Cook’in cooked

There is nothing like home-made food. Unfortunately, it seems like kitchens are never roomy enough to accommodate all those nice and fancy appliances for making soups, ice creams, bread, fondue and all that jazz. But as far as courtrooms go, some extra space can always be found for new kitchen appliance lawsuits.

In two previous posts, I discussed a case brought by Vorwerk & Co. Interholding GmbH against various companies responsible for the marketing of food processors of the MyCook brand in France. This case was indeed a good example of how patent infringement damages can be computed in our country.

It turns out that another case was also brought in parallel by the same company, based on the same patent, against other defendants (Guy Demarle Grand Public SAS et al.) responsible for the marketing of another food processor branded as Cook’in. Cook’in was held by the Paris Tribunal de Grande Instance (TGI) as infringing Vorwerk’s patent, just like MyCook – although readers may recall that the appeal judgment on the merits in the MyCook case was set aside by the Cour de Cassation for procedural reasons, so that the Cour d’appel will have to reconsider the issue afresh.

The reasoning adopted by the TGI on the question of infringement in the Cook’in case is very similar to that previously adopted by the TGI and the Cour d’appel in the MyCook case. So, in a way, the recent Cook’in TGI decision is not really surprising; but the decision is a very interesting example of how the doctrine of equivalence is applied in France.

According to well-established case law, two technical means are deemed equivalent if they are of a different form, but perform a same function for a similar result. An additional condition is that the function in question must be protectable.

In this case, claim 1 of the patent reads as follows:

Kitchen machine with a stirrer vessel and a drive for an agitator in the stirrer vessel, wherein the stirrer vessel in its lower region can be heated up, wherein the stirrer vessel is covered by an inserted lid, characterised in that on the inserted lid is arranged a top piece which has a perforated bottom for preparation by steaming of foods, wherein the perforations are formed in a cooking material support of the bottom of the top piece and condensate or moisture formed is conducted back into the stirrer vessel.

This claim was not literally infringed by the Cook’in apparatus for the following reason, according to the court:

The Cook’in machine of the defendants differs from the kitchen machine of the patent in that it does not comprise a lid between the stirrer vessel and the perforated element for steam cooking. This latter element comprises a flange in its lower part on which a seal is arranged, which makes it possible to directly attach it on the stirrer vessel.

The court then made a comparison between how the Cook’in apparatus operates and how the patented machine operates and, applying the traditional test, came to the conclusion that the different technical means that are used did in fact have the same function for a similar result:

[…] Even though the Cook’in machine does not have the insertable lid as taught by claim 1 […], the embossed annular part of the vapor bowl associated with the seal disposed on the periphery provides a means of a [different] form which has the same function, namely ensuring that the cap is above the stirrer vessel, for the same result, i.e. making vapors rise from the stirrer vessel to the upper part of the cap through the dedicated openings and reintroducing the condensates into the stirrer vessel. 

Various arguments were put forward by the defendants in order to show that the Cook’in apparatus did not operate in the same way as the claimed invention, but those were not deemed persuasive by the court.

The defendants also argued that the “inserted lid” feature in claim 1 was an essential feature of the invention which necessarily had to be reproduced in order for the patent to be infringed.

The interesting point about this argument is that this feature of the “inserted lid” was not present in claim 1 as filed and was added during prosecution. So, can the doctrine of equivalence be used at all in this situation? Yes, said the court. The fact that a feature was added during prosecution does not preclude a finding of infringement by equivalence on this very feature:

Vorwerk modified its claim by adding a lid, and the EPO examiner considered that the arrangement of the steam cooking container over the lid was a novel and inventive arrangement. 

Nevertheless, such novelty and inventiveness were acknowledged relative to a prior art where the pierced basket for steam cooking was positioned below the lid. 

Therefore, what was considered as novel and inventive was not so much the presence of the lid, but rather the fact that the steam cooking part was positioned above the stirrer and heating vessel. 

Thus, the scope of claim 1 does not prevent a possible infringement despite the absence of the intermediate lid, if it is established that the means of the Cook’in machine have the same functions for the same result as those of the patent. 

The analysis made by the court here relates to the second part of the equivalence test set forth above, i.e. whether the function of the equivalent means was “protectable“. In the present case, it seems that the function was protectable because the general idea of having a steam cooking recipient arranged above a stirrer vessel was a novel and inventive concept.

There are some devices in which the presence of a lid is absolutly essential.
There are some devices in which the presence of a lid is absolutly essential.

The bottom line of the court’s approach (which is indeed the traditional approach in France) is therefore to assess what the contribution of the invention to the art really is about. A third party’s product implementing the same inventive concept in a different manner will be held infringing, irrespective of the exact claim wording selected by the drafter.

Another interesting point to note about this decision is the computation of damages. Contrary to the parallel Vorwerk v. Taurus litigation, the court (in a different composition) did not appoint an expert but directly proceeded with the assessment of damages. The result of this assessment was similar but not exactly identical to the one made in Vorwerk v. Taurus.

The main point which was discussed was, again, the rate of the indemnifying royalty to be applied. The court was apparently unconvinced by the submissions of either party in this respect and therefore they preferred to rely on the expert’s report from the other case. Although the defendants were different and the infringing device was different, the rationale for determining the proper rate could indeed be applied in a similar manner.

The court noted that three options for the indemnifying royalty rate were offered by the expert, namely 1.5%, 3% and 4.5%. The court explicitly approved the methodology used by the expert, and then came up with its own figure without any clear justification:

In view of the above, in view of the profits made by the defendants, of the advantageous economic situation of [the defendants] due to the marketing of the patented invention without a license, the court can assess the harm suffered without granting the request for additional information, and the indemnifying royalty rate should be fixed to 4%.  

This figure of 4% does not correspond to any of the three options proposed by the expert in Vorwerk v. Taurus, although it is indeed within the expert’s range. But, more importantly, this is not the same figure as the one selected by the court in Vorwerk v. Taurus where a rate of 3% was ultimately chosen by the court! (Again, the composition of the court was different.) Unfortunately, there is no explanation as to why the Cook’in infringement is worth one third more than the MyCook infringement.

At the very least, this inconsistency should be a reminder that courts have a fairly wide discretionary power when it comes to determining the quantum of damages.


CASE REFERENCE: Tribunal de Grande Instance de Paris, 3ème chambre, 4ème section, July 2, 2015, Vorwerk & Co. Interholding GmbH v. SAS Guy Demarle Public et al., RG No. 12/11488.

 

Quel dommage – part 2

In this second post on damages assessment in the Vorwerk v. Taurus case, I will focus on the computation of the royalty rate used for the assessment of damages (the first part of the story is here).

According to established case law, the rate used for assessing damages needs to be based on a reasonable royalty rate that the parties would have agreed on, had they negotiated a license agreement, but then a multiplying factor needs to be applied to the basic royalty rate. This is often termed an indemnifying royalty.

Some believe that, according to a fundamental principle of civil law, damages cannot have a punitive nature as they are meant to repair a harm suffered by a victim (“all the harm, but not more than the harm”). Thus, an indemnifying royalty simply reflects the fact that a defendant found guilty of infringement would not be in a normal bargaining position and would be put at a disadvantage at the negotiation table.

Others are of the opinion that an indemnifying royalty is necessarily punitive in nature. This line of thought in fact seems to be consistent with what the court itself suggests in the Vorwerk damages decision:

[…] One should take into account the detrimental situation that the patent proprietor is in, since they have to put up with an exploitation of the invention that they have not decided. It would thus be unfair to simply apply a royalty rate equivalent to the one that they would have agreed on if they had negotiated a license agreement.

In the case at hand, the court was confronted with three different calculations of a royalty rate.

The first calculation was the expert’s: the defendants’ operating margin before taxes is 9.6%. A normal royalty rate should thus be 25% of this figure, so approximately 2.5%. However, this rate should further be cut in half and then rounded up to 1.5%, taking into account the fact that the importance of the patent was not paramount for marketing the food processors at stake. Then, three possible multiplying factors were offered by the expert to the court, namely 1 (which is not much of a multiplying factor), 2 or 3.

The second calculation was the plaintiff’s: the main difference between this calculation and the expert’s is that the plaintiff requested that the rate be calculated based on the defendants’ contribution margin, which was assessed to be significantly higher than the operating margin before taxes, at 22%. According to the plaintiff, some fixed costs were erroneously deduced by the expert from the margin, since the defendants would have supported these fixed costs anyway.

Then, the plaintiff suggested a royalty rate of 25 to 33% of the above margin, to which a true multiplying factor should be applied. The plaintiff disagreed with the expert’s finding regarding the lesser importance of the patent for the food processors at stake. But on the other hand, they agreed that those food processors in which the infringing steam-cooking cover was only optional (namely the Mycook Pro series) should be subjected to a lower overall rate than food processors in which the infringing steam-cooking cover was mandatory (the Mycook series).

Last (and least, in terms of figures), the defendants’ calculation was based on the proposition that the royalty rate should not be based on the overall turnover of the complete food processors, but rather on the turnover attributable to the steam-cooking cover. The price of the cover represents approximately 8% of the overall price. As far as the royalty rate itself is concerned, Taurus sided with the expert’s proposition of 2.5% to be cut in half – so, 1.25% without any rounding up. Taurus objected to any multiplying factor, by relying on the principle recalled above that there cannot be punitive damages under French law, and by adding that Vorwerk did not suffer from any negative consequence in the absence of evidence of any direct or indirect exploitation of the patent.

A calculator of royalty rates
A calculator of royalty rates

So, in summary, the three royalty rates offered to the court were:

  • 13% for the Mycook processors and 6.5% for the Mycook Pro processors (patentee);
  • 1.5, 3 or 4.5% for all processors, depending on the indemnifying multiplying factor (expert); and
  • 0.1% for all processors, if my math is correct: 1.25 % times 8 % (defendant).

The court selected the middle option, namely the expert’s. And among the three possibilities offered by the expert, they chose again the middle one, namely the 3% rate.

In particular, the court agreed with the selection of the operating margin, and with the proposition that 25% of this margin should represent a valid starting point for the royalty rate. Said the court, this coefficient of 25%

represents an allocation key which is commonly accepted in terms of patent licensing. 

It is indeed common thinking in patent licensing that approximately one fourth to one third of the profit made by the licensee owing to the invention should be paid back to the licensor, while the licensee should keep the rest of the profit. It is rather comforting that the court adopted this real-world pragmatic approach.

The court also agreed with the reduction of the rate suggested by the expert:

[…] In the marketing of the food processors at stake, the part taken by the exploitation of the patent itself needs to be put into perspective and reduced since other intangible assets may have contributed to the sales of these products.

Again, this looks like a sound approach. Traditional French case law on computation of damages was mainly established in situations wherein one invention equals one patent equals one product. But this probably no longer correctly reflects the current state of affairs, IP-wise. Even though food processors are not smartphones which incorporate technologies protected by thousands of patents, it seems plausible that they may incorporate a number of patented inventions – not to mention other sources of value.

Finally, the court applied a multiplying punitive-like factor of 2, apparently trying to strike a balance between a low factor which would be unfair to the patentee who did not agree to the exploitation of their patent, and a high factor which would also be unfair since the patentee did not clearly explain how the patent is directly or indirectly exploited by them and thus how there could be additional economic harm.

As mentioned in the first post on this topic, an additional amount of 6,255 euros was also awarded in terms of financial harm. This additional amount was calculated by the expert (with the approval of the court) based on the long-term interest rate in Germany, and was meant to compensate for the accrued interest that the claimant should have earned based on the collected royalties.

It would be interesting to see whether readers believe that other national courts in other European countries would have likely come up with the same kind of figure or whether there are any marked differences of approaches.


CASE REFERENCE: Tribunal de grande instance de Paris, 3ème chambre, 2ème section, September 26, 2014, Vorwerk & Co. Interholding GmbH v. Electrodomesticos Taurus SL, Lacor Export, Lacor Menaje Profesional SL & Taurus France. RG No. 2008/10729.

Quel dommage – part 1

As interesting as revocation verdicts may be, patents are sometimes found valid and even infringed.

In such a case, a court in France has two main options for determining the amount of damages: either they decide on the quantum in the same ruling in which the patent is found valid and infringed, or they decide on validity and infringement first and then appoint an expert with the task of making a recommendation to them; it is in view of the expert’s report and of further submissions of the parties that the court then determines the quantum.

Damages computation tends to be more detailed and better reasoned in cases of the second category than cases of the first category. Therefore, I thought it would be interesting to have a closer look at one recent case where use was made of an expert, as an example of computation methodology.

On January 11, 2011, the Paris Tribunal de Grande Instance (TGI) held that Electrodomesticos Taurus SL and other codefendants infringed a European patent owned by Vorwerk & Co. Interholdings GmbH by inter alia importing food processors of the brands Mycook and Mycook Pro into France and marketing those on French territory. The TGI appointed an expert and entrusted him with the task of estimating the proper amount of damages.

This second part of the procedure led to another judgment handed down on September 26, 2014 – yes, this is three and a half years later I am afraid. In this judgment, Vorwerk was awarded 127,367 euros of damages corresponding to lost profits, and 6,255 euros corresponding to financial harm. However, since they had already been awarded 310,000 euros as a provision on damages, they in fact had to pay the difference back to the defendants.

This is probably not the end of the story though, since:

  • there may be an appeal pending further to the ruling of September 26, 2014 (any information that readers may have on this question would be welcome);
  • although the initial validity and infringement verdict was confirmed on appeal on February 15, 2013, the Cour de cassation (supreme court) set aside the appeal judgment on November 25, 2014, due to some procedural violation during the appeal proceedings, and remitted the case back to the Cour d’appel in a different composition.

So, on the procedural standpoint, this is a relatively unusual and interesting situation indeed.

Anyway, let’s go back to this amount of damages of 127,367 euros and how it was reasoned by the court.

Vorwerk had not been working the patent itself – although other companies of the same group had apparently been. Therefore, the “lost profits” that they claimed were in fact lost royalties.

In order to assess these lost royalties, a classical two-step process was applied: first, the turnover generated by the infringement (or “infringing mass”) was calculated; second, the royalty rate was assessed.

As to the first step, the court defined the starting point and the end point of the period of time during which infringement took place. The end point was the date of the first judgment on validity and infringement. The plaintiff requested that posterior acts be also taken into account but this request was denied since such posterior acts were prohibited by the injunction pronounced in the first judgment, so that any breach of the injunction should give rise to specific remedies (to be recovered in different proceedings).

The starting point was taken to be three years prior to the commencement of the legal proceedings against the defendants, in keeping with the French statute of limitation (the limitation period has now been extended to 5 years according to new legislation).

One interesting defense raised by some of the codefendants was that they were not “direct infringers so that the starting point should be postponed as far as they were concerned. Under French law, manufacturers or importers of infringing products are defined as direct infringers and are therefore liable for the infringement regardless of whether they were aware of it. In contrast, distributors, users or marketers of infringing products are liable only insofar as they are aware of the infringement – provided that they are different from the manufacturers / importers.

Here, there were four codefendants: two Spanish companies and two French companies. The two French companies argued that they were not direct infringers, and therefore were only liable when they became aware of the infringement, that is when legal proceedings were started against them.

This argument was unsuccessful, as the court did not want to make any difference between the defendants:

It obviously derives from the judgment of January 14, 2011 that the court held Taurus France and Lacor Export [the French companies] liable for the importation acts and did not distinguish their case from that of Taurus Spain and Lacor Spain [the Spanish companies].

Besides, even though these companies are incorporated under French law and are located in France, it results from the statements provided by the defendants to the expert that Taurus France exclusively buys from Taurus Spain, and that Lacor Export handles order placed in France for Lacor Spain, so that they are co-authors of the acts of importation.

Therefore they are liable regardless of any awareness. Consequently, the starting point for the infringement period should be three years prior to the commencement of legal proceedings against each company, as posited by the expert.

The exact date of the starting point was not the same for all companies as legal proceedings were started against them at different points in time, but the take-away message here is that indirect infringers (such as marketers or distributors) having close ties with direct infringers (manufacturers or importers) are not viewed as actual indirect infringers but rather as co-authors of the acts of direct infringement.

Then the court turned to the determination of which articles were infringing. Here, one issue was that some food processors were sold with a steam cooking cover while others were not. The court analyzed the first judgment and deduced from this judgment that the patent infringement was related to the presence of the steam cooking cover. Food processors sold without a steam cooking cover were not infringing. On the other hand, the defendants also marketed steam cooking covers independently of (the main part of) the food processors.

A steam cooking cover for humans.
A steam cooking cover for humans

The court decided that the number of infringing articles corresponded to the sum of (1) food processors sold with a steam cooking cover and (2) steam cooking covers sold separately. The court’s reasoning was that standalone steam cooking covers were necessarily meant to be used with food processors previously sold without a cover. Therefore, the sum of (1) and (2) should indeed be equal to the number of cover-equipped food processors held by end users.

Based on the definition of the relevant period of time and of the relevant articles, the court was able to compute the overall turnover generated by the infringement – based on the numbers provided in the expert’s report.

In the second post on this topic, we will look at the second main step of damages assessment, namely the computation of the royalty rate.


CASE REFERENCE: Tribunal de grande instance de Paris, 3ème chambre, 2ème section, September 26, 2014, Vorwerk & Co. Interholding GmbH v. Electrodomesticos Taurus SL, Lacor Export, Lacor Menaje Profesional SL & Taurus France. RG No. 2008/10729.