Blogging Break

 I will be taking a blogging break next week, August 1-5.

Judge Gilstrap Denies Apple's Motion for Antisuit Damages

Here is the order in this matter, previously noted on this blog here.  Stories elsewhere on Law360, Bloomberg, and FOSS Patents.  The court finds no "imminent, irreparable harm," and further states that while it "has some level of sympathy for the frustration visited upon Apple by Ericsson’s strategic conduct in other diverse forums . . . such sympathy does not excuse a misuse of this Court’s rules regarding emergency motion practice."

Federal Circuit Affirms Award of Fees Pursuant to Inherent Equitable Powers

The case is Realtime Adaptive Streaming LLC v. Netflix, Inc., precedential opinion by Judge Chen, joined by Judge Newman and by Judge Reyna concurring-in-part and dissenting-in-part. The first three paragraphs of the opinion summarize the facts leading to the imposition of fees:

Plaintiff-Appellant Realtime Adaptive Streaming LLC (Realtime) filed three separate patent infringement actions against Defendants-Cross-Appellants Netflix, Inc. and Netflix Streaming Services, Inc. (collectively, Netflix). Realtime first asserted six patents in the District of Delaware. While the Delaware action was ongoing, Netflix filed seven petitions for inter partes review before the Patent Trial and Appeal Board seeking a determination that many of the claims asserted in the Delaware action were unpatentable. Netflix also moved to dismiss the complaint for failure to state a claim, arguing that four of the six asserted patents were ineligible under 35 U.S.C. § 101. Netflix fully briefed, and Realtime full responded to, those patent-ineligibility theories. Following institution of all seven inter partes review proceedings and a thorough report and recommendation from the Delaware magistrate judge finding claims of four of the patents ineligible under § 101, Realtime voluntarily dismissed the Delaware action—before the district court could rule on the magistrate judge’s ineligibility findings.

 

Although Realtime was done with Delaware, it was not done with Netflix. The next day, Realtime started fresh, re-asserting the same six patents against Netflix, this time in the Central District of California—despite having previously informed the Delaware court that transferring the Delaware action across the country to the Northern District of California would be inconvenient and an unfair burden on Realtime. Netflix then simultaneously moved for attorneys’ fees and to transfer the California actions back to Delaware. Prior to a decision on either motion, Realtime again avoided any court ruling by voluntarily dismissing its case.

Netflix then renewed its motion for attorneys’ fees for the California actions as well as the related Delaware action and inter partes review proceedings. The district court awarded fees for both California actions pursuant to § 285 and, in the alternative, the court’s inherent equitable powers. The district court declined to award fees for the related Delaware action or inter partes review proceedings under either § 285 or Federal Rule of Civil Procedure 41(d). . . . Realtime now appeals the court’s fee award for the California actions and Netflix cross-appeals the court’s denial of fees for the related proceedings. Because we hold that the district court did not abuse its discretion in awarding fees pursuant to its inherent equitable powers or in denying fees for the related proceedings, we affirm. We need not reach the question of whether the award also satisfies the requirements of § 285 (pp.2-3).

The court declines the invitation to decide (1) if FRCP 41(d) permits a district court to award fees (p.3 n.1); (2) if Realtime’s two voluntary dismissals rendered Netflix a “prevailing party” under § 285 (p.3 n.2); and (3) whether courts have authority to award fees under § 285 for related USPTO proceedings (p.12), stating that “nothing obligates the district court to award fees in related actions” and in this case “the district court’s fact findings support differentiating the related proceedings” (p.13).

In Judge Reyna’s separate opinion, he writes:

 

I concur with the majority’s holding that the district court did not abuse its discretion in awarding fees under its inherent powers to sanction. I dissent in part because I  also believe that the district court did not err in determining that two voluntary dismissals without prejudice is sufficient to confer prevailing party status under 35 U.S.C. § 285.

Cotter on U.S. and German Approaches to FRAND Disputes

I have a new paper on ssrn, titled Like Ships That Pass in the Night: U.S. and German Approaches to FRAND Disputes, forthcoming in FRAND: German Case Law and Global Perspectives (Peter George Picht, Erik Habich & Thomas F. Cotter eds., Edward Elgar Publishing Ltd. 2023).  Here is a link to the paper, and here is the abstract:

  

            The U.S. and German approaches to resolving disputes involving FRAND-committed standard-essential patents (SEP) diverge in many respects. While U.S. courts are reluctant to award injunctive relief in SEP cases, but have shown some willingness to determine FRAND royalties in both bench and jury trials, the German approach is precisely the opposite—with German courts interpreting the CJEUs decision in Huawei v. ZTE as authorizing awards of injunctive relief in many instances, while showing little enthusiasm for actually determining FRAND royalties themselves. The U.S. and Germany also differ in their tolerance for antisuit injunctions, which have become a recurrent topic in global FRAND disputes; and the countries’ perspectives on antitrust law differ fundamentally as well, with antitrust providing one of the few avenues for denying injunctive relief in Germany, while having relatively little bearing on SEP disputes in the U.S. thus far. These divergences reflect not only important differences in legal cultures and institutions but also, arguably, different understandings of optimal innovation policy. One way to transcend these differences might be through the establishment of a global FRAND tribunal or mandatory FRAND arbitration, as others have suggested, though whether such a solution will ever be forthcoming remains to be seen.

Preliminary Injunctions Prior to Grant?

In recent weeks the Kluwer Patent Blog has published two shorts posts on the topic of whether courts may entertain a request for preliminary injunctive relief prior to patent grant.  The first post, by Matthieu Dhenne, is titled A preliminary injunction can be based on a patent application, and discusses a recent decision of the Paris High Court.  The applicant, Novartis AG,  has a pending European Patent application (EP 2 959 894) relating to the treatment of MS using fingolimod hydrochloride.  According to the post (no decision is attached), the "EPO Board of Appeal had ordered the Examining Division to grant the patent on the basis of one of the claims," but the patent has not yet issued.  The post states that the court denied the request  for preliminary relief, but "accepted its admissibility of the basis of the patent application."  The other post, by Anders Valentin, is titled Danish court dismisses application for a PI based on a patent application.  This post discusses a decision (also not attached) of the Danish Maritime and Commercial Court, involving--guess what?--the exact same patent application, on the basis of which Novartis applied for a preliminary injunction in Denmark.  According to this post, the Danish court denied the request, noting that because there is still no formal EPO decision to grant the patent, "it is uncertain that the patent will have effect in Denmark," and also that there is a possibility "the patent could still be amended." 

This is an unusual issue.  As Mr. Dhenne points out, there could be situations in which "urgency" might seem to counsel in favor of hearing such a case, though he also states that a strict reading of the text of the relevant French statute would not permit this; and there could be no opposition proceeding to challenge validity until the patent issues.  For my part, I'm inclined to think that courts shouldn't grant preliminary injunctions in advance of grant, ever, though I wonder if there might be cases in which it would be advisable to consider a preliminary injunction conditioned on subsequent grant.  Temporary stays of permanent injunctive relief, after all, are not uncommon under U.S. law, and are available (in theory, at least) under German law as well (e.g., to enable design-around or sell-off).  Still, I'm not sure this is a good route to go down in the preliminary injunction realm, because of the obvious risks to the defendant--among them, that compensation for being wrongly enjoined may be incomplete after the CJEU's Bayer v. Richter decision (see, e.g., here).

Nichia v. Toshiba: Japan's IP High Court Awards Royalty of 132 Million Yen

This decision came down in November 2020, so I am late in reporting on it, but I only learned about recently from an article by Klaus Hinckelmann in the 6/2022 issue of Mitteilungen der deutschen Patentanwälten titled Aktuelle Entwicklungen auf dem Gebiet des japanischen Patentrechts:  Gestezes- und Praxisänderungen sowie Gerichtsentscheidungen aus den Jahren 2020 and 2021 (pp. 265-74).  I then checked the IP High Court's website and found an English-language translation of the decision, Nichia Corp. v. Toshiba Visual Solutions Corp., Case No. 2017 (Wa) 27238 (Nov. 18, 2020), here.  The damages are awarded under article 102(3) of the Japanese Patent Act.

The claims in suit relate to light-emitting displays (LEDs).  The IP High Court affirms the judgment of the Tokyo District Court that the defendant infringed the claims and that the claims are valid.  On damages, the IP High Court concludes that, on the facts, it was appropriate for the royalty based to be the defendant's end products--liquid crystal display (LCD) televisions--but set the rate at 0.5%, given that the end product incorporates many other features.  More precisely, as to the royalty base, the court writes (here, from the English-language summary of the case):

In addition to the gist and the like in Article 102, paragraph (3) of the Patent Act, in view of the circumstances that [i] the present LED was mounted on the directly under type backlight and used in the first court Defendant 's product, but it should be considered that the directly under type backlight is one of main components mounted inside the first court Defendant's product which is a liquid crystal TV set and cannot be separated easily from the first court Defendant 's product; [ii] performances of the LED largely influence the image quality of the liquid crystal TV, and what LED would be used and how it would be manufactured also influences manufacturing costs; and [iii] the first court Defendant sold the first court Defendant's product as a finished product utilizing the characteristics of the present LED, and in view that the first court Defendant has gained profits from the sales of the first court Defendant's product and the like, it is reasonable to calculate the amount equivalent to the license fee in Article 102, paragraph (3) of the Patent Act on the basis of the sales of the first court Defendant's product (p.ii).

As for the rate, if I'm understanding correctly the court concludes that, based on comparables and the advantages of the plaintiff's product, an appropriate rate for the LED component alone would be fairly high, not less than 10%; but since the LED is just part of the end product, albeit an important one, it concludes that the contribution rate (the rate to be multiplied against the end product base) should be 0.5%, which gives us just under 125 million yen.  

Interestingly, the court affirmatively states, as I understand it, that the royalty rate should reflect the ex post fact that the patent in suit is valid and infringed, and thus should be higher than the normal rate (see pp. 15-16).  The court also award attorneys' fees of 5%, or 12 million yen.  The total award of about 136 million yen equals just about US$ 1 million.   This amount exceeds the amount the plaintiff claimed in the court of first instance--a matter that Dr. Hinckelmann notes with an exclamation point. 

 

Federal Circuit Awards Sanctions for Allegedly Frivolous Appeal

The case is Pop Top Corp. v.  Rakuten Kobo, Inc., a nonprecedential per curiam opinion with a dissent by Judge Newman.  Defendant Kobo moved for sanctions against plaintiff Pop Top under Fed. R. App. P. 38, arguing that the “appeal was frivolous," and "request[ed] attorneys’ fees plus double its costs as damages. Kobo further requests we hold Pop Top and its counsel jointly and severally liable for the sanctions” (p.2).  According to the per curiam opinion, “The sole claim of the patent requires, among other things, an ‘internet document [that] includes code for invoking a highlighting service to operate with the internet document” (id.).  “Pop Top contended that the eBooks Kobo serves via its eReader application are the claimed internet documents because they are ‘highlightable’ and ‘include code,’” but  it did not  ”identify any particular code in the eBooks that allegedly invokes a highlighting service, despite having access to the code in two sample eBooks” (id.).  In response, “Kobo repeatedly explained to Pop Top that all code related to highlighting is in the Kobo App, not in individual eBooks” (id.)  The district court agreed and granted summary judgment of noninfringement, after which the Federal Circuit affirmed without opinion.  Kobo then moved for appellate sanctions.  From the per curiam opinion:

 

“Kobo argues Pop Top’s appeal was frivolous as filed. We agree. The district court determined that Pop Top offered ‘no evidence whatsoever that the eBooks for the Kobo App include "code for invoking a highlighting service," despite being in possession of a complete eBook file.’ . . . Because it ‘utterly fail[ed]’ to identify any evidence that the eBooks  contain code for invoking a highlighting service . . . Pop Top had no reasonable basis to appeal the district court’s summary judgment.

 

“Kobo further argues Pop Top’s appeal was frivolous as argued. Again, we agree. . . .

 

“Rule 38 authorizes us to award single or double costs and “just damages,” which may include attorneys’ fees. . . . Kobo requests attorneys’ fees and double its costs. The total amount requested is $140,964.46, which includes $53,216.19 in attorneys’ fees relating to this motion. We find the latter amount unreasonable. It took Kobo’s counsel 107.6 hours to fully brief and argue the merits of this appeal. Mot. Ex. A ¶ 7. The same counsel then spent about 83 hours briefing Kobo’s sanctions motion. See id. ¶¶ 8-9. Given that the sanctions briefing is only 28 pages long and largely parrots the merits briefing, counsel should have spent considerably less time preparing the sanctions briefing. We find that $20,000 is a more reasonable estimate of the actual cost of the sanctions motion. Accordingly, we award Kobo $107,748.27” (pp. 5-6).

The per curiam opinion closes by finding the plaintiff’s counsel jointly and severally liable, noting that "Pop Top does not oppose joint and several liability in its response to Kobo’s sanctions motion" (p.7).  In dissent, Judge Newman writes that although she “agree[s] that Pop Top did not have a winning case,” “due process and the Federal Rules provide the right of appeal. The United States has continually rejected the ‘loser pays’ philosophy of many countries, for our view of justice under law includes appellate review.  .  . . An adverse decision on appeal of the merits does not  subject the appellant to sanctions because the case was weak” (dissent pp. 1-2).  Judge Newman notes that the plaintiff's appeal from the district court's award of fees is separately pending before the Federal Circuit.

Federal Circuit Affirms Denial of Preliminary Injunction in Phillips v. Thales

The opinion is here.  Thales had sought a preliminary injunction prohibiting Phillips from seeking an exclusion order from the ITC.  The Federal Circuit affirms the order of the District of Delaware (where a FRAND trial is pending) denying a preliminary injunction, stating:

 

“A party seeking a preliminary injunction must establish that it is likely to suffer irreparable harm without an injunction.  .  .  .  The mere possibility or speculation of harm is insufficient.  .  .  .  Evidence of speculative harms, such as customers merely expressing concern that a potential future ITC exclusion order could affect Thales’ ability to deliver products down  the road, is insufficient to show a likelihood of irreparable harm. .  . .

 

“. . . Thales did not present any evidence that it lost customers, had customers delay purchases, or struggled to acquire new business because of the ongoing ITC proceedings. . . . Instead, it presented affidavits stating only that the threat of an ITC exclusion order caused several customers to ‘voice concerns’ and express doubt regarding Thales’ ability to deliver products. . . . And during oral argument, it characterized its alleged harm as living under the ‘cloud on the business’ of a potential exclusion order and the potential loss of business that may occur if it loses at the ITC. . . . This type of speculative harm does not justify the rare and extraordinary relief of a preliminary injunction” (pp. 4-5).

 

Not exactly a big surprise, given that the ITC last week issued its Initial Determination terminating the ITC investigation, as discussed on FOSS Patents, though the Federal Circuit doesn’t mention this.  A reversal on appeal is always a possibility, I suppose, but at this point the alleged harm does seem rather speculative.