New EC Study on IPRED

There already has been a lot going on in the IP world this year, especially in relation to SEPs  in the U.K., Germany, and China; and unfortunately, I am still a bit underwater for a variety of reasons--including the fact I’m teaching one-and-a-half-new courses this semester; the release of my new book Remedies in Intellectual Property Law; and going through edits (and very soon, page proofs) for my other new (forthcoming) book, Wrongful Patent Assertion.  As I work on catching up on the backlog, I thought I should mention the recent publication of the European Commission‘s Follow-up study on the application of the Directive on the Enforcement of Intellectual Property Rights, which I have begun reading.  For now, I will note a few things, mostly from the Executive Summary. and expect to have more to say about some of these issues in the weeks to come.  (As Florian Mueller notes on ip fray, the research that went into the study was concluded in 2024, so there isn’t much there about the UPC.  But what the report does address is, in my view, of substantial interest.) 

As stated in the Executive Summary, the study focuses on “five priority research topics”:  proportionality; PAEs; dynamic blocking injunctions; information sharing and data protection; and costs for the destruction of infringing goods.  Of these, the first two are of greatest relevance to patent law (though all are important to IP law, and my new remedies book provides some measure of discussion of blocking injunctions, the right to information, and the destruction remedy).  One thing that caught my attention is that, according to the study, in patent cases courts in EU member states grant permanent injunctions in 94% of cases, and that “proportionality was explicitly assessed in only 0.6% of these cases.” This is not exactly surprising, but it is interesting to see the statistics.  The study suggests that it might be useful to have some sort of harmonized criteria for determining when proportionality should limit matters such as injunctive relief and destruction orders, and in this regard “concludes that the Commission could issue guidelines defining factors which courts should assess when applying the proportionality principle, such as i) the nature of the plaintiff, ii) the economic harm suffered by the parties, and iii) the public interest.”  The full discussion of proportionality, found in section 3.1 of the report (pp. 27-50), includes some comparative analysis from different member states; discussion of some leading cases; and possible avenues for reform.  As for PAEs, the study states that “their presence in the EU remains relatively limited” compared to the U.S., but also notes that “the data could be showing only the tip of the iceberg as parties may settle disputes outside the courts.”  It also “found that PAEs are highly concentrated in Germany,” and calls for greater transparency “particularly in jurisdictions such as Germany where court decisions are not systematically published.”  The full discussion of PAEs, found in section 3.2 (pp. 50-69), includes, among other things, discussion of why (according to Darts-IP) 90%+ of all PAE activity takes place in the U.S. (among them, no loser-pays rule except in exceptional cases, much higher damages awards, and lack of specialized trial courts), and also suggests that the development of proportionality guidelines could help to forestall (future?) abusive litigation by PAEs within the EU.

Golden on Judicial Policing of Damages Experts

John Golden has published a paper titled Judicial Policing of Patent Damages Experts, 98 Texas Law Review 1307 (2020).  Here is a link, and here is the abstract:

The calculation of patent damages such as a reasonable royalty presents significant challenges for which the use of expert testimony is predictable, if not unavoidably vital. Struggles to employ and at the same time guide and restrain expert testimony on reasonable royalty damages have become prominent in the last two decades, in substantial part because of the rise of patent assertion entities (PAEs) that have intensified stresses on the United States patent system. Patent law’s peculiarly centralized court of appeals, the United States Court of Appeals for the Federal Circuit, has responded to such stresses by limiting the admissibility or cognizable sufficiency of expert evidence on reasonable royalties for patent infringement. Although seemingly more aggressive than the general appellate norm, this appellate-level activity has so far appeared in line with general understandings of the proper judicial role in regulating expert testimony and reliance on it. A strict understanding of the Federal Circuit’s rule of apportionment based on the smallest salable patent-practicing unit (SSPPU) might lead to an undue downward distortion of reasonable royalty awards under certain circumstances, but there currently seems enough flex in the articulation of the rule to accommodate corrective adjustments. Although imperfect, the current approach to regulating expert testimony on patent damages seems to embody at least a plausibly satisfactory form of “muddling through,” approximating the demands for reasoned analysis that courts commonly impose on the work of expert administrative agencies.

Interesting Chinese Case on Patent Damages

Kenneth Zhou has published an article titled Review of the year in Chinese patent litigation, 15 JIPLP 442-49 (2020) (available here, behind a paywall).  The article discusses, among other matters, the 2019 decision of the Supreme People's Court in Wuxi Guowei Ceramics Appliance v. Changshu Linzhi Electric Heating (brief discussion available here, in Chinese, as case number 2 ("二"), "PTC heater" ("PTC加热器").  By way of background, as the author notes in the majority of cases in which the patent owner prevails at trial, the court awards statutory damages, which are capped at 1 million RMB.  (This will go up to 5 million RMB on June 1, but that's still only about U.S. $700,000.)  A problem for patent owners is that it is often difficult to prove their actual damages or the infringer's profits (particularly given limitations on discovery).  In this case, however, the SPC was able to use "revenue information on the infringing products provided by the infringer," which it then multiplied by the plaintiff's profit margin of 15%, and then by another 50% to reflect the contribution of the patented technology to the infringing product (based on both its technical value and the fact that the defendant "had refused to participate in the court proceeding"), for a grand total of RMB 8.6 million (to which the court added an additional amount for other expenses, totaling in full RMB 9.5 million).

Mr. Zhou also discusses the 2019 conviction for extortion of an individual who allegedly filed a series of meritless patent infringement suits for the purpose of coercing settlements.  For previous mention on this blog, see here.   

 

Hat tip to Norman Siebrasse for calling this article to my attention.

Irish NPE Reports Grant of Injunction by Mannheim Court

Solas OLED Ltd., an Irish NPE, reported last week that the Mannheim Landgericht has issued a judgment in its favor, in a patent infringement action (Case No. 7 O 37/19) against LG and Sony.  The press release is available in English here, and in German here.  As far as I can tell, the decision has not been published yet, but I will continue to check back from time to time on dejure.org.  According to the press release, however, Solas filed suit for the infringement of DE 102 54 522 B4 ("Active matrix driving circuit") which originally issued to the University of Stuttgart in 2008; and the court stated, in a 43-page decision, that the plaintiff's status as a patent enforcement entity did not justify denial of an injunction.  Hat tip to Norman Siebrasse for bringing this to my attention. 

More FRAND News

1.  Enrico Bonadio and Luke McDonagh published a post on the Kluwer Patent Blog titled Another CJEU ruling on standard-essential patents and FRAND looks inevitable.  The post discusses, among other things, the German Federal Cartel Office's filing of an amicus brief requesting the Mannheim District Court to refer certain questions relating to SEPs to the Court of Justice for the European Union--among them, whether owners of FRAND-committed SEPs have a duty to license to any entity within the supply chain.  For previous discussion of this issue on this blog, see here, here, here and here.

2.  Also discussing the license-to-all versus access-to-all issue is a post on IPKat titled Academic spotlight (II):  Borghetti, Nikolic and Petit on FRAND licensing levels, which discusses, and takes issue with some of the conclusions, in a paper previously mentioned here.    IPKat also has an interesting post titled Academic spotlight (I):  Sterzi, Rameshkoumar and Van der Pol on NPE Activity, which discusses this recent paper on NPE activity in Europe.

3.  Via the Munich IP Dispute Resolution Forum, Professor Peter Picht hosted expert panels on Sisvel v. Haier (previously discussed here), part 1 featuring Judge Thomas Kühnen, and part 2 three German patent litigators.  Here is the link; the videos are in German. 

4.  On Law360, Bonnie Enslinger published an article titled TCL Seeks To Stay UK Suit In Philips Phone Patent Battle.  The article discusses a hearing earlier this week before the Patents Court for England and Wales, regarding whether the court should stay an upcoming infringement trial between SEP owner Philips and TCL in deference to a pending French action on whether Philips offered TCL a FRAND-compliant license.  

From Around the Blogs, Part 2

1.  On IPKat, Marie Barani published a post titled Sisvel v. Sun Cupid: a Dutch SEP injunction absent any counterclaim.  Apparently the defendant put up no defense, not even sending a lawyer to the hearing.   Ms. Barani concludes "Given the lack of evidence in support of a number of the claims made by Sisvel (and the lack of defence from the defendants), the decision seems quite favourable to the patent-holder: the finding of infringement is based only on the standard implementation, it provides for the notification, recall and destruction of products (subject to certain limits) and gave the patent owner the election as to how to calculate damages."

2.  On IP Watchdog, McCord Rayburn published a post titled Your Licensees' Patent Marking Program Is Also Your Concern.  The post discusses the Federal Circuit's recent decision in Arctic Cat Inc. v. Bombardier, in which the court held that the patent owner could not recover damages for a period of time during which its licensee did not mark the patented articles it was licensed to make.  Mr. Rayburn provides some helpful advice to patent owners, including ensuring that one's licensees are marking products by including such an obligation in the license agreement, and monitoring licensee conduct. 

For my post on the Arctic Cat decision, see here.  For Dennis Crouch's take on the case, in which he argues (citing a law review article by Michael McKeon) that it actually may be inconsistent with a very old Supreme Court decision on marking, see here.

3.  On Sufficient Description, Norman Siebrasse published a post this morning titled The “Would Have” Branch of the Non-Infringing Alternative Analysis.  The post discusses the question of how to determine whether a proposed noninfringing alternative (NIA) should count, for purposes of calculating patent damages.  The Canadian courts follow what might be described as a "could" and "would" approach which focuses both on whether the NIA could have been available and whether the infringer would have resorted to it.  The latter question in turn raises the issue of whether the infringer's non-economic motivations for avoiding the alternative should matter.  Professor Siebrasse argues they should not, and I agree.     

4.  Finally, on the Kluwer Patent Blog, Jonathan Ross published a post titled Mexichem v Honeywell [2020] EWCA Civ 473: Arrow Declarations – How broad can they be?  The post discusses a recent decision of the Court of Appeal for England and Wales affirming the denial of a motion to dismiss an action for  an Arrow declaration.  Specifically, according to the opinion, "Mexichem wishes to be free to market [refrigerants] ze and yf in the UK for use in MACs [mobile air-conditioning systems].  In addition to seeking to revoke the six patents in suit, Mexichem is also concerned that Honeywell has at least four other divisional patent applications in the pipeline undergoing examination in the European Patent Office.  In order to protect itself against the possible impact of the grant of patents in the future on those further applications, Mexichem has sought declaratory relief aimed at establishing that the mere idea of using ze or yf in a MAC was obvious at particular dates." For previous mention of Arrow declarations on this blog, see, e.g., here and here.  One of these days, however, I should devote more sustained attention to this topic, which appears to be quite distinct from declaratory judgments in the U.S.

From Around the Blogs, Part 1

1.  Michael Carrier has published a piece on Bloomberg News titled New Statement on Standard-Essential Patents Relies on Omissions, Strawmen, Generalities.  The article presents a (deservedly) critical take on the recently published USPTO/DOJ/NIST Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments.  For my comments on the policy, see here.

Meanwhile, the DOJ is asking the Ninth Circuit for permission to participate in oral argument, on behalf of Qualcomm, next month when the court hears FTC v. Qualcomm.  (See article on Law360 here.)  Yes, that would mean two agencies of the U.S. government arguing against each other before a federal court of appeals.  I couldn't make this stuff up if I tried.

2.  Léon Dijkman published a post on IPKat titled Hague Court of Appeal Stays Enforcement of Patent Injunction.  The post discusses what the author describes as an "exceptionally rare" decision in which the Hague Court of appeal stayed enforcement of an injunction pending appeal, on the grounds that (1) the district court failed to consider some of the defendant's arguments, (2) the enforcement would cause significant damage to the defendant, and (3) the patent owner might not be able to provide recourse to the defendant if the decision on the merits is overturned on appeal.  Very good post.  The decision (VG Colours B.V. v.  HE Licenties B.V.) is available here (in Dutch).

Also of possible interest to readers of this blog is a recent guest post on IPKat by Bohdan Widła titled Polish Constitutional Tribunal Rules That Rightholders Can Claim Damages Amounting to Twice a Hypothetical Licence Fee in Copyright Infringement Cases.

3.  On Patently-O, Jorge Contreras and Yang Yu published a guest post titled The Uncertain Criminal Status of PAE Litigation in China.  The post discussed a decision of the Shanghai Pudong New Area People's Court finding that two individuals guilty of extortion, where they allegedly falsified and backdated a license agreement to compel a company to settle infringement litigation on the eve of an IPO, but otherwise finding no wrongdoing simply for the assertion of patents against other companies that similarly were preparing for IPOs.  The prosecutor has appealed the latter ruling.

New Papers on IP Remedies

1.  Jane Cornwell has published an article titled Injunctions and Monetary Remedies Compared:  The English Judicial Response to the IP Enforcement Directive, 40 EIPR 490 (2018).  (Sorry I was a bit late in discovering this one!)  Here is the abstract:

This article reviews and compares English case law developments on injunctions (including intermediary injunctions) and monetary remedies under the IP Enforcement Directive. Highlighting the divergent judicial response to the IPED across these different remedies, it argues that the cases on monetary remedies suggest particular concern about the disruptive impact of this aspect of the IPED on the wider private law.

2.  Andrew C. Michaels has posted a paper on ssrn titled Implicit Overruling And Foreign Lost Profits, 25 B.U. J. Sci. & Tech. L. 101 (2019).  Here is a link to the paper, and here is the abstract:

How does one know when the Supreme Court has implicitly overruled a circuit panel precedent? Despite the fact that circuit courts are faced with this question on a regular basis, the answer is not clear. The Power Integrations case currently pending before the Federal Circuit provides an interesting case study in implicit overruling, as well as an opportunity for the court to clarify how extraterritoriality relates to proximate causation in the law of patent damages, in light of the Supreme Court's recent opinion in WesternGeco.

3.  Saul Levmore has posted a paper on ssrn titled Piece Problems: Component Valuation in Marketing and in Patent and Tort Law.  Here is a link, and here is the abstract:

The problems referred to in the title of this chapter concern evaluating a given variable when it is one of several that have combined to bring about a result. In some cases, there is an easy market solution. Imagine that you contract to buy a house and then the beautiful kitchen stove, one of many things that attracted you to the property, is destroyed before you close the transaction or occupy the property. How much should the price now be reduced? Here there is an upper limit based on the cost of a comparable replacement appliance. A more precise valuation would also be easy if identical houses, lacking this one feature, had recently been sold. The stove is just a piece of the larger transaction, and with these convenient facts, there is not much of a “component valuation problem.” Additionally, the stove is unlikely to have been of greater value because of its interaction with other items in the house; colors and sizes are fairly standardized. “Conjoint analysis” – a term that usually refers to survey evidence that tries to elicit the value of a component – is therefore unnecessary, or at least uncomplicated, because value does not depend on an interaction among variables in a way that is not directly observed. It is also interesting because it does not present a difficult Game Theory problem, or result that might be described in common parlance as something that depends on the relative bargaining skill of the parties.

4.  Norman Siebrasse recently published a post on Sufficient Description on an interlocutory appeal T-Rex Property AB v Pattison Outdoor Advertising Limited Partnership 2019 FC 1004, in which the Federal Court states (without deciding) that "the question of whether a non-practicing entity is entitled to elect between damages or profits appears to be a novel legal issue which adds to the proceeding’s complexity" (para. 27).  Professor Siebrasse notes some open questions surrounding the remedy of accounting of defendant's profits under Canadian law, and makes some observations about PAE litigation in Canada. 

Stierle on Non-Practiced Patents

Martin Stierle has published a book titled Das nicht-praktizierte Patent ("The non-practiced patent") (Mohr Siebeck 2018), based on his Ph.D. thesis (for which I understand he was awarded the Faculty Prize of the Law Faculty at Ludwig Maximilian University in Munich).  Here is a link to the book's Amazon webpage, and here is the book description (my translation from the German):

Patent trolls have become an essential part of patent law discussions over the past decade.  Inspired by developments in the U.S., the prevailing scholarly opinion in Germany is critical of the availability of injunctive relief for non-practicing entities, while the German case law on the subject nevertheless continues to afford claims for injunctive relief even to NPEs.  Martin Stierle undertakes a change in perspective.  He frees himself from the perspective of the patent owner and considers the problem from the standpoint of protective rights.  In the center stands the non-practiced in all its facets (blocking patents, licensing patents, sleeping patents, etc.).  With the use of patent function theory, he proposes the adoption of a legal obligation to practice one's patent, which would apply regardless of the type of patent holder.  He underpins his theory with legal history, comparative law, and law & economics considerations.

I haven't started reading it yet, but my library has obtained a copy.

Two New Papers by Koren Wong-Ervin

1.  Koren Wong-Ervin and Georgios Effraimidis have posted a paper on ssrn titled Recommendations Following the FTC’s October 2018 Hearings on IP and Innovation.  Here is a link to the paper, and here is the abstract:

On October 23-24, 2018, the U.S. Federal Trade Commission (FTC) held hearings on intellectual property (IP) and innovation as part of its broader ongoing hearings on Competition and Consumer Protection in the 21st Century. The hearings focused on the role of IP protection in promoting innovation, as well as the foundational question of whether the FTC (and the government more broadly) should play a role in advancing or supporting innovation and, if so, what role. The Commission is seeking further public input through its consultation process on this important (and commendable) inquiry, including asking whether the FTC currently uses its enforcement and policy authority to advance innovation, and what factors it should consider in attempting to achieve this objective. The hearings also included sessions on the role of IP in business and investment decisions, emerging trends in patent quality and litigation, and industry and economic perspectives on current U.S. IP and innovation policy.

This short article summarizes some of the major themes from these hearings and provides an economic and legal analysis of the relevant testimony. We conclude with recommendations for the FTC to consider when evaluating possible future enforcement and policy work in this area. Our recommendations focus primarily on certain concerning positions taken in the Commission’s 2003 and 2011 IP Reports, namely with respect to patent quality and the recommendation that courts adopt an ex-ante incremental value approach when calculating patent damages.

2.  Ms. Wong-Ervin also has posted a paper titled The 2018 FTC Hearings on IP & Innovation: Key Testimony, Economic Learnings, and Recommendations for Further Study.  Here is a link, and here is the abstract:

This Article provides a summary of some of the key testimony from the U.S. Federal Trade Commission’s October 23-24, 2018 hearings on intellectual property (IP) and innovation, followed by insights from the economics literature and recommendations for future study. Covered topics include: the role and importance of IP rights in promoting innovation; the role of IP in business and investment decisions, including data on recent investment trends; and effects of recent patent law reforms, including U.S. Supreme Court decisions restricting patent eligible subject matter (2012 Mayo and 2014 Alice decisions) and weakening patentees’ ability to obtain injunctive relief (2006 eBay decision); the high invalidity rate of patents following the 2011 American Invents Act and its creation of post-grant challenges through the Patent Trial and Appeal Board (PTAB); and the general trend towards lower patent damages awards. Key testimony covered includes remarks by the Commissioner for Patents at the U.S. Patent and Trademark Office, the Acting Chief Judge of the PTAB, investors and other industry participants, and leading academics.  

For video of the aforementioned hearings, at which I was one of the participants, see here. 

Big Numbers in Some Recent Patent Cases

The past few weeks have witnessed at least five multimillion dollar awards or settlements in patent or patent-related matters.  Without going into great depth about any of them, I thought it might be useful just to list them here, with some citations to further commentary.

1.   On July 27, a Delaware jury awarded IBM $82.5 million in a patent infringement case against Groupon.  The four patents in suit are all software/business method patents.  The jury also concluded that Groupon's infringement was willful, so there could be an enhancement yet to come.  For coverage, see articles on Bloomberg, CNET, IPWatchdog, and Law360.

2.  On August 1, a San Diego jury awarded Wilan $145 million in a suit against Apple, for the infringement of two patents related to wireless communications.  For coverage, see articles in Law360, the New York Times, and Reuters.

3.  On August 6, Arista agreed to pay Cisco $400 million to settle certain pending patent, copyright, and antitrust claims between the two firms.  For coverage, see articles in IPWatchdog, Law360,  Reuters, and the Wall Street Journal.

4.  On August 7, a jury in Chicago awarded three firms a total of $315 million in an antitrust action Scientific Games Corp., based on the latter's allegedly having engaged in sham litigation involving automatic card shufflers.  For coverage, see articles in Casino.org, Law360, and Reuters.

5.  On August 9, Qualcomm settled with the Government of Taiwan, in an antitrust dispute involving the licensing of Qualcomm patents in which the Taiwan Fair Trade Commission had previously leveled a $773 million fine.  The government will keep $93 million Qualcomm has already paid, and Qualcomm agreed to certain conditions in exchange, including investment in Taiwan.  For coverage, see articles in Bloomberg, IPWatchdog, and the Wall Street Journal.

Maine Supreme Judicial Court: Claim Alleging Bad Faith Patent Assertion Preempted

The opinion in Puritan Medical Products Co. v. Copan Italia s.P.a is available here.  (Hat tip to Professor Paul Gugliuzza for noting this case on Twitter; his article on the subject, Patent Trolls and Preemption, 101 Va. L. Rev. 1579 (2015), is cited in the opinion.)  As I note in my recent book Patent Wars, "since 2013 over thirty state legislatures have enacted laws forbidding the 'bad faith assertion of patent infringement,'" but "Federal Circuit case law in recent years has required persons asserting more traditional unfair competition claims premised on the wrongful assertion of IP rights" to prove that the claims asserted by the defendant were both objectively and subjectively baseless; and that if this principle is correct "the impact of these state laws would appear to be rather limited."  Now the Maine Supreme Judicial Court has held that the claim asserted in this case was preempted by federal patent law, because the plaintiff did not prove by clear and convincing evidence that the defendant's assertion was objectively baseless.  For his part, Professor Gugliuzza thinks that the Maine court applied the Federal Circuit's case law correcfly, but that that case law itself is dubious.  See Gugliuzza, supra, at 1584 (arguing that “the Federal Circuit's preemption rule is wrong as a matter of doctrine, is misguided as a matter of policy, and ignores important lessons from the history of patent enforcement”).

Also on the topic of patent assertion, the IAM Blog has an interesting story this morning titled Husband and Wife Accused of Patent Troll Activity Face Criminal Extortion Charges in Shanghai.  As the author, Jacob Schindler, notes, "As cases like this come to public attention, it may be that China is headed for a big public debate over the role of NPEs in its patent system.  That could have a huge impact on almost all global tech companies, as well as local patent stakeholders in China."

Love, Richardson, Oliver, and Costa on Brokered Patents

Brian J. Love, Kent Richardson, Erik Oliver, and Michael Costa have published a paper titled An Empirical Look at the “Brokered” Market for Patents, 83 Mo. L. Rev. 359.  Here is the abstract: 

We studied five years of data on patents listed and sold in the quasi-public “brokered” market. Our data covers almost 39,000 assets, an estimated eighty percent of all patents and applications offered for sale by patent brokers between 2012 and 2016. We provide statistics on the size and composition of the brokered market, including the types of buyers and sellers who participate in the market, the types of patents listed and sold on the market, and how market conditions have changed over time. We conclude with an analysis of what our data can tell us about how to accurately value technology, the costs and benefits of patent monetization, and the brokered market’s ability to measure the impact of changes to patent law.

The following observations relevant to damages can be found in the paper's Part V:  Analysis, at p.404:

First, our data strongly suggests that the brokered market for patents is primarily, and perhaps almost exclusively, a market for the transfer of potential legal liability, not a market for the transfer of technology. . . .

One important consequence of this conclusion is that prevailing prices in the brokered market may be of limited use for purposes of calculating damages in patent suits. While courts and commentators alike have called for the increased use of evidence derived from the market for “real world” patent transactions, . . . we are not convinced that data from the brokered market is a panacea for concerns about damages calculations. If we are correct that prices in the brokered market largely reflect buyers’ and sellers’ estimates of the litigation value of available assets, then brokered market data falls prey to the same “circularity” concerns that a long list of commentators has raised against undue reliance on prior license agreements. . . . True technology transfer, it would appear, remains hidden from public view even more so than the brokered market for “bare” patent transactions.

PwC 2018 Patent Litigation Study Is Out

Link here.  This year's study--titled simply 2018 Patent Litigation Study--is authored by Landan Ansell, Ronen Arad, Doug Branch, HyeYun Lee, Adil Pasha, and Paul Robinson, and it reports the following findings, among others, relating to U.S. patent litigation.  The study is based on decisions PwC identified as "final decisions at summary judgment and trial recorded in two Lexis Advance databases, US District Court Cases and Jury Verdicts and Settlements, as well as in corresponding docket entries from LexisNexis CourtLink" (p.18).  "Median damages have been adjusted for inflation to 2017 US dollars" (p.18).

1.  Using an October 1-September 30 year, patent cases filed were at their lowest level since 2011 (at approximately 4,000), while patent grants attained an all-time high of approximately 350,000 (p.2).

2.  The median damages award from 1998-2017 has been $5.9 million.  The median award in 2017 was $10.2 million (compared with $6.1 million in 2016), and $6.0 million for the period 2013-17 (p.5).  (If you're interested in comparing with previous years, see my posts discussing PwC's 2017, 2016, 2015, and 2014 studies.  For my discussion of Lex Machina's 2017 Patent Litigation Year in Review, see here.) The report also states, however, that "[m]edian damages have been trending upward for the last 20 years when summary and default judgments are excluded," with a median of $9.2 million for 2013-17 (p.5).  The median award in jury trials from 2013-17 was $10.2 million, compared with $1.9 in bench trials (undoubtedly some self-selection going on here, though), and among practicing entities reasonable royalties continue to account for the majority of awards (60% reasonable royalties only, 19% lost profits only, and the remained a combination of both, for the years 2008-17) (p.6).  NPEs have achieved higher median damages awards from 2013-17 ($14.8 million, versus $4.2 million for practicing entities) (p.9).  Among NPEs, universities and nonprofits do best, with a median award of $16.6 million from 1998-2017 (compared with $11.8 million for "company" NPEs and $7.1 million for individuals) (p.10).

3.  The overall success rate for practicing entities from 1998-2017 is 37%, and for NPEs 25%.  For cases decided pretrial, practicing entities had a 16% success rate and NPEs a 6% success rate, whereas for cases ending with a trial the rates are similar (66% for practicing and 62% for nonpracticing entities) (p.8). From 2013-17, patent owners fared better with juries than with bench trials (74% versus 52% success rates) (p.7), with NPEs doing substantially worse in bench trials (36% success versus 54% for practicing entities; success rates before juries are comparable, at 72% and 76%, respectively) (p.8).  Among NPEs, universities have the highest overall success rate (47%, compared with 31% for companies and 18% for individuals) (p.10).

4.  The District of Delaware has overtaken the Eastern District of Texas as the leading venue for patent infringement actions (pp. 14-15).

5.  The study reports that "the likelihood of a willful infringement finding increased after Halo v. Pulse"--the Supreme Court's June 13, 2016 decision that makes it somewhat easier for the trier of fact to conclude that the infringement was willful, and therefore potentially deserving of an award of enhanced damages--but that "the average enhancement multiplier declined" from 2.1 to 2.5 times the actual damages (p.17).  The report doesn't specify the time frame it is using, however, though I would guess that if the study's statistics go through the end of September 30, 2017, it's describing cases decided from the date of Halo through that date, and for a comparable period preceding Halo.  In any event, the number of requests hasn't gone up a lot (from 42 to 46), but the percentage finding willfulness has increased from 36% to 54%, which would translate into an increase of 15 to 25 cases.  But again, the average enhancement has actually gone down a bit (p.17).

From Around the Blogs: Damages in Canada and France, Injunctions in the U.K., and More

1.  On Sufficient Description, Norman Siebrasse has published a post titled Compound Interest is Here to Stay.  The post provides a detailed discussion of a recent Federal Court decision, Grenke v. DNOW Canada ULC, which (in addition to awarding compound interest, as per the the title of the post) addresses the calculation of lost profits and reasonable royalties, and denies a request for punitive damages.  Highly recommended. 

2.  On the EPLaw Blog, Pierre Véron has published a post titled FR – Novartis v. Teva / Valsartan – €13,000,000 advance on damages, discussing a recent case in which the Tribunal de grande instance de Paris awarded a preliminary injunction and €13,000,000 as an advance on damages.  M .Véron notes that "[t]his is probably the highest amount ever granted by a French court as an advance payment on damages in a patent infringement case," and provides a copy of the decision (in French) here.  Also on the EPLaw Blog recently, Olivia Henry published a post titled UK – Edwards Lifesciences v. Boston Scientific Scimed, about an English case staying an injunction, which also was recently discussed on IPKat and on this blog here.

3. On the IAM Blog, Timothy Au has published a post titled Fear about massive PAE litigation abuses in Europe is unfounded, new report concludes, discussing a  report authored by Igor Nikolic and published by the 4iP Council titled Are PAEs a Threat to Europe?  The abstract of the report itself reads as follows:

Patent Assertion Entities are often negatively portrayed as harmful “patent trolls” that engage in speculative and abusive patent litigation against manufacturing companies. Although mass PAE litigation has mainly been US phenomenon, a recent study indicated that PAEs are on the rise in Europe and a number of changes to the European patent and litigation system have been recommended. This paper provides a different perspective on PAEs. It will first show that not all PAEs engage in harmful activities and that most are in the legitimate business of patent licensing. Further, Europe has in place different patent and litigation incentives than the US, which effectively guard against any abusive patent litigation. Finally, the available evidence does not in fact show the presence of mass and harmful PAE litigation in Europe.

4.  On Patently-O, Dennis Crouch published a post on Huang v. Huawei, a nonprecential opinion handed down by the Federal Circuit last week affirming a grant of attorneys' fees against a pro se litigant.  This morning, by contrast, the Federal Circuit published a precedential opinion affirming a judgment denying attorneys' fees in Stone Basket Innovations, LLC v. Cook Med. LLC.  The opinion is fairly fact-specific, but basically holds that the district court did not abuse its discretion in denying fees in a case in which the patentee voluntarily dismissed its suit following institution of an IPR, and requested entry of an adverse judgment before the PTAB after the IPR was instituted.

Darts-IP Report on NPE Litigation in the European Union

Many readers of this blog already may have come across darts-ip's February 2018 study "NPE Litigation in the European Union:  Facts and Figures," but if not here's a link; it's an interesting study.  From the executive summary:

This report provides a factual overview of Non-Practicing Entity (NPE) related litigation and patent enforcement activities across the European Union (EU), including opposition actions filed before the European Patent Office (EPO). The findings are based on Dartsip’s database of IP case-law. With information on more than 3 million cases worldwide, this database constitutes the largest IP case-law database in the world. The reported statistics are calculated from the set of all patent-related actions contained in the database which have had their first registered procedural event in an EU court or IP office between the 1st of January 2007 and the 31st of December 2016. The majority of cases are infringement, invalidity and opposition actions.

The overview reveals a marked year-on-year upward trend in the number of actions involving NPEs in the EU, with a dramatic increase in the last five years, primarily concerning Information and Communication Technologies. . . .

The report finds that, in the EU, NPEs prefer litigating in Germany. During the 2007-2017 period, about one in every five infringement actions in Germany was NPE initiated. 

The report states that NPEs' preference for Germany may stem from, among other considerations, the bifurcated nature of Germany infringement litigation, "with injunctions often being granted prior to completion of the invalidity action."  For fairly extension discussion of the report on the IPKat Blog, see here and here, and on the IAM Blog, see here.

On a related note, in February the China IPR Blog reported on a report on an article on NPEs in China authored by King & Wood Mallesons, which report however appears to be in Chinese.  According to these sources, however, NPE activity in China at present appears to be at a minimum, though there are a variety of NPE-type business models operating there.

Some New Papers on Royalties, SEPs

1.  Michael Risch has published a paper titled (Un)Reasonable Royalties, 98 Boston University Law Review 187 (2018).  Here is a link to the paper, and here is the abstract:

Though reasonable royalty damages are ubiquitous in patent litigation, they are only a hundred years old. But in that time they have become deeply misunderstood. This Article returns to the development and origins of reasonable royalties, exploring both why and how courts originally assessed them.

It then turns a harsh eye toward all that we think we know about reasonable royalties. No current belief is safe from criticism, from easy targets such as the twenty-five percent “rule of thumb” to fundamental dogma such as the hypothetical negotiation. In short, this Article concludes that we are doing it wrong, and have been for some time.

This Article is agnostic as to outcome; departure from traditional methods can and has led to both overcompensation and undercompensation. But it challenges those who support departure from historic norms—all while citing cases from the same period—to justify new rules, many of which fail any economic justification.

2.  Tim Simcoe and Mark Lemley have posted a paper on ssrn titled How Essential Are Standard-Essential Patents?  Here is a link, and here is the abstract:

Courts, commentators, and companies have devoted enormous time and energy to the problem of standard-essential patents (SEPs) – patents that cover (or at least are claimed to cover) industry standards. With billions of dollars at stake, there has been a great deal of litigation and even more lobbying and writing about problems such as how if at all standard-setting organizations (SSOs) should limit enforcement of patent rights, whether a promise to license SEPs on fair, reasonable, and non-discriminatory (FRAND) terms is enforceable in court or in arbitration, what a FRAND royalty is, and whether a refusal to comply with a FRAND commitment violates the antitrust laws.

In this study, we explore what happens when SEPs go to court. What we found surprised us. We expected that proving infringement of a SEP would be easy – they are, after all, supposed to be essential – but that the breadth of the patents might make them invalid. In fact, the evidence shows the opposite. SEPs are more likely to be held valid than a matched set of litigated non-SEP patents, but they are significantly less likely to be infringed. Standard-essential patents, then, don’t seem to be all that essential, at least when they make it to court. 

At least part of the explanation for this surprising result comes from another one of our findings: many SEPs asserted in court are asserted by non-practicing entities (NPEs), also known as patent trolls. NPEs do much worse in court, even when they assert SEPs. And the fact that they have acquired a large number of the SEPs enforced in court may bring the overall win rate down significantly.

Our results have interesting implications for the policy debates over both SEPs and NPEs. Standard-essential patents may not be so essential after all, perhaps because companies tend to err on the size of over-disclosing patents that may or may not be essential. The failure of NPEs to win cases even with what seem like they should be a strong set of patents raises interesting questions about the role of NPEs in patent law and the policy efforts to curb patent litigation abuse. 

3.  Dan Spulber has posted a paper on ssrn titled Finding Reasonable Royalty Damages: A Contract Approach to Patent Infringement.  Here's a link, and here's the abstract:

The article introduces a contract approach to patent infringement and develops a methodology for finding reasonable royalty damages. The contract approach complements approaches based on property and tort, thus providing a more complete understanding of damages. The article argues that the patent infringement case should specify an informed contract. The informed contract improves estimation of damages by taking into account information revealed during the period of infringement. The article introduces a market value method for calculating reasonable royalty damages based on patent transfer prices. The contract approach helps calculate reasonable royalty damages based on royalties in comparable patent licenses. The contract approach addresses various controversies over reasonable royalty damages.

JFTC to Host Digital Economy and Competition Policy Symposium

Following on from Sunday's post, the Japan Fair Trade Commission and the Competition Policy Research Center are hosting an event titled "Osaka International Symposium: Digital Economy and Competition Policy–IoT, Data, Platforms and Laws" on Friday, March 30, 2018.  (Hat tip to Professor Jorge Contreras for alerting me to this.)  Here is a link, and here is the symposium description:

While innovation is being created one after another through utilization of big data, development and diffusion of artificial intelligence (AI) and IoT, there is concern that parties with a dominant position, such as having the fundamental technology for doing business, distort competition or impose unfair business conditions. In particular, behaviors of giant platformers, standard essential patents owners and “patent trolls” are attracting a lot of attention.
In this symposium, we discuss, in the course of the progress of digital economy, in what kind of competitive environment companies are placed, and what is the role of the competition law and competition policy, taking into consideration domestic and overseas movements.
1. Date: 30 March, 2018 (Fri) 13:00－17:30
2. Osaka Bar Association Building 2nd Floor Hall (http://www.osakaben.or.jp/11-english/index.php)
3. Agenda
Chair: Director Yosuke Okada, Professor, Hitotsubashi University/Director of CPRC
(1) Opening remarks (13:00 – 13:10)
Mr Masatoshi Ohara, President of Osaka Bar Association (OBA)
(2) Session I: IPRs and Competition Laws in the IoT/AI Era (13:10-14:15)
Session Chair: Fumio Sensui, Professor, Kobe University
Speaker: Jorge L. Contreras, Professor, the University of Utah
Commentators: Kazonori Shibata, KYOCERA Corporation
Noboru Kawahama, Professor, Kyoto University
Liyang Hou, Professor, Shanghai Jiao Tong University
(3) Session II: Data, Platforms and Laws- State of Play and the Way ahead (14:30-17:20)
Session Chair: Prof Thomas K. Cheng, Hong Kong Competition Commission Commissioner /
Associate Professor, University of Hong Kong
Reports from Public Antitrust Enforcers' and Advisors' View - Japan, Germany and the EU -
Speakers: Reiko Aoki, Commissioner, JFTC
Thomas Weck, Monopolies Commission, Germany
Simon Vande Walle, European Commission (DG Competition)
<Comments and Panel Discussion (15:50-17:20)>
Comments from: Noriko Fukuoka, Panasonic IP Management Co., Ltd
Takayuki Hamanaka, Attorney, Habataki Law Office/OBA
(4) Closing remarks (17:20-17:30)
Akira Negishi, Professor, Kobe University
[Host]: Competition Policy Research Center, Japan Fair Trade Commission
[Co-sponsor]: Osaka Bar Association, Kansai Economic Federation, Osaka Chamber of Commerce and Industry,
Japan Electronics and Information Technology Industries Association Kansai Branch, Kobe University*
[Note]: This symposium was supported by JSPS KAKENHI Scientific Research (A)"Rebuilding of a new competition policy for innovation and platform business"
[Application]: Please send your name and organization to CPRC address (cprcsec@jftc.go.jp) by e-mail.
[Fee]: Free
[Language]: Japanese-English Simultaneous interpretation

Papers from the June 2016 Patent Damages Conference at the University of Texas

The Review of Litigation (TROL) has published seven of the papers presented at this conference back in June 2016.  The remaining eight papers (including one of mine) will be published in the Texas Intellectual Property Law Journal (TIPLJ) and should be out soon.  In the meantime, all fifteen papers, published and not-yet-officially-published, are available on TROL's website.  Below is a comprehensive list:

 

Foreword:  Patent Damages: Working With Limits (John M. Golden)

Reliable Problems from Unreliable Patent Damages (Erik Hovenkamp and Jonathan Masur)

 

A Restitution Perspective on Reasonable Royalties (John M. Golden and Karen Sandrik)

Rationalizing FRAND Royalties: Can Interpleader Save the Internet of Things? (Jason Bartlett and Jorge Contreras)

U.S. Patent Extraterritoriality within the International Context (Amy L. Landers)

Patent Assertion Entities, Reasonable Royalties, and a Restitution Perspective (W. Keith Robinson)

Enhanced Damages for Patent Infringement: A Normative Approach (Keith Hylton)

The Federal Circuit Disavows Mandatory Smallest Salable Patent-Practicing Unit "Rule" (Douglas A. Cawley and Lindsay Leavitt)

Patent Damages Heuristics (Thomas Cotter)

Reconceptualizing Patent "Comparables" (Colleen Chien)

Final Report of the Berkeley Center for Law & Technology Patent Damages Workshop (Stuart Graham, Peter Menell, Carl Shapiro, and Tim Simcoe)

Allocating Patent Litigation Risk Across the Supply Chain (Michael Meurer)

Patent Damages Without Borders (Sapna Kumar)

Innovation Factors for Reasonable Royalties (Ted Sichelman)

Buying Monopoly: Antitrust Limits on Damages for Externally Acquired Patents (Erik Hovenkamp and Herbert Hovenkamp)

Gatekeeping Trends in Reasonable Royalty Cases (Andrew Amerson)

Farewell, Eastern District of Texas?

I've been away all day, so I just now got around to reading the U.S. Supreme Court's 8-0 decision this morning in TC Heartland LLC v. Kraft Foods Group Brands LLC.  (Opinion by Justice Thomas.)  Without going into too many of the technical details, the Court overruled Federal Circuit precedent and reinstated the rule, which the Supreme Court had previously announced in 1957, that the appropriate venue for a civil action for patent infringement filed against a domestic U.S. corporation can be either (1) the district corresponding to the state in which the defendant is incorporated, or (2) the district corresponding to the state in which "the defendant has committed acts of infringement and has a regular and established place of business."  Under the Federal Circuit's now-overruled interpretation of the federal venue statute (the meaning of which that court believed Congress had implicitly modified in 1988) a patent suit could be filed in any district in which the court could assert personal jurisdiction over the defendant--essentially meaning that a big company like Samsung could be sued just about anywhere.  Seizing this opportunity, patentees (particularly patent assertion entities) in recent years had taken to filing a disproportionate share of patent infringement suits (over 40% in 2015) in the Eastern District of Texas, which was known for its more plaintiff-friendly procedures, a comparatively high overall success rate for patent owners, and comparatively high median damages awards (though not as high as some districts; see p.22 of PwC's recent Patent Litigation Study).  Prospectively, it seems likely that the holding in TC Heartland will lead to many fewer cases being filed in the U.S. District Court for the Eastern District of Texas, though it remains to be seen how the holding will affect pending cases; whether it will mollify Congress's long-standing concerns over PAE litigation; and whether it will motivate more lawsuits against end users (e.g., retailers who may have "a regular and established place of business" in the Eastern District of Texas).  For some of my thoughts on end user suits, see here.