Code
EPLA European Patent Litigation Agreement
EPO European Patent Offi ce
GADI Giurisprudenza Annotata di Diritto Industriale
GATT General Agreement on Tariff s and Trade
IP Intellectual Property
Paris Convention Paris Convention on the Protection of Industrial
R&D Research and Development
TRIPS Trade Related Aspects of Intellectual Property Rights
USPTO United States Patent and Trademarks Offi ce
WIPO World Intellectual Property Organization
WTO World Trade Organization
