Thursday, December 7, 2017

AIPPI Resolution on Quantification of Monetary Relief

In early October I mentioned that the AIPPI World Congress would be meeting in Sydney to discuss, among other matters, the quantification of monetary relief for the infringement of IP rights.  My post also included  a link to the AIPPI webpage on this topic, which in turn included links to forty individual country reports.  Anyway, if you go to that link now you will also find a link to the resolution AIPPI adopted on October 17.  I won't quote it in full, but here are some of the more interesting parts of the AIPPI resolution.

First, point (1) of the resolution sets out the general principle that "Damages should compensate the right holder: a) for its lost profits in respect of sales of products or services that the right holder would have made but for the infringement; and/or b) for its lost profits in respect of price erosion; and/or c) by a reasonable royalty in respect of infringing sales that are not proved to have been lost sales of the right holder, save that the right holder cannot recover twice for the same loss."  Proceeding from these premises, point (2) notes that "the task is by its nature one of estimation," and point (3) then lists various factors that may be relevant to the calculation of lost profits, including "the availability of other substitutable products or services in the market."  This last point would, if adopted in the U.K., require the overruling of the old United Horse-Shoe case, which stands for the proposition that noninfringing alternatives are not relevant to the calculation of lost profits--and would therefore be a welcome change in the law.  (For my critique of United Horse-Shoe, see, e.g., here.)  Interestingly, I don't see any discussion of this specific issue in the U.K country report.  In addition, point (6) states that "Damages should also be recoverable where sales of goods or services of the right holder that compete with the infringement but do not embody the IP right have been lost because of the infringement, as long as the right holder proves a causal nexus between the infringement and the lost sales. The court may take the degree or strength of causation into consideration when considering the appropriate quantum of damages."  This is the rule followed in the U.S. under the Rite-Hite case, and although it remains controversial among some scholars it has always seemed correct to me if the overarching goal is to ensure that the patent owner is no worse off as a result of the infringement. 

Second, point (9) lists various factors that may be relevant to determining a reasonable royalty:
a) other licence agreements of the same IP right as the IP right in suit (but taking due account of the circumstances in which any such other licence agreement was negotiated and, in particular, but not limited to, whether infringement and/or validity of the IP right in suit had been determined);
b) other licence agreements of similar IP rights to the IP right in suit;
c) the cost of non-infringing alternatives;
d) advantages of the IP right in suit when compared with alternatives (including any applicable licence fees for alternatives);
e) profitability of the products or services encompassing the IP right in suit;
f) development costs of the IP right in suit; and
g) the absence and/or circumstances of prior licensing discussions between the
parties.
Up to a point, this is a reasonable distillation of two of what in my view should be the three most relevant factors:  comparables (a and b), and the advantage of the IP over alternatives (c and d).  The other major consideration, in my view, is apportionment (to what extent does the invention contribute to the profitability of the end product), and I don't see subpoint "e" fully addressing this issue.  (Neither does point (13), which states "Where the IP right in suit relates to a part of a multi-component product or service sold by the infringer, the value to be attributed to the IP right in suit (and the compensation available by way of lost profits or reasonable royalty) should be assessed having regard to the extent to which the infringing component provides the basis for customer demand for that multi-component product or service.")  I think it would have good to make that issue clearer.  I also don't agree with subpoint (f), since patents and other IP rights (again, in my view) are a reward for success, not effort, though I realize there is a robust debate (see, e.g, Ted Sichelman's work) on the question of whether damages should be based more on the cost of development. 

In addition, point (10) states that "In assessing a reasonable royalty, the parties should be considered as if they were willing licensor and licensee respectively, with the attributes of the actual right holder and infringer, but disregarding the fact that one or both parties would not in practice have agreed to license the IP right in suit," and point (11) correctly observes that "A reasonable royalty should be assessed on the basis that the IP right in suit is valid and infringed where validity and infringement have been determined in the same proceeding or, otherwise, if warranted in the circumstances." That corrective is necessary to avoid a double discounting problem, as I have observed many times elsewhere (and the observation is hardly original to me).  And point (16) notes the possibility of ongoing royalties when no injunction is granted (though it doesn't address whether injunctions should always or almost always be granted--that's not the topic of the resolution), stating that "In assessing a reasonable royalty where no injunction is granted, the royalty should include a royalty in respect of future infringements, if any."  It might have been good to add that, contrary to current U.S. practice, the rate should be the same rate used for pre-judgment royalties (a point I've made before, see, e.g., here), but so it goes.  Overall, though, I'd say this is a reasonably good resolution.

Monday, December 4, 2017

Assistant AG Delrahim's Speech on FRAND, Patents, and SSOs

A speech delivered on November 10 by the new head of the Department of Justice's Antitrust Division, Makan Delrahim, has gotten a fair amount of publicity from a number of sources, with for example the IAM Blog reporting that former USPTO Director David Kappos referred to the speech as "the most important DOJ antitrust speech on IP during my decades practising law, ” and similar praise coming from Judge Douglas Ginsburg and Koren Wong-Ervin in a paper titled The Department of Justice's Long-Awaited and Much Needed Course-Correction on FRAND-Assured Standard-Essential Patents.  Though I could be wrong, my own somewhat contrarian view is that the speech isn't nearly as significant as some of these observers seem to think.

First, while it's true that Mr. Delrahim's speech is very pro-patent-owner in its orientation--arguing, for example, that "holdout" on the part of prospective licensees is "a more serious impediment to innovation" than is "holdup" on the part of  patent owners, and suggesting that injunctive relief should be more widely available in SEP/FRAND cases--it's important to recognize that these views, while deserving of consideration and respect, are not binding on any court.  The Antitrust Division has no more of a say over the conduct of patent infringement litigation than does any other unrelated entity or person.

Second, while the speech clearly indicates that the DOJ won't view alleged violations of FRAND commitments as antitrust violations, or seek to penalize patent owners for seeking injunctions, this is hardly a change in course for the DOJ.  I don't believe there were any cases during the previous administration in which the DOJ challenged these practices as antitrust violations.  As I discussed in this paper in 2014, among the reasons why U.S. antitrust law wouldn't be conducive to such claims are that U.S. antitrust law generally doesn't condemn monopoly exploitation as opposed to expansion or maintenance, and (as Mr. Delrahim points out) doesn't regulate prices; there's also might be a Noerr-Pennington problem in basing liability based on a non-sham request for injunctive relief.  True, in 2013 the DOJ and USPTO jointly published a document titled Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary FRAND Commitments, which addressed "whether injunctive relief in judicial proceedings or exclusion orders in investigations under section 337 of the Tariff Act of 19301 are properly issued when a patent holder seeking such a remedy asserts standards-essential patents that are encumbered by a RAND or FRAND licensing commitment."  This document was cited by USTR Froman later that year in his veto of an exclusion order entered by the ITC.  And in two cases (Robert Bosch and Google/Motorola) the FTC (by a 3-2 vote) conditioned its acquiescence in a corporate acquisition on the acquiring party's commitment to not to seek injunctive relief for the infringement of FRAND-committed patents by willing licensees.  Still and all, there are lots of reasons why U.S. antitrust law hasn't gone any further than this, and probably wouldn't have done so under a President Hilary Clinton administration.  

Antitrust law in other countries, of course, may take a different approach, though one reason for this (as I have argued) is that in most other countries injunctions remain the default remedy for patent infringement, thus leaving antitrust (or the "abuse of right" doctrine, or something else) to pick up the slack.  But I don't view Mr. Delrahim's speech as presenting a big change in U.S. antitrust law on this issue (and even if it did, of course, his comments would bind at most the DOJ, not the FTC or the courts or the course of private antitrust litigation).

Mr. Delrahim's commentary could be significant in two other respects, however.  First, his comments may suggest that at the margin the DOJ will take a more hands-off approach to other types of cases at the intersection of IP and antitrust law.  Second, and more explicitly, Mr. Delrahim's comments suggest that the DOJ may take a harder look at the conduct of standard-setting organizations (SSOs) as potential violations of the Sherman Act.  The obvious implication here is the DOJ will be less likely going forward to take a favorable view of policies like those adopted by the IEEE in 2015, under which the SSO requires members not to seek injunctive relief against willing licensees and to calculate FRAND royalties using the SSPPU as the royalty based.  (See the  February 2, 2015 Business Review Letter from Renata Hesse, Acting Assistant U.S. Attorney General, to Michael Lindsay, available here.)  That shift in policy is potentially of some consequence, though to my knowledge no other SSO has followed the IEEE's lead in this regard (perhaps due to the controversy, whether deserved or not, that that policy engendered).

All told, then, while I could surely be proven wrong, I don't think the speech merits quite the reaction it has received among some of the commentators. 

Thursday, November 30, 2017

Further News from the European Commission on IP Enforcement

Annsley Merelle Ward of IPKat published a post last night on the Communication from the Commission to the Institutions on Setting out the EU approach to Standard Essential Patents (about which I also blogged yesterday, see here), stating that "neither of the camps who were intensely lobbying in advance of the publication seem able to declare an outright victory in respect of their primary positions . . . . It seems to be a score-draw."  The IPKat post also notes that the Commission published two other communications yesterday relevant to IP enforcement, a Communication from the Commission to the Institutions on Guidance on certain aspects of Directive 2004/48/EC of the European Parliament and of the Council on the enforcement of intellectual property rights and a Communication from the Commission to the Institutions - A balanced IP enforcement system responding to today's societal challenges. I will try to make some time over the next few days to read these and provide some comments here; IPKat also promises a future post on these two additional communications.  A busy end to the month!

Wednesday, November 29, 2017

European Commission Publishes Communication on the EU Approach to SEPs

Hat tip to Joff Wild of the IAM Blog, for reporting on the publication this morning by the European Commission of a document titled Communication from the Commission to the Institutions on Setting out the EU approach to Standard Essential Patents.  It's not terribly long (just 13 pages), but in the interests of time I'll just reproduce the bullet points as presented in the document itself while noting two things in particular that caught my attention.

First, the Commission urges an improvement in the quality and accessibility of information recorded in SDO (standard development organization) databases: 
The Commission: 
- calls on SDOs to urgently ensure that their databases comply with the main quality features described above and will co-operate with SDOs to facilitate this process; 
- calls on SDOs to transform the current declaration system into a tool providing more up-to-date and precise information on SEPs and will co-operate with SDOs in order to facilitate that process; 
- considers that declared SEPs should be subject to reliable scrutiny of their essentiality for a standard, and will launch a pilot project for SEPs in selected technologies with a view to facilitating the introduction of an appropriate scrutiny mechanism.
Second, the Commission sets out certain general principles for FRAND licensing terms for SEPs.  Among other things, this portion of the document states (at pages 6-7) that "Licensing terms have to bear a clear relationship to the economic value of the patented technology. That value primarily needs to focus on the technology itself and in principle should not include any element resulting from the decision to include the technology in the standard. In cases where the technology is developed mainly for the standard and has little market value outside the standard, alternative evaluation methods, such as the relative importance of the technology in the standard compared to other contributions in the standard, should be considered." The part about the value not including "any element resulting from the decision to include the technology in the standard" is consistent with a principle some of the U.S. case law has adopted, but inconsistent with Mr. Justice Birss's statement in Unwired Planet v. Huawei and with an argument made by Norman Siebrasse and me in our paper The Value of the Standard(For previous discusion of this matter on this blog, see here.)  The bullet points for this section are as follows:
- There is no one-size-fit-all solution on what FRAND is: what can be considered fair and reasonable can differ from sector to sector and over time. Efficiency considerations, reasonable licence fee expectations on both sides, the facilitation of the uptake by implementers to promote wide diffusion of the standard should be taken into account. 
- Determining a FRAND value should require taking into account the present value added of the patented technology. That value should be irrespective of the market success of the product which is unrelated to the value of the patented technology. 
- In defining a FRAND value, parties need to take account of a reasonable aggregate rate for the standard. 
- The non-discrimination element of FRAND indicates that rightholders cannot discriminate between implementers that are 'similarly situated'.
- For products with a global circulation, SEP licences granted on a worldwide basis may contribute to a more efficient approach and therefore can be compatible with FRAND. 
The Commission calls on SDOs and SEP holders to develop effective solutions to facilitate the licensing of a large number of implementers in the IoT environment (especially SMEs), via patent pools or other licensing platforms, while offering sufficient transparency and predictability. 
The Commission will monitor licencing practices, in particular in the IoT sector. It will also set up an expert group with the view to deepening expertise on industry licensing practices, sound IP valuation and FRAND determination.
Third, in a section titled "A Predictable Enforcement Environment for SEPs," the Commission states that "When assessing the availability of injunctive relief, courts are bound by Article 3(2) of the IPR Enforcement Directive, and notably the requirement to ensure that injunctive relief is effective, proportionate and dissuasive. Given the broad impact an injunction may have on businesses, consumers and on the public interest, particularly in the context of the digitalised economy, the proportionality assessment needs to be done carefully on a case-by-case basis. The Commission feels that considerations need to be given to the relative relevance of the disputed technology for the application in question and the potential spill-over effects of an injunction on third parties" (p.10, section 3.2).  I wonder if courts within the E.U., where injunctive relief still remains the default remedy for patent infringement at least outside the SEP context, will take this as a signal that they should be somewhat less wedded to that approach in a case in which an injunction would impose disproportionate harm on the infringer or the general public?  If so, I for one would welcome that development.  In any event, the bullet points for this section are:
The Commission considers that the FRAND process requires both parties to negotiate in good faith, including responding in a timely manner. Injunctive relief can, however, be sought against parties acting in bad faith (i.e. parties unwilling to take up a licence on FRAND terms), but it must be used proportionally. 
The Commission will: 
- work with stakeholders to develop and use methodologies, such as sampling, which allow for efficient and effective SEP litigation, in compliance with the industry practice of portfolio licensing; 
- further facilitate the roll-out of mediation and alternative dispute resolution tools; and 
- monitor the impact of PAEs in Europe.
Finally, the last (brief) section on open source and standards concludes with a bullet point stating that "The Commission will work with stakeholders, open source communities and SDOs for successful interaction between open source and standardisation, by means of studies and analyses."

Tuesday, November 28, 2017

Yesterday's oral argument in Oil States

This blog addresses the law and economics of patent remedies, and thus the constitutionality of inter partes review is a bit far afield; so I won't dwell on that matter, except to note one aspect of the oral argument that troubled me, from an economic perspective.  I'm referring to the comments made by Justice Breyer at pp. 29-31, where he states 
. . . suppose that the patent has been in existence without anybody reexamining it for 10 years and, moreover, the company's invested $40 billion in developing it. And then suddenly somebody comes in and says: Oh, oh, we -- we want it reexamined, not in court but by the Patent Office. Now, that seems perhaps that it would be a problem or not? . . .
. . . [D]o people gain a kind of vested interest or right after enough time goes by and they rely on it sufficiently so that it now becomes what? Is there something in the Constitution that protects a person after a long period of time and much reliance from a reexamination at a time where much of the evidence will have disappeared?
Later, at page 50, Justice Breyer appears to back away from a "vested right theory," but a related argument is taken up by Justice Gorsuch at pp. 47-48:
Mr. Stewart, let's say we had a land patent. Let's say the land patent said it becomes invalid if  anybody in -- uses the land in an improper way, in violation of an environmental law, labor law, you choose. 
Let's say the land then gets developed and turns into a housing development outside of, I don't know, Philadelphia. And it turns out, though, that a great-grandfather who owned the land originally back when it was a farm, indeed violated a labor or environmental law, rendering the land patent invalid on its terms. 
Could -- couldn't the Bureau of Land Management, for example, or some other department, Interior, official just pull back the patent?
The implication here, particularly of the latter quote from Justice Gorsuch, seems to be that invention patents and land patents should be treated the same way, and thus that at some point reliance interests should trump the public's interest in seeing that invalid patents are cancelled.  And yet from an economic perspective this makes no sense, because (as economists have been noting for decades) unlike land or personal property intellectual property is nonrivalrous.  Only a limited number of people can inhabit or use the same real or personal property at the same time, but an infinite number of people could use the inventive principle that is the subject of an invention patent without depleting it.  Or, to think of it another way, in Justice Gorsuch's example if my land is taken away I have to find another place to live.  If my patent is invalidated, I may suffer a financial loss (I can't license the patent any more, or use it to exclude competitors), and that's obviously undesirable from my point of view; but unless some other body of law (such as FDA regulation) prevents me there is nothing stopping me from continuing to use the inventive principle as much as I want.  

This seems like a pretty fundamental distinction to me, and I certainly hope that the outcome of Oil States does not hinge on such a weak analogy between real and intellectual property.  Comments?

Monday, November 27, 2017

Federal Circuit Places Burden of Proof on Noninfringing Alternatives on Patentee

At least that's the most important point that I would take away from the Federal Circuit's decision last week in Presidio Components, Inc. v. American Technical Ceramics Corp., an opinion authored by Judge Dyk (joined by Judges Moore and Taranto).  The patent in suit is for a type of capacitor, and the opinion discusses a variety of topics, among them claim definiteness and intervening rights (i.e., whether an amendment made during the course of reexamination was significant enough to excuse the defendant from liability for the period of time preceding the amendment).  I'll pass over those substantive matters, however, and focus on the remedies issues, which involve (1) lost profits, (2) enhanced damages, and (3) injunctive relief.  To cut to the chase, the district court (1) awarded $2,166,654 in lost profits, (2) awarded no enhanced damages despite a jury finding of willfulness, and (3) granted a permanent injunction.  The Federal Circuit reversed on (1), affirmed on (2), and vacated and remanded on (3).

As for the first of the remedies issues, the plaintiff argued that it was entitled to lost profits on sales it would have made but for the infringement.  During the period in question, the defendant sold two types of capacitors, one of which (the "550" capacitor) infringed and the other of which (the "560L") did not.  The relevant question therefore was whether purchasers of the infringing product would have purchased the noninfringing alternative from the defendant, had the defendant not produced the infringing model; if so, then the infringement didn't deprive the patentee of any sales, and it would be entitled only to a reasonable royalty.  (As I've noted before, this is correct as a matter of economics and is standard law in the U.S. and France, though not in the U.K.)  A subsidiary question centers on which party has the burden of proof:  is it the patentee's burden to demonstrate the absence of an adequate noninfringing alternative, or the defendant's burden to show that purchasers would have considered the alleged alternative to be adequate?  As several coauthors and I write in a draft of a forthcoming chapter of an edited volume titled Patent Remedies and Complex Products: Toward a Global Consensus (Cambridge University Press, forthcoming 2018):
. . . although U.S. law appears to place the burden of proving the absence of non-infringing alternatives on the patentee, to our knowledge there is little discussion in the legal or economic literature addressing whether this allocation of the burden of proof is optimal. One might speculate that the infringer often would be better placed than the patentee to propose and substantiate the existence of feasible alternatives (though perhaps patent owners have unique insights into the matter that are not apparent at first blush); or maybe the allocation of the burden of proof on this issue does not matter much in practice, since both parties often will be motivated to present the evidence that best favors their position. Further consideration in the scholarly literature would be welcome.
Anyway, the Presidio opinion pretty clearly follows the practice of placing the burden on the patentee, while also stating (1) that the relevant question is whether consumers would have viewed the alternative as an adequate substitute for the product the plaintiff was selling, and (2) that an alternative doesn't have to be on the market to be "available" (pp. 16-18):
ATC argues that the district court erred by finding that substantial evidence supported that Presidio had satisfied the second prong of Panduit analysis—the absence of an acceptable, non-infringing alternative. To prove the absence of acceptable, non-infringing alternatives, the patentee may prove either that the potential alternative was not acceptable to potential customers or was not available at the time. Grain-Processing Corp. v. Am. Maize-Prod. Co., 185 F.3d 1341, 1353–55 (Fed. Cir. 1999). . . .
The district court’s analysis and Presidio’s argument were flawed. The correct inquiry under Panduit is whether a non-infringing alternative would be acceptable compared to the patent owner’s product, not whether it is a substitute for the infringing product. “The ‘but for’ inquiry therefore requires a reconstruction of the market, as it would have developed absent the infringing product, to determine what [sales] the patentee ‘would . . . have made.’” Grain Processing, 185 F.3d at 1350. The district court erred by relying on evidence about sales of the 560L capacitor in competition with the currently infringing product, rather than comparing the 560L capacitor to Presidio’s BB capacitor in a  hypothetical market without the infringing 550 capacitor. There was not substantial evidence in the record upon which a jury could conclude that the 560L was not an acceptable, noninfringing  alternative for Presidio’s BB capacitors. Undisputed evidence showed that the 560L capacitor was less expensive than Presidio’s BB capacitor and also had lower insertion loss for at least some  frequencies, which indicates better performance.
On the question of availability, the district court determined that sufficient evidence supported the finding that the 560L capacitor was not an available substitute because unlike the infringing 550  capacitors, ATC sold the 560L capacitor only to a single customer and did not list it on its website. An alternative does not need to be on the market to be available. Grain Processing, 185 F.3d at 1356. But here, the alternative was on the market. The undisputed evidence shows ATC sold 88,000 560L capacitors to the customer. The fact that ATC only sold the 560L capacitor to a single customer does not establish that it was unavailable. Moreover, the fact that the 560L capacitor was not widely advertised when sold in a market with the 550 capacitor does not show a lack of availability. In a hypothetical market including the 550 capacitors, ATC may have chosen not to advertise the 560L capacitor. . . .
In summary, Presidio failed to provide evidence that the 560L capacitor was either not an acceptable or available substitute to Presidio’s BB capacitor. We reverse the denial of judgment as a matter of law. The jury’s award of lost profits is set aside; Presidio is only entitled to receive a reasonable royalty award. . . . Under these circumstances, a new trial is needed to determine the reasonable royalty award.
As for enhanced damages, the court affirms the district judge's decision not to award any notwithstanding the jury's finding of willfulness, noting the judge's conclusion "that the present case was a 'garden-variety' hard-fought patent case, rather than an egregious case of misconduct" (pp. 19-20), and holding that the court is not required to discuss the Read v. Portec factors (which can be relevant in determining the extent to which damages should be enhanced) (p.20).

Finally, on injunctive relief, the court holds that where lost profits are not proven is is less likely that the patentee will be faced with the prospect of irreparable harm--though not impossible, hence the need for a remand:
To prove irreparable injury, a patentee must show “1) that absent an injunction, it will suffer  irreparable harm, and 2) that a sufficiently strong casual nexus relates the alleged harm to the alleged infringement.” Apple Inc. v. Samsung Elecs. Co., 695 F.3d 1370, 1374 (Fed. Cir. 2012). To determine whether the patentee will suffer irreparable harm absent an injunction, the court may consider factors such as the nature of competition between the patentee and the infringer, the willingness of a patentee to license, and any lost sales the patentee has proven. . . .
Where irreparable injury is based on lost sales, “a likelihood of irreparable harm cannot be shown if sales would be lost regardless of the infringing conduct.” Apple Inc. v. Samsung Elecs. Co., 678 F.3d 1314, 1324 (Fed. Cir. 2012). Here, the district court correctly pointed out that a jury award of lost profits may support a finding of irreparable harm because it necessarily results in a finding that the patentee lost sales and would continue to lose sales in the future. Presidio, 702 F.3d at 1363. The district court then based its conclusion as to irreparable injury on the jury’s lost profits award. The district court reasoned that “[t]he jury’s lost profits award also supports a finding of irreparable injury” because “the jury necessarily found ATC’s [550] capacitor sales caused Presidio to lose BB capacitor sales.” J.A. 87. In light of our reversal of the lost profits award for lack of proof of past lost sales, we must vacate the injunction.
However, we do not decide whether this should be the end of the matter. The district court has  discretion to determine whether other evidence could support a finding of irreparable injury. In this respect, on remand, the district court should reopen the record and consider current evidence of irreparable harm. Since March 17, 2017, the injunction against ATC from selling 550 capacitors has been in effect. Based on the arguments and evidence presented to this court, it appears that this injunction may have created the hypothetical market necessary to determine whether consumers would purchase Presidio’s BB capacitors in the absence of ATC’s 550 series capacitors. On remand, the district court should consider whether consumers have turned to noninfringing alternatives to the BB capacitor, such as the 560L capacitor, after the 550 series capacitors became unavailable or whether Presidio’s sales of the BB capacitor have increased because the 550 series is no longer on the market. Based on this further evidence and other relevant evidence, the district court should determine whether Presidio has established irreparable injury and the appropriateness of an injunction. 
*                  *                   *

In other news, the U.S. Supreme Court is hearing two cases today on inter partes review:  Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, on the constitutionality of inter partes review, and SAS Institute Inc. v. Matal, on the narrower question of whether the PTAB is obligated "to issue a final written decision as to every claim challenged by the petitioner."

Saturday, November 4, 2017

Blogging Hiatus

I'm going to take a blogging hiatus for the next few weeks, while I devote some time to some other matters.  I hope to resume the blog before too long.  Meanwhile, I've published 837 posts since May 2013, so for those of you who are new to the blog, there's plenty of back reading.

Friday, November 3, 2017

More New Papers on FRAND, SEPs

1.  Joseph A. Alfred has published a paper titled Licensing Standards Essential Patents in les Nouvelles, Sept. 2017, pp. 223-28.  Here is a link to the paper, and here is the abstract:
This article reviews the progress of cellular standards and compares that rise with the increase of standards essential patents because of the smartphone. Relevant case law is examined including the seminal Georgia-Pacific fifteen factors and how they were cited in 95 cases since 1995. Relevant articles are reviewed concerning the smartphone royalty stack, GATT and standards and in particular the case law surrounding device licensing represented by the key factors deciding the Microsoft v. Motorola case. A way forward is proposed that industry once again take the lead to determine reasonable royalty when licensing standards essential patents.  
2.  Roberto Grasso has published a paper titled Standard Essential Patents:  Royalty Determination in the Supply Chain, 8 J. Euro. Comp. L. & Prac. 283 (2017).  Here is a link to the paper, which lists among its "key points" the principles that royalties should be calculated based on the SSPPU and on incremental ex ante value; that for complex products, one must take into account the aggregate royalty demand; and that SEP owners "must negotiate with and provide a FRAND license to anyone who requests it, regardless of which level of the value chain it operates."

3.   David Kappos published a paper in the May 2017 issue of AIPPI-Japan (pp. 111-17) titled Patent Hold-Up and Royalty Stacking--From Theory to Data to Rethink.  From the conclusion:
Scientific inquiry begins with hypotheses--it does not conclude with them. . .  [W]e must accept that the latest and most robust empirical studies dispatch with the theories of patent holdup and royalty stacking, and point towards a future where patents and standard play an enduring, viral and harmonious, role.
The paper cites to papers by Galetovic, Haber, and others that I have from time to time criticized on this blog.

Wednesday, November 1, 2017

Some Recent Articles, Posts on Unwired Planet v. Huawei

Readers will recall that back in April Mr. Justice Birss concluded in Unwired Planet v. Huawei (paras. 148-61) that FRAND is a point, not a range--one reason being to avoid a situation where both parties make FRAND offers and the court then has to decide which (if either) to accept.  I'm not sure I find that reasoning compelling; it seems to me more sensible to think of FRAND as a range, even if one consequence of this view is that courts sometimes will need to (somehow) select a rate within that range to decide a specific case.  One of Greg Sidak's papers that I mentioned on this blog recently (see here, heading number 6) also argues that FRAND is better conceived as a range, not a rate.  Anyway, the papers and posts listed below also address this issue, among others.

1.  Jorge Contreras has published a paper titled Global Markets, Competition, and FRAND Royalties:  The Many Implications of Unwired Planet v. Huawei, in the August 2017 issue of The Antitrust Source.  Here is a link to the article, and here is the abstract:
The recent UK decision in Unwired Planet v. Huawei addresses, for the first time, several key issues arising from the international nature of SEP licensing transactions and the manner in which national court decisions can impact global business and litigation strategies. The court's analysis is deeply rooted in competition law principles, often at the expense of the contractual underpinnings of the FRAND commitment. Most importantly, the court's willingness to establish global license terms covering patents outside the UK has serious implications for international commercial litigation and licensing transactions.  
Professor Contreras critiques the single FRAND rate rule at pages 2-4.

2.  Maximilian Haendicke published an article titled Lehren aus der Huawei v. Unwired Planet-Entscheidung für das deutsche Patentrecht ("Teachings of the Huawei v. Unwired Planet Decision for German Patent Law") in the August-September 2017 issue of GRUR Int. (pp. 661-69).  Here is the abstract (my translation):
On April 5, 2017, the Patents Court (England and Wales) has in the person of Judge Birss has reached a decision on numerous questions that must be confronted in connection with standard essential patents.  From a German perspective, the decision deserves special consideration because it touches on themes which up to now have not been decided, either at all or not explicitly but rather only partially and in divergent ways, by the German courts.  These concern in particular the methods for determining the FRAND rate as well as the conditions under which a competition-law based compulsory license defense can be applied.  The present article illuminates the English decision with a focus on the suggestions that the German courts may take away from it, especially with regard to the design of FRAND licensing contracts and the determination of FRAND rates.  
Dr. Haendicke is not enthusiastic about the one-FRAND-rate concept either.
 
3. On the IAM Blog, Richard Lloyd recently published a post titled Microsoft v Motorola judge criticises recent UK Unwired Planet SEP licensing decision.  According to the post, Judge Robart stated at a recent IPO annual meeting that Mr. Justice "Birss was wrong to offer specific royalty rates for the technology in question, rather than offering a range, and stated that he did not expect the judgment to be particularly influential in US courthouses."

4.  Two recent papers in the Journal of European Competition Law & Practice provide an overview of the Huawei decision: Sophie Lawrence and Francion Brooks's Unwired Planet v. Huawei:  The First UK FRAND Determination, 8 Euro. J. Comp. L. & Prac. (forthcoming 2017), and Damien Neven & Pierre Régibeau's Unwired Planet vs Huawei: A Welcome Clarification of the Concept of FRAND and of the Role of Competition Law Towards SEP Licencing, 8 Euro. J. Comp. L. & Prac. 463 (2017), and Sophie Law.  In contrast to the above sources, neither appears to be critical of Mr. Justice Birss's one-single-FRAND-rate rule.   

Monday, October 30, 2017

Some Recent Papers on Injunctions, Stays in the U.S.

1.  Steven M. Amundsen has published a paper titled Federal Circuit Decisions Concerning Smartphones Have Created Uncertainty Regarding the Evidence Needed to Prove Irreparable Harm and Establish Entitlement to Injunctive Relief, 42 Rutgers Comp. & Tech. L.J. 232 (2016).  From the introduction:
In four decisions by the Court of Appeals for the Federal Circuit in two patent cases that Apple filed against Samsung, the court has appeared to flip-flop when describing the evidence needed to prove an essential element for injunctive relief: irreparable harm. A patentee must establish irreparable harm, among other things, to obtain a preliminary or permanent injunction. And to establish irreparable harm, a patentee must demonstrate a sufficiently strong connection-or causal nexus-between the patent infringement and the alleged irreparable harm.
In its Apple v. Samsung decisions, the Federal Circuit explained that "[s]ales lost to an infringing product cannot irreparably harm a patentee if consumers buy that product for reasons other than the patented feature."' So if "the accused product would sell almost as well without incorporating the patented feature," the infringement injures the patentee only insubstantially even if the accused product's sales cause substantial damage commercially.' Thus, the causal-nexus requirement (1) ensures that the infringement causes the irreparable harm "in the first place"' and (2) prevents the patentee from "leverag[ing] its patent for competitive gain beyond that which the inventive contribution and value of the patent warrant."
This article discusses the causal-nexus requirement's evolution at the Federal Circuit based on two cases initially filed in April 2011 and February 2012. This article also discusses how various trial courts have applied the causal-nexus requirement when considering the propriety of injunctive relief. It then discusses points to consider when seeking to show or refute a causal nexus.
The most recent Federal Circuit decision in this series is currently awaiting a cert. decision from the U.S. Supreme Court.  For discussion, see, e.g., this post and this post by Florian Mueller on FOSS Patents. 

2.  J. Gregory Sidak has published a paper titled Irreparable Harm from Patent Infringement, 2 Criterion J. on Innov. 1 (2017).  Here is a link to the paper, and here is the abstract:
The Patent Act empowers a court to issue an injunction “to prevent the violation of any right secured by patent.” Whether a court will permanently enjoin an infringer depends on whether (1) the patent holder would suffer irreparable harm otherwise, (2) its legal remedies are inadequate, (3) the balance of hardships favors the patent holder, and (4) the injunction would not disserve the public interest. Similar factors inform the grant of a preliminary injunction. The Federal Circuit often says that the harm from patent infringement is irreparable if it cannot be measured. I say that such harm is irreparable because it irreversibly destroys wealth.
Patent infringement irreversibly obliterates wealth when it impedes society’s technical progress. Patent infringement does more than transfer wealth involuntarily from the patent holder to the infringer; it also harms third parties by devastating the surplus that consumers would derive from using the product practicing the new technology. Damages are impotent to cure that harm to the public interest. A court’s order of damages can no more recreate the wealth that has been or will be destroyed by an act of patent infringement than it can restore an ancient redwood after the axeman has felled it.
3.   Jonathan Stroud has published a paper titled NFC Technology LLC v. HTC America, Inc.:  Judge Bryson's Sitting-by-Designation Guide to Securing Stays in Light of Inter Partes Review, 65 Am. U. L. Rev. 1075 (2016).  Here is a link to the paper, and here is the abstract:
Federal Article III judges may stay civil litigation. Stays are most appropriate where another court or authority may resolve a part of or the entire dispute. Some statutes guide the courts on when to stay; some case law and appellate precedent guide judges on when a stay is appropriate. But the interlocutory nature of such decisions makes precedential decisions scarce. The Patent Trial and Appeal Board (PTAB), an administrative body tasked with patent post-grant review, efficiently reviews patentability of and can estopp later validity arguments. Stays in light of these proceedings are particularly favored. Although it will be some time before a body of appellate precedent develops surrounding these stays, one senior appellate judge from the patent-focused U.S. Court of Appeals for the Federal Circuit, sitting by designation, has issued a district court decision in a contentious district, where he exhaustively compiled district court stay cases and offered a guide for other judges faced with determining whether to stay. This Essay analyzes that decision.
Here is a copy of the decision itself.   

Thursday, October 26, 2017

Two New Papers on SSPPU

Following up on a post from last month on the IEEE's Patent Policy, here are two more papers discussing whether it is preferable for the royalty base to be the sales revenue from the sale of the end product, or rather the smallest saleable patent practicing unit (SSPPU):

1.  Anne-Layne Farrar published The Practicalites and Pitfalls of the Smallest Saleable Patent Practicing Unit in the December 2016 issue of les NouvellesHere is a link to the paper, and here is the abstract:
Dr. Anne Layne-Farrar reviews a paper by Teece and Sherry who assess the economics of the SSPPU doctrine. She summarizes each argument made in support of the application of SSPPU and evaluates their logical underpinnings. She also discusses the practical difficulties that arise in applying the SSPPU doctrine and discusses the policy implications. Many limitations raised by Teece and Sherry caution against a broad, automatic application of the SSPPU doctrine and suggest and more careful use of the doctrine when it is applied. 
For another recent paper by Dr. Layne-Farrar on this topic, see here.

2.  Gerard Llobet and Jorge Padilla have published The Optimal Scope of the Royalty Base in Patent Licensing, 59 J. L. & Econ. 445 (2016).  Here is the abstract:
Legal scholars debate the merits of using the total value of the product, as opposed to the value of the component to which the technology contributes, as the base for a royalty in licensing contracts. In this paper we make use of the fact that these two royalty bases are equivalent to using ad valorem and per-unit royalties, respectively. We abstract from implementation and practicability considerations to analyze the welfare implications of the two rules. Ad valorem royalties tend to lead to lower prices, particularly in the context of successive monopolies. They benefit upstream innovators and do not necessarily hurt downstream producers. This benefit increases when there are multiple innovators contributing complementary technologies, as is typical of standard-setting organizations. Ad valorem royalties are even more desirable when enticing upstream investment is optimal. Our findings explain why most licensing contracts include royalties based on the value of the product.

Tuesday, October 24, 2017

Minnesota Law Review Symposium on Pharmaceutical Drug Development

Though not directly related to the topic of patent remedies, this upcoming event may be of interest to some of my readers, particularly as it relates to the law and economics of patent protection for drugs.  On Friday of this week, the Minnesota Law Review will be hosting a symposium titled "A Prescription for Pharmaceutical’s Future: Balancing Industry and Consumer Concerns in Pharmaceutical Drug Development" at the University of Minnesota Law School from 8:15 a.m. to 4:00 p.m. (webpage here).  They have quite an impressive list of speakers lined up, as described below, so if you happen to be near the Twin Cities area you might want to check this out.  I assume that at least some of the presentations will be appearing in a future volume of the Minnesota Law Review.  (Update (10/26/17):  Here is a link to a video about the conference, which states (among other things) that a video recording of the conference will be available on the Minnesota Law Review's website.)  Anyway, here is the agenda:

Key Note Address by Dr. Jonathan Jarow, Senior Medical Advisor to the Director of the Center for Drug Evaluation and Research, U.S. Food and Drug Administration
  • “FDA Regulation of Drugs and Biologics: Finding the Right Balance”
Introduction by Michelle M. Mello, Ph.D., J.D., Professor of Law, Stanford Law School, and Professor of Health Research and Policy, Stanford University School of Medicine
  • “Why Ensuring Access to Affordable Drugs Is the Hardest Problem in Health Policy”
Address by Joanne Chan, J.D., Assistant General Counsel, Pharmaceutical Research and Manufacturers of America

Panel 1: Investigating the Pricing Equation: A Law and Economics Analysis
Pricing pharmaceutical drugs is a complex endeavor bogged down by disparate market forces and motivations. On one side of the equation, pharmaceutical companies gauge competitor prices by consulting insurers, consulting providers to assess prices with treatment plans, assessing input costs (such as research, development, marketing, FDA approval and other compliance measures, etc.), and determining desired profits for shareholders and the company, to name a few factors. On the other side of the equation, consumers want prescriptions and insurance premiums to be affordable and effective. The pricing process remains largely hidden, because partly Medicare cannot negotiate prices directly with drug companies. This panel confronts which underlying issues need to be addressed in the pricing equation and which issues should change or remain the same. Moderated by Thomas F. Cotter, M.S., J.D., Briggs and Morgan Professor of Law, University of Minnesota Law School.

Featuring:
  • Arti K. Rai, J.D., Elvin R. Latty Professor of Law, Duke University Law School
    • “Regulatory Gaming and Antitrust: Drugs vs. Biologics”
  • Christopher Robertson, Ph.D., J.D., Professor of Law and Associate Dean for Research and Innovation, University of Arizona College of Law
    • “The Economics and Experience of Patient Cost Exposure”
  • Rachel E. Sachs, M.P.H., J.D., Associate Professor of Law, Washington University School of Law
    • “The Role of Reimbursement”
  • Stephen W. Schondelmeyer, PharmD, Ph.D., Professor and Head of the Department of Pharmaceutical Care and Health Systems, Director of the PRIME Institute, University of Minnesota

Panel 2: “Safe & Effective” or “Now & Cheap”?: Finding the Right Role for the FDA
The FDA, its mission, and its powers are partially the result of Congressional response to a series of national incidents sparked by bad drugs and public outcries. Such a history lends itself to a potentially incoherent or incomplete mission. In fact, critiques of the FDA have suggested that its mission is in one sense too broad because it must investigate drugs for effectiveness and not merely safety. Others have suggested that the FDA’s commitment to be only scientific in its approval process is too narrow and does not allow for the consideration of other relevant factors, such as immediate need of the product. State right to try laws, in which a terminally ill patient may try drugs before FDA approval, exemplify one way that lawmakers challenge the approval process. As with any administrative agency, there are also issues of “mission creep” and exceeding statutory bounds, often to consider factors in drug approval that are not statutorily permitted. This panel will explore potential changes to the statutory mission and authority of the FDA. What should be its fundamental mission? What factors should it be allowed to consider? Have we already struck the proper balance? Moderated by Ralph Hall, J.D., Professor of Practice, University of Minnesota Law School.
Featuring:
  • Amy Kapczynski, M.A., J.D., Professor of Law and Faculty Director of the Global Health Justice Partnership, Yale Law School
    • “Why Do We Have Pre-Market Review of Medicines? The“Precautionary” Fallacy and the FDA’s Role in Information Production”
  • Jordan Paradise, J.D., Professor of Law, Loyola Chicago School of Law
    • “Regulatory Silence at the FDA: Impact on Drug and Biologic Competition”
  • Nicholson Price II, J.D., Ph.D., Assistant Professor of Law, University of Michigan Law School
    • “Drug Approval in a Learning Health System”

Panel 3: Pharmaceuticals Around the Globe: Access and Delivery Issues for Consumers

A final vital aspect of pharmaceutical drug development concerns bringing these drugs to consumers. Due to the expense of drug research and development, pharmaceutical companies need to make careful decisions on what products to pursue. However, consumers, particularly those consumers in poor areas, can suffer from the unavailability of particular pharmaceuticals or underdeveloped pharmaceuticals. Moreover, the pharmaceutical drugs that even are available might not be delivered competently. How does the intellectual property regime influence this phenomenon? Is pharmaceutical research and development compatible with social justice, and how so? What kinds of reforms are needed, and what is feasible for businesses? This panel will tackle both the international community’s need to respond as well as the United States’ role in response efforts. Moderated by Fred Morrison, Ph.D., J.D., Popham, Haik, Schnobrich/Lindquist & Vennum Professor of Law, University of Minnesota Law School.

Featuring:
  • Margo A. Bagley, J.D., Asa Griggs Candler Professor of Law, Emory University School of Law
    • “Making Room at the (Drug Access) Table: Is There a Place for Traditional Medicine?”
  • James Love, Director, Knowledge Ecology International
    • “Delinking R&D Costs, including Incentives from Prices for Drugs and Vaccines”
  • Jerome H. Reichman, J.D., Bunyan S. Womble Professor of Law, Duke University Law School
    • “Compulsory Licensing of Patented Pharmaceuticals under Article 31bis of TRIPS: The Way Forward”

Monday, October 23, 2017

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.

Friday, October 20, 2017

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.

Wednesday, October 18, 2017

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.
 

Tuesday, October 17, 2017

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. 

Monday, October 16, 2017

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.

Friday, October 13, 2017

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.

Wednesday, October 11, 2017

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 DeprivedHere 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.     

Monday, October 9, 2017

AIPPI: Quantification of Monetary Relief

The AIPPI World Congress will be meeting October 13-17 in Sydney.  (Webpage here.)  One session on Monday, October 16 will be on injunctions in pharmaceutical patent cases, and another on Tuesday, October 17 is titled "How Much for Your FRAND?"  Perhaps of most interest to readers of this blog, however, there will be a Study Committee Meeting on Saturday, October 14 titled "Quantification of Monetary Relief" and on Sunday, October 15 a "Plenary Session for proposed Resolution (4) - Quantification of monetary relief."  The description of the October 14 session is as follows:
In litigation concerning infringement of IP rights, monetary relief in the form of damages is commonly requested by the IP rights holder. It is generally accepted that this relief should at a minimum be adequate to compensate for the loss suffered by the rights holder and deter further infringement. In practice, few cases proceed beyond a determination of liability and courts are asked to determine the quantum of damages relatively infrequently.  However, if a case does proceed to that stage, it may in practice be difficult to obtain economic evidence regarding infringement, and to estimate the appropriate quantum of damages to be awarded within the factual matrix of the dispute before the court.  For example, where permanent price erosion has occurred, or other irreparable harm has occurred, the relevant quantum of damages can be very difficult to determine.  Predictable and logical rules for quantification are desirable as this allows the parties to have a reasonably clear idea of the likely quantum of damage, which may in turn encourage early settlement.  Otherwise, the amount of any damages award may vary significantly from one country to another, irrespective of the size of the market. Reports have been received from a number of National and Regional Groups on the issue of quantification, and the objective is to synthesise a number of common rules on the quantification of monetary relief that could be applied in a uniform way, promoting legal certainty. 
It will be interesting to see what resolution comes out of the meeting.  The individual country reports prepared in advance of the meeting--forty of them, ranging alphabetically from Argentina to Vietnam--are available here.  (I haven't read many of them yet myself.)  The Japan report is also available in the July 2017 issue of AIPPI-Journal of the Japanese Group of AIPPI (pp. 217-28), and the Germany report in the August-September 2017 issue of GRUR-Int. (pp. 736-43).

Thursday, October 5, 2017

Federal Circuit Reiterates that a Claimant Must Prove All Four eBay Factors to Get an Injunction

The case, decided this morning, is Amgen Inc. v. Sanofi, opinion by Chief Judge Prost, joined by Judges Taranto and Hughes.  The patents in suit relate to monoclonal antibodies used to reduce LDL cholesterol, and most of the opinion is devoted to a discussion of the written description and enablement doctrines, on which grounds the court reverses and remands for a new trial.  (I'll be teaching enablement and written description in my patent law class next week, so maybe I'll use this case as an example for class discussion.)  Of more interest to readers of this blog, however, is the court's discussion of injunctive relief.  The district court had entered judgment for the plaintiffs, Amgen, and entered a permanent injunction against Sanofi's "Praluent" product, even though (according to the district court) one of the four eBay factors--the public interest--weighed against entry of the injunction.  The Federal Circuit, echoing its May 1 decision in Nichia v. Everlight (see discussion here), concludes that this was error--though at the same time, it cautions that the public interest doesn't require that courts never enter injunctions in cases involving pharmaceuticals (pp. 21-23):
Finally, we address the district court’s permanent injunction removing Appellants’ Praluent from the market. As noted earlier, we stayed this injunction pending resolution of this appeal. Because we vacate the district court’s judgment as to written description and enablement and remand for a new trial, we also vacate the permanent injunction.
We write to note, however, that the district court’s permanent injunction analysis in this case was improper for two distinct reasons. First, the district court misapplied eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006). In that case, the Supreme Court explained that: 
[A] plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief. A plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. 
Id. at 391 (emphases added). Here, the district court concluded that issuing a permanent injunction would disserve the public interest. Despite that finding, the court issued a permanent injunction. J.A. 33–34. That was in clear violation of eBay. If a plaintiff fails to show “that the public interest would not be disserved by a permanent injunction,” then the district court may not issue an injunction. eBay, 547 U.S. at 391.
Second, the district court also erred in its analysis of the “public interest” factor. In reaching its conclusion that the injunction would disserve the public, the district court weighed “being a patent holder and a verdict winner” on the one hand and “taking an independently developed, helpful drug off the market” on the other. J.A. 33. It then “conclude[d] that the public interest of having a choice of drugs should prevail.” J.A. 33–34.
But eliminating a choice of drugs is not, by itself, sufficient to disserve the public interest. Under such an approach, courts could never enjoin a drug because doing so would always reduce a choice of drugs. That, of course, is not the law. See 35 U.S.C. § 271(e)(4)(B) (“[I]njunctive relief may be granted against an infringer to prevent the commercial manufacture, use, offer to sell, or sale within the United States or importation into the United States of an approved drug, veterinary biological product, or biological product.”). We previously rejected such reasoning in WBIP, LLC v. Kohler Co. and explained that: 
The district court’s decision is based on its reasoning that having more manufacturers of a lifesaving good in the market is better for the public interest. But this reasoning is true in nearly every situation involving such goods, such that, if it alone is sufficient, it would create a categorical rule denying permanent injunctions for life-saving goods, such as many patented pharmaceutical products. As the Supreme Court has warned, categorical rules regarding permanent injunctions are disfavored.
829 F.3d 1317, 1343 (Fed. Cir. 2016). Just as a patent owner does not automatically receive an injunction merely by proving infringement, see eBay, 547 U.S. at 394, an accused infringer cannot escape an injunction merely by producing infringing drugs. Accordingly, a reduction in choice of drugs cannot be the sole reason for a district court to deny an injunction.
I've argued before that, although I don't think it is appropriate to award injunctions to the prevailing plaintiff in virtually every patent case, as was the understanding of U.S. law prior to eBay (and is still the practice in many countries, at least outside of the FRAND context), I also wouldn't read eBay quite so literally as to require the plaintiff to prevail on all four eBay factors--a result that seems to me rather contrary to traditional notions of equitable balancing, among other problems.  For discussion, see here.  But it appears that the two panels of the Federal Circuit have now taken the literal approach--though arguably the statements above in Amgen are dicta, since the court reversed and remanded the judgment in favor of the plaintiffs anyway.