Damages for indirect patent infringement.

AuthorKarshtedt, Dmitry
PositionIV. Evidentiary and Atomistic Approach to Indirect Infringement Damages B. The Atomistic Approach of Cardiac Pacemakers through VI. Conclusion, with footnotes, p. 945-978
  1. The Atomistic Approach of Cardiac Pacemakers

    1. Background

      Lucent was decided on September 11, 2009. Less than a month earlier, on August 19, the Federal Circuit decided Cardiac Pacemakers, Inc. v. St. Jude Medical, Inc., (177) a case that said something quite different about the relationship between indirect infringement damages and proven acts of direct infringement. Cardiac Pacemakers is emblematic of what I call the atomistic approach to indirect infringement damages. (178) In this procedurally complex case, (179) the plaintiff, Cardiac, accused St. Jude of infringing its patents by selling implantable cardiac devices (ICDs). (180) As summarized by the Federal Circuit, "ICDs are small devices that detect and correct abnormal heart rhythms that can be fatal if left untreated. The ICDs ... work by administering electrical shocks to the heart, those shocks being calibrated to restore normal heart functioning." (181) Crucial to the issue of damages on appeal, ICDs "can be programmed to administer different types of electrical shocks," (182) including a relatively familiar procedure called defibrillation (183) and a lesser-known procedure called cardioversion. Defibrillation entails applying high-energy shocks to the heart to treat acute, life-threatening disturbances in the heart's rhythm; by contrast, cardioversion requires less energy and is used to treat disturbances that are less severe. (184) The ICD is typically capable of both of these modes of operation, (185) but in some settings, an ICD unit might be used for defibrillation only. (186)

      At the outset of the litigation, in 1997, Cardiac asserted "numerous claims under four patents relating to implantable cardiac defibrillators." (187) By the time the case reached the Federal Circuit for the fourth time in 2009, however, only a single claim, claim 4 of U.S. Patent No. 4,407,288 ("'288 patent"), (188) remained at issue. (189) This claim was drafted in dependent form, (190) referencing claim 1, and read as follows: "4. The method of claim 1, wherein said at least one mode of operation of said implantable heart stimulator includes cardioversion." (191) For this method claim,192 Cardiac had to proceed on inducement and contributory infringement theories, arguing that directly infringing acts required for liability (193) occurred when physicians who bought ICDs from St. Jude performed the patented method: "[Cardiac] emphasizes that all of St. Jude's devices were capable of executing [infringing] cardioversion therapy, and ... contends that St. Jude even instructed physicians how to program its devices to execute this therapy." (194)

      On appeal, the Federal Circuit reviewed Cardiac's challenges to various aspects of the district court's judgment, including its grant of St. Jude's "Motion for Summary Judgment Limiting [Cardiac's] Damages" (195) for infringement of claim 4. The court's decision in Cardiac Pacemakers is best known for its en banc portion, which addressed a different problem. (196) Yet the panel part of the opinion that (among other things) affirmed the district court's summary judgment order limiting damages, (197) to which I now turn, also raised some very interesting questions.

    2. Limitation of Damages

      The record showed that St. Jude's ICDs had to be programmed by end users in order to perform cardioversion. (198) Indeed, many physicians used the ICDs for applications that were more common than cardioversion, such as defibrillation and another procedure called cardiac pacing, and either never programmed the devices to perform cardioversion (199) or did so but never actually utilized the devices to stimulate the heart by that technique. (200) Based on these facts, the district court held that, "[a]s a matter of law, [Cardiac's] damages for infringement of Claim 4 of the '288 patent are limited to only those devices that can be shown to have executed the claimed method of cardioversion during the relevant infringement period." (201) In a short section, the Federal Circuit affirmed this portion of the district court's decision: In calculating "royalties on its patented method[,].... Cardiac can only receive infringement damages on those devices that actually performed the patented method." (202) As I explain below, this approach is misguided because it conflates infringement liability analysis with the damages analysis.

      Because the Federal Circuit's discussion of this issue was quite abbreviated, the district court's approach requires further explication. The district court cited its own earlier opinion in the Cardiac Pacemakers case for the proposition that, "[t]o hold St. Jude liable for infringement on this method claim ... [Cardiac] was required to come forward with some evidence of actual use of the infringing method by someone." (203) That ruling, however, was a judgment of no liability due to lack of proof of underlying direct infringement, and not a grant of a motion to limit damages. (204) The court's confusion between issues of liability and damages becomes apparent when one examines Joy Technologies, Inc. v. Flakt, Inc.,205 a case that it relied upon to support the "some evidence of actual use" proposition. (206) Joy Technologies held that sales of a device capable of performing an infringing method do not result in liability, direct or indirect, unless the method is performed by someone during the term of the patent. (207) That case, however, said nothing about limiting damages as a matter of law once the threshold finding of direct infringement was made. (208) The Federal Circuit approved the district court's reliance on Joy Technologies (209) even though it was easily distinguishable because no indirect infringement liability at all was found in that case.

      The district court's choice of language, "cannot be held liable" (210) rather than "does not owe damages," is notable--it suggests an atomistic, particularized conception of indirect liability. Even though all the ICDs may be exactly the same, liability formally runs to the defendant via each particular ICD unit, so that the plaintiff must prove direct infringement for each ICD in order to establish indirect infringement liability (and therefore be entitled to collect damages) for that unit. In other words, although Cardiac showed that some units have been used to practice the infringing method, it was barred as a matter of law from basing the royalty on all the ICDs that St. Jude sold in the absence of proof that each unit was used to perform the claimed method at least once. (211) Summing up its atomistic approach, the district court stated that even though "all of St. Jude's devices were capable of executing cardioversion therapy, and [Cardiac] contends that St. Jude even instructed physicians how to program its devices to execute this therapy[,] .... [n]one of these facts are sufficient to impose liability (and therefore damages) for every device sold." (212) This is tort law's imputation formalism at work.

      It bears repeating that "devices that actually performed the patented method" (213) of cardioversion are not qualitatively or intrinsically different from the devices that were not used to carry out the method. ICDs sold by St. Jude were identical units of the same kind of device, which were all capable of carrying out the cardioversion procedure. The district court elided this issue, and further conflated liability and damages, when it relied on Standard Havens Products, Inc. v. Gencor Industries, Inc. (214) The court correctly characterized Standard Havens as holding that "method claims [were] not directly infringed by the mere sale of an apparatus capable of performing the claimed process," (215) but it did not appreciate that this case was not quite on point. The accused devices at issue in Standard Havens were asphalt plants that were used by the defendant's customers to infringe a patented "method for continuously producing an asphaltic composition from asphalt and aggregates," the so-called "counterflow" method. (216) Three of the ten plants sold by the defendant, however, ran on another method, called the "parallel flow" method. (217) The parallel flow plants were different from the counterflow plants. Not only were the parallel flow plants never used in an infringing manner, but they were not even capable of infringing because they utilized a completely different mode of operation. (218) The theory of "limitation of damages" in Standard Havens is wholly unremarkable: if I sue someone for indirect infringement arising from the use of device A, it generally makes no sense for me to collect damages from the use of an unrelated device B--which cannot be used in such a way as to perform the claimed method. (219) The Federal Circuit in Standard Havens correctly held that sales of the B devices should be subtracted from the award of damages. (220)

      Perhaps one way to extend Standard Havens to the facts of Cardiac Pacemakers is to argue that a device that is never programmed to execute cardioversion is different in kind from one that is so programmed--similar to the A/B distinction above. The district court did attempt to cast the issues in this light by explaining "the distinction between all devices sometimes practicing the patented method and the very different situation of some devices never practicing the patented method." (221) But since

      all the devices in question are merely units of the same ICD, Standard Havens does not appear to support limiting damages as a matter of law to only those units that were used to perform the claimed method. (222) The district court never answered the key question: was there really no genuine issue of material fact that the parties would not have based a license to practice the cardioversion method on the sales of all ICD units, regardless of whether medical professionals ever used them to perform cardioversion (or ever programmed them to perform cardioversion)?

      Moreover, the district court ignored another crucial fact...

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