Monday, January 11, 2016

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.

1 comment:

  1. Thank you for your postings. I truly enjoy the opportunity to comment.

    I have an issue with precluding a patent holder from seeking an injunction, simply because of their status. I believe a patent holder (regardless of licensing assurance) has the right to seek an injunction by pursuing a court action. For a patent is simply the right to exclude and without that right to exclude you have nothing more than a paper tiger. The judge will act as a gatekeeper under the eBay factors (in the US) and allow or deny the request. This is not something that is subject to unilateral abuse. It is not in the public interest to grant an injunction to someone who hasn't bargained in good faith.

    Additionally, under the Noerr Pennington doctrine, I, as a plaintiff, have the right under the First Amendment to seek redress. So if I go to court seeking an injunction, and the judge does not issue one, I also have the right to be wrong -- the right to err is implicit with the right to petition the government. As we saw in the ECJ decision, if the patent holder and licensee follow certain steps, then the patent holder can seek an injunction without it rising to the level of abuse under anti-competition. But what determines whether a licensee is willing? If you notice in the ECJ case, Huawei sued ZTE after only 6 months of failed negotiations. Recently we saw the Apple/Ericsson dispute that involved 2 years of failed negotiations, but that has been put to bed. Is it 6 months? Is it 2 years? That 4x delta can make or break companies.

    Further, by subjecting a patent holder to anti-competition damages when it seeks injunctive relief will have a chilling effect on innovation. How would you balance the treble damages from a anti-competition claim with the treble damages of a willful infringement claim? Because, let's be honest, patent assurances are known at SDOs like ETSI and a device manufacturer is on actual notice of issued (and even pending) patents that read on the technology. Shouldn't willfulness be involved?

    In the Imation case, One-Blue had the "right to seek an injunctive relief." This is a basic tenant of patent law -- the right to exclude. By dismissing this basic tenant, you inherently choose the side of implementers and shift to weaken patents. Courts, Agencies, etc., should not be in the business of picking sides.

    While I have not reviewed all of your writings (you are prolific), I am curious about your view regarding why you believe patent holders of FRAND assured essential patents are precluded from seeking injunctive relief. Maybe if you could highlight one or two that I may review to better understand your perspective?

    Thank you again for your writings on FRAND-assured Essential Patents.