Thursday, November 13, 2014

New Papers and Other News on Reasonable Royalties, FRAND Royalties

1.  The Journal of Intellectual Property Law & Practice (JIPLP) has two articles relating to patent royalties this month (volume 9, issue 11, November 2014), both available here.  First, Jeremy Phillips has a short editorial titled The Typical License Royalty Rate:  A Sea of Change.  Second, Tilman Müller and Volkmar Henke have a paper titled Patent enforcement as a violation of antitrust law: EU Commission decisions in Samsung and Motorola, which previously appeared at pages 662-65 of the July 2014 issue of the German publication GRUR Int. under the title  Patentdurchsetzung als Kartellrechtsvertoß.  Die Entscheidungen der EU-Kommission in Sachen Samsung und Motorola, and which I blogged about this past July here.

2. The Essential Patent Blog noted recently that the European Commission is seeking public comments on patents and standards through January 31, 2015.  Here is a link to the Commission's webpage, from which readers may download and answer questions relating to eight key issues-- among them "What principles and methods do you find useful in order to apply [the terms "fair," "reasonable," and "non-discriminatory"] in practice?", and "How can it be ensured that injunctions based on standard essential patents are not used to (a) either exclude companies from implementing a standard or (b) to extract unreasonable, unfair or discriminatory royalties?"

3.  On September 10, 2014, U.S. Federal Trade Commission Chair Edith Ramirez delivered a speech titled Standard Essential Patents and Licensing:  An Antitrust Enforcement Perspective.  The speech briefly discusses the FTC's 2013 action relating to Google's acquisition of Motorola Mobility, the European Commission's investigations of Samsung and Motorola Mobility, and the FTC's recommendation in its 2011 report The Evolving IP Marketplace: Aligning Patent Notice and Remedies with Competition that FRAND royalties be calculated on the basis of a hypothetical negotiation occurring "before the licensee has made significant investments to implement a technology" and reflecting the incremental value of the technology in comparison with alternatives.  More interesting, however, are some rather blunt statements about China:

In contrast to the FTC’s and EC’s approach, media reports indicate that China’s antitrust authorities may be willing to impose liability based solely on the royalty terms that a patent owner demands for a license to its FRAND-encumbered SEPs, as well as royalty demands for licenses for other patents that may not be subject to a voluntary FRAND commitment.

I am seriously concerned by these reports, which suggest an enforcement policy focused on reducing royalty payments for local implementers as a matter of industrial policy, rather than protecting competition and long-run consumer welfare.

The following week, FTC Commissioner Maureen Ohlhausen echoed these concerns about China in her speech titled Antitrust Enforcement in China-What Next?-Second Annual GCR Live Conference, and suggested that China was taking inspiration from the FTC's decision (from which she dissented) in Google/Motorola Mobility

4.  William Rooklidge has published an interesting paper titled Infringer's Profits Redux:  The Analytical Method of Determining Patent Infringement Reasonable Royalty Damages, in Bloomberg BNA Patent, Trademark & Copyright Law Daily (Nov. 5, 2014), available here behind a paywall.  As stated in Lucent Technologies, Inc. v. Gateway, Inc., 580 F.3d 1301, 1325 (Fed. Cir. 2009), as an alternative to the hypothetical negotiation or willing licensor/willing licensee framework for estimating reasonable royalties, U.S. courts sometimes employ an "analytic" approach that “focuses on the infringer's projections of profit for the infringing product.”  Mr. Rooklidge argues that, in practice, courts that use this method do not properly take into account what portion of the anticipated profits are attributable to the patent, and do not consider the expected profits as merely a cap on the prospective royalty.  Worse yet, in Mr. Rooklidge's analysis, courts sometimes use the infringer's actual profits as a proxy for its anticipated profits and thus effectively restore the remedy of an accounting of infringer's profits, which (though common in many parts of the world, and still available for design patent and other IP infringement in the U.S.) was eliminated from U.S. utility patent law in 1946.   

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