`
`Commercial Success:
`Economic Principles Applied
`Litigation
`
`Jesse Davio
`
`NERA Economic Consulting
`
`Marion B, STEWART
`NERA Economic Consulting
`
`A party accused ofinfringing a patent may contend that the aserted patentis invalid
`
`because of obviousness. To help ewaluate that issue, court. may consider whether the patented
`invention is a “commercial success.” Determining whether an invention has, or has not,
`been a commercial success & primarily an economic exercise, and econcmists increasingly
`assist Courts in evaluating this issue, Case law indicates that courts have traditionally
`(1) looked at such factors as increasing revenues, gain in market share, and public acclaim
`in an attempt to determine whether a product has been a commercial success and (2) con-
`sidered whether the patent holder has established a “nexus” between the claimed inven-
`tion and the product’s commercial success.
`Im this chapter we discuss these tests and
`consider them alongside another test suggested by economic principles, namely, whether
`the patented invention has earned or can be expected to carn a positive net return on
`invested capital after accounting for all the relevant costs associated with developing and
`commercializing the product, We analyze the commercial success standard in the context
`of two recent cases in which we applied these principles,
`
`INTRODUCTION
`
`A party accused of infringing a patent may contend that the asserted patent ts invalid
`because of obviousness, That contention may be rebutted by a showing that the patented
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`be
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`a
`5
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`Invention 1 a" comunercial success —one of several ‘secondary considera (3015
`that COUrES
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`Mylan v. Sanofi - IPR2018-01675
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`Mylan Ex.1074
`Mylan v. Sanofi - IPR2018-01675
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`\60 ECeonoeice OF PATENT DAMAGES
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`look to for identifying the differences between the patented invention and the prior art.
`These secondary considerations—known as objective indicia of nonobviowsness—also
`include such factors as copying, long felt but unsolved need, failure of others, andlicensing.~
`Determining Whether an invention has, or has nor, been a commercial success is pri-
`marily an economic exercise, and economists increasingly assist courts in evaluating this
`isue, Case law indicates that courts have traditionally looked for such characteristics as
`increasing revenues, gain in share in an appropriately defined market, and public acelaim
`in an attempt to determine whether a product has been a commercial success. Courts have
`also comsidered whether the patent holder has established a “nexus” between the claimed
`mnvention and the product's comumercial success
`—that is, whether the commercial success,
`if evident, is due to the patented feature as opposed to some other characteristic of the
`product or mode of selling employed by the manufacturer.
`From an economic perspective, commercial success could in principle be defined by a
`single criterion: Does the patented invention earn a positive net return (risk-adjusted) on
`invested capital after accounting for all relevant costs associated with developing and com-
`mercializing the patent as well as any alternatives available to the patent holder? Patents
`exist to protect the human and financial investment used to develop new products, serv-
`ices, or processes, This investment, however, is beneficial, from a social perspective, only if
`consumers are willing to purchase an embodiment of the invention at such a price as to
`fully compensate the inventor for all costs incurred in bringing the product to market,” Put
`simply, patents are not needed to protect inventors from making poor investment decisions,
`The courts’ use of the previously mentionedfactors ts not necessarily in conflict with
`this definition, and many—perhaps most—previous decisions made by courts are likely
`to have been consistent with it. Given the limitations onavailable data, it is entirely rea-
`sonable that an analysis of commercial success should consider and place significant weight
`on the traditional measures such as market share or revenuc growth. However, under cer-
`tain circumstances, rapid sales growth and gains in market share will not mecessarily reflect
`a profitable underlying Invention, Moorncovver, calculating the proper measure of profit-
`abiliey can be a complicated task and should be considered in an appropriate context —
`for example, relative to an appropriate benchmark or alternative. Consequently, it is our
`opinion that courts should look more deeply into the economic characteristics of the
`product before arriving at a determination of the commercial success of the patent.
`In this chapter we consider whether the tests traditionally used by the courts are consis-
`tent with the criterion suggested by economic principles, We then analyze the commercial
`success standard in the context of two recent cases in which we applied these principles.
`
`SUMMARY OF THE Case Law
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`In Grofam Jolin Deere Co. (1966), the seminal case identifying commercial success as a
`relevant “secondary consideration”in a determination of patent validity, the LS. Supreme
`Court cited a University of Pennsylornia LowReview article that focused on the consumer
`perspective for evaluating the commercial success of a patent. The article stated that “|t|he
`
`Mylan Ex.1074
`Mylan v. Sanofi - IPR2018-01675
`
`Mylan Ex.1074
`Mylan v. Sanofi - IPR2018-01675
`
`