Some European Scholarship on Huawei v. ZTE, Part 2

This blog post is a continuation of the post from Monday, January 18 (see here).  Some more papers on the CJEU's judgment in Huawei v. ZTE:

1. Jérôme Passa has published a paper titled Action en contrefaçon concomitante à la négociation d’une licence FRAND sur un brevet essential à une norme:  conditions de l’abus de position dominante, in the November 2015 issue of Propriété Industrielle.  Here is the abstract (my translation from the French):

Commentary on the Huawei judgment by which the Court of Justice, ruling on the interpretation of article 102 of the TFEU, sets forth the conditions under which the owner of a standard-essential patent , who has committed to grant FRAND licenses to interested third parties, commits an abuse of dominant position in asserting an action for injunctive relief, and thus a pressure, during the course of negotiations for such a license or subsequent to their failure 

This issue of Propriété Industrielle also includes, as part of a multiauthored article on recent decisions of the CJEU on industrial property, a shorter write-up on Huawei by Caroline Rodà.
 
2.  Peter Picht has posted a paper on ssrn titled The ECJ Ruling on Standard-Essential Patents:  Thoughts and Issues Post-Huawei.  Here is a link to the paper, and here is the abstract:

The beneficial effects of standardization can be jeopardized by unwanted conduct of its participants, for instance where a SEP holder engages in hold-up or a standard implementer in hold-out. In its Huawei decision the ECJ attempts to resolve such situations by defining rules of conduct for FRAND disputes. Although promising, the decision evokes new questions and has left many issues unsolved. Among those highlighted in the article are the roles of contract and competition law in relation to the concepts of “good faith and recognized commercial practice”, the ECJ’s excessive reliance on FRAND commitments, the procedural and substantive aspects of FRAND determination and FRAND-compliant conduct, the exact consequences of FRAND violations, and the potential future role of SSOs.

3.  Miguel Rato and Mark English had published a paper titled An Assessment of Injunctions, Patents, and Standards Following the Court of Justice's Huawei/ZTE Ruling, in the Journal of European Competition Law & Practice.  Here is a link to the paper, and here is the abstract:

In its Huawei/ZTE ruling, the Court of Justice of the EU establishes the legal standard for a fair, reasonable, and non-discriminatory (FRAND) defence in EU competition law as a basis for resisting injunction requests in respect of alleged infringement of a standard essential patent. In our opinion, the Court promotes, in that ruling, a formalistic and stylised test, largely divorced from the reality of licensing negotiations. It diverges from the test proposed by the Commission in its 2014 Motorola and Samsung decisions and imposes on the implementer/infringer more obligations than had been proposed by the Commission.

Vringo v. ZTE: Romanian FRAND/SEP Case

Some of my readers may already be aware of this case, but I wasn't until I saw a reference to it in an article earlier today.  According to this press release in October 2015 (that is, a few months after the CJEU's decision in Huawei v. ZTE) a Romanian appellate court affirmed the entry of a preliminary injunction in favor of Vringo and against ZTE for the alleged unauthorized use of a FRAND-committed SEP.  If anyone has a copy of the judgment, please send it my way.  I don't read Romanian, but with Google Translate and a knowledge (of varying quality) of some Romance languages, I might be able to at least get the sense of it.

More Amicus Briefs in Halo and Stryker

The Scotus Blog now has links to eight of the nine amicus briefs filed in the Halo/Stryker cases on January 20.  All eight of these briefs are in support of the respondents.  (In case you're joining this discussion late, Halo and Stryker are companion cases in which the U.S. Supreme Court is being asked to articulate the correct standard for awarding enhanced damages for patent infringement under 35 U.S.C. section 284.  For my previous blog posts on the case, and links to the merits and amicus briefs filed in December, see here, here, here, here, here, here, and here.)

Aside from the brief filed by Yahoo and Arthrex (which I had access to and mentioned last week here), and the one that isn't available yet online (filed by EMC Corporation), the newly filed amicus briefs are:

Brief amicus curiae of BSA I The Software Alliance as amici curiae in support of respondents. 

Brief for Intel Corp., Hewlett Packard Enterprise Co., and Medtronic PLC as amici curiae supporting respondents.

Brief of amicus curiae Marvell Semiconductor, Inc. in support of respondents.

Brief of amicus curiae Huawei Technologies Co., Ltd. in support of respondents.

Brief of Dell, Applied Materials, BJ's Wholesale Club, Inc., CCIA, CTIA, Facebook, Global Automakers, HP, HTC, The Internet Association, JCPenney, Limelight Networks, MGA Entertainment, Micron, National Retail Federation, QVC, Rackspace, Red Hat, Samsung Electronics, Sandisk, SAS, Varian Medical Systems, Vizio, and Xerox as Amici Curiae in support of respondents.

Brief of Certain Members of Congress as amici curiae in support of respondents.

Brief for amici curiae Google Inc., Cisco Systems, Inc., Verizon Communications Inc., and salesforce.com, inc. in support of respondents.

From a quick look, it appears that for the most part these briefs argue that willfulness is the correct standard for enhanced damages, and that the Supreme Court should retain Seagate.  The brief filed by the members of Congress argues that "In passing the AIA, Congress Understood the Seagate Standard Would Continue to Govern the Assessment of Enhanced Damages Under 35 U.S.C. § 284," that "The Legislative History of Congress’s Patent-Law Reform Efforts Confirms that Congress Was Well Aware of Seagate," and that "Congress Did Not Amend Section 284’s Enhancement Provision in the AIA Knowing that Seagate Would Remain in Place."  The signers are United States Senators Patrick Leahy (D-VT), Orrin Hatch (R-UT), and Michael Bennett (D-CO), and United States Representatives Lamar S. Smith (R-TX), Robert W. Goodlatte (R-VA), and Steven J. Chabot (R-OH).  The brief filed by Marvell references the litigation filed by Carnegie Mellon against Marvell (see previous discussion on this blog, here) to argue that "an objective test—reviewed de novo by the Federal Circuit—is necessary to ensure that patent holders do not receive windfalls at the expense of the public interest."  The brief filed by Intel et al. would modify Seagate slightly, to the extent of permitting an inference of willfulness based on "subjective proof that an accused infringer deliberately copied a patented product and affirmatively believed that it was infringing the patent," even if it turned out later that it had a "viable defense."  Some of them also address the standard of review issue.

Liege Competition and Innovation Institute Conference on Patent Holdup

The Liege Competition and Innovation Institute (LCII) is holding a half-day conference titled "Regulation 'Patent Holdup'?  An Assessment in Light of Recent Academic, Policy and Legal Evolutions" on February 29, 2016 in Brussels (link here).  Here is the conference abstract:

The patent hold-up theory has nurtured many policy developments in the past ten years. On the one hand, Standard Setting Organizations (SSOs) have been exploring changes to their licensing policies, in particular in relation to the commercial implications of FRAND pledges given by holder of Standard Essential Patents (“SEPs”). On the other hand, antitrust agencies and patent courts across the globe have been confronted with several waves of cases. Those proceedings have generated a thick, diverse and somewhat inconsistent body of caselaw on a wide array of topics, including the availability of injunctive relief, patent valuation, portfolio licensing, practicing and non-practicing entities, etc. This conference seeks to provide a 360° state of play on patent hold-up in contemporary antitrust and patent policy.

Here is the conference schedule--looks like a very interesting mix of speakers.

12.45               REGISTRATION

13.10               INTRODUCTION OF THE CONFERENCE

Melchior WATHELET, Advocate General, Court of Justice of the EU

13.20 – 13.40 KEYNOTE SPEECH

Ian FORRESTER, Judge, General Court of the EU

13.40 – 15.00 SESSION I: ACADEMIC PANEL

PATENT HOLD-UP: THEORY AND EVIDENCE

Chairman: Axel GAUTIER, Professor, LCII, University of Liege

Stephen HABER, Professor, Hoover Institution, Stanford University

Pierre LAROUCHE, Professor, TILEC, University of Tilburg

Greg LANGUS, Senior Vice President, Compass Lexecon

Jorge CONTRERAS, Professor, University of Utah

15.00 – 16.20 SESSION II: IP IN STANDARD SETTING

THE VIEWS FROM POLICY MAKERS AND STAKEHOLDERS

Chairman: Gunnar WOLF, DG COMP, European Commission

Serge RAES, ETSI IPR Special Committee Vice-Chair, ITU IPR Ad

Hoc Group Chair, Rapporteur on Patent Issues, Orange

Alex ROGERS, SVP & Deputy General Counsel, Qualcomm

Yann MENIERE, Professor, Mines ParisTech

Scott KIEFF, Commissioner, US International Trade Commission

Jean BERGEVIN, Head of Unit, DG GROW [TBC]

16.20 – 16.40 COFFEE BREAK

16.40 – 18.00 SESSION III: LEGAL PANEL

TRENDS IN ANTITRUST AND IP LAW

Chairman: Peter TOCHTERMANN, Judge, Mannheim District Court

Renata HESSE, DAAG, US Department of Justice

Jorge PADILLA, Senior Managing Director, Compass Lexecon

Miguel RATO, Partner, Shearman & Sterling LLP

Josef DREXL, Professor, Max Planck Institute for Innovation and

Competition

Nicolas PETIT, Professor, LCII, University of Liege

CLOSING SPEECH – CONCLUDING REMARKS

18.00 – 18.20 Paul BELLEFLAMME, Professor, University of Louvain

Some Upcoming Events Relating to Patent Remedies

1.  Apropos of last week's post about the Samsung v. Apple amicus briefs, the IP Chat Channel is hosting a webinar next week on design patent damages.  Here is a link, and here is the description:

Design Patent Damages: The Law As It Is Today
Thursday, January 28, 2016 2:00pm – 3:00pm ET
When the Federal Circuit last summer rejected a request for a rehearing en banc from Samsung on the damages awarded to Apple for infringement of three of its design patents, it reaffirmed what experts in design patents already knew: With design patents, the infringer’s damages are its entire profits from the article of manufacture. That formula stemmed from design patents’ has historically been used as a weapon in the fight against counterfeits and knock-offs. But the ruling in Apple v. Samsung, based on a straightforward reading of Section 289 of the Patent Act, was an eye opener even for many patent law veterans outside the design space. The Federal Circuit reiterated its stance again in September in Nordock v. Systems, when it remanded a patent design case because the lower court’s damages calculation shortchanged the plaintiff.
Our panel brings together two design-patent veterans with a damages expert to discuss the implications on design patent prosecution and litigation of the increased consciousness regarding design patent damages. Is this just a blip or will it lead to an increase in design patent litigation and prosecution, as some experts predict? How will courts define “the article of manufacture”? What are the limitations of design patent enforcement despite the possibility of 289 damages? The panelists will also consider Samsung’s certiorari petition to the U.S. Supreme Court.
Speakers:

Alan Cox, NERA Economic Consulting
Robert Katz, Banner & Witcoff
Damian Porcari, Ford Global Technologies LLC

2.  The AIPLA 2016 Mid-Winter Institute ("Enforcing IP from Creation to Monetization and Litigation") runs from January 27-30 in La Quinta, California (link here).  There is a plenary session on the International Trade Commission ("ITC—A Brave New World: Obtaining Exclusion Orders Enforcing Trademarks, Copyrights and Essential Patents") on Thursday, January 28, a session on border measures that same day, and a plenary session titled "Paying the Piper:  Fee Shifting in IP Litigation Outside the U.S." on Saturday, January 30.

3.  The ABA-IPL 31st Annual Intellectual Property Law Conference is scheduled for April 6-8 in Bethesda, Maryland (link here).  There is a session on Friday, April 8 titled High Octane Fee Shifting for Attorney Fee Awards, as well as a session earlier in the week on preliminary injunctions in trademark cases. 

Federal Circuit Vacates Award of Double Attorneys' Fees

This morning the Federal Circuit published an opinion in Lumen View Technology LLC v. Findthebest.com, Inc. (opinion here).  Judge Lourie wrote the opinion, joined by Judges Moore and Wallach.  

The plaintiff Lumen View is described as "the exclusive licensee of U.S. Patent 8,069,073 (“the ’073 patent”), which is directed to a method for facilitating bilateral and multilateral decisionmaking.  The claims are directed to a method of matching parties, involving analyses of preference data from both a first class of parties and a second class of counterparties" (p.2).  The defendant FTB "operated a specialized search website with a comparison feature entitled 'AssistMe' that provided users with personalized product and service recommendations."  FTB moved for judgment on the pleadings, which the court granted on the ground that the patent in suit was directed to an unpatentable abstract idea and therefore invalid.  The court also found that the case was "exceptional" and therefore merited an award of attorneys' fees under Patent Act § 285, which states that "The court in exceptional cases may award reasonable attorney fees to the prevailing party." The court then awarded FTC double its attorneys' fees, citing “'the need to deter the plaintiff’s predatory strategy, the plaintiff’s desire to extract a nuisance settlement, the plaintiff’s threats to make the litigation expensive, and the frivolous nature of the plaintiff’s claims'”  (pp. 3-4).  In addition, "the court noted that the lodestar was uncharacteristically low due to the court’s expeditious resolution of the case. As a result, the court found that, here, the lodestar amount alone would be insufficient to deter similar misconduct by Lumen in the future, justifying an enhancement of the lodestar amount" (p.4).  

Citing the Supreme Court's opinions in Highmark and Octane Fitness, the Federal Circuit concludes that the district court did not abuse its discretion in finding that, in view of the totality of the circumstances, the case was exceptional for purposes of § 285.  Nevertheless, and despite the fact that the amount of fees to be awarded is also committed to the district court's discretion, § 285 did not provide a basis for an award of double fees:

In calculating an attorney fee award, a district court usually applies the lodestar method, which provides a presumptively reasonable fee amount . . . by multiplying a reasonable hourly rate by the reasonable number of hours required to litigate a comparable case . . . . This method has been characterized as “readily administrable” and “objective,” but “not perfect” and “never intended to be conclusive in all circumstances” . . . .  

We have noted that “although the amount the client paid the attorney is one factor for the court to consider in determining a reasonable fee, it does not establish an absolute ceiling.” Junker v. Eddings, 396 F.3d 1359, 1365 (Fed. Cir. 2005). In “rare” and “exceptional” cases, a district court may enhance the lodestar amount based on various factors, provided they are not adequately taken into account by the lodestar calculation. . . .

We agree with Lumen View that the district court failed to provide a proper rationale to justify enhancing the attorney fee award by a multiplier of two. The district court justified its award based on the specific circumstances of the case, the court’s proactive case management and expeditious resolution on the merits, which resulted in an “extremely low” lodestar. Lumen View Tech., 63 F. Supp. 3d at 326–27. If the court had adopted Lumen View’s proposed schedule, it stated, FTB would have reasonably incurred “significantly greater” attorney fees. Id. at 327. That analysis, however, appears to align more with the “results obtained” rationale disfavored by Supreme Court precedent, rather than being a justification for enhancing the lodestar determination. See Bywaters, 670 F.3d at 1230–31 (explaining that “the ‘results obtained’ factor is generally subsumed within the lodestar calculation and thus normally should not provide an independent basis for a departure from the lodestar figure.” (citing Blum v. Stenson, 465 U.S. 886, 900 (1984); Perdue, 559 U.S. at 554)).

The district court further reasoned that the calculated lodestar amount would be insufficient to deter an ongoing predatory strategy of baseless litigation, and thus the deterrent aspect of awarding fees would not be well served by a relatively low amount. But deterrence is not generally a factor to be considered in determining a reasonable attorney fee under § 285. Although deterrence may be a consideration when determining whether to award attorney fees, it is not an appropriate consideration in determining the amount of a reasonable attorney fee, which is principally based on the lodestar method. Unlike sanctions that are explicitly tied to an amount that suffices to deter repetition of conduct, see Fed. R. Civ. P. 11(c)(4), § 285 only specifies “reasonable attorney fees” once an exceptional case is found. And the lodestar method, yielding a presumptively reasonable attorney fee amount, focuses on the counsel retained by the prevailing party: higher standing attorneys are theoretically reflected by higher rates charged, and more complex issues are reflected by more hours worked. 

Adjusting the lodestar has been condoned for situations in which the prevailing party’s attorney’s performance or conduct somehow is not factored into the lodestar calculation. Perdue, 559 U.S. at 554–56 (finding that enhancement may be appropriate where lodestar does not adequately measure attorney’s “true market value”; attorney is subjected to “extraordinary outlay of expenses” for protracted litigation; or “exceptional delay” in payment of fees). However, factors outside the realm of performance or conduct attributable to the prevailing party’s attorney have not been accepted as justifying an enhancement. See id., 559 U.S. at 554 (noting that “inferior performance by defense counsel, unanticipated defense concessions, unexpectedly favorable rulings by the court, an unexpectedly sympathetic jury, or simple luck” cannot justify an enhanced award).

As such, we do not find proper support for the district court’s decision to enhance the lodestar amount by the specified multiplier as a reasonable fee award. . . .  Because we conclude that the expedited schedule and the deterrence purpose are unrelated to the suitability of compensation of FTB’s attorneys, and hence not relevant to enhancement of the lodestar, we conclude that the district court has not properly justified the amount awarded.

We therefore vacate the attorney fee award and remand the case for recalculating a reasonable attorney fee award and determining whether there may be other issues open for consideration relating to attorney conduct. Whether the court wishes to utilize Rule 11 or any other statutory framework is of course up to the district court (pp.6-10).

I'm inclined to agree with the Federal Circuit that the relief awarded under § 285 is intended to be compensatory; and that if, in a given case, there is a need for additional deterrence, there are other mechanisms (enhanced damages, Rule 11 sanctions) that may take this interest into account.  Relevant to this issue, I would note as well that the briefs filed last week in the Halo and Stryker cases (see here) argue that § 285 is compensatory in nature, because this fact might provide a basis for concluding that something other than a discretionary, totality of the circumstances test might be appropriate for awards of enhanced damages under § 284.   

A further thought.  Enhanced damages under § 284 would of course not be an available remedy in a case in which the accused infringer prevails.  I have at times wondered whether it would be desirable, as a matter of policy, for courts to have the authority to award attorneys' fee multipliers or some other monetary award in favor of prevailing defendants in certain circumstances, in order to deter overly broad assertions of IP rights.  See, e.g., Thomas F. Cotter, Fair Use and Copyright Overenforcement, 93 Iowa L. Rev. 1271, 1301 (2008).  I'm inclined to think nonetheless that the Federal Circuit is correct in holding that § 285 doesn't contemplate such a remedy.  

Samsung v. Apple Cert Petition: Amicus Briefs

I mentioned last month (here) that Samsung had filed a petition for certiorari with the U.S. Supreme Court arising from the case that involved Apple design patents relating to the iPhone.  The petition asks the Court to consider:

"1. Where a design patent includes unprotected non-ornamental features, should a district court be required to limit that patent to its protected ornamental scope?
"2. Where a design patent is applied to only a component of a product, should an award of infringer’s profits be limited to those profits attributable to the component?"

The Court has requested a response from Apple, which according to Scotus Blog is now due on February 16.  Meanwhile, six amicus briefs have been filed in support of the petition.  Dennis Crouch has a write-up on and links to the briefs on Patently-O.  Shara Tibken also has an article on CNET, here.  I imagine there could be amicus briefs filed in opposition to the petition sometime next month.

Respondents' Supreme Court Briefs in Halo and Stryker Enhanced Damages Cases

Halo Electronics, Inc. v. Pulse Electronics, Inc. and Stryker Corp. v. Zimmer, Inc. are the two pending U.S. Supreme Court cases that will address the standard for awarding enhanced damages for patent infringement.  On January 13 respondents Pulse Electronics and Zimmer, Inc. filed their merits briefs, available here and here.  (Thanks to Jason Rantanen and Chris Seaman for passing these along.)  Both sets of respondents argue that, historically and as a matter of legislative history, an award of enhanced damages requires a showing of willfulness.  Pulse also argues, among other things, that the Seagate test is consistent with the common-law understanding of willfulness and recklessness; that it "advances the overarching policies of the Patent Act"; that a more lenient standard (one that makes it easier to recover enhanced damages) will chill, rather than promote, innovation; and that the Supreme Court's attorneys' fees decisions (Octane Fitness and Highmark) do not require a different result because the relevant statutory provisions, "although adjacent to one another in the U.S. Code, are largely unrelated, with vastly different purposes, legislative histories, and judicial interpretations. Moreover, the policy considerations that supported the results in Octane and Highmark point to affirmance of the existing standard in this case."  Zimmer raises similar arguments, and also contends that, if the Court reaches the issue at all, it should retain the Federal Circuit's de novo standard of review for the objective prong of the willfulness standard.  (Both parties also argue for retaining the "clear and convincing evidence" burden of proof.)

I believe the remaining amicus briefs are due in today, and will post something about them when I see them.  For previous blog posts on the case, and links to the merits and amicus briefs filed in December, see here, here, here, here, here, and here.

Update:  Here's an amicus brief filed today by Yahoo! Inc. and Arthrex, Inc. in support of affirmance. 

Some European Scholarship on Huawei v. ZTE, Part 1

On July 16, 2015, the Court of Justice for the European Union (CJEU) issued its judgment in Huawei v. ZTE, setting out certain conditions under which E.U. competition law precludes the owner of a FRAND-committed standard-essential patent (SEP) from seeking injunctive relief for the unauthorized use of the patent.  (Recently, by the way, the CJEU issued a correction to the German version of the judgment, clarifying the conditions the owner of a FRAND-committed SEP must fulfill if it is to obtain an injunction--namely, that the owner must both inform the alleged infringer of the alleged infringement and make a concrete offer on FRAND conditions; for discussion, see this post from the Kluwer Patent Blog.  Previously the German text was ambiguous on whether both conditions needed to be fulfilled because of the placement in paragraph 71 of the words "vor Erhebung des Klages," meaning "before asserting the claim"; it now conforms to the French and English versions.)  

My initial write-up on the case, from this past July, is here.  Since then there have been a couple of cases applying Huawei (see here, here, and here), and several papers have been published on the case.  Some of the latter--including Nicolas Petit's paper Huawei v. ZTE:  Judicial Conservatism at the Patent-Antitrust Intersection, which questions whether the Huawei framework applies at all in a case in which the SEP owner does not sell products in the downstream market--I've mentioned on this blog previously, see here and here.  I also enjoyed hearing Professor Alison Jones' and Professor Josef Drexl's thoughts on the case at TILEC's December 2015 conference in Amsterdam.  Since then, Norman Siebrasse and I have been discussing some of the procedural issues arising from the court's analytical framework, and we hope to post something on this topic in the near future.  Meanwhile, here are some other recent papers on the case:  

 1. Christoph Cordes and Olaf Gelhausen have published a paper titled Zwischen „Orange-Book-Standard‟ und „Samsung‟—Was bringt die EuGH Entscheidung „Huawei Technologies/ZTE u.a.‟ (C-170/13) für Patentverletzungsprozesse, die auf standardessentielle Patent gestüzt werden? ("Between Orange-Book-Standard and Samsung:  What Does the CJEU's Decision in Huawei v. ZTE Promise for Patent Infringement Actions Based on Standard-Essential Patents?"), Mitteilungen der deutschen Patentanwälte, 2015, 426.  Here is the abstract (my translation from the German):

"Patent Wars" involving mobile devices have affected the public perception of patent actions in Germany.  The main focus:  standard-essential patents.  These are patents the teaching of which a standard-compliant product necessarily makes use.  On July 16, 2015, the CJEU announced a judgment in Case No. C-170/13 (Huawei Technologies v. ZTE), which addresses the question under what conditions the assertion of a patent infringement claim based on a standard-essential patent constitutes an abuse of dominant position under article 102 of the TFEU.  The referral had resulted in the stay of numerous parallel actions involving standard-essential patents. The judgment of the CJEU takes a middle position between the leading BGH decision in "Orange-Book-Standard" and the interpretation represented by the European Commission in the Samsung and Motorola proceedings.  This article attempts an initial analysis and evaluation of the consequences of the decision.

2.  Andreas Heinemann has published a paper titled Standardessenzielle Patente in Normenorganisationen:  Kartellrechtliche Vorgaben für die Einlösung von Lizenzierungsversprechen ("Standard-Essential Patents in SSOs:  Competition Law Requirements for Complying with Licensing Commitments"), GRUR 2015, 855.  From the conclusion (my somewhat free translation from the German):

The Huawei judgment of the CJEU is a new leading decision for the relationship between IP and competition law.  It illustrates that an innovation-friendly solution is to be attained not by screening IP law from competition law, but rather through the recognition of the complementarity of both bodies of law.  The judgment will deeply affect dealings with standard-essential patents, even if it directly concerns only the unilateral conduct of market dominant firms.  The court has given us a general direction, but the roadmap remains relatively rough.  As far as practical operations are concerned, the decision poses many unique questions, which must be resolved by parties, SSOs, (arbitration) courts, and even competition authorities.

3.  Torsten Körber has published a paper titled Orange-Book-Standard Revisited, Wettbewerb in Recht und Praxis (WRP) 2015, 1167.  Despite the title, the article is in German.  From the conclusion:

The CJEU's decision is to be greeted without qualification.  It leads to a case-by-case weighing of interests between patent owners and patent users (implementers).  It shuts the door on the abusive hindrance of competition through claims for injunctive relief and the setting of unreasonably high license rates (so-called hold up), without neglecting the rightful IP interests of the patent owner or encouraging the setting of unreasonably low rates (reverse hold-up) by patent users.  Legal certainty is created for cases in which both parties are fundamentally willing to negotiate, such as the dispute on which the referral was based, as well as (with a view to the scope of article 102 of the TFEU) for the practice of competition authorities--which in the end benefits all good faith business participants. The German patent courts now have an obligation carefully to regard the competition boundaries established by the judgment. 

More to come in a future post. 

Two Papers on the Chinese Huawei v. InterDigital FRAND Dispute

1.  Yang Li and Nari Lee have posted a paper on ssrn titled European Standards in Chinese Courts -  A Case of SEP and FRAND Disputes in China, which is forthcoming in Governance of Intellectual Property Rights in China and Europe (N. Lee, N. Bruun & M. Li eds., Edward Elgar Publishing 2016).  Here's a link to the paper, and here is the abstract:

After the initial grants of patents, contracts, industry customs and standards are adopted voluntarily by the market participants and they function as self-regulating or governing instruments to coordinate fragmentations caused by territorial rights. The activities of the standard-setting organizations (SSOs) that set standards for the use of the standard essential patents (SEPs) are one such example of self-regulation. Often, while the patent rights are local, SSOs are organizations often with multiple and heterogeneous participants. The guidelines and other soft law policies that SSOs voluntarily adopt are often likely to reflect such multi-territorial nature of SSOs’ participants. When a dispute arises on the conditions that are set by SSOs over the assertion of SEPs, the problem would be likely to include factual considerations that arise across territories. As such, disputes surrounding SEPs force local courts to consider not only local judicial standards and doctrines, but also those used elsewhere that may be relevant to understanding complex facts of disputes. This chapter discusses such tendency of the courts in the interpretation of a particular licensing principle of ‘fair, reasonable and non-discriminatory’ (FRAND) adopted by an European SSO, the European Telecommunications Standards Institute (ETSI), in Chinese courts. The chapter explores in detail the dispute surrounding SEPs between Huawei and InterDigital in China, and analyses it in the context of similar cases surrounding SEPs and FRANDs elsewhere. We argue that there seems to be a judicial globalization, where courts use of foreign-developed principles in judging local disputes with global commercial impacts, resulting from self-regulation, and that the Chinese court cases may be understood in the same vein. We conclude by arguing that this may be a next phase in the development of Chinese IP law, where the local practices of governance have to be built after the initial norms transplant.

2.  Yuanshi Bu has published a paper titled Die Kartellrechtlichen Einschränkungen des Immaterialgüterrechts in China ("Competition Law Restraints on IP Rights in China") in GRUR Int 2015, 1098-1106.  Here is the abstract (my translation from the German):

The relationship between competition law and IP law is a very important and at the same time highly complicated matter, which stands at the interface of both bodies of law.  In April 2014 the long-awaited Regulation on the Prohibition of the Abuse of IP Rights in China was adopted, after which competition law offenses in the People's Republic were investigated and claims recently filed against well-known international firms in the technology, automotive, and pharmaceutical sectors.  All the more urgent then is the demand for more legal certainty for business in the region.  This article attempts comprehensively to illuminate the current state of the law based on these cases.

A portion of the article (pp. 1104) discusses the judicial determination of FRAND terms in the Huawei v. IDC matter, and critiques the court's use of a license between Apple and IDC (which had a rate of 0.0187%) as the principal comparator, on the ground that Apple also was required to pay a lump-sum quarterly royalty--though the author also notes that IDC refused to  disclose the terms of comparable license rates itself and thus that the lower rate might be viewed as something in the nature of a sanction.   

Siebrasse & Cotter on Judicial Determinations of FRAND Royalties

Norman Siebrasse and I have just posted on ssrn a paper titled Judicial Determinations of FRAND Royalties, which will be a chapter in a forthcoming edited volume titled The Cambridge Handbook of Technical Standardization Law (Jorge L. Contreras ed., Cambridge University Press).  Here is a link to the paper, and here is the abstract:

This chapter from the forthcoming Cambridge Handbook of Technical Standardization Law reviews the principles and methodologies courts have used for calculating royalties for the infringement of standard-essential patents (SEPs) that the owner is obligated to license on fair, reasonable and non-discriminatory (FRAND) terms.  As we show, the decisions thus far--including the U.S. decisions in Microsoft, Innovatio, Ericsson, and CSIRO, the Japanese Apple v. Samsung judgment, and Chinese Huawei v. InterDigital matter--have tended to focus on a relatively small number of additional considerations beyond the generally applicable principles used for calculating reasonable royalties. Although reasonable minds may disagree with specific features of the relevant decisions, overall the courts (correctly, in our view) have emphasized that the owner of an SEP should receive a royalty that is proportionate to the technology’s contribution to the value of standard—a principle which, when properly applied, reduces concerns over the potential for SEPs to induce holdup and royalty stacking.

Comments welcome.

Japan's Two FRAND Cases

The September 2015 Issue of AIPPI-Journal of the Japanese Group of AIPPI has two articles that may be of particular interest to readers of this blog.  (To my knowledge, however, neither article is available online.)  

The first, by Hirokazu Honda, is titled The Intellectual Property High Court Grand Panel Cases on the Enforcement of Patents Subject to a FRAND Declaration, 40 AIPPI J. 316-331 (2015), and provides a very good overview of the Apple-Samsung FRAND case decided in 2014 by Japan's IP High Court.  (For earlier discussions of this case on this blog, see here, here, here, here, and here.)  Mr. Honda argues, among other things, that the court was correct in rejecting Apple's argument that Samsung's FRAND declaration constituted a binding contract for the benefit of third parties. He also agrees (as do I) that the court reached the correct result in holding (1) that Samsung was not entitled to an injunction for the unauthorized use of its FRAND-committed patents, as long as Apple was a willing licensee (and he notes that, with respect to the issue of injunctive relief, the court appears to place the burden of showing that Apple was a willing licensee on Apple, the defendant); and (2) that Samsung was entitled to damages up to the amount of a FRAND royalty (that is, that the act of seeking an injunction did not constitute such an abuse of right as to deprive Samsung of the right to any damages, as the lower court had held).  Finally, he takes us through the court's methodology for calculating a FRAND royalty, which involves determining what percentage of the value of the end products was attributable to the standard at issue (though the relevant percentages are redacted from the published version of the court's judgment); then determining what percentage of that "contribution value" would be payable as royalties for the use of the patents essential to the practice of that standard (in other words, determining the royalty cap); and then dividing that value by the number of SEPs (529).  In the past, I've expressed some reservations that the royalty cap (5%) was too low, though as Mr. Honda notes the parties agreed to this number, and the court considered other evidence that it believed rendered the 5% number reasonable.  (But--the evidence as recounted by the court appears to show that the parties accepted 5% of the product sales turnover as reasonable, see here p.63; 5% of the contribution ratio would necessarily be lower, though we don't know by how much.)  I've also expressed doubt about simply dividing up the value to be allocated to the SEPs by the number of SEPs--a principle known as numeric proportionality, often used by patent pools--though again as Mr. Honda notes the court had no evidence suggesting that the patent before it was of above-average value, so according it an average value on the facts of this case may have been reasonable.  Nice paper altogether.

The second article is a case note by Shuhei Furukawa on a case I had not read about previously, Imation Corporation Japan v. One-Blue LLC, Tokyo Dist. Ct., Feb. 18, 2015, Case No. 2013 (Wa) 21383.  According to the note, the defendant is the manager/operator of a patent pool relating to Blue-Ray disc products.  Some of the patents are standard-essential.  Defendant sent notification to three retailers that they were infringing these patents and that the patentee had a right to seek injunctive relief.  In response, the plaintiff (described as a business partner of the recipients of the notification) sued for unfair competition, arguing that the act of seeking an injunction for the infringement of a FRAND-committed SEP against a willing licensee is an abuse of right under the  Apple v. Samsung precedent.  The court agreed and therefore enjoined the defendant from sending similar notifications (which would be "false allegations" of a right to injunctive relief), though it denied a request for damages on the ground that at the time the notifications were sent (prior to the IP High Court's decision in Apple v. Samsung) the law was not yet clear.  (The note does not indicate the degree of proof the court required from the plaintiff to show that the alleged infringers were willing licensees.)  On the basis of this case, it would seem that at present Japanese law on the question of whether the owners of FRAND-committed SEPs can sue for injunctive relief is much more like U.S. law (in terms of result--the rationale, abuse of right, is not the same) than it is like German law, as discussed in my post last week.

The IP High Court maintains a website that contains English-language translations of some Japanese IP cases (not just cases decided by the High Court itself).  If and when the Imation judgment becomes available in English translation, I'll let readers know.

Cotter on Legal Pragmatism, Intellectual Property, and Standard Essential Patents

My article Legal Pragmatism and Intellectual Property Law, 7 Zeitschrift für Geistiges Eigentum/Intellectual Property Journal 291-317 (2015), is now out and available from the publisher here.  (It is a revised version of a paper I originally published in 2013 in an edited volume titled Intellectual Property and the Common Law (Shyamkrishna Balganesh ed., Cambridge University Press), which is also available on ssrn here.)  The new version, which I presented at a conference organized by Professor Michael Grünberger in Bayreuth, Germany last year (see blog posts here and here) concludes with some thoughts on the question of whether courts should award injunctions for the infringement of SEPs, and if not which body of law--patent remedies, competition law, contract, or abuse of right--is best suited for achieving this result.  Here is the abstract:

The legal pragmatism movement that came to prominence in the 1990s adopted a skeptical attitude toward “foundationalism” – the idea that any one body of law can be adequately explained by some grand, foundational theory, or united by a single goal or value. The pragmatists' embrace of anti-foundationalism, in turn, emphasizes the virtues of concepts such as value pluralism, practical reason, and what Cass Sunstein refers to as “incompletely theorized agreements” for reaching consensus on particulars when opinions differ at a higher level of abstraction. This article argues that a legal pragmatist approach to intellectual property (IP) law has both strengths and weaknesses. Among its strengths are its recognition of the competing values that animate IP policy and doctrine; its understanding of the limits of both instrumental and natural rights theories in explaining and shaping the contours of IP rights; and its appreciation for the common law method of incrementally adapting doctrine to changing technological environments. At the same time, however, a legal pragmatism that naively embraces totality-of-the-circumstances tests may induce overcompliance on the part of IP users. An approach that overemphasizes the unquantifiable and the incommensurable may inhibit the use of economic analysis as a tool (albeit an imperfect one) for precisely stating one's assumptions, predicting consequences, and testing results; and, more generally, may blunt the critical edge necessary to counter the ever-expanding scope of some IP rights. Policymakers, in short, should avoid the temptation to turn legal pragmatism's anti-foundationalist stance itself into a foundational principle of IP policy. The article concludes with a brief example of the author's pragmatic law-and-economics methodology as applied to an issue of great contemporary relevance, namely whether courts should award injunctions for the unauthorized use of standard-essential patents.

Will the German Courts Ever Tell Us What a FRAND Rate Is?

As mentioned previously on this blog (see here and here), district courts in Düsseldorf and in Mannheim recently have issued injunctions in favor of the owners of FRAND-encumbered SEPs.  Interestingly, in both cases the entity asserting the patents was a nonpracticing entity.  The courts left many questions open but both applied what is arguably a fairly narrow reading of the CJEU's 2015 judgment in Huawei v. ZTE.

The Huawei decision (which also left several issues open, as I have noted here and as others have discussed in papers I've mentioned or will soon mentioning here) nevertheless lists several conditions that must be met before the SEP's owner seeking of an injunction constitutes an abuse of dominant position in violation of European competition law.  Specifically:

Accordingly, the proprietor of an SEP which considers that that SEP is the subject of an infringement cannot, without infringing Article 102 TFEU, bring an action for a prohibitory injunction or for the recall of products against the alleged infringer without notice or prior consultation with the alleged infringer, even if the SEP has already been used by the alleged infringer.

Prior to such proceedings, it is thus for the proprietor of the SEP in question, first, to alert the alleged infringer of the infringement complained about by designating that SEP and specifying the way in which it has been infringed. . . .

Secondly, after the alleged infringer has expressed its willingness to conclude a licensing agreement on FRAND terms, it is for the proprietor of the SEP to present to that alleged infringer a specific, written offer for a licence on FRAND terms, in accordance with the undertaking given to the standardisation body, specifying, in particular, the amount of the royalty and the way in which that royalty is to be calculated. . . .

. . . [I]t is for the alleged infringer diligently to respond to that offer, in accordance with recognised commercial practices in the field and in good faith, a point which must be established on the basis of objective factors and which implies, in particular, that there are no delaying tactics.

Should the alleged infringer not accept the offer made to it, it may rely on the abusive nature of an action for a prohibitory injunction or for the recall of products only if it has submitted to the proprietor of the SEP in question, promptly and in writing, a specific counter-offer that corresponds to FRAND terms.

Furthermore, where the alleged infringer is using the teachings of the SEP before a licensing agreement has been concluded, it is for that alleged infringer, from the point at which its counter-offer is rejected, to provide appropriate security, in accordance with recognised commercial practices in the field, for example by providing a bank guarantee or by placing the amounts necessary on deposit. The calculation of that security must include, inter alia, the number of the past acts of use of the SEP, and the alleged infringer must be able to render an account in respect of those acts of use.

In addition, where no agreement is reached on the details of the FRAND terms following the counter-offer by the alleged infringer, the parties may, by common agreement, request that the amount of the royalty be determined by an independent third party, by decision without delay.

One might think, from reading the above, that courts would now be busy determining, among other things, whether an SEP owner's offer was FRAND and whether the alleged infringer's offer was FRAND; and that this would provide some insight into the methodology German courts think is appropriate for determining FRAND royalties (akin to the decisions in U.S. in Microsoft v. Motorola, Innovatio, Ericsson, and CSIRO, the Japanese judgment in Apple v. Samsung, and the Chinese judgment in Huawei v. InterDigital, all of which will be discussed in a short book chapter Norman Siebrasse and I are working on). So far, though, in the two German cases, Sisvel (see here and here) and Deutche Telekom (see here), the courts have been able to avoid doing so by deciding these cases on other grounds:  in Sisvel, that the defendant failed to provide security for its alleged past infringement when its counteroffer was rejected, and in Deutsche Telekom that the defendant didn't provide a specific enough counteroffer (it instead offered to base the royalty on the royalty that was to be determined in a proceeding in the U.K.) and also that it failed to provide the necessary security when its counteroffer was rejected.  For further discussion, see the write-ups (some of which I have previously linked to) on Sisvel here, here, and here, on Deutsche Telekom here.  Also of interest is this article by Nadine Herrmann and Catherine Manley in Global Competition Review's European Antitrust Review 2016 discussing, among other matters, an earlier proceeding involving St. Lawrence and Deutsche Telekom and a presentation made by German Judges Kühnen and Maimann in January 2015 that does suggest some guidelines on determining a FRAND range (perhaps this deserves its own blog post in the near future).