Wednesday, December 24, 2014
Tuesday, December 23, 2014
Federal Circuit Discusses the Uses of Ex Post Information in Calculating Royalties: Aqua Shield v. Inter Pool Cover Team
Yesterday the Federal Circuit issued an opinion (authored by Judge Taranto) in Aqua Shield v. Inter Pool Cover Team, available here. The patent in suit "claims enclosures designed to cover pools or create sun rooms," and the district court granted summary judgment for the patent owner on infringement of certain claims and validity. The district court then held a bench trial on damages. The court entered a permanent injunction but found that the plaintiff had not proven an entitlement to lost profits (an issue not challenged on appeal). As for reasonable royalties, the district court initially concluded that, although certain of the Georgia-Pacific factors weighed in favor of awarding a "higher" royalty rate, there was insufficient evidence of what the initial rate should be, and therefore awarded zero damages. On a post-trial motion, however, the court revised this particular conclusion. As described by the Federal Circuit (at p.5):
Noting 35 U.S.C. § 284’s “clear” instruction “that the Court ‘shall’ award damages ‘in no event less than a reasonable royalty,’” id. at *5, the court relied on evidence of IPC’s profits on past infringing sales as the foundation for a royalty calculation, id. at *3–5. The court found that IPC’s net profit on infringing sales had been five percent, amounting to $135,000. Id. at *5. Then, “[c]onsidering the benefits [of the patented invention], while still allowing Defendants a profit on infringing sales,” the court stated that, in a hypothetical negotiation occurring before infringement began, IPC would have been willing to pay a royalty of five percent of those net profits, but the court raised that figure to eight percent to reflect the Georgia-Pacific considerations that pointed toward a higher royalty. Id. The result was an award to Aqua Shield of $10,800 in damages.
The district court also concluded, however, that the infringement was not willful and therefore did not award enhanced damages.
On appeal, the court first set out the governing framework for appellate review of patent damages, as follows (pp. 5-6):
The amount of damages awarded to a patentee, when fixed by the district court, is a factual finding reviewed for clear error. SmithKline Diagnostics, Inc. v. Helena Labs. Corp., 926 F.2d 1161, 1164 (Fed. Cir. 1991). But the methodology underlying the district court’s damages computation is reviewed for abuse of discretion. Id. A district court abuses its discretion when it “ma[kes] a clear error of judgment in weighing relevant factors or clearly erroneous factual findings.” Genentech, Inc. v. Novo Nordisk A/S, 108 F.3d 1361, 1364 (Fed. Cir. 1997). In the damages context, therefore, we examine the methodology for consistency with the legal principles defining a reasonable royalty.
Second, the court stated that the hypothetical negotiation (or willing licensor-willing licensee) framework is determined based on what reasonable parties would have agreed to ex ante, and that ex post information is relevant only to the extent it is relevant in reconstructing the parties' ex ante expecations. (As some readers may be aware, Norman Siebrasse and I recently have taken issue with this framework, in this paper, so perhaps we will say something about this case in our next draft. The paper explains our critique of statements like some of the ones that follow below.) Here are the most relevant passages from Judge Taranto's opinion (pp. 6-8):
. . . The “value of what was taken”—the value of the use of the patented technology—measures the royalty. Dowagiac Mfg. Co. v. Minn. Moline Plow Co., 235 U.S. 641, 648 (1915). A traditional heuristic for assessing this market value is to posit a “hypothetical negotiation” between the patentee and adjudicated infringer and to “attempt to ascertain the royalty upon which the parties would have agreed had they successfully negotiated an agreement just before infringement began.” Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir. 2009). The inquiry, besides being hypothetical, involves approximation: “[t]he hypothetical negotiation tries, as best as possible, to recreate the ex ante licensing negotiation scenario and to describe the resulting agreement.” Id. at 1325.
. . . The district court correctly noted that the infringer’s actual profits earned during the period of infringement can be relevant to the inquiry, see Trans-World Mfg. Corp. v. Al Nyman & Sons, Inc., 750 F.2d 1552, 1568 (Fed. Cir. 1984), but it erred in the use it made of IPC’s profit figures. What an infringer’s profits actually turned out to have been during the infringement period may be relevant, but only in an indirect and limited way—as some evidence bearing on a directly relevant inquiry into anticipated profits. Thus, when the infringer is a profit-making enterprise, a “reasonable royalty is the amount that ‘a person, desiring to manufacture[, use, or] sell a patented article, as a business proposition, would be willing to pay as a royalty and yet be able to make[, use, or] sell the patented article, in the market, at a reasonable profit.’” Id. (bracketed changes in original; quoting earlier authority). In hypothetical-negotiation terms, the core economic question is what the infringer, in a hypothetical pre-infringement negotiation under hypothetical conditions, would have anticipated the profit-making potential of use of the patented technology to be, compared to using noninfringing alternatives. If a potential user of the patented technology would expect to earn X profits in the future without using the patented technology, and X + Y profits by using the patented technology, it would seem, as a prima facie matter, economically irrational to pay more than Y as a royalty—paying more would produce a loss compared to forgoing use of the patented technology. See Riles v. Shell Exploration & Prod. Co., 298 F.3d 1302, 1312 (Fed. Cir. 2002) (“The economic relationship between the patented method and non-infringing alternative methods, of necessity, would limit the hypothetical negotiation.”); Dowagiac, 235 U.S. at 648 (it is “permissible to show the value [of using the patented technology] by proving what would have been a reasonable royalty, considering the nature of the invention, its utility and advantages, and the extent of the use involved” (emphasis added)); Suffolk Co. v. Hayden, 70 U.S. (3 Wall.) 315, 319–20 (1865).
. . . Another hypothetical assumption, bearing particularly on the anticipated-profits inquiry, abstracts away from the particular infringer’s degree of efficiency. An especially inefficient infringer—e.g., one operating with needlessly high costs, wasteful practices, or poor management—is not entitled to an especially low royalty rate simply because that is all it can afford to pay without forfeiting or unduly limiting its profit if it uses the patented technology rather than alternatives. Thus, the royalty the particular infringer could profitably pay by going about its business in its particular way does not set the market value that the hypothetical negotiation aims to identify.
Applying these standards here (pp. 10-11):
. . . two points are key. First, anticipated incremental profits under the hypothesized conditions are conceptually central to constraining the royalty negotiation, as recognized in Trans-World Mfg., 750 F.2d at 1568. Second, “[e]vidence of the infringer’s actual profits generally is admissible as probative of his anticipated profits.” Id.; see Interactive Pictures Corp. v. Infinite Pictures, Inc., 274 F.3d 1371, 1385 (Fed. Cir. 2001); see also Sinclair Ref. Co. v. Jenkins Petrol. Process Co., 289 U.S. 689, 698 (1933) (post-infringement evidence can be a relevant “book of wisdom”); Lucent, 580 F.3d at 1333.
Contrary to Aqua Shield’s broader contention, therefore, the district court did not err in considering IPC’s profits. But it did err in treating the profits IPC actually earned during the period of infringement as a royalty cap. That treatment incorrectly replaces the hypothetical inquiry into what the parties would have anticipated, looking forward when negotiating, with a backward looking inquiry into what turned out to have happened. See Interactive Pictures, 274 F.3d at 1385 (expectations govern, not actual results).
The district court’s analysis also incorrectly replaces the inquiry into the parties’ anticipation of what profits would be earned if a royalty (of amounts being negotiated) were to be paid with an inquiry into what profits were earned when IPC was charging prices without accounting for any royalty. Thus, the district court seems to have simply assumed that any royalty paid by IPC would have directly reduced its profits, dollar for dollar. But that would not be true, in general, if IPC could have raised its to account (fully or partly) for a royalty payment. The district court did not find, and IPC has not argued here, that IPC was selling in a perfectly competitive market in which it was forced to act as a pure price-taker. We have not been shown proof that this case is different from the typical one in which pricing might be adjusted to account for a royalty based on sales price. Indeed, IPC has not pointed to any evidence supporting the district court’s conclusion that a royalty should be a percentage of profits rather than sales revenues. . . .
Finally, on the issue of willfulness, the court stated that while the denial of a preliminary injunction is a factor that may weigh against such a finding, it is not necessarily dispositive, particularly where (as here) the denial (by a different district court) was based in part on questions over whether the court could assert personal jurisdiction over the defendant. While cautioning that it was not deciding the willfulness issue itself, the Federal Circuit stated that questions remained whether the defendant had implemented a noninfringing design-around after the summary judgment ruling; and that during the summary judgment proceedings the defendant had not presented a noninfringement defense against some of the claims in suit, and had not presented an element-by-element invalidity argument. The court vacated and remanded for consideration of whether the first and second Seagate prongs were satisfied, and stated that if the district court altered its findings on this issue it also should reconsider the plaintiff's request for attorneys' fees.
Monday, December 22, 2014
I blogged about the district court opinion in this case, which awarded $217 million in trebled lost profits damages, almost a year ago (see here). From my previous post:
The plaintiff and the defendant are the two principal competitors in the market for a medical device, known as an orthopedic pulsed lavaged device, used for cleaning wounds and tissue during surgery. In December 2010, Stryker sued Zimmer for infringing three patents. Two years later, the jury returned a verdict that the patents were valid and willfully infringed, and awarded Stryker $70 million in lost profits. In August 2013, the district court denied Zimmer’s post-verdict motions for judgment as a matter of law or for new trial; concluded that the case was exceptional and merited an award of attorneys’ fees, and that Stryker was entitled to $2,351,257.66 in supplemental (post-verdict) damages and $11,167,670.50 in prejudgment interest as well; and ordered judgment for treble the lost profits and supplemental damages, or about $217 million, not including the interest and fees.
The Federal Circuit's opinion, authored by Judge Prost, came out on Friday (available here). The court affirmed the jury's findings of validity and infringement (pp. 4-16). Moving along to the damages issues, here are the highlights of the court's opinion:
First, as I noted in my January 2014 post, the district court had rejected Zimmer's argument that Stryker did not mark “substantially all” of its products, and therefore was not entitled to recover lost profits damages for the period preceding the date on which Stryker filed suit. The Federal Circuit affirmed, though with a caveat (pp. 16-17 n.5):
Zimmer also appeals the jury’s finding that Stryker’s products were sufficiently marked by the ’383 patent during part of the period for which it sought damages. We need not reach this issue, because we affirm the finding that Zimmer infringed the ’807 and ’329 patents, which is sufficient to support all of Stryker’s award of damages for lost profit. However, we note that the jury was indeed incorrectly instructed that it should consider “whether some portion of the Stryker products not with other related patent notices.” Stryker Corp. v. Zimmer, Inc., No. 10-1223, slip op. at 18 (W.D. Mich. Aug. 7, 2013), ECF No. 537 (“Post-Verdict Order”) (emphasis added). Because of this instruction, the jury could have been misled to consider a product marked with the number of a patent related to the ’383 patent—but not with the ’383 patent number itself—as being sufficiently marked. While the district court appears to have relied on cases that suggest that there is some flexibility in what constitutes sufficient marking, the statute is not so broad as to allow marking with a different patent—with different claims—to provide sufficient notice to the public. Rather, the plain language of the marking statute provides that the patented article be marked with the “number of the patent.” 35 U.S.C § 287(a) (emphasis added).
Second, the court affirmed the lost profits award without further explanation (p.20).
Third, and most significant, was the question of whether Zimmer had willfully infringed and therefore was potentially liable for enhanced damages. Section 284 of the U.S. Patent Act states that "the court may increase the damages up to three times the amount found or assessed" but provides no criteria for determining when such an enhancement is appropriate. Under Federal Circuit case law, however, enhanced damages are available only for “willful” infringement, see Cohesive Techs., Inc. v. Waters Corp., 543 F.3d 1351, 1374 (Fed. Cir. 2008); and in In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007) (en banc), the court held that for infringement to be “willful” it must be both objectively and subjectively reckless. More specifically, Seagate holds that “to establish willful infringement, a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent. . . . If this threshold objective standard is satisfied, the patentee must also demonstrate that this objectively-defined risk (determined by the record developed in the infringement proceeding) was either known or so obvious that it should have been known to the accused infringer.” As noted in my January 2014 post, the district court in Stryker had rejected the argument that "because the Court did not grant Stryker's motions for summary judgment on the issues that went to trial, Zimmer's positions on those issues were, necessarily, reasonable," stating that "[t]he flaw in Zimmer's argument is that there is a difference between an 'objectively reasonable' position and a position with which a reasonable jury could agree. The bare fact that some jury, somewhere might adopt Zimmer's position does not mean Zimmer's position is objectively reasonable." While not adopting Zimmer's argument about the effect of surviving a pretrial motion, the Federal Circuit nevertheless reversed the district court, stating that "[t]he district court failed to undertake an objective assessment of Zimmer’s specific defenses to Stryker’s claims," and that "[a]n objective assessment of the case," which the court then purported to undertake, "shows that Zimmer presented reasonable defenses to all of the asserted claims of Stryker’s patents" (p.18).
Fourth, the court vacated the award of attorneys' fees because the award was based on the district court's determination of willfulness, and remanded for further consideration of that issue (p.20).
* * *
The standard for "willful infringement" continues to present some interesting issues. First, although the fact that the defendant survived a pretrial motion for summary judgment doesn't necessarily mean that the defendant has a sufficiently reasonable defense to withstand a subsequent finding of willful infringement, one might imagine that if (as in Stryker) the defendant survived a dispositive pretrial motion it has a decent chance of succeeding against a subsequent willfulness finding. See also, e.g., Halo Elecs., Inc. v. Pulse Elecs., Inc., 769 F.3d 1371 (Fed. Cir. 2014) (affirming a finding of no willfulness, where "[t]he record shows that although Pulse was ultimately unsuccessful in challenging the validity of the Halo patents, Pulse did raise a substantial question as to the obviousness of the Halo patents."); Spine Solutions, Inc. v. Medtronic Safamor Danek USA, Inc., 620 F.3d 1305, 1319 (Fed. Cir. 2010) (holding that “Medtronic was not objectively reckless in relying on” its nonobviousness defense, even though that defense was unsuccessful, and thus was not a willful infringer, and stating that the “‘objective’ prong of Seagate tends not to be met where an accused infringer relies on a reasonable defense to a charge of infringement”); but see Powell v. Home Depot, Inc., 663 F.3d 1221, 1237 (Fed. Cir. 2011) (affirming a finding of willfulness, notwithstanding the district court’s denial of the plaintiff’s motion for a preliminary injunction, and its rejection of the defendant’s inequitable conduct defense based only on the balance of equities). Second, a question that Stryker does not address is whether the Federal Circuit’s willfulness framework still makes sense in the wake of Octane Fitness, LLC v. Icon Health & Fitness, Inc., 134 S. Ct. 1749 (2014), and Highmark Inc. v. Allcare Health Mgt. Sys., 134 S. Ct. 1744 (2014), the Supreme Court’s opinions earlier this year on awards of attorneys’ fees in “exceptional cases” (see my post, here). As Jason Rantanen has noted (see here) in his post on Judge O'Malley's recent concurring opinion in Halo Electronics, over the years the Federal Circuit has come to link the standards for willfulness and for “exceptional case.” However, now that the “exceptional case” standard has changed, does it still make sense to premise a finding of willful infringement on proof, by clear and convincing evidence and subject to de novo review on appeal, of objective baselessness? Whatever the right answer is, the Federal Circuit isn’t taking up these questions just yet, though it’s clear that at some point it will have to do so.
Friday, December 19, 2014
1. Dmitri Karshtedt has published a paper titled Damages for Indirect Patent Infringement, 91 Wash. U. L. Rev. 911 (2014). Here is a link to the paper, and here is the abstract:
In many patent infringement cases, the only practical way that the plaintiff can obtain relief is on a theory of secondary liability, which is generally referred to as indirect infringement. The remedy in patent cases frequently includes damages for past infringement. Because jury verdicts in patent cases can amount to hundreds of millions of dollars, patent damages have become a hotly litigated issue. Nevertheless, much to the frustration of the litigants in these high-stakes lawsuits, the courts continue to struggle to clarify how damages for indirect infringement should be determined.
The Court of Appeals for the Federal Circuit, which has exclusive appellate jurisdiction over patent cases, has deepened the confusion over calculating damages. Two opinions from the Federal Circuit have made contradictory pronouncements on the issue of accounting for proven acts of primary (i.e., direct) infringement in determining damages for indirect infringement. Lucent Technologies, Inc. v. Gateway, Inc. held that the extent of directly infringing use of the patent should be viewed as one of many pieces of evidence for measuring the extent of damages (“the evidentiary approach”). In contrast, Cardiac Pacemakers, Inc. v. St. Jude Medical, Inc. endorsed a rule that enables trial judges to limit damages as a matter of law to proven, enumerated acts of direct infringement of the asserted patents (“the atomistic approach”).
The conflict between the two approaches raises fundamental, unanswered questions concerning the relationship between patent infringement and ordinary torts. This Article fills a gap in the literature by identifying, and working toward unraveling, one of the puzzles of indirect infringement. Specifically, it examines what the legal fiction of formally imputing an act of one entity to another—an important tenet of secondary liability in tort—means for patent damages. The answer is surprising: the atomistic approach is consistent with the principles of tort law, but is at odds with well-established, general rules for determining patent damages. Conversely, the evidentiary approach seems to ignore tort law’s imputation principle and embodies the pragmatic, patent-specific damages rules that the atomistic approach eschews. This Article resolves the tension in favor of the evidentiary approach and explains that considerations of policy, logic, and precedent support a damages analysis that reflects fundamental differences between patent law and tort law.
2. Daniel Harris Brean has published Will the 'Nexus' Requirement of Apple v. Samsung Preclude Injunctive Relief in the Majority of Patent Cases?: Echoes of the Entire Market Value Rule, 51 San Diego L. Rev. 153 (2014). Here is the abstract; an earlier version of the paper can be found on ssrn.
In eBay Inc. v. MercExchange, L.L.C., the Supreme Court put an end to the practice of presuming that injunctive relief is appropriate upon a finding of patent infringement, where it held that “the decision whether to grant or deny injunctive relief rests within the equitable discretion of the district courts, and that such discretion must be exercised consistent with traditional principles of equity, in patent disputes no less than in other cases governed by such standards.” 547 U.S. 388, 394 (2006). This decision made injunctive relief much more difficult to obtain but also attempted to maintain discretion and avoid rigid rules for determining when injunctive relief is appropriate. Beginning with Apple, Inc. v. Samsung Electronics Co., 678 F.3d. 1314, 1324 (Fed. Cir. 2012), the Federal Circuit has added a “nexus” requirement for determining whether a patent owner has suffered irreparable harm in the form of lost sales—inquiring whether the sales were lost “because of” the infringement or for some other reason. This new hurdle to injunctive relief, which appears to be borrowed from patent infringement damages law, is exceedingly difficult to satisfy where the patented feature or component comprises only a portion of a larger accused product or system. Because most patents are directed to a single component or feature of a larger product or system, such a rule will likely preclude injunctive relief in the vast majority of cases.
Apple adopts concepts and verbiage from precedent concerning the “entire market value rule,” which prevents patentees from collecting damages based on a multicomponent product unless it can be shown that the patented feature drives the consumer demand for the entire product. This standard is virtually indistinguishable from the nexus requirement and can rarely be satisfied in cases where many different factors are likely to influence consumers’ purchasing decisions, such as price, advertising, and brand name recognition, let alone the multitude of technical and design features not covered by a plaintiff’s patent. Importantly, however, failure to satisfy the entire market value rule results in a limitation on damages, but failure to satisfy the nexus requirement results in zero injunctive relief.
Despite several patents being infringed by Apple’s direct competitor Samsung and Apple’s lost sales to Samsung, Apple has thus far been denied preliminary and permanent injunctive relief across the board almost entirely on the basis of lack of nexus. If Apple’s innovative phone and tablet designs and features cannot satisfy this standard, few, if any, individual aspects of a multicomponent product can hope to do so. This result can be viewed as inequitable and is perhaps why a number of post-Apple decisions have found various ways to skirt or even ignore the nexus test and grant injunctive relief. However, the potential to relax the rigidness and potential inequity of the nexus test lies in the third of Apple’s appeals to the Federal Circuit by, for example, (1) recasting the way that nexus considerations are analyzed under eBay by addressing them outside the context of irreparable harm; (2) allowing nexus to be considered in the aggregate where multiple patents are infringed by a single product; and (3) encouraging more flexible injunctions to be entered that enjoin only the infringing features and allow time for those features to be designed around before the injunction goes into effect.
Although the panel decision in Apple’s third appeal has been recently decided, the opinion is inconsistent with the prior Apple appeals concerning the nexus requirement, making the case ripe for en banc consideration by the Federal Circuit to bring uniformity to the law on this exceptionally important and timely issue.
Wednesday, December 17, 2014
On February 6-7, 2015, Bayreuth University will be hosting a conference titled "Intellectual Property and the Public Domain--Results and Perspectives." I will be on a panel with Professor Herbert Zech of the University of Basel on the topic "Intellectual Property and Economics--Can You Have One Without the Other?" I haven't finalized my presentation yet, but I plan to talk a bit on this paper that I presented at the University of Pennsylvania a few years ago, supplemented by some thoughts on whether it is preferable to deal with FRAND/SEP issues (such as the availability of injunctive relief) primarily by means of patent law/patent remedies or competition law or something else--a topic I discuss to some extent in this paper, and have continued to discuss on this blog. Other speakers include leading European and U.S. IP scholars, and I'd be very happy to meet any of my European readers who happen to be in the area.
Here is a link to the conference agenda.
Tuesday, December 16, 2014
Spicy IP has a couple of updates (here and here), and a link to another article, on the Ericsson v. Xiaomi patent dispute that I mentioned here last week. I don't have any further information beyond what I've read in these sources, but apparently Xiaomi will be allowed to sell devices that include chipsets made by Ericsson's licensee Qualcomm, and another hearing is scheduled for January 8.
Monday, December 15, 2014
1. Janusz Ordover and Allan Shampine published a paper titled Implementing the FRAND Commitment in the October 2014 issue of The Antitrust Source, available here. From the introduction:
For many years, standard-setting organizations (SSOs) have required members to commit to license standard-essential patents (SEPs) on Fair, Reasonable and Non-discriminatory (FRAND) terms. How FRAND terms can and should be interpreted has been the subject of extensive debate (as well as litigation in many jurisdictions). While we acknowledge other objectives behind these commitments, we focus here on their role as constraints on the ability of the holders of the SEPs to hold up implementers of such FRAND-encumbered patents, with potential anticompetitive effects.
In this article, we explain why, from a practitioner’s perspective and given the economic goals of FRAND terms, a mere commitment to license on FRAND terms does not ensure that the ex-post negotiations will invariably satisfy the FRAND principles. We then describe when and how we believe FRAND commitments should be enforced to achieve the economic goals of FRAND terms and avoid anticompetitive effects.2. The same issue of The Antitrust Source also features an article by Douglas H. Ginsburg, Taylor M. Owings, and Joshua D. Wright titled Enjoining Injunctions: The Case Against Antitrust Liability for Standard Essential Patent Holders Who Seek Injunctions, available here. From the introduction:
A standard essential patent (SEP) may give the patent holder market power in the market for an input that technology manufacturers need in order to make their products compatible with each other. Several commentators have argued that, when a patent becomes part of a standard pursuant to an agreement among competitors given in exchange for the patent holder’s promise to license the technology under fair, reasonable, and non-discriminatory (FRAND) terms, antitrust law should limit the holder’s right to seek an injunction to stop an infringing manufacturer from selling its standardized product. We disagree for two reasons: First, antitrust sanctions are not necessary, given the law of contracts and of injunctions, to avoid harm to consumers and, second, the application of antitrust law in this situation could, by undermining the ability of courts to tailor appropriate remedies, diminish the incentives for companies to innovate and for industries to adopt standards.3. Elaine Xu has published a student comment titled Brave New Frontier: Antitrust Implications of Standard-Setting Patents in the Smartphone Market, 32 Wisconsin International Law Journal 384 (2014). It doesn't appear to be available yet on the journal's website but can be accessed on Westlaw. From the introduction:
This article discusses two topics. Part I discusses standardization and how antitrust issues can arise as a result of standard essential patents. It introduces the legal framework for antitrust analysis, and gives an overview of important standard setting cases. Comparing how Europe and the United States have ruled on antitrust violations of standard essential patents provides the framework for analyzing whether Samsung committed antitrust violations in its interactions with standard essential patents.
4. Philip Maume has a paper on ssrn titled Compulsory Licensing in Germany, which is a chapter in a forthcoming book titled Compulsory Licensing (Reto Hilty and Kung-Chung Liu eds., MPI Studies on Intellectual Property and Competition Law, Vol. 22, Springer). Here is a link, and here is the abstract:Part II, using the antitrust analysis, defines how Samsung's patented technology and its substitutes form the relevant market. It discusses Samsung's monopoly power and analyses whether Samsung abused its standing by withholding information regarding its patents from the European Telecommunications Standards Institute during the development of the third generation universal mobile telecommunication system standard.
In the last 20 years, German courts have developed a sophisticated approach to compulsory licensing of patents. Compulsory licences under competition law are of particularly high relevance. In short, German competition law obliges the holder of a patent, which is essential in a standard to grant a licence on terms that are fair, reasonable, and non-discriminatory (FRAND). Users of such patents can also raise a so-called competition law defence against imminent injunction orders.
The resonance of the German debate in international scholarly literature has remained relatively low, probably because of the language barrier. Most works merely scratch the surface of the particularly complex issues. This paper provides an in-depth analysis of the German legal background and the consequences in practice. It suggests a streamlined, simplified approach to competition-law-based defences.
5. Gunther Friedl and Christoph Ann have published a paper in the October issue of GRUR titled Entgeltberechnung fur FRAND-Lizenzen an standardessenziellen Patenten ("Calculating FRAND License Fees with respect to Standard Essential Patents"). Here is the abstract (my translation from the German). I haven't read the paper yet and may have more to say about after I have:
If SEP owners are obligated by competition law to license their patents on FRAND terms, questions remain concerning the terms of such licenses. Above all is the question of how to calculate the amount of a FRAND-conforming license fee. Fundamentally, valuation approaches are conceivable that are based on patent usage, but problems present themselves here with respect to complex products such as FRAND-notorious smartphones. A cost-based assessment for FRAND license fees, such as is common in regulated industries, presents itself as suitable. Such an approach, based on the total costs of a patent, is sketched in the present essay. On the one hand, this approach ensures to the patent owner a reasonable rate of return, and on the other preserves the FRAND conformity of the so-determined license fee.
Friday, December 12, 2014
Here is the order granting certiorari in Kimble v. Marvel Enterprises, Inc. The petition for certiorari poses the following question:
Petitioners are individuals who assigned a patent and conveyed other intellectual property rights to Respondent. The court of appeals “reluctantly” held that Respondent, a large business concern, was absolved of its remaining financial obligations to Petitioners because of “a technical detail that both parties regarded as insignificant at the time of the agreement.” App. 2-3; 23. Specifically, because royalty payments under the parties’ contract extended undiminished beyond the expiration date of the assigned patent, Respondent’s obligation to pay was excused under Brulotte v. Thys Co., 379 U.S. 29, 32 (1964), which had held that “a patentee’s use of a royalty agreement that projects beyond the expiration date of the patent is unlawful per se.”
A product of a bygone era, Brulotte is the most widely criticized of this Court’s intellectual property and competition law decisions. Three panels of the courts of appeals (including the panel below), the Justice Department, the Federal Trade Commission, and virtually every treatise and article in the field have called on this Court to reconsider Brulotte, and to replace its rigid per se prohibition on postexpiration patent royalties with a contextualized rule of reason analysis.
The question presented is: Whether this Court should overrule Brulotte v. Thys Co., 379 U.S. 29 (1964).
I don't want to appear overconfident about the outcome, since only four votes are required to grant cert; but I think it is reasonable to assume that the Court wouldn't have done so (against the wishes of the Solicitor General, no less) unless there was a very good chance of reversal. As I've noted before (here and here), economic analysis suggests that Brulotte v. Thys was wrongly decided. It looks to me like Brulotte's days are now numbered.