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A prescription for liability: Injunction in gray-market drug case based on material differences

by Ian J. Howard | Aug 27, 2026 | Life Sciences, Trademarks

Affirming a preliminary injunction, the US Court of Appeals for the Fourth Circuit found that companies importing foreign-market pharmaceuticals for domestic patients were likely liable for trademark infringement, and that healthcare administrators and pharmacy benefit managers that continued facilitating those transactions despite reason to know of the infringement were likely liable for contributory infringement. Gilead Sciences, Inc. v. Meritain Health, Inc., Case No. 25-1828 (4th Cir. Aug. 13, 2026) (Agee, Harris, Keenan, JJ.)

Gilead sued a group of companies involved in filling US patient prescriptions for the HIV drug Biktarvy® with a Gilead-branded version of the drug intended for Turkey. Gilead alleged that the defendants’ importation and distribution of the Turkish-market product infringed its trademarks under the Lanham Act. In addition to suing companies directly involved in sourcing and supplying the prescriptions, Gilead sued Meritain Health, the third-party administrator of the relevant healthcare plan, and ProAct, a pharmacy benefit manager, for contributory infringement.

Shortly after filing suit, Gilead moved for a temporary restraining order and then a preliminary injunction enjoining the defendants from importing gray-market versions of Biktarvy®. The district court granted the requested relief, finding that Gilead had demonstrated a likelihood of success on its direct infringement claims against certain defendants and its contributory infringement claims against others. Meritain, ProAct, and the other defendants appealed.

The defendants first argued that the Federal Food, Drug, and Cosmetic Act (FDCA) precluded Gilead’s Lanham Act claims. Although the Turkish version of Biktarvy® was not US Food and Drug Administration approved, Gilead did not premise its trademark claims on that fact. The Fourth Circuit therefore concluded that adjudicating Gilead’s claims did not require enforcement or interpretation of the FDCA.

The defendants also challenged the district court’s likelihood-of-confusion finding, emphasizing that Gilead itself manufactured the Turkish version of Biktarvy® and that the product bore authentic Gilead trademarks. The Fourth Circuit disagreed, explaining that goods bearing a genuine trademark may nevertheless be considered nongenuine for trademark purposes if they materially differ from the authorized domestic product or are sold outside the trademark owner’s quality-control procedures.

Although the Turkish and US versions of Biktarvy® were chemically identical, the Fourth Circuit found material differences between them. Among other things, the Turkish product contained foreign-language labeling and lacked certain warnings and patient information provided with the US version. The Turkish product also was not transported through Gilead’s quality-control system. Those differences were sufficient to support the district court’s finding of material differences.

The Fourth Circuit also rejected Meritain and ProAct’s challenges to the contributory infringement ruling. The Court explained that contributory infringement does not require actual knowledge of another party’s infringement. Liability may arise where a defendant knew or should have known of the infringement and nevertheless continued supplying products or services that facilitated it.

The Fourth Circuit further rejected Meritain and ProAct’s argument that contributory infringement required proof that they exercised control over the direct infringers. In doing so, the Court declined to adopt the Ninth Circuit’s control requirement. The Fourth Circuit also concluded that even if [...]

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Off the mark: NPE licensees must comply with patent marking for pre-suit damages

by Keval Amin | Aug 27, 2026 | Patents

Affirming dismissal of a patent infringement complaint and an award of attorneys’ fees, the US Court of Appeals for the Federal Circuit reiterated that a nonpracticing entity (NPE) seeking pre-suit damages cannot disregard its licensees’ obligations under the patent marking statute, and that a pattern of abusive litigation conduct supports an exceptional case finding under 35 U.S.C. § 285. VDPP, LLC v. Volkswagen Group of America, Inc., Case No. 24-2226 (Fed. Cir. Aug. 19, 2026) (Moore, Lourie, Cunningham, JJ.)

VDPP, an NPE, sued an auto manufacturer for infringement of a patent directed to electrically controlled spectacles. The district court dismissed the complaint under Rule 12(b)(6) and denied leave to amend as futile. Because VDPP sought pre-suit damages, it was required to plead compliance with 35 U.S.C. § 287(a), including compliance by its licensees.

VDPP had entered into 11 settlement agreements that included patent licenses, but its proposed amended complaint did not allege that any licensee had marked its products. Instead, VDPP relied on its status as an NPE and asserted that it had no products of its own to mark. VDPP appealed the district court’s dismissal and fee award.

The Federal Circuit affirmed. Although a patentee that does not make or sell patented products may not have products of its own to mark, its licensees remain subject to § 287’s marking requirements. The Court rejected VDPP’s attempt to distinguish licenses granted through settlement agreements, explaining that a settlement license is no different for marking purposes from any other patent license. The Court noted that all 11 settlement agreements were structured as licenses and that one expressly stated that the licensee had no obligation to mark. Because VDPP could not plausibly allege that it made reasonable efforts to ensure compliance by its licensees, the Court affirmed the denial of leave to amend as futile.

The Federal Circuit also affirmed the district court’s exceptional case determination and fee award under § 285. The district court relied on several aspects of VDPP’s litigation conduct, including seeking future damages and injunctive relief on an expired patent, failing to disclose relevant settlement agreements despite being reminded of them, and advancing positions the district court characterized as frivolous.

The Federal Circuit rejected VDPP’s argument that conduct must independently satisfy Rule 11 before it may support an exceptional case finding. It also concluded that the district court properly considered VDPP’s broader pattern of filing patent infringement suits followed by low-value settlement demands, noting that such a pattern is relevant to an exceptional case determination where adequate evidence of an abusive litigation strategy is presented.

The Federal Circuit dismissed the appeal as to sanctions imposed on VDPP’s counsel for lack of jurisdiction. VDPP’s counsel’s notice of appeal listed only VDPP as the appellant, and the counsel’s name appeared only incidentally within a description of the orders being appealed. Corrected notices filed more than 90 days after entry of the orders came too late. The Court also rejected VDPP’s argument that it had standing to contest its own counsel’s [...]

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Resolution impossible: Lower resolution prior art is analogous art to higher resolution claims

by Vincent Li, PhD | Aug 27, 2026 | Patents

The US Court of Appeals for the Federal Circuit affirmed the Patent Trial & Appeal Board’s decision finding that prior art disclosing a low-resolution system was analogous prior art to claims directed to a high-resolution system for purposes of obviousness under 35 U.S.C. § 103. The Nielsen Company (US), LLC v. TVision Insights, Inc., Case No. 2025-1371 (Fed. Cir. Aug. 14, 2026) (Dyk, Reyna, Bissoon, JJ.)

Nielsen owns a patent related to audience measurement systems that use cameras to capture images of viewers watching media content. The specification describes a “people counter” that may use low-resolution images to detect audience members and a “person identifier” that uses high-resolution images for facial recognition.

TVision petitioned for inter partes review (IPR), asserting two grounds of obviousness, both of which relied on a scientific publication by Tian as part of the asserted prior-art combinations. The Tian publication, titled “Evaluation of Face Resolution for Expression Analysis,” disclosed experimental results evaluating facial-expression analysis using lower-resolution images “down-sampled from the originals.” The Board held that all challenged claims were obvious on both grounds. Nielsen appealed.

A central issue was whether the Board erred in concluding that Tian qualified as analogous art. Two tests define the scope of analogous art: whether the art is from the same field of endeavor, and if not, whether the reference is still reasonably pertinent to the particular problem with which the inventor is involved. In its petition, TVision asserted that Tian was in the same field of endeavor as Nielsen’s patent. Nielsen responded that Tian was neither in the same field of endeavor nor reasonably pertinent. The Board ultimately concluded that Tian was reasonably pertinent analogous art without reaching the field of endeavor prong. Nielsen argued that the Board violated the Administrative Procedure Act (APA) by applying the reasonably pertinent test when TVision’s petition only argued that Tian was in the same field of endeavor, depriving Nielsen of adequate notice and an opportunity to respond.

The Federal Circuit rejected Nielsen’s APA argument on three independent grounds:

The Court explained that although the two analogous-art tests are separate, the evidence and analysis relevant to them may overlap. The Court also explained that an analogous-art theory need not be expressly stated and may instead be implicit in the petition. Here, TVision’s discussion of Tian’s analysis of images for head detection and pose estimation placed Nielsen on notice that reasonable pertinence was at issue.
Nielsen had an opportunity to address reasonable pertinence and in fact addressed both analogous-art prongs in its Patent Owner Response.
Nielsen conceded that it could not identify any evidence or argument that it had been prevented from presenting. Accordingly, even if there had been a notice error, it was harmless.

On the merits, the Federal Circuit found that substantial evidence supported the Board’s determination that Tian was reasonably pertinent analogous art. The Court rejected Nielsen’s attempt to limit the analysis to prior art that an ordinarily skilled artisan would reasonably search to address the problems specifically identified in [...]

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Ministerial requirements aren’t enough: Post-AIA prior art priority requires § 112 written description support

by Dexter Hamilton | Aug 20, 2026 | America Invents Act, Patents

The US Court of Appeals for the Federal Circuit vacated a Patent Trial & Appeal Board final written decision finding challenged claims obvious, concluding that the Board applied the wrong legal standard in determining whether an asserted prior art reference could obtain the filing date of an earlier provisional application based only on satisfaction of “ministerial requirements.” Dental Monitoring SAS v. Align Technology, Inc., Case No. 25-1752 (Fed. Cir. Aug. 10, 2026) (Lourie, Stall, Taranto, JJ.)

Dental Monitoring owns a patent directed to a method for acquiring and analyzing an image of a patient’s dental arch. Align Technology petitioned for inter partes review (IPR) of the patent based on three references: Salah, Carrier, and Maninis.

Carrier’s status as prior art was central to the dispute. Carrier claimed priority to a provisional application filed before the effective filing date of Dental Monitoring’s patent, but Carrier’s nonprovisional application was filed afterward. Thus, Carrier qualified as prior art only if it could obtain the benefit of its provisional application’s filing date under America Invents Act (AIA) § 102(d)(2).

Dental Monitoring argued that under the Federal Circuit’s 2015 decision in Dynamic Drinkware v. National Graphics, Carrier could rely on the provisional filing date only if the provisional provided written description support for at least one claim of Carrier. The Board disagreed, concluding that Dynamic Drinkware addressed only pre-AIA law. Instead, relying on its precedential decision in Penumbra v. RapidPulse, the Board determined that a reference patent receives the filing date of an earlier application for AIA prior art purposes if it satisfies the “ministerial requirements” of §§ 119 and 120 and the earlier application describes the subject matter relied upon in the reference. Because Carrier’s provisional described the relied-upon subject matter, the Board treated Carrier as prior art as of the provisional filing date.

On the merits, the Board found the claims unpatentable as obvious over a combination of three references. Dental Monitoring appealed.

The Federal Circuit reviewed the statutory question de novo, concluding that §§ 102(d)(2), 119(e)(1), and 112(a) foreclosed the Board’s ministerial requirements approach.

Section 102(d)(2) provides that a patent or patent application may be effectively filed for prior art purposes as of an earlier application’s filing date if it is “entitled to claim a right of priority” under § 119 or the benefit of an earlier filing date under § 120. Section 119(e)(1), in turn, permits a nonprovisional application to claim priority to a provisional only when the invention disclosed in the later application is disclosed in the provisional “in the manner provided by” § 112(a). The Federal Circuit therefore concluded that § 102(d)(2) incorporates § 112(a)’s substantive written description requirement. The Court also found further support in the phrase “entitled to claim a right of priority,” because an applicant would only be “entitled to claim priority” by fulfilling the statutory requirements, including § 112’s written description requirement.

Align argued that Dynamic Drinkware did not apply because its analysis was limited to the pre-AIA version of § [...]

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Keyword bidding alone doesn’t constitute trademark infringement

by Jolie B. Schenerman | Aug 13, 2026 | Trademarks

Addressing trademark infringement arising from online advertising, the US Court of Appeals for the Eleventh Circuit held that purchasing a competitor’s trademark as a keyword (keyword bidding), without displaying or otherwise referencing the mark in the resulting advertisement, does not constitute trademark infringement because the behind-the-scenes use is not likely to confuse consumers. The Court nevertheless upheld the jury’s infringement finding based on the defendant’s visible use of the protected mark in advertising copy, product descriptions, and customer communications. Deltona Transformer Corporation v. The NOCO Company, Case No. 24-13590 (11th Cir. Aug. 4, 2026) (Lagoda, Kidd, Newsom, JJ.)

Deltona Transformer Corporation manufactures vehicle battery chargers that charge a battery to capacity and then maintain the charge without overcharging it. Deltona owns federally registered trademarks for BATTERY TENDER and DELTRAN BATTERY TENDER. One of Deltona’s founders coined the term “battery tender,” drawing on the maritime use of “tender” for a vessel that services or supplies another vessel.

The NOCO Company makes similar battery chargers. Beginning in 2014, NOCO promoted its products using “battery tender” in several ways, including bidding on the term as a search keyword, placing the term in advertisements and product descriptions, and referring to its products as battery tenders in communications with customers and marketing firms. Deltona sued for federal and state trademark infringement and unfair competition. A jury found for Deltona and awarded damages, and the district court later ordered disgorgement of NOCO’s profits and entered a permanent injunction. NOCO appealed.

NOCO first argued that Deltona’s marks were generic and therefore unprotectable. The Eleventh Circuit disagreed. Federal registration provided prima facie evidence of validity, and the Court concluded that “battery tender” was at least descriptive (and potentially suggestive) because “tend” metaphorically rather than literally describes what the charger does. The Court further concluded that a reasonable jury could find secondary meaning based on Deltona’s decades of use, advertising, promotion, and industry recognition.

The Eleventh Circuit also rejected NOCO’s argument that “battery tender” had subsequently become generic. Although NOCO introduced survey evidence indicating that many respondents understood the term as identifying a type of product rather than a brand, the survey was not conclusive, and the jury was entitled to weigh it against the remaining evidence supporting trademark significance.

Turning to infringement, the Eleventh Circuit addressed for the first time whether purchasing another party’s trademark as an online advertising keyword can itself constitute infringement. The Court concluded that it cannot in circumstances such as those presented here. Keyword bidding occurs “behind the scenes,” meaning consumers do not see the purchased keyword and instead see the resulting advertisement. Accordingly, likelihood of confusion depends on what the consumer sees in the advertisement, not on the invisible mechanism that caused the advertisement to appear.

The result was different where NOCO visibly used Deltona’s marks. NOCO used “battery tender” and similar language in the text of advertisements, including advertisements describing NOCO products as battery tenders. The Eleventh Circuit found sufficient evidence for the jury to conclude that these uses were likely to [...]

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Safety-enhancing color is functional, not protectable as trademark

by Taylor MacDonald | Aug 13, 2026 | Trademarks

The US Court of Appeals for the Eighth Circuit affirmed cancellation of a trademark covering chartreuse-colored water hoses, finding that the color was functional because it improved visibility and therefore enhanced safety. The Court also affirmed a $3 million attorneys’ fee award based on the trademark owner’s lack of candor before the United States Patent & Trademark Office (USPTO), litigation conduct, and continued reliance on an incorrect interpretation of the functionality standard. Weems Industries, Inc. d/b/a Legacy Manufacturing Co. v. Teknor Apex Co., Case No. 25-2956 (8th Cir. July 30, 2026) (Colloton, Arnold, Grasz, JJ.)

Weems Industries sued competing water hose manufacturer Teknor Apex for trademark infringement and other claims. Weems asserted a federally registered trademark covering the chartreuse color used on its water hoses. Teknor countered that the color was functional and sought cancellation of the registration. Teknor also requested attorneys’ fees.

The district court agreed with Teknor, finding that chartreuse served a functional purpose because the bright color made hoses more visible against dark grass and therefore improved product safety. The district court also concluded that Weems had not established acquired distinctiveness in the color. It cancelled the registration and awarded Teknor approximately $3 million in attorneys’ fees. The district court based the fee award on three categories of conduct: Weems’ lack of candor before the USPTO, its conduct during the litigation and trial, and its continued reliance on an incorrect interpretation of trademark functionality. Weems appealed.

The Eighth Circuit reviewed the district court’s functionality determination for clear error. A product feature is functional and therefore not subject to trademark protection if it is essential to the product’s use or affects the product’s cost or quality. The Court explained that a feature that improves product safety may affect product quality and therefore be functional.

The record contained substantial evidence supporting the district court’s finding that chartreuse improved hose visibility. Weems’ own promotional materials described the visibility and safety benefits of the color. The record also included patent-related materials describing the utility of chartreuse and expert testimony addressing the color’s visibility.

The Eighth Circuit rejected Weems’ argument that a feature is functional only if it improves the mechanical operation of the product. Functionality, the Court explained, is not limited to whether a feature makes a product operate better. A feature that improves safety can also affect product quality and therefore fall within the functionality doctrine.

The Court also rejected Weems’ argument that chartreuse should remain protectable because Teknor could have selected a different highly visible color for its hoses. The availability of alternative colors did not require a competitor to design around a functional safety feature. Because the Court affirmed the finding that chartreuse was functional, it did not need to address whether the color had acquired distinctiveness.

The Eighth Circuit next considered the attorneys’ fee award. The Lanham Act permits fee awards in “exceptional cases,” which courts evaluate based on the totality of the circumstances. A case may be exceptional because of the substantive weakness of a party’s [...]

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Unplugged: Claim construction errors, presumption of harm short-circuit preliminary injunction

by Yuhe Liu, PhD | Aug 13, 2026 | Patents

The US Court of Appeals for the Federal Circuit vacated a preliminary injunction, finding that the district court improperly imported a spatial limitation into the claim term “backplate” and erroneously treated the structural term “pin” as a means-plus-function limitation. The Court also reiterated that in preliminary injunction proceedings, a strong showing of validity and infringement does not give rise to a presumption of irreparable harm. Socket Solutions, LLC v. Import Global, LLC, Case No. 25-1121 (Fed. Cir. Aug. 4, 2026) (Moore, C.J.; Prost, J.; Seeborg, Distr.J. (sitting by designation)).

Socket Solutions owns a patent directed to an indoor electrical outlet cover designed to conceal an outlet’s contact openings while permitting continued use of the outlet. Socket Solutions sued Import Global, alleging that Import Global’s Neat Socket product infringed. Socket Solutions also moved for a preliminary injunction. Adopting a magistrate judge’s reports and recommendations, the district court granted the injunction, barring Import Global from making, using, selling, offering to sell, or importing the accused product. Import Global appealed.

The Federal Circuit first addressed the district court’s construction of “backplate.” The district court construed the term as the component of the cover opposite the frontplate that included at least one set of electrical prongs. Import Global argued that the backplate instead referred to the portion of the cover closest to the wall outlet.

The Federal Circuit rejected both constructions because each imposed a spatial relationship not required by the specification. Looking to the written description, the Court explained that the backplate was used to define the thickness of the outlet cover. The Court therefore construed “backplate” as the component that, together with the frontplate, formed the cover such that the cover’s maximum thickness was measured between the frontplate and that component at the cover’s central portion. The Court also declined to require the backplate itself to include electrical prongs. Because the asserted claim separately recited that limitation, incorporating it into the construction of “backplate” would improperly render other claim language superfluous.

The Federal Circuit next concluded that the district court erred by construing “pin” as a means for making an electrical connection between a wire and a corresponding prong, effectively treating the term as a means-plus-function limitation under Section 112(f). Because the claim did not use the word “means,” the presumption against application of Section 112(f) applied. The Court found that the presumption was not overcome because the specification described a “pin” structurally, and the parties agreed that a skilled artisan would understand a pin to identify structure.

The Federal Circuit rejected Socket Solutions’ proposed purely functional construction as too broad because not every structure capable of connecting a wire to a prong is necessarily a pin. It likewise rejected Import Global’s proposed “mechanical system” construction as unsupported by the specification. Finding neither lexicography nor disavowal, the Court concluded that “pin” should receive its plain and ordinary meaning.

Finally, the Federal Circuit addressed the district court’s irreparable harm analysis. Although the Court did not decide whether Socket Solutions had established irreparable harm, [...]

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Not even a thread left: Single reference anticipation, missing claim limitation entitle defendant to JMOL

by Tyler Jackson | Aug 6, 2026 | Patents

The US Court of Appeals for the Federal Circuit reversed a judgment of infringement, concluding that the asserted patent claims were anticipated by a single prior art reference and that the accused products did not satisfy a limitation under the district court’s claim construction. As a result, the Court concluded that the defendant was entitled to judgment as a matter of law (JMOL) of both invalidity and noninfringement. Board of Regents of the University of Texas v. Boston Scientific Corp., Case Nos. 24-2062; -2063 (Fed. Cir. July 27, 2026) (Taranto, Bryson, Cunningham, JJ.)

The Board of Regents of the University of Texas (UT) owns a patent directed to a composition containing at least one biodegradable polymer fiber that includes one or more dispersed therapeutic agents. The claimed invention may be used with commercially available stents to deliver drugs at the site where the stent is placed.

In 2017, UT sued Boston Scientific Corporation (BSC), alleging that BSC’s drug-eluting coronary stent systems infringed UT’s patent. Following claim construction, the case proceeded to trial. The jury found that BSC willfully infringed the asserted claims and rejected BSC’s argument in its motion for JMOL that the claims were anticipated by a prior art reference known as Song. The jury awarded damages to UT. The district court subsequently set aside the willfulness finding as legally unsupported but otherwise upheld the verdict. BSC appealed the infringement and validity rulings, and UT cross-appealed the district court’s decision overturning the willfulness verdict.

The Federal Circuit reversed the judgment for UT, finding that BSC was entitled to JMOL that the asserted claims were invalid as anticipated and, independently, that BSC did not infringe.

Addressing anticipation, the Federal Circuit concluded that Song disclosed each limitation of the asserted independent claim. Song taught the claimed biodegradable polymer fiber and disclosed the claimed “second phase” limitation. The Court explained that Song’s noncontiguous drug phases satisfied the requirement for discrete drug-containing regions.

The asserted dependent claims added limitations expressed in Markush-group form. Because Song disclosed at least one member of each claimed Markush group, the Federal Circuit concluded that those claims were also anticipated. The Court further found that Song disclosed the claimed release of a drug at varying rates.

The Federal Circuit separately concluded that BSC was entitled to JMOL of noninfringement. Under the district court’s claim construction, the asserted claims required a “thread-like” structure. The Court determined that UT’s evidence did not establish the presence of such a structure in BSC’s accused stent coatings.

UT’s infringement theory relied on sections of the coating that had been artificially separated for purposes of analysis. The Federal Circuit concluded that no reasonable jury could characterize those artificially isolated portions as the claimed thread-like structure. BSC therefore was entitled to JMOL of noninfringement.

Irreparable harm? Don’t bury your trade secret

by Jodi Benassi | Aug 6, 2026 | Trade Secrets

The US Court of Appeals for the Eighth Circuit affirmed the denial of a preliminary injunction, finding that the district court did not abuse its discretion in concluding that the plaintiff’s asserted harms, including lost profits and injury from the alleged trade secret injury, could be adequately remedied through monetary damages. Revenue Management Solutions, LLC v. Commerce Bank, Case No. 25-3159 (8th Cir. July 23, 2026) (Gruender, Benton, Erickson, JJ.)

Revenue Management Solutions (RMS) licensed to Commerce Bank software that processes and organizes records and payment information. Commerce marketed the software under the name RemitConnect. Under the parties’ license agreement, Commerce received access to RMS’s confidential software and source code but was prohibited from copying or disclosing the software or source code, reverse engineering the software, or creating derivative works based on RMS’s proprietary technology.

In 2018, Commerce began developing its own software, RemitConnect 2.0. By 2025, RMS observed a decline in Commerce’s use of the licensed version of its software. Suspecting that Commerce had reverse engineered and copied its software, RMS moved for a preliminary injunction to prohibit Commerce from using RemitConnect 2.0. The district court denied the motion, concluding that RMS failed to present sufficient evidence of irreparable harm. RMS appealed.

RMS argued that the district court failed to recognize the irreparable harm resulting from Commerce’s misappropriation of its trade secrets. RMS asserted claims under the Defend Trade Secrets Act and the Missouri Uniform Trade Secrets Act, identifying two categories of trade secrets: sets of input-output data and segregation logic. According to RMS, Commerce misappropriated those trade secrets in developing RemitConnect 2.0.

The Eighth Circuit noted that the district court did not expressly discuss RMS’s trade secrets in its irreparable-harm analysis. The Court explained that RMS itself framed its alleged harm primarily as lost profits, referring to the misuse and disclosure of its trade secrets only in passing through a few parenthetical references. By characterizing its injury in terms of lost profits, RMS permitted the district court to conclude that any potential harm could be adequately remedied by an award of damages. The Eight Circuit thus concluded that the district court did not clearly err in finding that RMS failed to demonstrate irreparable harm.

Practice note: Although the loss, misuse, or disclosure of trade secrets may constitute irreparable harm, a plaintiff seeking injunctive relief should clearly articulate how the alleged misappropriation causes harm that cannot be adequately remedied by monetary damages. Framing the injury primarily as lost profits or another quantifiable economic loss may undermine the argument that preliminary injunctive relief is necessary.

Book of wisdom has limits: Can’t impute knowledge of later-arising facts to hypothetical negotiation

by Ashley K. Justice | Jul 30, 2026 | Copyrights

The US Court of Appeals for the Federal Circuit vacated in part a US Court of Federal Claims damages award, finding that the court erred in applying the book of wisdom in its damages analysis and assessing noncompensatory damages against the government. 4DD Holdings, LLC, et al. v. United States, Case No. 2024-1996 (Fed. Cir. July 16, 2026) (Hughes, Prost, Stark, JJ.)

4DD licensed TETRA software to the US Department of Defense and the US Department of Veterans Affairs to improve interoperability among existing military healthcare databases. Under the license, the government was permitted to make only a single backup copy of TETRA. 4DD later discovered that the government had made thousands of unauthorized copies of the software and sued for copyright infringement. During discovery, 4DD learned that the government had deleted TETRA copies from its development and test center and had destroyed evidence related to those copies. 4DD moved for sanctions.

The Court of Federal Claims imposed about $1.1 million in sanctions, found that the government had exceeded the scope of the licenses by hundreds of thousands of Federator cores and Studio seats, and awarded about $12.7 million in damages based on a hypothetical negotiation rather than the parties’ license agreement. In assessing the parties’ bargaining positions, the claims court relied in part on the fact that TETRA was never implemented, had no established profitability, and faced competition from a less expensive software product. 4DD appealed.

4DD argued that the claims court should have calculated damages using the royalty rates established in the parties’ license agreement, which it contended would have resulted in an award amount between $3 billion and $5 billion. The Federal Circuit disagreed, explaining that 28 U.S.C. § 1498(b), which provides for “reasonable and entire compensation,” does not require a particular methodology for calculating copyright damages. Although a reasonable royalty may be based on an established royalty rate, it may also be determined through a hypothetical negotiation. The Court explained that the relevance of prior license agreements depends on the extent to which they are economically comparable to the infringing use. Because the government’s licensed use differed materially from the scope of its infringing use, the Federal Circuit concluded that the claims court did not abuse its discretion in determining damages through a hypothetical negotiation rather than by simply applying the parties’ license rates.

4DD also argued that the claims court misapplied the book of wisdom doctrine by imputing to the government (at the time of the hypothetical negotiation) knowledge of its later decision to abandon the TETRA project. The Federal Circuit agreed. The Court explained that although later-occurring facts may be considered to reduce uncertainty and illuminate the value that existed at the time of the hypothetical negotiation, they may not be used to impute knowledge of unforeseeable future events that affect the value of the license. Here, the court’s claims improperly relied on the government’s subsequent change in leadership and resulting decision to discontinue the project before TETRA was implemented to diminish 4DD’s bargaining [...]

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