Friday, September 30, 2016

Patent Remedies at the Upcoming AIPLA Annual Meeting

The American Intellectual Property Law Association (AIPLA) is holding its 2016 Annual Meeting from October 27 to 29 in Washington, D.C.  Details here.  It looks like there will be three sessions devoted in whole or in part to patent remedies on Friday, October 28.  First, there's a panel at 10:15 a.m. on "Global IP Protection and Enforcement Strategies," with speakers addressing "Customs Seizure Practices Around the World"  How Does the US Compare?"; "Leveraging Information from Foreign Seizures to Protect Rights at the US Border"; and "European Trademark Reform:  What's Different and Why Does It Matter?".  Second, at 2 p.m. there's a session titled "Patent Licensing," with speakers addressing "The Nuts and Bolts of Licensing:  Strategies for Negotiating to Yes"; "Learn About 'Must Have' Licensing Terms from the Perspective of Both Sides"; and "Assessing Value:  How Much Is That Patent Really Worth?  Techniques for Valuing Patents."  Most relevant, perhaps, is a session at 3:30 p.m. titled "Damages 101," with speakers addressing "Hitting a Moving Target:  A High Level Guide to Patent Damages Issues"; "Tying the Facts of the Case to the Royalty Analysis:  A Peek into an Expert's Approach to Patent Damages"; and "Not All Things That Count Can Be Counted:  Approaches and Considerations for Patent Damages."  This last presentation will be by someone I've had the pleasure of meeting and speaking with a few times here in Minnesota, Carol Ludington.  Should be a good event, though I'll be away at a different meeting that same day.

Wednesday, September 28, 2016

Two More Papers on Enhanced Damages

1.  Keith Hylton has posted on ssrn a new draft of the paper he presented at the University of Texas Patent Damages Conference this past June, titled Enhanced Damages for Patent Infringement:  A Normative ApproachHere is a link to the paper, and here is the abstract: 
In Halo Electronics v. Pulse Electronics the Supreme Court granted greater discretion to lower courts to enhance damages for patent infringement. This paper takes a normative approach to patent infringement damages. Its underlying premise is that the goal of a damages regime should be to maximize society’s welfare. Patent damages should therefore balance society’s interest in encouraging innovation against the need to regulate infringement incentives. Although the analysis here is mostly normative and draws heavily on the economic theory of penalties, the aim of this paper is to provide a set of practical guidelines courts can follow in explaining, justifying, and developing rules to structure the discretion that Halo has returned to them.
2. Justin A. Reddington has published a comment titled To Caesar What Is Caesar's:  An Audacious Claim for Punitive Damage Reform in Patent Law, 10 Liberty U. L. Rev. 201 (2016).  From the introduction: 
In general, tort reform-particularly in the area of damages-has sparked much legal debate by academics, judges, and legislators in the last half century. Frequent large punitive damages awards, increased frequency of punitive damages in general, and the constant enticement of a potential punitive windfall have caused growing concern in the legal community about the structure and application of punitive damage awards. . . . This Comment offers a possible alternative to the continued and non-productive grant of punitive damages as a plaintiffs windfall. But that is not to say that punitive damages themselves are improper. It is clear that punitive damages are, and will always be, an important part of civil litigation. . . . They impose additional punishment on intentional, willful, and wanton tortfeasors by making an example of them to the public, and by providing sufficient, quasi-criminal punishment to deter the offender from committing the offense in the future. What is unclear-and what has been increasingly questioned of late'-is whether plaintiffs should be granted those awards. The damages are levied for the purpose of reforming or deterring an offender, and are only so imposed in cases where the offender's conduct merits their use. Technically, the plaintiff is already made whole by a compensatory damages award. Should the plaintiff be awarded a windfall? Would that windfall serve as a significant incentive to other potential plaintiffs (and their lawyers) to bring causes of action that they would not otherwise undertake? Can the damages be given to a more deserving entity and still serve the interests of justice?
This Comment seeks to answer these questions, and to show that a split recovery system for punitive damages-if adopted by the Federal Patent Code-would be best suited to serve the interests of justice in patent claims and to help allay the disturbing upward trend in punitive damage awards in American courts. . . .

Monday, September 26, 2016

Feldman and Lemley on Treble Damages After Halo

Michael Feldman and Mark Lemley have posted a short piece on ssrn titled "Characteristic of a Pirate":  Willfulness and Treble DamagesHere is a link, and here is the (correspondingly short) abstract:
In this short piece we take a first look at the Supreme Court's decisions in Halo and Stryker, identifying some of the questions that remain unanswered in patent treble damages, including the role of willfulness, the role of opinion letters, and the role of the jury.
The authors state that lower courts might interpret Halo as suggesting "that treble damages requires subjective intent to engage in misconduct, in which case, the Supreme Court has established a standard stricter than Seagate's."  That last part I don't quite get, since Seagate held 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."  I guess the point the authors are making is that a "subjective intent to engage in misconduct," if that's what the courts now require, could be harder to show than the subjective prong of Seagate ("known or so obvious that it should have been known").  But since Halo does away with the need to prove the "objective" prong as well as the clear and convincing evidence standard, I think it would be a stretch to read Halo as establishing a stricter standard.  Maybe I'm missing something.  And to be fair, the authors also note that one could read the case as making it easier to obtain treble damages, if courts conclude that enhanced damages may be "appropriate in any case that goes 'beyond typical infringement.'"

I was also initially confused by the authors' discussion of the timing of the culpability inquiry and how this may relate to opinion letters, but I think I get it now.  If, on the one hand, culpability is determined at the time the infringement began, and the infringement was at that time unknowing, it's not culpable, so there's no point in producing an exculpatory opinion letter. (Failure to produce such a letter appears to be irrelevant under 35 U.S.C. section 298:  "The failure of an infringer to obtain the advice of counsel with respect to any allegedly infringed patent, or the failure of the infringer to present such advice to the court or jury, may not be used to prove that the accused infringer willfully infringed the patent or that the infringer intended to induce infringement of the patent."). If on the other hand culpability is determined once the infringer continues to infringe after being put on notice (say, by a cease and desist letter), then it might be in the defendant's interest to commission an exculpatory opinion letter at that point.  Interesting issue.

Finally, the authors talk about whether Halo contemplates a role for the jury (p.3).  I'm inclined to think that juries will make the determination whether the defendant's conduct was culpable (willful, whatever) and that judges (as before) will exercise discretion in deciding whether to award a damages enhancement in light of that determination.  But we'll see.

(For my post last month on the first two post-Halo Federal Circuit decisions on willfulness, see here.  For my posts this month on two more cases, see here and here.) 

Friday, September 23, 2016

Upcoming Sedona Conference on Global Patent Litigation

The Sedona Conference will be hosting its 16th Annual Sedona Conference on Patent Litigation October 24-25 in Washington, D.C.  This year's theme is "Global Strategies for Managing Both Multifront Domestic and International Litigation of IP Assets."  Here is the description of the conference, from its webpage:
As markets and technology grow increasingly interconnected around the world, patent owners are re-orienting their strategies for patent protection to reflect global realities. At the same time, changes in the legal landscape, both in the U.S. and abroad, are giving rise to both new risks and new opportunities for patent enforcement. And with the coming Unified Patent Court in Europe, new guidelines from national competition authorities, and domestic legislative initiatives, even more changes are on the way.
Co-chairs Monte Cooper of Orrick and Mark Selwyn of WilmerHale and a distinguished faculty of judges, regulators, and counsel from around the world will lead the dialogue on topics identifying and explaining the emergence of alternatives to the traditional model of U.S. District Court litigation, comparative approaches across different international patent regimes, and the interplay between international competition policy and IP enforcement.
How should patent owners account for these new global realities in developing strategies for protecting their IP rights?
What strategies should defendants employ, both individually and in collaboration with any joint defense groups, in response?
How can the U.S. courts efficiently manage multi-district litigations (MDLs) and "pseudo-MDLs" (cases filed by patent owners against multiple defendants in multiple U.S. jurisdictions that are subsequently consolidated)? And how can the U.S. courts, the USPTO/PTAB, the USITC, and foreign courts efficiently manage the disputes before them? Are there opportunities for coordination? Should there be?
The detailed agenda can be found here.  As the above description suggests, there will be several sessions relevant to patent remedies in the U.S. and other countries, including sessions on damages, injunctions, FRAND, and the impact of competition law.  Should be an interesting event.

Wednesday, September 21, 2016

WesternGeco v. ION: Federal Circuit Remands Another Case for Consideration of Enhanced Damages

Opinion by Judge Dyk, joined in its entirety by Judge Hughes, here.  The case was on remand to the Federal Circuit from the U.S. Supreme Court.  Vacating and remanding for reconsideration of enhanced damages in light of Halo, the June case in which the U.S. Supreme Court overturned the comparatively strict Seagate standard for awarding enhanced damages, is getting to be an almost weekly occurrence.  For last week's opinion in Stryker, see here.

No big surprise, then, that the court vacates its previous decision that an award of enhanced damages would have been unwarranted solely because "ION’s noninfringement and invalidity defenses were not objectively unreasonable" (p.4).  Instead, as Judge Dyk writes, "Halo emphasized that subjective willfulness alone—i.e., proof that the defendant acted despite a risk of infringement that was “‘either known or so obvious that it should have been known to the accused infringer,’” Halo, 136 S. Ct. at 1930 (quoting Seagate, 497 F.3d at 1371)—can support an award of enhanced damages" (p.7).  Judge Dyk also notes, however, that "After Halo, the objective reasonableness of the accused infringer’s positions can still be relevant for the district court to consider when exercising its discretion" (p.8).  The court further instructs (pp. 9-11):
On remand the district court must consider two questions. The first of these is subjective willfulness. The jury here was instructed on the Seagate standard for subjective willfulness. . . .  The jury found that WesternGeco had “prove[d] by clear and convincing evidence that ION actually knew, or it was so obvious that ION should have known, that its actions constituted infringement of a valid patent claim.” J.A. 77. We note that ION’s renewed motion for JMOL contended that the jury’s verdict of subjective willfulness was unsupported by substantial evidence. ION argued that “no reasonable jury could conclude that the subjective-prong of the willfulness inquiry was established by clear and convincing evidence.” WesternGeco I, No. 4:09-cv-01827, ECF No. 559, at 16 (ION’s renewed motion for JMOL of no willful infringement of Sept. 28, 2012). On remand, the district court must review the sufficiency of this evidence as a predicate to any award of enhanced damages, mindful of Halo’s replacement of Seagate’s clear-and-convincing evidence standard with the “preponderance of the evidence standard.” Halo, 136 S. Ct. at 1934.3/ 
3/  ION did not waive its challenge to the willfulness verdict based on the lack of subjective willfulness by failing to raise it on the first appeal. At the time of the first appeal it had raised the issue in a JMOL motion but the district court did not decide that issue (the district court having ruled that there was a lack of objective willfulness, a ground then sufficient to set aside the willfulness verdict). . . .
Thus, this case is distinguishable from our recent decision in Halo Electronics, Inc. v. Pulse Electronics, Inc., where the accused infringer failed to raise the issue at the JMOL stage in district court or “challenge the propriety of the jury finding of subjective willfulness” on appeal. No. 13-1472, 2016 WL 4151239, at *10 (Fed. Cir. Aug. 5, 2016). We do not suggest that appellees in the future can avoid waiver by limiting discussion on the first appeal to just one aspect of the overall issue of enhanced damages since under the Supreme Court’s decision in Halo, objective and subjective willfulness are no longer distinct issues.
The second issue that the district court must consider on remand, if the jury’s finding of willful infringement is sustained, is whether enhanced damages should be awarded. Halo emphasized that the question of enhanced damages under § 284 is one that must be left to the district court’s discretion. The district court, on remand, should consider whether ION’s infringement constituted an “egregious case[] of misconduct beyond typical infringement” meriting enhanced damages under § 284 and, if so, the appropriate extent of the enhancement. Id. at 1935.
Judge Wallach dissents in part on the question of whether WesternGeco was entitled to recover foreign lost profits traceable to conduct found to be infringing under section 271(f) of the U.S. Patent Act.  This is the same position he took the two previous times this case came before the Federal Circuit.  (For previous discussion on this blog, see here and here.)  The majority this time concludes that the issue of lost profits is not within the scope of its remand from the Supreme Court (see Judge Dyk's opinion p.5 n.1), a matter on which Judge Wallach disagrees (see Judge Wallach's opinion, p.3 n.1).

Monday, September 19, 2016

Hovenkamp and Masur on the Unreliability of Comparable Licenses

Erik Hovenkamp and Jonathan Masur have posted a paper on ssrn titled Reliable Problems from Unreliable Patent Damages.  (This is an updated version of the paper they presented at the University of Texas Patent Damages Conference back in June.)  Here's a link to the paper, and here is the abstract:
If a litigated patent has previously been licensed to a third party, the courts generally adopt the terms of the prior agreement as the best measure of damages. However, while administratively convenient, this “licensing-based damages” standard creates problematic incentives and undermines the efficient commercialization of patented inventions. It rests on the trivialized (and generally false) presumption that a patent license is like a commodity, with the patentee charging a common price to all comers. As a consequence, patentees distort their future recovery prospects – and by extension the outcomes of future licensing negotiations – whenever they license their patents, whether or not today’s agreement will be a good proxy for tomorrow’s dealings or disputes. Knowing this, patentees are discouraged from licensing at anything less than a high royalty rate, even if they could reach many additional mutually-beneficial agreements on more modest terms. The result is that patent holders rationally cut off the bottom segment of the licensing market, creating substantial deadweight loss. This injures not only patentees, but also prospective licensees and their consumers. The standard creates additional problems by encouraging secrecy and “gamesmanship” in patent licensing. 
We propose that the licensing-based damages standard be abandoned, and that damages should generally be awarded ad hoc. This does not mean that private parties should ignore comparable licenses in their private dealings; it simply means that courts should not use them as a measure of damages. That this necessitates some speculation does not suggest it is the less desirable approach, for it is better that damages be somewhat random than systematically harmful. Further, while the licensing-based damages standard is clearly easy to apply, there is little reason to believe it is accurate in a typical case. As such, its apparent lack of randomness does not suggest that it is producing good results.
The authors make a number of important points about why comparables often aren't a very realistic indicium of the reasonable royalties the court should award in a given case--and how their use may in turn distort the market for patent licensing.  In my paper Patent Damages Heuristics I cite Masur's and Hovenkamp's previous solely-authored work highlighting some of the flaws in using comparable licenses, as well as an earlier version of their coauthored paper--though I'm still inclined to believe the appropriate use of comparables can sometimes be a justifiable time- and cost-economizing means for approximating the correct royalty (and thus I wouldn't advocate discarding the use of comparables altogether).  Another possible approach (which is not exclusive to the authors' proposal, and which they appear to support at p.29) would be to make more information on actual licenses publicly available (as this proposal recommends).  Whether private parties will be motivated to make substantially more of these available, however, remains to be seen.

Thursday, September 15, 2016

New FRAND Scholarship

1.  Alan Devlin has published a book titled Antitrust and Patent Law (Oxford Univ. Press 2016).  Chapter 9, "Manipulation and the Standard-Setting Process," discusses among other things, SEPs, holdup, and FRAND, with a focus on U.S. and E.U. law.  Here is a link to OUP's webpage for the book, and here is the book description:
Patents lie at the heart of modern competition policy. In the new economy, firms use them variously to protect their R&D, to bolster their market positions, and to exclude rivals. Antitrust enforcers thus scrutinize patentees to ensure that they do not use their intellectual-property rights to suppress competition. Today's antitrust lawyers must therefore navigate intellectual-property issues and advise clients on the procurement and assertion of patents. It is no easy task. In granting exclusive rights, patents have an uneasy relationship with competition law, which struggles in turn to apply policies developed in bricks and mortar industries to the world of technology.
This book explores the acquisition and use of patents under the law of the world's two most important antitrust regimes: the United States and the European Union. It examines antitrust rules governing technology transfer, standard-essential technologies, patent aggregation, open and closed systems, coercive licensing terms that amount to misuse, evergreening tactics in the pharmaceutical industry like 'paying for delay', and patentee immunity in suing for infringement. To contextualize that analysis, the book explores the theoretical relationship between patents and competition law, addresses the U.S. 'patent crisis', the move towards unitary patents in Europe, and differences between the US and EU competition regimes. Further, the book explores idiosyncrasies governing the core antitrust questions of market definition, market power, and anticompetitive conduct in the patent setting. In doing so, the book allows those who practice, enforce, teach, or study competition law to understand the subtleties of this fascinating subject.
2.  Damien Geradin has posted a paper on ssrn titled FRAND Arbitration: The Determination of Fair, Reasonable and Non-Discriminatory Rates for SEPs by Arbitral TribunalsHere is a link to the paper, and here is the abstract:
At the core of most disputes concerning the licensing of standard-essential patents (SEPs) lies the inability of the SEP holder and the standard implementer to agree on fair, reasonable and non-discriminatory (FRAND) license terms. As an alternative to court litigation, a growing number of academics, agency officials and private practitioners have advocated arbitration of SEP-related disputes, and there is anecdotal evidence that are increasingly relying on arbitration to settle such disputes. The purpose of this paper is to discuss based on the author’s personal experience how arbitral proceedings to set FRAND terms work in practice, as well as the various challenges faced by arbitrators, parties, and counsel involved in such proceedings.
3.  Dae-Sik Hong has posted a paper on ssrn titled A Review of Korean Competition Law and Guidelines for Exercise of Standard-related Patents, 15 J. Korean L. 117 (2015).  Here is a link to the paper, and here is the abstract:  
The purpose and main scope of this paper is to focus on the types of specific conduct with potential issues, the standards for them, and the applicable factors to be considered that were provided with respect to the exercise of patent rights-related technology standards in the Review Guidelines on the Unfair Exercise of Intellectual Property Right (IPR Guidelines), review the methods to identify the types of such conduct and relevance of such proposed standards, and propose alternatives thereto.
This paper concludes with suggestions as follows: Firstly, the Korea Fair Trade Commission (KFTC) will use its guidelines as a primary framework to enforce the Monopoly Regulation and Fair Trade Act (MRFTA) by the KFTC officials even though it has no legislative basis; therefore, it is very important to carefully review its contents. Secondly, in order to regulate non-disclosure of relevant patent technology under the MRFTA, the IPR Guidelines needs to specifically provide that both the intent and effect of the non-disclosure on the standard setting process are required. Thirdly, provisions on imposing unreasonable or discriminatory royalties should be improved to take necessary considerations into account, provide specific factors or standards under the special circumstances where the patented technology is included in a standard. Fourthly, whether procedures for the disclosure of patent information and the ex ante negotiation for licensing terms have been complied with, which are provided as important factors to be considered in judging illegality, does not bear causation or close relationship with the violation of the MRFTA and failure to comply with such procedures should not be considered more seriously than other factors. Lastly, the standard for determining whether an FRAND-encumbered SEP holder’s filing for injunctive relief may be anti-competitive can be considered acceptable compared with the recent practical developments in other jurisdictions.
4.  Koren W. Wong-Ervin, Douglas H. Ginsburg, Bruce H. Kobayashi, and Joshua D. Wright have posted a paper titled FRAND in India on ssrn.  Here is a link to the paper, and here is the abstract:
In the last several years, India has raised several novel and controversial concerns regarding standard-essential patents (SEPs). For example, in 2013 and 2014, the Competition Commission of India (CCI) issued investigation orders against Ericsson, alleging that the company violated its commitments to license on fair, reasonable, and nondiscriminatory (FRAND) terms by imposing discriminatory and “excessive” royalty rates and using Non-Disclosure Agreements (NDAs). In its investigation orders, the CCI stated that “forcing a party to execute [an] NDA” and “imposing excessive and unfair royalty rates” constitutes “prima facie” abuse of dominance and violation of section 4 of the Indian Competition Act, as does “[i]mposing a jurisdiction clause debarring [the licensee] from getting disputes adjudicated in the country where both parties were in business.” Most recently, India’s Department of Industrial Policy and Promotion (DIPP) issued a Discussion Paper on SEPs, which, among other things, expresses concerns about holdup by patent holders while omitting any concerns about holdup and holdout by implementers.
This article analyzes these developments, providing guidance based upon the approach taken by the United States and the Europe Commission. We offer policy recommendations concerning the availability of injunctive relief; the advisability of a one-size-fits all template for standard-development or standard-setting organizations (SDOs or SSOs); the imposition of royalty caps or competition sanctions for “excessive pricing”: the use of NDAs and the “Non Discriminatory” element of FRAND; balancing desires for transparency with needs for confidentiality in licensing; and the use of international arbitration on a portfolio basis as likely the most efficient and realistic means of resolving FRAND disputes.
Update (Friday, Sept. 16):  I see from Professor Danny Sokol's Antitrust & Competition Policy Blog this morning that the Geradin paper noted above is one of several that are published in CPI Antitrust Chronicle's September 2016 issue, titled "Patents and Standards Settings," which you can access from Professor Sokol's blog.  It looks like most though not all of the contributors are people I would associate with the higher-protection side of the debate, but whether you find that position persuasive or not (I generally don't, subject to some qualifications) these papers definitely should be worth reading. 

Tuesday, September 13, 2016

Asia Vital Components: Federal Circuit Reverses Dismissal of Declaratory Judgment

Last Thursday the Federal Circuit issued an opinion in Asia Vital Components Co. v. Asetek Danmark A/S (opinion here), reversing the district court's dismissal, for lack of subject matter jurisdiction, of an action for a declaratory judgment of noninfringement and invalidity.  DJ plaintiff Asia Vital Components (AVC) makes cooling systems for integrated circuits.  In 2014, patent owner Asetek sent AVC a letter accusing AVC of infringing two patents relating to liquid cooling systems, but (as AVC explained to Asetek's apparent satisfaction) the accused product was one that AVC didn't make.  AVC nevertheless sought a meeting with Asetek, which the latter initially rebuffed.  Asetek followed up with a letter stating its belief that AVC likely was selling infringing products, and a meeting was eventually held at which the parties discussed a possible license.  A few weeks later AVC filed suit for a declaratory judgment that two products it had designed and built, the K7 and K9, did not infringe.  The district court dismissed the action on the ground that Asetek had never accused those two products of infringing.

In an opinion by Chief Judge Pratt (joined by Judges Linn and Taranto), the Federal Circuit reverses, finding that the complaint alleged facts making out a justiciable case or controversy:
. . . we have explained post-MedImmune that “jurisdiction generally will not arise merely on the basis that a party learns of the existence of a patent owned by another or even perceives such a patent to pose a risk of infringement, without some affirmative act by the patentee.” SanDisk, 480 F.3d at 1381. Instead, we have required “conduct that can be reasonably inferred as demonstrating intent to enforce a patent.” Hewlett-Packard Co. v. Acceleron LLC, 587 F.3d 1358, 1363 (Fed. Cir. 2009). . . . 
We agree with AVC that the totality of circumstances indicates that an actual controversy existed between the parties at the time of the declaratory judgment complaint. Although the April 30, 2014 letter incorrectly accused AVC of manufacturing the Liqmax 120s, it was still a demand letter that referenced a product that AVC contends is similar to its own K7 and K9 products. Upon receiving the letter, AVC contacted Asetek, saying that it did not manufacture the Liqmax 120s, and then, in a follow-up email, AVC requested a meeting with Asetek “to discuss the related matter.” J.A. 105. Instead of simply responding that it had made a mistake with respect to the Liqmax 120s, Asetek’s August 2, 2014 email contained a number of statements that indicate that an actual controversy between the parties existed. For example, Asetek (1) rehashed the volatile relationship between the parties, saying that poor experiences with AVC in the past have “sown distrust in Asetek for AVC”; (2) stated that it “does not license its patents” generally and, more specifically, that it would not license them to AVC due to the previous conflicts between the parties; (3) accused AVC of “likely selling other infringing products in the United States”; (4) warned AVC that it “enforced its IP” and noted its “pending litigations against CoolIT and Cooler Master”—companies that AVC alleges sell products similar to the K7 and K9; and (5) emphasized that it has been allowed a patent in the European Union with claims similar to the asserted patents and also has similar claims pending in China. J.A. 207. Such a response by Asetek clearly “demonstrate[s] intent to enforce a patent,” Hewlett-Packard, 587 F.3d at 1363, and is thus sufficient to conclude that a substantial controversy between the parties existed at the time of the complaint.
The further interactions between the parties only confirm our conclusion. Despite recognizing that AVC does not manufacture the Liqmax 120s, Asetek still agreed to a meeting with AVC where they discussed potential licensing of the asserted patents. Moreover, AVC alleges that Asetek made threats to its customers regarding AVC’s infringement of the asserted patents. Specifically, AVC alleges that “AVC’s customers for the K7 and K9 products have expressed concern that [they will be subject] to liability under the Asserted Patents and AVC has withheld accepting purchase order out of fear of possible liability based upon the Asserted Patents.” . . . Such threats constitute affirmative actions by Asetek to impede and frustrate AVC’s attempts to meaningfully participate in the liquid cooling market and further support our conclusion that a substantial controversy existed between the parties.
Asetek relies heavily on the fact that it never referenced AVC’s particular products or product line as potentially infringing, and, in fact, did not even know of AVC’s products at the time of the complaint. But we have not required such specific facts to find jurisdiction. . . . 
In addition to an affirmative act by Asetek, AVC must also show that the threat of suit is real and immediate to establish jurisdiction. MedImmune, 549 U.S. at 127. . . . Here, AVC has made the requisite showing. AVC alleged that (1) it has completed designs of the K7 and K9 products; (2) it has manufactured sample prototype products of the K7 and K9 (as confirmed by photographs of the products presented to the district court below); (3) it intends to market and sell the products in the United States; and (4) its K7 and K9 products “are positioned to directly compete in the market against Cooler Master, Coolit Systems and Enermax as well as the Asetek’s products.” J.A. 67. AVC’s allegation regarding the concerns of its customers and that it has “withheld accepting purchase order[s]” indicates that AVC has customers lined up for its products that have submitted, or, at the very least, are prepared to submit purchase orders for the products. Id.
Although my initial instinct was that the district court got it right, by the time I finished reading the opinion I was convinced by Chief Judge Pratt's analysis.  The case shows the importance, after MedImmune, of considering all the relevant facts and circumstances.  Clearly, the fact that Asetek had not accused the specific products at issue wasn't enough to defeat jurisdiction.

Monday, September 12, 2016

Stryker v. Zimmer: Federal Circuit Remands for Consideration of Enhanced Damages

Opinion by Chief Judge Prost, joined by Judges Newman and Hughes, hereStryker v. Zimmer was one of two cases (the other was Halo v. Pulse) in which the Supreme Court granted cert to determine the appropriate standard for awarding enhanced damages under section 284 of the U.S. Patent Act.  For my blog post on the Supreme Court's June 13 decision, see here.  For my post on the Federal Circuit's decision on remand in Halo v. Pulse, see here.  As in that case, the Federal Circuit reads Halo as supporting the proposition that subjective willfulness alone may result in a damages enhancement.   Note also the panel's statement, however, that just because the defendant is found to have willfully infringed doesn't necessarily mean the case is "exceptional" for purposes of awarding attorneys' fees (pp. 18-20):
After taking into consideration the circumstances of a particular case, a court may exercise its  discretion and award enhanced damages under 35 U.S.C. § 284. Halo Elecs., Inc., 136 S. Ct. at 1933. “[H]owever, such punishment should generally be reserved for egregious cases typified by willful misconduct.” Id. at 1934.
In making its willfulness determination, the district court applied the standard we had previously articulated in Seagate, which required a patentee to establish, by clear and convincing evidence, both that there was an objectively high likelihood that the accused infringer’s actions constituted patent infringement, and that the risk was “either known or so obvious that it should have been known to the accused infringer.” See 497 F.3d at 1371. The Supreme Court rejected this approach and explained that “[t]he subjective willfulness of a patent infringer, intentional or knowing, may warrant enhanced damages, without regard to whether his infringement was objectively reckless.” Halo Elecs., Inc., 136 S. Ct. at 1932. The Supreme Court also rejected the use of a clear and convincing standard in favor of a preponderance of the evidence standard. Id. at 1934.
On appeal, Zimmer did not appeal the jury’s finding of subjective willfulness under the Seagate test. On the record in this case, willful misconduct is sufficiently established by the jury’s finding. The jury made its determination under the clear and convincing evidence standard, which is a higher standard than is now necessary. We therefore affirm the jury’s finding of willful infringement.
In doing so, we think the best course is to vacate the award of enhanced damages and remand to the district court for consideration of this issue. As Halo makes clear, the decision to enhance damages is a discretionary one that the district court should make based on the circumstances of the case, “in light of the longstanding considerations . . . as having guided both Congress and the courts.” Id. at 1934. Thus, it is for the district court to determine whether, in its discretion, enhancement is appropriate here. We therefore vacate the district court’s award of enhanced damages and remand to the district court so that it may exercise its discretion. . . .
The district court’s award of attorneys’ fees was based solely on its determination that Zimmer was liable of willful infringement. Though we uphold the district court’s willfulness determination, it does not necessarily follow that the case is exceptional. As with the determination of whether enhanced damages are appropriate, “[d]istrict courts may determine whether a case is ‘exceptional’ in the case-by-case exercise of their discretion, considering the totality of the circumstances.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749, 1756 (2014). Because there exist further allegations of litigation misconduct in this case and because the standard for finding an exceptional case has changed since the district court issued its ruling regarding attorneys’ fees, we also remand this issue for further consideration by the district court.
Earlier in the opinion (p.6), the Court reiterated that the defendant's invalidity and noninfringement arguments were "not unreasonable."  Perhaps this will affect the district court's decision whether to enhance damages (and if so by how much), and whether to award fees?

Thursday, September 8, 2016

Xu on Damages for IP Infringement in China

Xu Zhuobin, Judge of the IP Tribunal of the Shanghai Higher People's Court, has published an article titled Review & Analysis on IP Infringement Cases with High Damages Awards:  Damages Determination Method and Evidence Production in China Patents & Trademarks, No. 1, 2016, pp. 98-104.  Judge Xu notes the "prevailing conception among the general public . . . that infringement damages awarded by the Chinese courts tend to be low," but argues that this does not "represent[ ] the whole picture, as there have been actually a number of IP infringement cases in which the rightholders were awarded generous damages" (p.99).  He briefly reviews seven such cases, including four copyright, one trademark, one integrated circuit layout design, and one patent case, in which damages exceeded RMB 1 million.  (In the patent case, Netac Technology Co. v. Beijing Watertek Information Technology Co., Guangxi Zhuang Autonomous Region Nanning Intermediate People's Court's Civil Judgment No. Nanshiminanchuzi 59/2012 (2015), the damages awarded by the first instance court amounted to RMB 40 million, which at today's exchange rate would equal about $US 6 million. As of June 2015, the defendant had announced its intent to appeal.)  In some of these cases, the plaintiff was unable to prove its own actual loss or the defendant's gain from the infringement; but there was evidence from which one could estimate the defendant's overall profit on infringing goods.  Based on this evidence, rather than awarding maximum statutory damages (which are available when you can't calculate actual loss or gain, and is by far the most common remedy for patent infringement in China, see discussion here), the court in its discretion awarded damages in excess of the maximum statutory damages amount on the theory that the actual gain was surely in excess of that amount.  This might seem at least roughly analogous to the practice in Germany whereby courts will make a rough estimate of damages in their free discretion (nach freier Überzeugung) when the evidence presented by the parties isn't adequate to make any more precise estimate (see my discussion in my paper Patent Damages Heuristics at p.20 & n.76).  Judge Xu also discusses recent initiatives to authorize penalties for evidence spoliation.

Tuesday, September 6, 2016


1.  Inika Charles published an August 16, 2016 post on the Spicy IP Blog titled Ericsson’s offer of SEP terms to TCL held to adhere to FRAND standards by U.S Court.  The post discusses a recent order of the U.S. District Court for the Central District of California (Selna, J.), in a dispute between Ericsson and TCL.  (I tried finding the order on Lex Machina and didn't succeed, but I think I found the order in question on Westlaw as 2016 WL 4150033--though on Westlaw it's dated July 25, not August 1 as stated in the blog post.)  Anyway, the district judge ruled, first, that Ericsson didn't violate the nondiscriminatory aspect of its FRAND commitment by offering TCL only essential patents and not certain nonessential implementation patents that were licensed to other companies.  Judge Selna also held that Ericsson wasn't engaging in double dipping by bundling together 2G, 3G, and 4G patents, even though Qualcomm had licensed the 3G patents and sublicensed them to TCL, as long as TCL was only paying for the 2G and 4G patents.  A jury will determine whether the terms of Ericsson's offer and Ericsson's overall conduct were "fair."  

The post also states that the judge dismissed TCL's argument that the court is bound by an arbitration panel's determination that an offer Ericsson made to Huawei was discriminatory.  I don't see any mention of this in the order available on Westlaw, so maybe there is a subsequent August 1 order that discusses this issue but isn't up on Westlaw or Lex Machina yet.

The author also notes Ericsson has an infringement suit pending against TCL in the Eastern District of Texas, and briefly discusses some of Ericsson's litigation in India.
2.  Thomas Musmann and Henrik Timmann published a September 1, 2016 post on the Kluwer Patent Blog titled Trolls Get Ease on Collaterals Under German Procedural Law.  The post discusses a June 21 decision of the German Federal Supreme Court (available here--I haven't read it yet myself, though) holding that an NPE/owner of purported standard essential patents was a resident of the E.U., and thus was not obligated to post security for costs, where the plaintiff had a registered address in Ireland.  According to the authors (emphasis in original):
Irrespective of the registered domicile, which was not decisive for Sec. 110 ZPO, all places where effective management might be present (domicile / office of the first managing director or domicile / office of the second managing director) were located within the EU. . . .  The decision leaves a number of questions unanswered, in particular how much responsibility needs to be borne inside the EU/EEA in cases where part of the management is domiciled outside. But the decision certainly alleviates the burden for any plaintiff, in particular for NPE’s, when they try to establish a cheap and simple domicile just for litigation purposes.
3.  Bristows' Clip Board Blog published a short post recently titled FRAND in Finance discussing the European Commission's acceptance of "legally binding commitments from the International Swaps and Derivatives Association Inc. (ISDA), a trade organisation in the market for over-the-counter derivatives, and Markit, a financial information service provider, to license their IP on fair, reasonable, and nondiscriminatory (FRAND) terms."  The post links to the Commission's press release, which states that:
In July 2013, the Commission raised concerns that ISDA, Markit and some of its member investment banks breached EU antitrust rules by:
  • refusing to license the Final Price for exchange trading,
  • subjecting the Final Price to a Use Agreement which contains restrictions for its use for exchange-traded products or transactions and
  • refusing to licence the CDX and iTraxx indices for exchange trading.
This may have blocked or delayed the emergence of an effective, safer and cheaper market for exchange traded credit derivatives, which would have reduced the bid-ask spreads imposed by CDS dealers and thus the costs of trading. . . .
The main elements of the commitments are:
  • both ISDA and Markit will exclude CDS dealers from taking individual licensing decisions and prevent them from influencing such decisions.
  • ISDA will license its rights in the Final Price for the exchange trading on fair, reasonable and non-discriminatory (FRAND) terms.
  • Markit will license its rights in the iTraxx and CDX indices on FRAND terms for exchange traded financial products based on the indices it owns.
The commitments will apply for ten years, during which ISDA and Markit's compliance will be monitored by independent trustees. In addition, both sets of commitments are subject to third-party arbitration in case of dispute. The commitments will facilitate access to essential price data and indices for CDS exchanges and exchange products. It will also facilitate access for investors whose statutes may oblige them to trade on regulated venues only.

The post and the press release aren't clear on what the underlying IP rights are, though perhaps the information can be gleaned from documents available on the Commission's webpage for the case. I'm guessing they might be rights under the E.C. Database Directive.   

Hat tip to Norman Siebrasse for bringing these last two matters to my attention.

Friday, September 2, 2016

Samsung's Supreme Court Reply Brief Now Available

Courtesy of Scotus Blog, here is a link to Samsung's reply brief in its design patent damages case against Apple.  For links to the other briefs filed in the case see either the Scotus link in the preceding sentence or my previous post here.  Samsung argues, among other things, that "Apple now admits" that the "article of manufacture" on which the total profit may be awarded may be a component of a product, not the entire product (p.1).  Maybe this will give the Supreme Court some room to distinguish this case from the ones that apparently motivated Congress to enact what is now section 289 back in the nineteenth century--that is, to conclude that where the design is affixed to a detachable component, the profit should be based on that component even if the component isn't sold separately; but where (as with carpets, etc.) it isn't detachable, the relevant article of manufacture is the entire product. 

It's a little cheeky, perhaps, that Samsung cites, albeit as authority only for the fairly innocuous proposition that "patent liability is a strict liability offense" (p.8), William F. Lee & A. Douglas Melamed, Breaking the Vicious Cycle of Patent Damages, 101 Cornell L. Rev. 385, 403-04 (2016).  That's the same William F. Lee, of course, who is lead counsel for Apple.