My Law360 Article on FTC v. Qualcomm

My analysis, titled US Antitrust Law Supports An FTC Win Against Qualcomm, is now available on Law360. In the piece, I argue that "if Judge Koh credits the factual evidence the FTC assembled during the course of the January trial, that evidence would appear sufficient to sustain the FTC’s claims, as well as an injunction forbidding Qualcomm from engaging in similar tactics in the future."

Federal Circuit Declines to Vacate $140 Million Damages Award

This morning the Federal Circuit published a modified nonprecedential opinion in Sprint Communications Co. v. Time Warner Cable, Inc., replacing the original panel opinion issued in November 2018.  (I blogged about the original opinion, affirming a $140 million judgment in favor of Sprint, here.)  The modifications seem slight, the only material differences being that the Federal Circuit added an additional cite to Ericsson v. D-Link, and a few additional sentences discussing Sprint's expert witness's testimony.  I highlight these passages below:

Time Warner argues that Sprint’s damages case was flawed because Sprint did not apportion the damages award to the incremental value that the patented invention added to the end product. See Ericsson, Inc. v. D-Link Sys., Inc., 773 F.3d 1201, 1226 (Fed. Cir. 2014). That argument, however, ignores that the objective of apportionment can be achieved in different ways, one of which is through the jury’s determination of an appropriate royalty by applying the so-called Georgia-Pacific factors, under proper instructions embodying apportionment principles. See Exmark Mfg. Co. v. Briggs & Stratton Power Grp., LLC, 879 F.3d 1332, 1349 (Fed. Cir. 2018) (“[T]he standard Geor-gia-Pacific reasonable royalty analysis takes account of the importance of the inventive contribution in determining the royalty rate that would have emerged from the hypothetical negotiation.” (quoting AstraZeneca AB v. Apotex Corp., 782 F.3d 1324, 1338 (Fed. Cir. 2015))); Ericsson, 773 F.3d at 1228 n.5 (“While factors 9 and 13 of the Georgia-Pacific factors allude to apportionment concepts, we believe a separate instruction culled from Garretson [v. Clark, 111 U.S. 120 (1884)] would be preferable in future cases.”).

Such an analysis often considers rates from comparable licenses, and we have explained that “otherwise comparable licenses are not inadmissible solely because they express the royalty rate as a percentage of total revenues, rather than in terms of the smallest salable unit.” Commonwealth Sci. & Indus. Research Org. v. Cisco Sys., Inc., 809 F.3d 1295, 1303 (Fed. Cir. 2015). The fact that two other licenses were granted for the same technology, together with the Vonage verdict—all of which were for the same royalty rate as the rate utilized in the Vonage case to yield the $1.37 per VoIP subscriber per month damages assessment—provides strong support for Sprint’s argument that the damages award in this case reflected the incremental value of the inventions and thus satisfied the requirement of apportionment. See Ericsson, 773 F.3d at 1227–28 (damages testimony regarding real-world rele-vant licenses “takes into account the very types of appor-tionment principles contemplated in Garretson.”).

Contrary to Time Warner’s contention, the jury’s damages award was based on the value of what was taken from Sprint, not the value of unpatented features of Time Warner’s VoIP system. Sprint’s damages expert addressed apportionment at some length during his testimony, explaining that his damages calculations were designed to determine “the incremental profits that are attributable to the patents in suit.” And the jury was specifically instructed on apportionment. The court directed that the reasonable royalty “must be based on the incremental value that the patented invention adds to the end product. When the infringing products have both patented and unpatented features, measuring this value requires a determination of the value added by the patented features.” Time Warner did not propose alternative instructions on damages, so the issue is simply whether the evidence was sufficient to support the jury’s award. In light of the Vonage verdict and the other two licenses, as well as testimony from Sprint’s expert as to the cost to Sprint and the benefit to Time Warner from Time Warner’s decision to operate the VoIP system itself rather than contracting that work out to Sprint, the jury had an adequate basis from which to find that damages should be awarded in the amount of $1.37 per VoIP subscriber per month.

Video of My "Patent Wars" Lecture

Two weeks ago I gave a public lecture on my book Patent Wars at John Marshall Law School.  The video is available here.  Thank you to John Marshall Law School, and Professor Daryl Lim, for inviting me!

Lex Machina 2019 Patent Litigation Year in Review

As I noted the other day in my post on injunctions, Lex Machina recently published its Patent Litigation Report 2019.  In addition to compiling statistics on permanent and preliminary injunctions--and showing a decline in both federal district court and PTAB case filings in 2018--the report also includes some interesting statistics on damages.  In particular, the report states that "Even though 2018 saw around the same quantity of cases awarding damages as in the previous five years"--56 in 2018, compared with 57 in 2017--"there was a much greater total amount of damages awarded, the highest since 2014. The large increase in damages from the previous years is attributable to large jury awards of reasonable royalty damages. Particularly, in Virtnex Inc. v. Apple the jury awarded plaintiff over $500 million in damages and in Kaist IP v. Samsung the jury awarded $400 million in damages."  The report further breaks down damages awards into reasonable royalties (accounting for 38 cases), lost profits, enhanced damages, and other categories.  Readers who have access to Lex Machina should definitively request a copy.

News on Injunctions

1.  Citing Lex Machina's recently released Patent Litigation Report 2019 (which I plan to say about in a forthcoming post), Ryan Davis recently published an article on Law360 titled Patent Injunctions Drop Sharply in 2018.  According to the article, U.S. courts granted 17 permanent injunctions in patent cases last year and denied 9.  (There were also "134 injunctions issued on consent judgments.")  By comparison, in 2017 there were 36 grants and only 3 denials (along with 184 issued on consent judgments).  As for preliminary injunctions, in 2018 there were 8 grants and 23 denials ("compared to nine granted and 41 denied the year before").  The numbers for permanent injunctions surprise me a bit, since (until recently, I guess) most of the empirical studies reported that the ratio of grants to denials was holding steady at about 75%--though if you average out 2017 and 2018,  you get a grant rate of just over 80% (not counting the consent judgments).  Moreover, things can vary from one year to another.  And, as one Mr. Davis's interviewees noted, there is probably something of a self-selection effect; if you know the odds of getting an injunction are low, you may not waste time and money on a losing effort.  

2.  Nadine Herrmann has published an article titled Injunctions in Patent Litigation Following the CJEU Huawei v. ZTE Ruling (Germany), 9 J. Eur. Competition L. & Prac. 582 (2018).   Hat tip to Professor Danny Sokol for calling this to my attention on the Antitrust Law & Policy Blog.   The article provides a good overview of how the German courts have interpreted or are likely to interpret the procedural requirements of the Huawei case.

3.  The Kluwer Patent Blog published a short interview with Professor Rafal Sikorski, in an article titled 'eBay decision has led to much better understanding of how injunctions affect markets'.  Professor Sikoski discusses the rationale for conferring discretion on courts to deny injunctions in certain types of cases, and observes that such flexibility is at present available in some countries by way of equity, competition law, or the abuse of rights doctrine.  As the article notes, Professor Sikorski recently published an edited volume titled Patent Law Injunctions; and as I noted in my blog post on the book a few weeks ago, he's also the coauthor of two chapters in the forthcoming Patent Remedies and Complex Products:  Towarda Global Consensus (Brad Biddle, Jorge L. Contreras, Brian J. Love & Norman V. Siebrasse eds., Cambridge Univ. Press), to which I also contributed some material.

Stays Pending Design-Around in Germany, Part 4

On a few occasions I've blogged about whether courts should more readily grant stays of injunctive relief, pending the defendant's implementation of a non-infringing alternative.  As I noted here last May, Colleen Chien and Eric Shulman have nicely summarized the rationale for granting such "tailored" injunctions: 

Making tailored injunctions in component patent cases, rather than full injunctions the default when injunctions are warranted, has several benefits. First, tailored injunctions are less disruptive than removing the product but more powerful than simply giving damages. In this way, it can address both hold-up: the wielding of power by the patentee in light of the high costs of switching, and hold-out: the refusal of accused infringers to consider legitimate patent demands because they can. Under the threat of a non-tailored injunction, an implementer may end up settling based on unnecessary switching or design around costs, even though the patent is invalid or not infringed, a concept often referred to as “hold-up.” But without the threat of injunction, the patentee cannot get the alleged infringer to the table, a concept often referred to as “hold-out.” 

While the prospect of a tailored, rather than all-or-nothing injunction, changes the dynamic for the parties, it benefits third parties as well. Tailored injunctions reduce the risk of error in calculating long-term damages. Rather than having to approximate the damages until the patent expires, the court orders the specific relief of injunction. That relief is simpler to determine (though it does create monitoring costs). Tailored injunctions reduce disruption to the public or third parties who have sunk costs into the existing solution.

Courts in the U.S. do occasionally stay injunctions pending design-around, rather than denying injunctive relief altogether; and so has the Patents Court for England and Wales in at least one case (see here).  

Courts in Germany, on the other hand, have been reluctant to grant such stays--known as Aufbrauchfristen in German--absent truly exceptional circumstances.  I have discussed this topic in a series of posts three times previously (see here,  here, and here).  The first two posts discussed the Bundesgerichtsfhof's Judgment of 10 May 2016, X ZR 114/13 (Wärmetauscher, or "Heat Exchanger"), available in the original German here.  The third post mentioned a more recent decision of the Düsseldorf Landesgericht, the Judgment of March 9, 2017, 4a O 17/15, in which the court denied an Aufbrauchfrist that would have stayed an injunction to enable the defendant to design around a medical device (an "Apparatus for endovascularly replacing a patient's heart valve").

One thing that wasn't clear to me from these previous decisions was whether German courts would be authorized to grant interim damages pending the design-around period, had they been inclined to delay entry of the injunction.  Recently, however, a German Ph.D. student, Maximilian Schellhorn, alerted to me a 1960 decision in which the Bundesgerichtshof indicated that the claim for damages during this period would be untouched (unberührt).  It's an unfair competition case, the Judgment of May 31, 1960, I ZR 16/59--Sektwerbung (BGH), in which the court authorized a four-month Aufbrauchfrist, apparently to enable the defendant to sell off its inventory of Sekt (a sparkling wine) pending a change in its labeling.  The facts are a bit quirky.  The plaintiff claimed to be the first wine merchant to sell Sekt in Germany, dating back to 1826.  The defendant had been in the wine business starting in 1794, but began producing Sekt only in 1843.  For several years preceding the lawsuit, however, the defendant had sold only Sekt, and its bottles, ads, etc. bore the legend "gegründet 1794" or "seit 1794" ("founded 1794," "since 1794").  The court agreed that this amounted to misleading advertising, insofar as some consumers might think the firm had been selling Sekt (and not merely conducting business) that long.  Given that the violation was neither willful nor grossly negligent, however--and that the plaintiff had tolerated it for quite a long time--the court allowed the defendant to avoid the injunction for a period of four months, until September 30, 1960.  As noted, however, the court indicated that the plaintiff could recover a judgment for damages covering the entire period in which the defendant continued to sell infringing products (Judgment part V.4, para. 33).

Although German decisions do not identify the parties by name, based on what the court says about the companies that litigated the case it would appear that both the plaintiff and the defendant remain in business.  I will make a note to sample some of their products when I'm in Germany later this month--all in the interest of research, of course.

Upcoming Speaking Engagements

Later this month I'll be heading to Europe for some speaking engagements.  I'm looking forward to seeing some old friends and meeting some new ones, and am always interested in talking to readers of this blog.  Here are the events:

1.  On March 22, 2019, the Institute of Law and Technology at Friedrich-Alexander-Universität Erlangen-Nürnberg will be hosting a conference titled "Enforcing Patents Smoothly: From Automatic Injunctions to Proportionate Remedies." I will be speaking on the economics of injunctions in patent law.  Here is a link to the conference flyer. 

2.  On March 25, 2019, I will be speaking in Barcelona at an event hosted by the ESADE Alumni Law Club, the ESADE Entrepreneurship Institute, and the ESADE Law School and titled 'Patent Wars? A debate about the role of patents for entrepreneurs.'  Here is a link to the event announcement.

3.  On March 26, 2019, the Bar Association of Barcelona will be hosting an event titled "Current Affairs of Patents Conference:  American and European Perspective."  I will be on three panels, discussing the doctrine of equivalents, patentable subject matter, invalidation proceedings, and injunctions.  Here are links to the event announcement in Spanish, Catalan, and English.  (The event will be in English.)

4.  On April 4-5, Ludwig Maximilian University of Munich will be hosting a conference titled "Injunctions and Flexibility in Patent Law - Civil Law and Common Law Perspectives," at which I will again be discussing the economics of injunctions in patent cases.  Here is a link to the conference announcement, and here is a link to the flyer.