From Around the Blogs

1. Enrico Bonadio, Jorge Tinoco, and Daniel Leopoldino have published a post on the Kluwer Patent Blog titled SEPs Injunctions with a Tropical Flavour: the Brazilian Scenario.  The post discusses several FRAND cases in which Brazilian courts have granted preliminary and, in one case, permanent injunctive relief.  The authors note one recent case, however—DivX v Gorenje—in which the court denied a preliminary injunction, subject to the defendant posting a bond, which they state “ might represent a turn in the national SEPs case law, which would place Brazil more in line with other jurisdictions such as the EU where FRAND commitments are taken seriously . . . .”

2. Graham Burnett-Hall has published a post on EPLaw titled UK – Panasonic v. Xiaomi – Appeal / FRAND, discussing the recent decision of the EWCA holding, as the author states, “that, once the parties to a FRAND dispute have agreed that the UK court should determine the fair, reasonable and non-discriminatory (FRAND) terms for a global licence for the relevant standard essential patents (SEPs), it is not consistent with the patentee’s FRAND obligations for the patentee to pursue separate proceedings and seek injunctions against the same implementer in other jurisdictions,” and that instead the patentee should be an interim license that may be adjusted later on.  I also blogged about this decision recently, here.

3. On ip fray, Florian Mueller published a post titled UPC’s Dusseldorf LD enjoins resale of smartphones for elderly over LED patent, addresses some interesting legal questions, discussing a recent decision (Seoul Viosys v. expert e-Commerce GmbH & expert klein GmbH) granting an injunction, notwithstanding the fact that the patent in suit forms a relatively minor component of the end product (see para. I(G) of the decision). 

4.  I mentioned a few weeks ago that OxFirst would be presenting a free webinar on the European Commission’s amicus brief, filed with the Munich Higher Regional Court, in HMD Global Oy v. VoiceAge EVS GmbH & Co.  The recording of the webinar is now available here.  I should note that I will be participating in a webinar on this topic, along with inter alia my coeditors Peter Picht and Erik Habich, sometime in November; more details to follow.

5.  On Patently-O, Dennis Crouch published a post titled The Historical Roots of Patent Injunctions: Revisiting Horton v. Maltby (1783).  Very interesting post, thought I remain unconvinced that U.S. courts are legally obligated to consider ongoing infringement inherently to constitute irreparable harm, given the courts’ contemporary ability to award damages, including postjudgment damages for ongoing infringement.

Some Recent Papers on Royalties

1. William F. Lee and Mark A. Lemley have published The Broken Balance:  How Built-In Apportionment and the Failure to Apply Daubert Have Distorted Patent Infringement Damages, 37 Harv. J.L. & Tech. 255 (2024).  Here is a link, and here is the abstract:

The United States patent system is designed to be a balance: in exchange for the inventor disclosing their invention to the public, patentees are granted exclusive rights to that invention for a period of time. This ensures that patentees are adequately compensated for their innovation and society at large benefits from the patent’s disclosure. This balance is now broken. Over recent years, patentees — particularly non-practicing entities — have been permitted to seek and recover unreasonable damages that stretch far beyond the value of the technology they invented. This has had serious and negative consequences: excessive patent damages discourage innovation, increase risk and cost of production, and, in turn, increase the cost of products to consumers.

 

Patent law has a solution to this broken balance: apportionment. This principle, which dates back to the nineteenth century, holds that damages must be limited to the value of just the patented invention and cannot capture the value of other features or technology. When applied as intended, apportionment ensures the patent balance — patentees recover the value of what they invented but no more. But therein lies the problem: in recent years, many courts have been backsliding from the principle of apportionment. First, some courts have permitted plaintiffs to rely on “built-in apportionment” to bypass apportionment entirely. Second, some courts have failed to properly apply Daubert and Federal Rule of Evidence 702 to exclude unreliable apportionment theories, particularly where experts purport to use regressions or conjoint survey analysis.

 

The Federal Circuit and district courts should take action to correct the skewed balance caused by improper application of apportionment law. The Federal Circuit should end the “built-in apportionment” exception to apportionment and district courts should do the hard work at the Daubert stage of ensuring that apportionment is effective and reliable. Inventors, businesses, and the balance upon which the patent system was built depend on it.

I previously read the paper in draft, and noted it on this blog here.

2. Maria Teresa Bartalena has published an article titled Reasonable Royalty Damages Across Different Countries and Through a Law and Economics Lens, 2 J. Law, Market & Innovation 59 (2023).  Here is a link to the paper, and here is the abstract:  

In most legal systems, a reasonable royalty represents the minimum compensation for patent infringement litigation, and it is undoubtedly the most used among the remedies at the courts’ disposal. Therefore, its calculation is crucial in the intellectual property field and, more specifically, within the function of liability in this context to incentivise investments in R&D and promote innovation.

 

Nonetheless, some differences can be found between the methods used to calculate reasonable royalty awards in two largely developed countries, ie in the U.S., where judges are deemed to consider only the parties’ ex ante information and in Germany, where ex post considerations are involved in calculation.  This article intends to analyse how these different approaches can affect investments in the field of technology and innovation. In this process, German and U.S. case law will be primarily investigated, but some references will also be taken from Chinese experience, a legal system for some aspects similar to civil law ones and in which patent infringement disputes are solved by specialised judges, such as in Germany, whose set of remedies, nonetheless, has been recently modified to include a measure that resembles much the treble or punitive damages of the U.S. Code.

3.  John Turner has posted a paper on ssrn titled Welfare-Optimal Rewards and Royalties for a Full Stack of Standard-Essential Patents.  Here is a link, and here is the abstract:

This paper studies the problem of determining the optimal size and structure of royalties for a full stack of standard-essential patents (SEPs). Conditioning on a full stack sidesteps many complicated and contested issues that typically arise when determining fair, reasonable and non-discriminatory (FRAND) royalties for SEPs. This focuses attention on an important question-what should be the total cost of licensing SEPs for a particular standard to incentivize both standard development and adoption? To study this problem, I adapt a workhorse general equilibrium model to capture the behavior of firms that invent and implement new technology standards, and derive the welfare-optimizing level and structure of royalty-based rewards for the full stack. This model shows that a new standard can emerge and yield higher welfare as long as the reward satisfies two "guardrail" conditions. As a fraction of income spent on standard-compliant goods, the reward: (1) must exceed the unrecovered invention cost margin; and (2) must be less than the welfare contribution margin of the standardized technology. If the first condition does not hold, invention of standardized technology is unprofitable; if the second does not hold, product variety and/or output per variety is so low that welfare would not improve. Multiple reward structures can optimize economic welfare. With an optimal reward structure, a one-percentage-point increase in reward size decreases product variety by one percentage point.

Supreme People's Court Summaries of "96 Typical Cases" from 2023

2024 Issue No. 3 of the magazine China Patents & Trademarks has published, in the original and in translation, an article titled Judgment Essentials (2023) Released by the IP Court of the Supreme People’s Court (I) (English version at pp. 91-99).  According to the article, the IP Court of the Supreme People’s Court has “selected 96 typical cases from 4,562 cases concluded in 2023, and summarized 104 rules therefrom.”  The article, which is part 1 of a two-part series, lists 58 of these (all the patent cases), including a few relating to remedies and also to wrongful patent assertion.   You can also access the entire list, which also includes summaries of cases on plant varieties, trade secrets, and some other matters in a different translation by Aaron Wininger on the Schwegman firm's website here.  

The case summaries of most relevance to this blog are:

Case 40, Zuigaofazhiminzhong 1584/2022, in which the court held that, for purposes of calculating damages, where the patented article is not on public sale, “the products that are related to the implementation of the patented technical solution and mostly associated with the acquisition of market benefits can be taken as a reference for calculating damages on a case-by-case basis.”

Case 41, Zuigaofazhiminzhong 2480/2021, in which the court held that an infringer’s dishonest actions, including making false statements during litigation, “can be taken into account . . . in the determination of reasonable expenses for safeguarding the rights of the right holder.”

Cases 42, 49, 50, and 51, Zuigaofazhiminzhong 235/2023, 1353/2021, 2586/2022, and 1861/2022, all address one form or another of wrongful assertion, including abuse of IP rights and malicious IP litigation.  The former proceeds from the principle that IP rights must be “enforced under the principle of good faith and . . . not harm others’ legitimate rights and interests.”  This sounds similar, to me, to the abuse of rights doctrine that one encounters in other civil law jurisdictions, and is a topic I will be taking up in chapter 6 of my forthcoming book on wrongful assertion.  The case references the “Reply of the Supreme People’s Court on the Issues Concerning the Claim of the Defendant for Compensation for Reasonable Expenses in Intellectual Property Infringement Litigation on the Grounds of Plaintiff’s Abuse of Rights,” which I shall endeavor to obtain a copy of.  The other three cases address situations in which the patentee knows that the suit has no legal or factual basis, or induces others to infringe so that it can then affect their operations, or knows the patent has terminated.   

Case 43, Zuigaofazhiminzhong 1744/2022, addresses how a court should proceed in a suit for a declaration of non-infringement, where the patentee’s “warning notice does not specify a particular product.” 

It appears there is some overlap between the cases listed above and another list of "41 legal application issues from the intellectual property cases concluded by the Supreme People's Court in 2023," provided by Mr. Wininger on China IP Law Update a few months ago.  This one includes some cases on trademarks and trade secrets as well, including one each on damages issues.

EWCA: Xiaomi Entitled to Interim FRAND License to Panasonic SEPs

This morning the Court of Appeal for England and Wales released its decision in Panasonic Holdings Corp. v. Xiaomi Technology UK Limited, [2024] EWCA Civ 1143, principal opinion by Lord Justice Arnold.  The appeal is from orders entered in the Patents Court in July, dismissing Xiaomi’s application for a declaration that a willing licensor in the position of Panasonic “would agree to, and would enter into, an interim license of” Panasonic’s portfolio of 3G and 4G SEPs, “pending the determination by the Patents Court of what terms for a final license” are FRAND.  The parties had agreed to an undertaking in November 2023 that they would abide the terms of a global FRAND license as determined by the Patents Court.  Panasonic then backed away from this agreement (para. 39), and at present has several hearings in patent infringement actions against Xiaomi scheduled to take place in Germany, beginning next week.  Meanwhile, the FRAND trial in the Patents Court also is scheduled to take place starting later this month, with a decision projected for the end of the year.  Xiaomi therefore applied to the Patents Court for a declaration that, under the circumstances, a willing licensor would agree to an interim license pending the Patents Court’s determination of a final license.  The Patents Court denied the application, but the EWCA grants the appeal.

Without going into great detail for now, I’ll note simply that the EWCA’s view is that Panasonic is not acting in good faith, as required by clause 6.1 of the ETSI IPR Policy, because the only point of proceeding with the German litigation and refusing an interim license (other than on terms which would greatly favor Panasonic, see paras. 59-60, 85) can only be seen as a means to negotiate a better deal than the one the Patents Court is likely to strike if the case proceeds to final judgment there.  See, e.g., para. 82: “Panasonic seeks to achieve better terms than those determined by the Patents Court.  Put bluntly, Panasonic wishes to use the exclusionary power of injunctions granted by the German courts and/or the UPC to try to force Xiaomi to pay more than the English courts would order.”  Further, Lord Justice Arnold writes, “In my judgment Panasonic’s conduct is indefensible. . .  Panasonic is not complying with its obligation to negotiate a licence with Xiaomi in good faith, and thereby avoid hold-up, but aiming to coerce Xiaomi into accepting terms more favourable to Panasonic than the Patents Court would determine to be FRAND. . . .  [T]he key point is that it is plain that Panasonic is attempting to coerce Xiaomi into paying more than the Patents Court determines to be FRAND, despite Panasonic having both invoked that jurisdiction and both parties having undertaken to enter a licence on those terms” (paras. 86, 87).   The Court takes pain to note that it is not criticizing the German approach to FRAND, and is not advising the German courts how to proceed—though “if the declarations do induce Panasonic to reconsider its position and to grant Xiaomi an interim licence, that would, as Xiaomi submit, promote comity because it would relieve the German courts and the IPC of a great deal of burdensome and wasteful litigation” (para. 96). Lord Justice Arnold writes that, in his view, the terms of the interim licence should be as follows:

It is probable, although not certain, that the terms determined by the Patents Court to be FRAND for the final licence will be somewhere between the terms offered by Xiaomi and those demanded by Panasonic. Accordingly, in my judgment the terms on which a willing licensor in the position of Panasonic would grant an interim licence to Xiaomi are those proposed by Panasonic for the final licence with two modifications. First, the period of the interim licence should be from 2011 until the licence determined by the Patents Court takes effect (rather than until 2029). For the convenience of calculating the royalty payable, it may be assumed that the latter date will be 31 December 2024. Secondly, the sum payable by way of royalty in respect of that period should be midway between (i) the sum offered by Xiaomi for that period and (ii) the proportion of the sum demanded by Panasonic on 13 September 2024 that is referrable, on a pro rata basis, to the period of the interim licence. This sum (and the accompanying licence terms) will be subject to adjustment up or down when the Patents Court determines the terms of the final licence (para. 100).

Lord Justice Moylan concurs.  Lord Justice Phillips would dismiss the appeal, and instead writes that this case is one in which an antisuit injunction (ASI), on the ground of vexatious and oppressive conduct on the part of Panasonic, might be appropriate.  

For further discussion, see this post by Florian Mueller on ip fray.