Some Recent Papers on Huawei v. ZTE

1.  Giuseppe Colangelo and Valerio Torti have posted on ssrn the following abstract of their paper Filling Huawei's Gaps:  The Recent German Case Law on Standard essential Patents, Eur. Comp. L. Rev. (forthcoming):

The Huawei ruling identified the steps that owners and users of SEPs will have to follow in negotiating a FRAND royalty. Compliance with the code of conduct will shield patent holders from the gaze of competition law and, at the same time, will protect implementers from the threat of an injunction.

The licensing framework provided by the CJEU is aimed at increasing legal certainty and predictability for the whole standardisation environment. Nevertheless, the judgment has been criticised because a relevant number of issues are left unresolved. In this scenario the activities of national courts in filling the gaps left by the CJEU deserve the utmost consideration. This paper will seek to explore the approach developed at national level post Huawei, focusing on the German judicial experience. 

2. Urska Petrovcic has posted on ssrn the following abstract of her paper Injunctions for Standard-Essential Patents in the European Union:

Injunctions for standard essential patents (SEPs) — that is, patents that are essential to practice an industry standard — have been at the center of the antitrust debate for more than a decade. In July 2015, the Court of Justice of the European Union (CJEU) issued its long awaited decision in Huawei Technologies. Co. v. ZTE Corp., in which it addressed, for the first time, the question of whether an SEP holder’s request for an injunction could violate Article 102 of the Treaty on the Functioning of the European Union (TFEU) — the provision of EU competition law that prohibits a dominant company from abusing its market position. In this article, I analyze the implications of the CJEU’s judgment for SEP holders that seek to enforce their SEPs in the European Union. Huawei confirmed that an SEP holder faces a stricter level of antitrust scrutiny in the European Union than in some other jurisdictions, such as the United States. In practical terms, however, the developments that followed Huawei showed that the judgment limited Article 102 TFEU’s scope in addressing an SEP holder’s behavior, when compared with the approach that the European Commission had adopted in its previous investigations. After Huawei, an SEP holder’s request for an injunction is less likely to trigger antitrust liability under Article 102 TFEU. In addition, Huawei raised the barrier that an SEP holder must overcome to obtain an injunction. Yet, the requirements established in Huawei are not so strict as to preclude obtaining that remedy. Unlike in the United States, where, as of August 2017, no SEP holder has obtained an injunction, several SEP holders have requested and obtained injunctions against infringers in the European Union. 

3.  Nicolo Zingales has posted on ssrn a paper titled The Legal Framework for SEP Disputes in EU Post-Huawei:  Whither Harmonization?.  Here is a link to the paper, and here is the abstract:

This article revisits the antitrust treatment of unilateral conduct in Standard Essential Patent (SEP) disputes in EU, with particular focus on the landmark CJEU judgment in Huawei v ZTE and the way it has affected subsequent developments before national courts. It illustrates that while the Court in Huawei significantly improved legal certainty both for SEP holders and their potential licensees, it also left open a number of crucial questions affecting everyday’s licensing practice. First, it is not entirely clear whether the liability of an SEP holder presupposes leveraging by a vertically integrated firm or can also arise in purely vertical or horizontal relationships. Secondly, the safe harbor procedure formulated in the judgment begs important questions concerning burden of proof and portfolio licensing, which have given rise to divergent interpretations. It follows that the space remains wide open for competing national and even regional approaches to the rights and obligations of SEP holders, calling for further European harmonization - be it judicially, legislatively, or administratively through the European Commission. In support for the latter measures, the article illustrates the limited remit of EU private international law rules in preventing the forum shopping which is likely to unfold as a result of a fragmented landscape for the resolution of SEP disputes.

Two More Conferences on SEPs

1.  The Jindal Institute on Research in IP and Competition (JIRICO) will be holding its Third International Conference on Innovation for Shared Prosperity:   Deliberations on Standard Setting and Patent Licensing on November 4-5 at the Taj Mahal Hotel in New Delhi.  I will be participating remotely on day two, during a session titled "Patent Damages in SEP Cases and Court Adjudications."  The conference website is available here.

2.  The IPKat Blog earlier this week called attention to a conference taking place in London on December 6-7 titled "The 11th Annual Standards, Patents & Competition: Law & Litigation," which will include a session titled "The Latest on FRAND from the EU Courts."  The conference website is available here.

Seaman on the VirnetX v. Apple Enhanced Damages Opinion

This past Tuesday I wrote that "reports are coming in that Judge Schroeder (Eastern District of Texas) on September 29 entered a memorandum opinion and order awarding VirnetX $41.3 million in enhanced damages and another $96 million in costs, attorneys' fees, and interest, on top of a damages award $302 million, in a suit against Apple.  For coverage, see, e.g., this story on Ars Technica.  Apparently the opinion and order have now been unsealed, but as of this morning it isn't showing up on Lex Machina."  Professor Christopher Seaman (Washington & Lee University) has now posted the opinion on Scribd and has authorized me to publish the following guest post summarizing it: 

The district court found that Apple willfully infringed VirnetX’s patents by selling products that contained the accused features for a number of months (10 months for VPN on Demand, 5 months for FaceTime) after the initial jury verdict in 2012 found that Apple infringed and that the patents in suit were not invalid.  The court’s reasoning (see pp. 29-38) is focused on Apple’s post-verdict conduct, finding that “Apple’s continued sales after the verdict of products with the [infringing] features [was] unreasonably risky or reckless.”  (p. 35)  It rejected Apple’s claim that the PTO’s grant of a inter partes reexamination into the patents after the verdict made its conduct not willful/egregious (appeals of the reexam proceedings are still pending, but at least some claims of two of the patents-in-suit were cancelled by the PTAB in July).  Applying the Read factors (pp. 38-50), it awarded a 50% enhancement of the royalty rate during the relevant time frame, resulting an enhancement of approx. $41 million, even though the court concludes that “VirnetX has not presented any evidence of copying,” nor did it find any attempt to conceal the alleged misconduct.  The court also awarded attorney’s fees under 285 in part for VirnetX for the September 2016 trial.

 

News on Enhanced Damages

1. The Stanford Program in Law, Science & Technology and Samsung Electronics are sponsoring an event this coming Friday, October 20 titled "Patent Law in Global Perspective," which will include a session titled "The law of enhanced damages and how companies should respond to willfulness risk."  Speakers for this session will include Professors Colleen Chien, David McGowan, and Peter Menell, as well as Chris Lubeck (Tesla) and Isaac Peterson (Netflix). Information is available here.

2.  The aforementioned speakers should have a lot to talk about.  Just a couple of days ago Dr. Sanjeev Mahanta published a post on IP Watchdog titled "Idenix v. Gilead: District Court Exercises Discretion to Deny Enhanced Damages," discussing the September 22 decision of Judge  Stark (D. Delaware) denying Idenix a damages enhancement (and an award of attorneys' fees) on top of the $2.54 billion reasonable royalty award for the infringement of Idenix's patent on a method of treating hepatitis C (which I earlier reported on here.)  A redacted version of Judge Stark's opinion is available here.  Dr. Mahanta's post seems pretty thorough, though I may wish to write up some of my own thoughts on the opinion later this week or next week.  (My initial reaction, for what it's worth, is favorable.)  The court also awards prejudgment interest at the prime rate.

3.  Meanwhile, reports are coming in that Judge Schroeder (Eastern District of Texas) on September 29 entered a memorandum opinion and order awarding VirnetX $41.3 million in enhanced damages and another $96 million in costs, attorneys' fees, and interest, on top of a damages award $302 million, in a suit against Apple.  For coverage, see, e.g., this story on Ars Technica.  Apparently the opinion and order have now been unsealed, but as of this morning it isn't showing up on Lex Machina. 

Bray on Remedies and Economics

According to the old saying (attributed to the Greek poet Artilochus and later popularized by Sir Isaiah Berlin) the fox knows many things, but the hedgehog one big thing.  That could, perhaps, be the message of Professor Samuel Bray's recent paper Remedies, Meet Economics; Economics, Meet Remedies, which is forthcoming in the Oxford Journal of Legal Studies.  Bray argues that, while one might "expect to find a high degree of affinity between law and economics and the field of remedies," in fact this often isn't the case--one possible reason being "disciplinary fragmentation . . . .  As specializations narrow and literatures grow, keeping up becomes difficult."  Too many of us are hedgehogs, in other words, and not enough of us as foxes.  (This may even include me, as much as I try to be a fox.  I admit that I wasn't aware of Landes & Posner's 1994 paper in the Journal of Legal Studies on the economics of anticipatory adjudication, which Professor Bray cites (and critiques) in this article.)  I suspect there's a good deal of truth in Professor Bray's observation, and overall this is a very interesting, though-provoking paper (though I'm not sure I would agree that Calabresi and Melamed intended some of their statements about property and liability rules, as presented in their famous 1972 paper, as anything more than a stylized model, as Professor Bray himself at times seems to acknowledge).  I hope the paper spurs greater interest among both remedies scholars and law-and-economics scholars to work together and learn from one another.  Anyway, here's a link to the paper, and here's the abstract:

One would expect the fields of ‘law and economics’ and ‘remedies’ to have substantial interaction. But scholars in each field largely ignore those in the other. Thus law and economics scholars blunder in their description of the law of remedies, and remedies scholars are cut off from economic insights. For scholars who are in these fields, this article offers a critique, as well as suggestions for cooperation. For all legal scholars interested in melding conceptual and economic analysis, it offers a cautionary tale of disciplinary fragmentation.

Patent Remedies Sessions at Some Upcoming Conferences

1.  AIPLA is holding its annual meeting next week (October 19-21) in Washington, D.C. (webpage here).  On Friday, October 20, there will be a panel titled "Best Practices for Managing Parallel Patent Trial and Appeal Board (PTAB) and District Court Proceedings, which will include R. Eric Hutz speaking on stays pending PTAB proceedings.  Later that same morning a session titled "Around the World in 75 Minutes:  Key IP Updates," which will include Alice Young-Ran Choi speaking on "South Korea:  How IP Law Changes Are Affecting Damages, Evidence, and Invalidation."  

2.  On October 30, there will be a conference in Turin, Italy titled "Tutela giudiziale di Standard Essential Patents," which will feature a mock trial and much discussion of Huawei v. ZTE.  Webpage here.  For further information, see posts on IPKat and EPLaw.

3.  Georgetown Law and the Berkeley Center for Law & Technology are putting on their Ninth Annual Patent Law and Policy Conference in Washington, D.C. on November 5 (webpage here).  There will be a session patent remedies in the afternoon, featuring Morgan Chu, Professor Bernard Chao, Ken Korea, and Matt Powers.

Some New Papers, Posts on SEPs, FRAND in Asia

1.  Jorge Contreras has posted a paper on ssrn titled National Disparities and Standards-Essential Patents:  Considerations for India, which is a draft of a chapter in a forthcoming edited volume titled Complications and Quandaries in the ICT Sector:  Standard Essential Patents and Competition Issues (Ashish Bharadwaj, Vishwas Deviah & Indraneth Gupta eds., Spinger, forthcoming 2017).  Here is a link to the paper, and here is the abstract:

Patents on standardized technologies are being issued with increasing frequency, and the majority of these patents are held by large multinational firms based in developed economies. As a result, firms from less-developed economies with sparse patent holdings are disadvantaged in both domestic and foreign markets. While protectionist governmental policies can address these disparities, such measures are potentially contrary to international treaty obligations and generally unsuccessful in the long term. An alternative approach involves greater participation in international SSOs by firms from less-developed economies. This increased participation is likely to benefit such firms both in terms of technology development, strengthening of patent positions, and influence over SSO policies. To facilitate increased participation, both financial and institutional support will be required from local governments, NGOs, multinational organizations and SSOs themselves. To the extent that participation in international SSOs by firms in developing economies such as India can be increased, it could have a meaningful impact on domestic innovation, job creation, technical capability and manufacturing output.

2.  Ankita Tyago and Sheetal Chopra have posted a paper on ssrn titled Standard Essential Patents (SEP's)--Issues & Challenges in Developing Economies, 22 J. Intell. Prop. Rts. 121 (2017).  Here is a link, and here is the abstract:

Intellectual property rights (IPRs) in standards have proven to be an intensively debated issue nowadays. Although standards are meant to offer ‘access’ to technology and patents grant the possibility to ‘exclude’ others (exclusivity rights), both aim to promote innovation. The “return on investment” (ROI) from the patented technology selected to become part of a standard is the motor that fuels the development and implementation of standards. When aiming to solve highly complex technology problems the effort of many companies in sharing the technology resulting from large R&D investments is necessary. It is not surprising that, before sharing with others, such technical solutions are protected by patents. Thus, in the information communication technology (ICT) area the phenomenon of patents in standards is the general rule. Indeed, connecting millions of devices with each other (interoperability) and making them work properly (high performance) can only be achieved when the best technologies out of thousands of contributed technical solutions are selected. Considering some of the most celebrated Government of India’s initiatives such as Internet of Things, Start Up India, Make in India, Digital India etc. calls for an effective IPR regime that incentivizes development of standardized technologies and encourages indigenous local manufacturing of innovative standardized devices. This will go a long way in reducing India’s net import reliance, enhancing value addition, creating IP, generating employment, increasing domestic patent footprint, reducing cash outflow due to Bill of Materials (BOM), etc.

With this view, the present paper analyses the concept of Standard Essential Patents (SEPs) and related issues to mobile technology that are deliberated at various forums. It summarizes some important aspects that arise when dealing with SEPs. The linkage of standards and patents has also been studied. The paper examines the patent landscape and offers analysis of existing and anticipated patent holdings. It also outlines the evolution of key technologies and provides comparative analysis of key patents. The paper brings light to some notable circumstances likely to influence the mobile patent landscape for the next several years and gives some recommendations for facilitating India’s growth story in creation, protection, and wider adoption of technology.

3.  Hao Yuan has posted a paper titled SEP Holder's Right to Injunction Shall Not Be Lightly Deprived.  Here is a link to the paper, and here is the abstract:

The 2017 Beijing High Court Patent Infringement Guidelines’ rule of “no injunction as a principle for SEP holders” has been premised on two “it” theories, i.e. the patent hold-up and royalty stacking conjectures, which still need to be judged by their predictive power in the real world. For the past two decades these conjectures did an unsatisfying job in this respect – despite grand appearance at first sight, empirical support of a stagnant market for SEP-intensive industries is still in serious lacking. As direct variants of classical transaction cost economics hold-up theory and the Cournot Complement problem, the conjectures also seem to be inconsistent with the established theories. From a historical and comparative law’s perspective, occasional patent hold-up is by no means a new phenomenon limited to the standard setting. It is entirely possible that the patent system is imperfect, with frictions or loopholes happening from time to time. But there is a significant distinction between acknowledging occasional overcharging behavior (frictions or loopholes), and concluding that a systematic market failure has been resulted, or will be resulted absent taking aggressive “reforms” departed from the classical rule. For the former, comparative law teaches us that patent law has been functioning pretty well in the past hundreds of years, and absent the latter, aggressive departures from a fundamental notion of a well - working patent system, for example in the form of “no injunction by principle” rule, is simply wrong. Market mechanism with carefully and finely tuned rules has largely proved itself to be capable in dealing with occasional hold-ups, and without substantial empirical evidence to the contrary, policy makers in China should not be frightened into making overzealous changes. 

4.  On September 29, the Japan Patent Office published its "Invitation to Contribute to Guidelines for Licensing Negotiations Involving Standard-Essential Patents," available here.  Some recent blog posts discuss a proposal, floated this summer but not mentioned in the above document, that would have submitted disputes over FRAND-committed SEPs to mandatory ADR.  See Hirotaka Nonaka, Japan Considers Introducing a New ADR System with Compulsory License for SEPs, Trust in IP Blog, Aug. 12, 2017; Jacob Schindler, Patent Owners Sound Alarm over Proposed "Compulsory Licensing for SEPs" in Japan, IAM Blog, July 27, 2017; and (most recently) Jacob Schindler, Japanese Government Will Issue SEP Negotiation Guidelines, but Controversial ADR Proposal on Hold for Now, IAM Blog, Oct. 3, 2017.