Sedona Conference FRAND Publication

I just received an announcement concerning the publication of The Sedona Conference Framework for Analysis of Standard-Essential Patent (SEP) and Fair, Reasonable, and Non-Discriminatory (FRAND) Licensing and Royalty Issues (Stage Two), Public Comment Version.  Interested readers can access the document here.

Federal Circuit Leaves Open the Question of Whether an Award of Profits Is a Question of Law in a Design Patent Case

In a precedential opinion handed down this morning, Columbia Sportswear North Am., Inc. v. Seirus Innovative Accessories, Inc., the court (1) affirms a judgment that the claims-in-suit of Columbia's utility patent are invalid; (2) reverses a grant of summary judgment that Seirus infringed Columbia's design patent; and (3) remands for a new trial on design patent infringement.  As an incident to (2) and (3), the court also vacates the $3 million jury award, stating (p.19):

The parties raise additional issues regarding the court’s damages award under 25 U.S.C. § 289. For example, Columbia argues that the § 289 remedy is one of disgorgement that should be tried to the bench. And there is a significant issue as to whether the proper article of manufacture in this case should be the HeatWave product actually sold or the fabric encompassing the design. Both of these issues are important, but we do not reach them because we have vacated the infringement finding. 

So, the court breaks no new ground, but does leave two important questions open--namely, whether an award of the defendant's profits is question of fact for the jury or a question of law for the judge (I'm inclined to think it is the latter, see, e.g., here); and how to determine the relevant "article of manufacture" for purposes of § 289.  For discussion of the article of manufacture issue, see, e.g., Professor Burstein's article here.

More Anti-Antisuit Injunction Injunctions

I heard about this yesterday, and now JUVE Patent has a short article on it:  IPCom has obtained not one but two anti-antisuit injunction injunctions against Lenovo, one in Paris and one in London, both directed against litigation in the U.S.  (Story here).  If I come across a copy of any written decisions by either court, I will pass them along.  I have nothing more to add at this point, other than that SEP disputes are certainly giving rise to some unusual procedural maneuvers.

In other news, on Written Description Professor Camilla Hrdy has a post on a new paper by Professor Elizabeth Rowe titled eBay, Permanent Injunctions, and Trade Secrets.  Although my blog focuses on patent remedies, I think many readers will be interested in Professor Rowe's empirical analysis of eBay in trade secret disputes.

AIPPI Study Reports on IP Damages for Acts Other Than Sales

A few weeks back I received my copy of the July 2019 issue of A.I.P.P.I.--Journal of the Japanese Group of AIPPI, which includes (beginning at p.256) AIPPI Japan's answers to AIPPI's 2019 Study Question (General), "IP damages for acts other than sales."  I haven't read it all that carefully yet, but I was immediately drawn to question and answer 10, which asks "Should the subsequent export and sale of manufactured infringing goods change the quantification of damages?"  (AIPPI Japan's answer is no, although it further states that "damages should be available only to the extent that there is a sufficient causation between the infringing act and the loss," and that "damages cannot be recovered for the portion of the loss that is practically the same as the portion fo the loss covered by the damages already paid in relation to the manufacturing.")  This is, of course, the sort of question that is now being debated in the U.S. after the Supreme Court's WesternGeco decision last year.  (for recent discussion on this blog, see here.)  I have previously noted a couple of Japanese cases that appear more or less consistent with the principle that the patent owner can recover damages for losses suffered abroad that were proximately caused by an act of domestic infringement (see here).  Overall, I'm quite interested in this topic right now, and am planning to write something about it in the months to come; I also will be speaking on this topic at an event in Taiwan next month.  

Anyway, the article noted above then prompted me to see if other countries' responses were available on AIPPI's website, and they are (here).  I haven't looked through all of them yet but will start doing so.  I also would call interested readers' attention to AIPPI's Study Guidelines, which specifically note the extraterritorial damages issue in headings 21 and 22, as follows:

21) If the infringing activity is manufacturing, should it be assumed that all of the manufactured goods will be sold in the jurisdiction (X) where they were manufactured?

22) If it is not assumed that all of the manufactured goods are sold in the jurisdiction (X) they are manufactured in, and some proportion will be exported for sale in jurisdictions Y and Z, should it be assumed that the right holder’s loss / a reasonable royalty can be determined on the basis of:

- Manufacturing in jurisdiction X alone;

- Sales in jurisdictions Y and Z, and if so, how do two potentially different sale prices in jurisdiction Y and Z affect the calculation; and/or

- A combination of manufacturing (in X) and sales (in Y and/or Z), and if so, what combination?

The AIPPI Summary Report summarizes the members' views under heading 10 (page 7), while the  AIPPI Resolution proposes that courts should strive for "full compensation" (heading 3) and under heading 4 states that "When quantifying damages for infringing non-sales acts relating to specific products, any potential subsequent sales of the same specific products (whether infringing or non-infringing, and whether in the same jurisdiction or not) could be used as a benchmark for the quantification. The objective is to determine the economic effect of the non-sales infringement on the right holder."

New Papers on FRAND, SEP Issues Part 2

1.  Jan Boone, Florian Schuett, and E. Tarantino have posted a paper titled Price Commitments in Standard Setting under Asymmetric Information.  Here is a link to the paper, and here is the abstract:

Many observers have voiced concerns that standards create essentiality and thus monopoly power for the holders of standard essential patents (SEPs). To address these concerns, Lerner and Tirole (2015) advocate structured price commitments, whereby SEP holders commit to the maximum royalty they would charge were their technology included in the standard. We consider a setting in which a technology implementer holds private information about demand. In this setting, price commitments increase efficiency not only by curbing SEP holders’ market power, but also by alleviating distortions in the design of the royalty scheme. In the absence of price commitments, the SEP holder distorts the implementer’s output downward in the low-demand state to reduce the high-demand type’s information rent. Price commitments reduce this distortion.

2.  J. Gregory Sidak has posted a paper titled Misconceptions Concerning the Use of Hedonic Prices to Determine FRAND or RAND Royalties for Standard-Essential Patents, 4 Criterion J. Innov. 501 (2019).  Here is a link, and here is the abstract:

Two months after I published Hedonic Prices and Patent Royalties in August 2017, Dr. Allan Shampine of the CompassLexecon economic consultancy published a review of that article arguing that the hedonic price model for LRDIMMs does not comply with the Federal Circuit’s decision in Ericsson Inc. v. D-Link Systems, Inc. Shampine’s criticisms of the hedonic price model rest on incorrect premises of law and economics. He criticizes the model for failing to apply the ex ante incremental value approach — a theory that contends that a FRAND or RAND royalty should not exceed the incremental value of the patented technology over the next-best alternative available at the time of standard adoption. Yet, like many economists, Shampine erroneously assumes that the ex ante incremental value approach is a positive principle of law, rather than merely a normative prescription that he happens to favor. He fails to recognize that the hedonic price model separates the value of the patented technology from the value of standardization, such that the model faithfully complies with the Federal Circuit’s apportionment requirement reiterated in Ericsson v. D-Link. Shampine also criticizes the hedonic price model for relying on data that became available after the moment of standard adoption. He then proposes — as an alternative to the hedonic price model — reliance on hypothetical data concerning consumer demand that typically would not exist at the time of standard adoption. His suggested approach would fail Daubert because it is manifestly unreliable and unscientific. In contrast, the econometric methodology that the hedonic price model employs has passed muster under Daubert in at least one publicly reported federal district court case concerning SEPs. In sum, Shampine’s criticisms do not detract from the reliability and usefulness of hedonic price analysis in calculating a FRAND or RAND royalty for a given SEP or portfolio of SEPs. To the contrary, if embraced, Shampine’s suggestions would reduce the intellectual rigor, replicability, and reliability of expert economic testimony concerning the calculation of a FRAND or RAND royalty.  

The Shampine paper that Mr. Sidak is responding to is available on the Antitrust Source's website here.

3.  Matthew Spitzer has published a short article titled FTC v. Qualcomm:  Origins and Problems on the Competition Policy International blog, arguing that "the circumstances under which the FTC chose to bring this case should lead everyone, including the Court of Appeals, to view this case with skepticism."  (Needless to say, I disagree.)  Elsewhere, Florian Mueller published several posts on the recently concluded Unwired Planet hearings before the U.K. Supreme Court (all available here), and Amy Sandys has a discussion of the hearings (titled Untangling the wires of global FRAND) on JUVE Patent.  Law360 published an article titled US Gov't Wades into HTC-Ericsson License Dispute, discussing the DOJ's recent filing of an amicus brief in the pending appeal in HTC Corp. v. Telefonaktienbolaget LM Ericsson.  The Department also recently filed a statement of interest in a district court case, Lenovo v. IPCom, arguing that it is not a violation of U.S. antitrust law to seek an injunction for the infringement of a FRAND-committed SEP.

New Papers, Posts on FRAND, SEP Issues

1.  King Fung Tsang and Jyh-An Lee have posted on ssrn a paper titled Unfriendly Choice of Law in FRAND , 59 Va. J. Int'l L. 220 (2019).  Here is a link to the paper, and here is the abstract:

Standards are technical specifications providing a common design for products or processes to function compatibly with others. Standards are pervasive in various communications and platform technologies since they facilitate interoperability between different products. These technical standards inevitably cover a large number of patented technologies standard implementers must use, which are referred to as standard-essential patents (SEPs). SEPs are normally subject to fair, reasonable, and non-discriminatory (FRAND) terms based on SEP holders’ declarations made to voluntary associations known as standard-setting organizations (SSOs) or standards-development organizations (SDOs). In recent years, the increasing use of standards and SEPs has led to an increased number of lawsuits relevant to the interpretation and enforcement of FRAND terms. As a result, legal issues surrounding FRAND have become a subject of litigation and academic debate. This Article is an endeavor to fill the gap in academic literature on the choice-of-law issues relating to FRAND. It seeks to provide readers with a deeper understanding of the choice-of-law issues as revealed by key judicial precedents around the world. Ultimately, this research attempts to suggest practical solutions that may mitigate, if not resolve, the choice-of-law issues.

2. On a somewhat related note, Léon Dijkman published a post on IPKat titled How and where may implementers sue for FRAND-licences, discussing a recent decision of the Patents Court for England and Wales dismissing a claim brought by Vestel Elektronik Saneyi on jurisdictional grounds. 

3.  Jay Kesan and Carol Hayes have posted a paper titled Standard Setting Organizations and FRAND Licensing, Competition Policy and Intellectual Property in Today's Global Economy (Robert D. Anderson, Nuno Pires De Carvalho and Antony Taubman eds., Cambridge Univ. Press, 2020) (forthcoming).  Here is a link, and here is the abstract:

This chapter reviews the law and policy relating to Standard Setting Organizations (SSOs) and the FRAND commitment. To improve interoperability, we need technology standards, and to create them, we need industry members to work together in standard-setting organizations (SSOs). To ensure that the technology standards can be broadly adopted, the SSOs often need patent owners to promise to make standard-essential patents (SEPs) available to all manufacturers for a fair, reasonable, and non-discriminatory (FRAND) royalty.

The legal effect of such FRAND commitments is not yet settled, leading to a considerable amount of litigation in the United States and around the world. This lack of clarity is especially problematic when the dispute is international because jurisdictions may view these commitments very differently.

There are many issues relating to FRAND commitments, including: (1) what makes a patent 'essential' to a standard; (2) whether the FRAND obligation transfers to subsequent assignees of the patent; (3) whether FRAND commitments should apply to patents acquired after making the FRAND commitment (i.e., after-acquired patents); (4) whether nonmembers of the SSO should have the same standing as SSO members to enforce FRAND commitments; and (5) whether the FRAND commitment should impact remedies available in patent litigation, either from the perspective of the patent owner or the beneficiary of the FRAND commitment. As the law surrounding FRAND commitments develops, the legal community should be wary of abuses on both sides. While patent owners should not be permitted to abuse the added leverage that owning a SEP provides, the FRAND commitment must not be abused by standard adopters who take advantage of the fact that a SEP owner cannot simply deny a license.

To be meaningful, a FRAND commitment should be enforceable against a SEP owner’s successor-in-interest, and injunctions for SEP infringement should be issued under limited circumstances. Ultimately, policy concerns require the balancing of many different interests in order to ensure a healthy market for technology. 

News on Injunctions

1.  In August, Annsley Merelle Ward published a post on IPKat titled Irish Supreme Court in Merck v. Clonmel puts "adequacy of damages" back in the balance when granting preliminary injunctions.  The post includes an analysis by Colette Brady on a recent Irish Supreme Court opinion in Merck Sharp & Dohme Corp. v. Clonmel Healthcare Limited that modifies the application of the standard for granting a preliminary injunction.  The standard in Ireland is the same as the English American Cyanamid standard, but until this case the Irish courts tended to deny preliminary injunctions if, in their view, damages would provide an adequate remedy.  The new understanding of the standard requires the courts to consider adequacy as part of the overall balance of convenience inquiry (even while stating that "The most important element in that balance is, in most cases, the question of adequacy of damages" (para. 64(4)). 

For more on the American Cyanamid standard, see my book Comparative Patent Remedies at pp. 176-79. 

2.  Rafael García Pérez published a paper in 2016 that I only recently came across, titled Injunctions in Intellectual Property Cases:  What Is the Power of the Courts?, 1 I.P.Q. 87 (2016).  Here is the abstract:

This article argues that even after the enactment of Directive 2004/48 on the enforcement of intellectual property rights, the English courts retain a discretionary power to grant injunctions in intellectual property cases. It is suggested that the traditional tenets regarding the exercise of discretion in granting injunctions are still valid, and that the principles enshrined in art.3 of the Directive (efficacy, proportionality, dissuasiveness, etc.) come into play once the court has decided to grant an injunction, as benchmarks to model it. Moreover, the article proposes an interpretation of art.12 of the Directive ("alternative measures"), based on the distinction between cases in which damages in lieu of an injunction are awarded to the benefit of the infringer, and cases in which an injunction is granted to the benefit of the intellectual property owner.

3.  Song Jian published an article titled Overview and Analysis of Apple and Qualcomm's Global Battle, China Patents & Trademarks No. 3, 96-104 (2019).  The article discusses the Apple/Qualcomm disputes in China, the U.S., and Germany, including the temporary injunctions entered against Apple by the Fuzhou Intermediate Court in November 2018.