Thursday, February 6, 2014

Thursday miscellany: Papers on SEPs/FRAND by Lerner & Tirole, Geradin, and Contreras; Patent Remedies in Germany; Declaratory Judgments in the U.K. and Italy

1. On the topic of standard esssential patents (SEPs), three recent papers of note are Josh Lerner and Jean Tirole's Standard-Essential Patents, NBER Working Paper 19664, available here; Damien Geradin's The European Commission Policy Towards the Licensing of Standard-Essential Patents:  Where Do We Stand?, 9 J. Comp. L. & Econ. 1125 (2013), available here; and Jorge Contreras's A Brief History of FRAND, available here. 

Here is the abstract of the Lerner-Tirole paper:
A major policy issue in standard setting is that patents that are ex-ante not that important may, by being included into the standard, become standard-essential patents (SEPs). In an attempt to curb the monopoly power that they create, most standard-setting organizations require the owners of patents covered by the standard to make a loose commitment to grant licenses on reasonable terms. Such commitments unsurprisingly are conducive to intense litigation activity. This paper builds a framework for the analysis of SEPs, identifies several types of inefficiencies attached to the lack of price commitment, shows how structured price commitments restore competition, and analyzes whether price commitments are likely to emerge in the marketplace.
I may publish a post or a guest-blog on this paper sometime in the next few weeks.

Here is the abstract of the Geradin paper, which provides an overview of the law in the E.U.:
Defining the circumstances in which the licensing conduct or litigation strategy of a standard-essential patent (SEP) holder amounts to an abuse of a dominant position in breach of Article 102 of the Treaty has been one of the most intractable issues for the European Commission given the significance of the interests at stake and the diversity of opinions among stakeholders. Although the Commission has spent most of the past ten years investigating alleged abuses committed by SEP holders, many issues, such as the meaning of FRAND and the compatibility with Article 102 of injunctions sought by SEP holders to enforce their patents, remain unresolved given the lack of clear precedents. This article provides a critical review of the main investigations carried out by the Commission over the past decade, including pending cases before the Commission and the European Court of Justice. 
Finally, here is the abstract of the Contreras paper.  (This one I haven't read yet, but it's on my to-do list.)
Much has been written lately about commitments that participants in standards-setting activities make to license their patents on terms that are “fair, reasonable and non-discriminatory” (FRAND). These discussions pay little attention, however, to a long series of remedial patent licensing decrees issued by federal courts from the 1940s through 1970s that outwardly resemble FRAND commitments in all but the rationale for their imposition. These early decrees shed light on questions only now re-emerging as pertinent to the FRAND debate: the meaning of the non-discrimination prong of the FRAND commitment, the degree to which courts should intervene in the determination of reasonable royalty rates, the use of arbitration as a means for resolving licensing disputes, the extent to which royalty-free licensing may be “reasonable”, the effects of a potential licensee’s refusal to accept a patent holder’s license offer, the acceptability of a patent holder’s demand for reciprocal licenses from its licensees, and means for ensuring that such commitments survive the transfer of underlying patents.

This article offers the first historical analysis of the patent licensing decrees issued from the 1940s through the 1970s in view of their relationship to FRAND commitments made in the standards-setting context. It concludes that these historical patent licensing orders are, in fact, the direct lineal predecessors of today’s FRAND commitments, and that despite their differences, the interpretation and analysis of these remedial orders by courts, enforcement agencies and private firms offer essential insight into the interpretation of FRAND commitments today.
2.  Florian Mueller has had a couple of interesting remedies-related posts this week.  The first discusses the relevance of the Federal Circuit's 2011 TiVo decision to the question of whether Judge Koh will enter an injunction against Samsung following a January 30 hearing on post-trial motions in the damages retrial case relating to certain (non-SEP) Apple patents.  I blogged a bit about TiVo and its aftermath here.  The second discusses an infringement trial that begins next week in Mannheim, in which IPCom is seeking $2 billion in damages against Apple over a wireless SEP.  I will certainly want to follow this one.  Update:  There's also a short article about this case in today's Wall Street Journal, here.
 
3.  Daniel Hoppe-Jänisch published an article in the October 2013 issue of GRUR RR, titled Die Rechtsprechung der Instanzgerichte zum Patent- und Gebrauchsmusterrecht seit dem Jahr 2011 ("The Case Law of the Courts of First and Second Instance on Patent and Utility Model Law Since 2011").  The article discusses German cases on, among other things, preliminary injunctions, damages, and the Orange-Book-Standard compulsory licensing objection.  I'll probably start wading through some of the cited cases that I have not seen before.  One of the cases that caught my eye was the Judgment of Sept. 8, 2011, I-2 U 77/09, 2 U 77/09, OLG Düsseldorf--Schräg-Raffstore, which involved an award of infringer's profits.  Dr. Hoppe-Jänisch describes the case as standing for the proposition that, in assessing the portion of the defendant's profits attributable to the infringement, the fact that the patented feature is easy to design around is not to be taken into consideration, unless the design-around has already arrived on the market during the period of infringement ("Bei der Berechnung des Kausalanteils sei nicht zu beachten, dass die patentgemäße Ausgestaltung gelangt während des Verletzungszeitraumes bereits auf den Markt").  I downloaded the opinion from Juris.de, and the relevant language can be found in paragraph 144 of the opinion.  The court goes on to say that the defendant's argument amounts to the objection that it could have produced a noninfringing product and thereby earned the same or even a higher profit, but that such a hypothetical causal sequence is irrelevant.  For further discussion of this issue under German law, see my book pp. 273-74 and accompanying footnotes.     

4.  Steffano Barazza recently published a post on PatLit on the U.S. Supreme Court's recent decision in Medtronic v. Mirowski Family Ventures LLC, and cited my post on the decision, here.  Sig. Barrazza writes:
It is interesting to note, as observed by Professor Cotter here, that the path taken by the Supreme Court mirrors the approach employed by German courts ('the patentee always has the burden of proof with regard to the infringement issue, even in negative declaratory actions' - for a similar principle applied by Italian courts, see this case), but differs from the ruling of the Court of Appeal for England and Wales in the recent case of Generics [UK] Ltd v Yeda Research and Development Co Ltd & Anor ('the burden of establishing non-infringement fell on [the plaintiff that brought the declaratory judgment action'). The latter case, however, should probably be read in conjunction with Baxter Healthcare Corporation et al. v Abbott Laboratories, where the patentee was required to plead its case, even if the burden of proof remained on the plaintiff (see IPKat post here). From this point of view, even jurisdictions which provide for a shifting of the burden of proof are likely to introduce additional requirements, in order to identify the perimeter of the underlying infringement dispute that prompted the licensee to file the declaratory judgment action. 
The English court's requirement that the patentee plead its case, even if the burden of proof remains on the declaratory judgment plaintiff, makes a lot of sense, since the patentee presumably has a better idea than the declaratory judgment plaintiff just what it believes its patent covers.  In the Medtronic case, the declaratory judgment plaintiff argued that the lower courts could fashion something similar by requiring the patentee to respond to interrogatories explaining just how the product at issue allegedly infringes (see my post on the oral argument here), but the U.S. Supreme Court apparently didn't think that was a good enough reason to allocate the burden of proof to the DJ plaintiff.  I'm also thankful for the cite to the Italian case, Sentenza N. 14695 del 6 Settembre 2012 (Corte di Cassazione), available here.  Like the German case I noted in my blog, the Italian case is not a patent matter (it's a dispute over whether a worker was an employee or an independent contractor), but the court clearly states that, under article 2697 of the Civil Code, the burden of proving facts constituting a right falls on the one who asserts itself as the owner of the right and intends to assert it, even if that party is the defendant in a negative declaratory judgment action ("l'onere di provare i fatti costitutivi del diritto grava su colui che si afferma titolare del diritto stesso ed intende farlo valere, ancorché sia convenuto in giudizio di accertamento negativo").   

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