Friday, September 21, 2018

Further Analysis of Power Integrations

Michael Risch posted a comment to my post from yesterday, which has caused me to rethink whether (as I stated) the Federal Circuit's revised opinion in Power Integrations articulates a stricter standard for invoking the entire market value rule.  I now think that Professor Risch (and Dennis Crouch, who appears to take the same view) are correct, and that my characterization of the revised opinion as articulating a stricter standard was wrong--though I have to say, I find this entire question very confusing.  Maybe it's just me.  Or maybe litigants should start hiring analytical philosophers as consultants or expert witnesses in patent cases . . .

Anyway, as stated yesterday the Federal Circuit altered the relevant passage from its original opinion in Power Integrations as follows (modifications shown below in boldface):
Where the accused infringer presents evidence that its accused product has other valuable features beyond the patented feature, the patent holder must establish that these features are not relevant to consumer choice do not cause  consumers to purchase the product. A patentee may do this by showing that the patented feature “alone motivates customers to purchase [the infringing product]” in the first place. See id. at 69. But when the product contains multiple valuable features, it is not enough to merely show that the patented feature is viewed as essential, that a product would not be commercially viable without the patented feature, or that consumers would not purchase the product without the patented feature. Id. at 68. When the product contains other valuable features, the patentee must prove that those other features did not influence purchasing decisions do not cause consumers to purchase the product
I stated that I viewed the revised opinion as making "it slightly more difficult than it already was to use the entire market value of the infringing end product as the royalty base; or, to put it another way," as rendering "the conditions under which courts may invoke the entire market value rule (EMVR) even more strict than they were before." Professor Risch's comment on my post, however, reads as follows:
I'm not sure I agree with your reading. I read this as less stringent than before. I think that it is much easier to show that a feature did not CAUSE a purchase than it is to show that a feature did not INFLUENCE a purchase.
I think the way to resolve this is to focus on the distinction between "causing" and "influencing" (or being "relevant").  Consider a hypothetical device that includes two features, A and B.  A infringes P's patent, B is in the public domain.  P wants to use the entire market value of the device (including A and B) as the royalty base; D says the base should include the value of A only.  Under the original panel opinion, P would have to show that B is not "relevant" to consumers' demand for the device.  Under the new opinion, P would have to show that the presence of B does not "cause" consumers to buy the device.  Which rule is tougher on P?   

To answer this question, I think we need to focus on what it means to be "relevant" (or "irrelevant").  One possibility is that B is irrelevant if consumers are indifferent to the presence of B.  A device with AB* is just as good as one with AB.  In that case, I think it's fair to say both that (1) B is irrelevant to consumers' purchasing decisions, and (2) B's presence does not cause consumers to buy the device.  So there's no practical difference between the two standards.  But maybe you need a B-like thing--whether it's B or B*--to sell the product at all.  That is, B and B* provide the same functionality, and you need one of them, but it doesn't have to be B; B* is just as good.  Consumers are indifferent to B over B*, and the presence of B (as opposed to B*) doesn't cause consumers to buy the device, but you have to have either B or B* in the product or it won't sell.  So, is it fair to say that B is irrelevant to consumer demand?  That it doesn't cause consumers to buy the product?  I'm honestly not sure what the right answer is, but again I'm not seeing much of a difference at all between the two standards (causation and relevance).

Alternatively, maybe all it means to say that B is "relevant" or "influences" consumers is that consumers will consider B in deciding what to buy--it's a factor they take into account--but it won't affect the purchasing decisions of an identifiable number of them.  In that case, maybe it's correct to say that the presence of B does not "cause" consumers to buy the device, but it does "influence" them or is "relevant" to them.  And in that case, the new standard for invoking the EMVR is less strict than the one articulated in the original opinion, as Professor Risch surmises.  Consumers might prefer AB to AB*, but if AB is the one on the market and AB* isn't, they will buy AB rather than some other alternative (maybe A*B?).  (Though is it fair to say that, under such circumstances, the presence of B "influences" their decisions?)

I think my own confusion over this is due to the difficulty of proving a negative.  I would think that it is harder to prove that X causes Y than it is to prove that X is "relevant" to Y as that term is used in the above paragraph.  That is, it should be harder to prove that the presence of B causes some consumers to buy the device, than it is to prove that the presence of B is something that they would consider in deciding what to buy.   But it doesn't follow that it is harder to prove that the presence of B does not cause consumers to buy the device, than it is to prove that the presence of B is something they would not consider; in fact, precisely the opposite.

All that said, I still wonder how much of a practical difference any of this will make, and whether it is worth the effort . . .

Thursday, September 20, 2018

Federal Circuit Issues Slightly Revised Opinion on EMVR in Power Integrations

The revised opinion in Power Integrations, Inc. v. Fairchild Semiconductor Int'l, Inc., published today, is here.  Dennis Crouch beat me to the punch in reporting on this one, and as he notes on Patently-O the only changes are as indicated below in boldface:

1.  At p.20, the sentence reading "In some circumstances, for example, where the other features are simply generic and/or conventional and hence of little distinguishing character, it may be appropriate to use the entire value of the product because the patented feature accounts for almost all of the value of the product as a whole" has been changed to "In some circumstances, for example, where the other features are simply generic and/or conventional and hence of little distinguishing character, such as the color of a particular product, it may be appropriate to use the entire value of the product because the patented feature accounts for almost all of the value of the product as a whole."

2.  At p.22, the original opinion has been changed as follows:
Where the accused infringer presents evidence that its accused product has other valuable features beyond the patented feature, the patent holder must establish that these features are not relevant to consumer choice do not cause  consumers to purchase the product. A patentee may do this by showing that the patented feature “alone motivates customers to purchase [the infringing product]” in the first place. See id. at 69. But when the product contains multiple valuable features, it is not enough to merely show that the patented feature is viewed as essential, that a product would not be commercially viable without the patented feature, or that consumers would not purchase the product without the patented feature. Id. at 68. When the product contains other valuable features, the patentee must prove that those other features did not influence purchasing decisions do not cause consumers to purchase the product.
The bottom line is that the revised opinion appears to make it slightly more difficult than it already was to use the entire market value of the infringing end product as the royalty base; or, to put it another way, renders the conditions under which courts may invoke the entire market value rule (EMVR) even more strict than they were before. 

When I blogged about the original panel opinion on July 12, I wrote:
The result doesn't seem all that surprising to me.  (Whether it's right or wrong as a matter of policy is another matter.)  To be sure, the Federal Circuit has permitted some variations from the EMVR--for example, in CSIRO v. Cisco, where the court (in a bench trial) used the entire market value as the royalty base, because the parties themselves had done so during their own (unsuccessful) negotiations over a royalty; in Ericsson v. D-Link, where the court allowed the plaintiff's expert witness to base his opinion on comparables that used the entire market value as the base; and in Exmark, where the claim covered the end product as a whole (see discussion here).  But this case doesn't appear to have any of these distinguishing features, or at least there's no mention of any such features in the opinion.
So, maybe I should have been surprised that the original panel's language about the EMVR wasn't more stringent than it was, though I'm inclined to believe that the revised opinion's alternative linguistic formulation won't make much of a practical difference.  And at the end of the day, I'm still mildly skeptical about the virtues of the EMVR at all, given that the commutative property of multiplication means that a small rate multiplied by a large base can equal the same product as a large rate multiplied by a small base.  On the other hand, the U.S. practice of using juries to determine damages awards may counsel in favor of some version of the EMVR, as the Federal Circuit has pointed out more than once, and as my coauthors and I discuss in the Reasonable Royalties chapter of the forthcoming edited volume Patent Remedies and Complex Products: Toward a Global Consensus.

Tuesday, September 18, 2018

Patent Remedies and Complex Products: Toward a Global Consensus

As I wrote last week:
I've mentioned a couple of times previously my involvement, along with several other scholars from around the world, in the International Patent Remedies for Complex Products (INPRECOMP) project.  (INPRECOMP began as a joint venture between the Center for Law, Science and Innovation (CLSI) at Arizona State University's Sandra Day O'Connor College of Law and the Dickson Poon School of Law at King's College London, and is primarily funded by a gift to CLSI from Intel.)  The manuscript of our long-awaited edited volume, Patent Remedies and Complex Products:  Toward a Global Consensus (Brad Biddle, Jorge L. Contreras, Brian J. Love & Norman V. Siebrasse eds.) is now in the hands of Cambridge University Press, and we are hoping it will be available in hard cover at some point in the not-too-distant future.  Meanwhile, we will be posting the individual chapters on ssrn in the coming days, and I will try to remember to announce of each of them on this blog as they become publicly accessible. 
All of the chapters except for the introduction are now up on ssrn.  So here are links to each of the chapters (except for the introduction, which I will add as soon as I can), followed by its abstract: 

Introduction (available soon)

Chapter 1:  Reasonable Royalties (coatuhored by Thomas F. Cotter, John M. Golden, Oskar Liivak, Brian J. Love, Norman Siebrasse, Masabumi Suzuki, and David O. Taylor):
This chapter (1) describes the current state of, and normative basis for, the law of reasonable royalties among the leading jurisdictions for patent infringement litigation, as well as the principal arguments for and against various practices relating to the calculation of reasonable royalties; and (2) for each of the major issues discussed, provides one or more recommendations. The chapter’s principal recommendation is that, when applying a “bottom-up” approach to estimating reasonable royalties, courts should replace the Georgia-Pacific factors (and analogous factors used outside the United States) with a smaller list of considerations, specifically (1) calculating the incremental value of the invention and dividing it appropriately between the parties; (2) assessing market evidence, such as comparable licenses; and (3) where feasible and cost-justified, using each of these first two considerations as a “check” on the accuracy of the other.
Chapter 2:  Lost Profits and Disgorgement (coauthored by Christopher B. Seaman, Thomas F. Cotter, Brian J. Love, Norman Siebrasse, and Masabumi Suzuki):
This book chapter addresses two types of monetary remedies for patent infringement: (1) recovery of the patentee’s lost profits and (2) disgorgement of the infringer’s profits. Both remedies make a comparison between what actually happened and a hypothetical “but for” world in which no infringement occurred. But the two remedies have substantially different objectives: lost profits are intended to compensate the patentee by restoring it to the position it would have occupied absent infringement, while disgorgement may serve other purposes, including deterrence, recapturing wrongful gains, and encouraging ex ante licensing of patented technology.
Part II addresses several key issues regarding lost profits awards, including the availability and standard of proof, the role of non-infringing alternatives, potential recovery for the sale of related but unpatented goods, whether and how to apportion lost profits awards for complex products, and potential recovery for other infringement-related harms. Part III describes the justifications for, and availability of, the disgorgement (accounting) remedy in major patent systems and, additionally, analyzes a number of questions related to calculating such awards. In both sections, we make recommendations and identify areas for further research.
Chapter 3:  Enhanced Damages, Litigation Cost Recovery, and Interest (coauthored by Colleen V. Chien, Jorge L. Contreras, Thomas F. Cotter, Brian J. Love, Christopher B. Seaman, and Norman Siebrasse):
This chapter discusses the law and policy of monetary awards—including exemplary damages and litigation cost recoveries—that go beyond the compensatory damages to which prevailing parties in patent litigation are normally entitled. Up to treble damages are authorized in the United States for knowing infringement, but attorney fees are awarded only in exceptional cases. The rest of the world tends towards the opposite: attorney fees are awarded as a matter of course, but punitive damages are generally prohibited as against public policy. In this chapter we discuss the theory, law, and policy of enhanced damages and attorney fee awards in the U.S., Europe, and Asia. While the availability of enhanced damages and fees can bring accused infringers that might otherwise “holdout” to the table, care must also be taken to ensure that it does not discourage productive learning from patents or challenges to overbroad and vague patents. Rather than endorsing any single set of doctrinal rules, we recommend further research into a number of unanswered questions about current and potential future configurations, in order to inform future policy-making.
Chapter 4:  Injunctive Relief (coauthored by Norman Siebrasse, Rafał Sikorski,  Jorge L. Contreras, Thomas F. Cotter, John M. Golden, Sang Jo Jong, Brian J. Love, and David O. Taylor): 
Patent systems commonly empower courts to order accused or adjudged infringers to refrain from continuing infringing conduct in the future. Some patentees file suit for the primary purpose of obtaining and enforcing an injunction against infringement by a competitor, and even in cases in which the patentee is willing to license an invention to an accused infringer for an agreed price, the indirect monetary value of an injunction against future infringement can dwarf the amount a finder of fact is likely to award as compensation for past infringement. In some of these cases, an injunction, if granted, would impose costs on accused infringers or third parties that go well beyond the more intrinsic value of the patented technology. This chapter explores the theory behind injunctive relief in patent cases, surveys the availability of this remedy in major patent systems, and suggests a general framework for courts to use when deciding whether injunctive relief is appropriate in individual cases.
Chapter 5:  The Effect of FRAND Commitments on Patent Remedies (coauthored by Jorge L. Contreras, Thomas F. Cotter, Sang Jo Jong, Brian J. Love, Nicolas Petit, Peter Georg Picht, Norman Siebrasse, Rafał Sikorski, Masabumi Suzuki, and Jacques de Werra):
This chapter addresses a special category of cases in which an asserted patent is, or has been declared to be, essential to the implementation of a collaboratively-developed voluntary consensus standard, and the holder of that patent has agreed to license it to implementers of the standard on terms that are fair, reasonable and non-discriminatory (FRAND). In this chapter, we explore how the existence of such a FRAND commitment may affect a patent holder’s entitlement to monetary damages and injunctive relief. In addition to issues of patent law, remedies law and contract law, we consider the effect of competition law on this issue. 
Chapter 6:  The Effect of Competition Law on Patent Remedies (coauthored by Alison Jones and Renato Nazzini):
Although competition law and IP law probably pursue complementary goals, competition laws can (i) affect remedies available for patent infringement; and/or otherwise (ii) limit the conduct of patentees, particularly when transferring or licensing their patents. This chapter discusses the cases in which tensions between the protection of patents in complex products and the competition laws have arisen or may arise, particularly as regards the ability of owners of standard essential patents (SEPs) to monetise their patents either by seeking an injunction against implementers or by refusing to grant licences complying with previously given commitments—generally, commitments to license on fair, reasonable and nondiscriminatory (FRAND) terms. This chapter also examines potential competition law constraints on the pricing of patent licences, other licensing terms, multi-level licensing and level discrimination, patent pools, sale of patent portfolios and patent acquisitions.
Chapter 7:  Holdup, Holdout and Royalty Stacking: A Review of the Literature (authored by Norman Siebrasse):
This article provides a critical review of the theoretical and empirical literature on holdup, holdout, and royalty stacking, as they relate to remedies for patent infringement.

Monday, September 17, 2018

FRAND Perspectives from India, Spain

1.  Subhajeet Roy has published a post on SpicyIP titled Deconstructing the FRAND Regime vis-à-vis Recourse to Injunctive Relief.  The author provides a brief recap of the debates for and against injunctive relief in SEP cases, notes some of the governing standards in the E.U., the U.S., China, and India, and concludes that "The key takeaway from this debate is that it is crucial to encourage the parties to engage in good-faith negotiations and induce them to reach a consensus. More often than not, in the absence of a universally acclaimed method of determining FRAND royalty rates, courts go into the negotiating history of the parties. This often turns out to be the single most important factor in grant of an injunction in FRAND encumbered patents."

Also of interest on SpicyIP is Divij Joshi's recent post tiled "Drugs Are Not Sweets"-Bombay HC Imposes Exemplary Costs for Pharma Trademark Infringement.  If I understand correctly, the court in Glenmark v. Curetech awarded 1.5 crores (about $US 200,000) in exemplary damages (not costs in the sense of attorneys' fees) to be payable to charity, which the author says is probably the largest such award in Indian trademark law.

2.  Judge Enrique Sanjuan and Professor Ana Belen Campuzano have posted a paper titled Valuation of Patents in Spanish LawHere is a link to the paper, and here is the abstract: 
This study deals with the necessary adaptation of Spanish law to the new European regulations on FRAND licenses and focuses on the valuation of the so-called standard-essential patents (SEP). From the criteria followed in the USA and UK, our regulations must adapt to the valuation system in these new cases given the lack of rules and according to the European Union legal ordering. However, a consideration of the nature of such licenses is necessary first, that American and European doctrine put in the contractual field.

Friday, September 14, 2018

From Around the Blogs

1.  Mark Cohen published a post on the ChinaIPR Blog about the upcoming conference at the University of Nevada-Las Vegas on Intellectual Property Rights Enforcement at Trade Shows, at which I also will be participating.  I'm looking forward to learning from Mr. Cohen about enforcement of IP rights at trade fairs in China. 

UNLVpostcard 

2. On the IAM Blog, Jacob Schindler posted an article titled Patent Litigation in Japan Should Be More Attractive Option, Says JPO Commissioner.  The article discusses a recent speech in which Commissioner Naoko Munakata "pointed out that raising damages and making evidence collection easier would benefit large Japanese firms by better preparing them for the global patent enforcement environment," and "announced the recent opening of an arbitration centre devoted to SEP disputes in Tokyo."

3.  The EPLaw Blog published a post yesterday noting the publication on my book Patent Wars:  How Patents Impact Our Daily Lives, noting correctly that I "invite[ ] readers to think for themselves, and not necessarily to agree with" me.

 

Thursday, September 13, 2018

INPRECOMP

I've mentioned a couple of times previously my involvement, along with several other scholars from around the world, in the International Patent Remedies for Complex Products (INPRECOMP) project.  (INPRECOMP began as a joint venture between the Center for Law, Science and Innovation (CLSI) at Arizona State University's Sandra Day O'Connor College of Law and the Dickson Poon School of Law at King's College London, and is primarily funded by a gift to CLSI from Intel.)  The manuscript of our long-awaited edited volume, Patent Remedies and Complex Products:  Toward a Global Consensus (Brad Biddle, Jorge L. Contreras, Brian J. Love & Norman V. Siebrasse eds.) is now in the hands of Cambridge University Press, and we are hoping it will be available in hard cover at some point in the not-too-distant future.  Meanwhile, we will be posting the individual chapters on ssrn in the coming days, and I will try to remember to announce of each of them on this blog as they become publicly accessible.