Friday, December 29, 2017

Liu on Accountings of Profits Under U.K. Law

I hope to publish a post on Judge Selna's opinion in Ericsson v. TCL sometime next week; meanwhile, Professor Jorge Contreras's analysis of the opinion on Patently-O is quite thorough and highly recommended.  Meanwhile, to close out the year, for readers interested in the remedy of accountings of profits (that is, awards of the infringer's profits, sometimes referred to as disgorgement of profits) Professor Deming Liu has recently published two articles in the European Intellectual Property Review (EIPR) on the topic:  Reflecting on an Account of Profits for Infringement of Intellectual Property Rights, 39 EIPR 686 (2017), and  What costs are deductible in accounting for profits for infringement of intellectual property rights? The Court says, "not all of them!", 39 EIPR 749 (2017).  The articles are available on Westlaw.  Here are the abstracts of the two articles, respectively:
The article debates on the changes the EC Intellectual Property Enforcement Directive brings about for the law of an account of profits in the UK. It also examines case law to establish how the courts take the account and what methods they use in allocating the profits. Inter alia, it criticises the court’s approach toward remuneration for the infringers’ skills and labour. Furthermore, it argues against the UK court’s refusal to change the principle of election between an account of profits and damages. It yet again takes issue with some courts’ approach to apportioning profits.
The Court of Appeal in Hollister Inc Dansac AS v Medik Ostomy Supplies Ltd and Design & Display Ltd v Ooo Abbott visited the issue of what proportion of general overheads can be deducted in accounting for profits. The court held that such a proportion of the general overheads as attributable to the infringement can be deducted; in making such a calculation, the court adopts the concept of the opportunity cost. To what extent is that test correctly applied by the lower courts, and what techniques do the courts employ in apportioning the overheads in practical terms? The article discusses these questions.

Wednesday, December 27, 2017

European Commission Communications on IP Rights

As I noted on November 30 (here), in addition to publishing a communication on the EU approach to SEPs on November 29 (see post here), the European Commission had also published two other communications relevant to IP enforcement, a Communication from the Commission to the Institutions on Guidance on certain aspects of Directive 2004/48/EC of the European Parliament and of the Council on the enforcement of intellectual property rights and a Communication from the Commission to the Institutions - A balanced IP enforcement system responding to today's societal challenges. (There is also something called the "COMMISSION STAFF WORKING DOCUMENT: Overview of the functioning of the Memorandum of Understanding on the sale of counterfeit goods via the internet," described as an "Accompanying document to the COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE: A balanced IP enforcement system responding to today's societal challenges," available here.)  The first of these is probably of greater importance to the law of remedies as such, though as the Commission notes it isn't legally binding, and in large part summarizes existing CJEU judgments on remedies, including the judgments in Stowarzyszenie ‘Oławska Telewizja Kablowa’ v. Stowarzyszenie Filmowców Polskich, Case C-367/15 on whether E.U. member states can award double damages for copyright infringement (see my blog post here), and in UnitedVideo Properties, Inc v Telenet NV, C-57/15 on the recovery of attorneys' and advisors' fees in IP cases (see my blog post here).  On these issues the document states, inter alia, the following:
Article 13(1)(b) of IPRED [the Intellectual Property Rights Enforcement Directive] does not preclude national legislation under which a holder of an infringed IPR may claim from the infringer the payment of a sum corresponding to twice the hypothetical royalty/fee. While Article 13(1)(b) of IPRED does not necessarily require such doubling of that hypothetical royalty/fee, the national legislation implementing this provision should enable the rightholder to demand that the damages set as a lump sum are calculated not only on the basis of the single amount of that hypothetical royalty/fee, but also on the basis of other appropriate aspects. This can include compensation for any costs that are linked to researching and identifying possible acts of infringement and compensation for possible moral prejudice or interest on the sums due. . . .
Article 14 of IPRED does not preclude national legislation providing for a flat-rate scheme to reimburse costs for a lawyer’s assistance, provided that those rates ensure that the costs to be borne by the unsuccessful party are reasonable, taking into account features which are specific to the case. However, Article 14 precludes national legislation providing for flat rates which are too low to ensure that, at the very least, a significant and appropriate part of the reasonable costs incurred by the successful party are borne by the unsuccessful party. . . .
Article 14 of IPRED applies to legal costs, which includes lawyers’ fees, as well as to other costs directly and closely related to the judicial proceedings concerned. The latter includes costs incurred for the services of a technical adviser, where those services are essential in order for a legal action to be usefully brought seeking, in a specific case, to have a right upheld.
Much of the document, however, discusses such topics as injunctions against intermediaries (often of greater relevance in the copyright and trademark arenas), preservation orders, the provision of security, confidentiality measures, and so on.  The Commission also has some kinds words about protective letters (a/k/a protective briefs or writs), an instrument by which "a defendant fearing to be sued for an IPR infringement (for instance, because it has received a warning letter from the rightholder) informs the competent judicial authorities in advance, (i.e. even before an application has been made), why the potential infringement claim is, according to the defendant, not founded," stating:
Although not expressly provided for in IPRED, the instrument of a protective brief can be seen as a good instrument to help balance, in a fair and proportionate manner, the various conflicting interests and fundamental rights at issue in relation to the possibility of issuing ex parte measures set out in Articles 7(1) and 9(4) of IPRED.
For previous metnion on this blog, see, e.g., here, here, and here.

Saturday, December 23, 2017

Judge Selna's FRAND Decision Is Out

Update (12/27/17):  Here are links to the opinion, in three parts:  part 1, part 2, and part 3.

Hat tip to Matt Larson of Bloomberg, who mentioned this on Twitter, and to Scott Graham of The Recorder.  The latter source links to the opinion (divided into three parts), in which U.S. District Judge James Selna (Central District of California) awarded Ericsson $16,449,071 in past royalties, less than half of what it sought from TCL Communications, and set the rates going forward for the use of certain FRAND-committed SEPs belonging to about 150 patent families.  (The opinion is not showing up on Lex Machina just yet.)  I haven't read much of the opinion yet myself, and I don't plan to until after Christmas, but I'm sure I'll have something to say about it sometime next week.  Mr. Graham reports that the decision focuses on the "nondiscriminatory" portion of the FRAND commitment, and applies a top-down methodology. Mr. Larson also refers to a jury decision last week (Eastern District of Texas, judgment here) awarding Ericsson $75 million for TCL's infringement of a single patent.

And, lest I forget, Season's Greetings to my readers, from the Comparative Patent Remedies Blog.

Thursday, December 21, 2017

Compulsory Licensing in Germany

In July and September I blogged (here and here) about the decision of the German Federal Supreme Court (Bundesgerichtshof) to affirm the grant of a preliminary injunction authorizing the compulsory licensing to Merck of the German component of a European patent held by the Japanese firm Shionogi on the anti-AIDS drug raltegravir.  Since then there have been several other writeups, including posts on EPLaw (by Tobias Wuttke), the IAM Blog (by Johann Pitz), the Kluwer Patent Blog (by Jochen Buehling), and SpicyIP (by Dr. Thorsten Dierkes and Dr. Anuradha Sharma).  (IAM also published a follow-up last week, discussing calls coming from the Netherlands for greater use of compulsory licensing of pharamceuticals, see here.)  These are all worth reading, for their takes on how the court understands the "public interest" requirement for the granting of a compulsory license, as well as the "urgency" requirement for granting a preliminary injunction (basically, it's not as relevant in this context as in others if the moving party hesitated to seek relief, given that the basis for granting a compulsory license is to protect the public interest).  The authors all note that this is the first time that the BGH has affirmed the grant of a compulsory license for a drug, so perhaps the decision heralds a new approach in German (and European) law on the subject; though for reasons I stated in my July post I would still hesitate to draw too many conclusions on the basis of this one case that, as explained in my post, involved what appeared to be rather unusual facts.  It also is worth noting, as explained in this subsequent post by Dr. Rudolf Teschemacher on EPLaw, that the EPO Technical Board of Appeal on October 11 revoked Shionogi's patent.  (The decision doesn't appear to be up yet on the EPO's website, though presumably it will be before too much longer.) 

Tuesday, December 19, 2017

The Düsseldorf Court of Appeals' Decision in SISVEL v. Haier

Christopher Weber published a post on the IPKat blog last month discussing a judgment of the Düsseldorf Oberlandesgericht (decided in March, but only recently published) addressing the procedure SEP owners and implementers should follow in the wake of the CJEU's decision in Huawei v. ZTEHere is a link to the full text of the decision, in German; I have not yet read all of it myself, so I may have more to say about it in due time.  For now, I'll mostly just note a couple of important points made by Mr. Weber:

1.  According to Mr. Weber, the court held that the patent owner's claim for damages is limited to a FRAND royalty, a conclusion he describes as "an important part of the decision."  Whether this is a change from previous German law, however, is not so clear to me.  As noted here, a previous decision had held only that the amount of damages would be constrained by the FRAND amount if the patentee had not made a good-faith FRAND offer.  I think that's what the Düsseldorf court is getting at too in paragraphs 350 and 351 of the decision, and I'm not sure this means that FRAND constrains the amount of damages if the implementer is the one in default of its obligations under Huawei (but it would be interesting to hear more about this issue).  More generally, the question of whether a FRAND royalty is less than a reasonable royalty (or whatever other monetary remedy would be forthcoming, were the patent in suit not FRAND-committed) is an important one.
2.  Mr. Weber also provides an interesting discussion of the court's understanding of the parties' respective burdens of proof:
. . . the Court found that the Claimant did not submit an offer in conformity with the FRAND-requirements. None of the offers submitted to the Defendant was non-discriminatory in comparison to license agreements between the Claimant and other licenses on the same patent. FRAND would not mean that each offer has to be similar, but the difference has to be justified in an objective way. If the patent holder did not offer a FRAND-conform license to the infringer, the infringer is not obliged to show his willingness with a counter offer in conformity with the FRAND-principles. The duties established by the ECJ are not independent from each other. This highlights a certain difference to case-law from other jurisdiction: Quite obviously German courts think that the letters "ND" are points that need to be discussed separately from "FR". An offer may be fair and reasonable but still be discriminatory.
In principle, the patent infringer bears the burden of proof for the fact that the license offer was not in conformity with the FRAND principles not only under German procedural rules but also under European Competition law. However, the patentee bears the subsidiary burden of proof ("sekundäre Darlegungslast") about the details of the FRAND-license agreements with third licensees. . . .
The Court then held that the offer of the Claimant to conclude a FRAND-license agreement discriminates the Defendant in comparison to the relevant license agreements with third parties. The fees are exorbitantly higher. . . .
According to Mr. Weber, the matter is now on appeal before Germany's Federal Supreme Court. 

Monday, December 18, 2017

Petitions for Certiorari Relating to Patent Damages

There are two petitions for certiorari currently pending before the U.S. Supreme Court relating to patent damages issues.  It may be a few weeks or more before we know whether the Court will decide to hear either case.

The first is WesternGeco LLC v. ION Geophysical Corp., No. 16-1011, petition filed February 17, 2017.  The question presented is "Whether the U.S. Court of Appeals for the Federal Circuit erred in holding that lost profits arising from prohibited combinations occurring outside of the United States are categorically unavailable in cases where patent infringement is proven under 35 U.S.C. § 271(f)."  Readers may be familiar with the underlying case, which I have blogged about before (see here, here, and here).  For background, section 271(f) of the Patent Act reads as follows:
(1) Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.
(2) Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use, where such component is uncombined in whole or in part, knowing that such component is so made or adapted and intending that such component will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

The defendant in this case was found liable under section 271(f), based on evidence that it supplied components of the invention from the U.S. to foreign customers, who then assembled them and performed marine seismic surveys for customers on the high seas.  The patent owner argues that, but for the infringement, it would have carried out those surveys and earned the resulting profit.  The Federal Circuit concluded, however, that the patent owner may not recover damages for lost profits arising from services it would have been performed outside the U.S., even if the evidence indicates that, but for the unlawful conduct that occurred within the U.S. (the supplying of the components), it would have performed those services.  Judge Wallach dissented.  (For more details, read my earlier posts.)  Anyway, here are links to the briefs filed so far (courtesy of Scotus Blog), including one filed this past week at the Supreme Court's behest by the Solicitor General (who urges the Court to reverse):

So far I've only carefully read the SG's brief, which argues that the principle of full compensation requires that the patent owner recover its lost profits on these facts, subject to normal tort law principles of proximate causation; and that such an award would not contradict the general principle against extraterritorial application of U.S. patent law.  Similar issues have arisen in the Federal Circuit's decisions in Power Integrations and Carnegie-Mellon v. Marvell (see previous posts here, here, here, here, and here), all of which the SG appears to believe were wrongly decided (see brief p.19).  The SG also argues that the rule Federal Circuit applied here departs from the rule that other courts have applied in copyright cases (see pp. 19-20); given the Supreme Court's predilection in some recent cases (Impression Products v. Lexmark, SCA Hygiene Products) to construe patent and copyright rules in a similar fashion, that might be a persuasive point for the Court.  In addition, the SG notes the possibility that in cases like these the defendant might have had available a noninfringing alternative (shifting its production overseas, where it wouldn't implicate U.S. patent law at all), but if so this is a matter the trier of fact should consider (see p.9 n.1).

In regard to the issues presented in this case, I should note that a few weeks back Norman Siebrasse published a very interesting post inspired by a recent Canadian case that could be read as implicating some analogous issues, see here.

2.  I am informed that EVE-USA, Inc. has filed a cert petition (No. 17-804) in a case that the Federal Circuit recently decided under the name Mentor Graphics Corp. v. EVE-USA, Inc. (see previous posts here and here).  I haven't seen a copy of the petition itself yet, but presumably it will be available on Scotus Blog or some other site before long.  In Mentor Graphics, the Federal Circuit held that the owner of a patent on a component that is incorporated into a multicomponent product can recover whatever profit it lost (if any) from sales it lost as a result of the defendant's infringement, rather than an apportioned lost profit.  For reasons stated in my previous posts, I think that decision is eminently correct, so I am hoping the Court will deny cert on this issue--a result that, it appears to me, would be dictated by the SG's full compensation principle in WesternGeco, were the Court to accept that principle.

Thursday, December 14, 2017

Cambridge Handbook of Technical Standardization Law

The Cambridge Handbook of Technical Standardization Law Competition, Antitrust and Patents, edited by Professor Jorge Contreras, is now available.  Here is a link to CUP's webpage for the volume, here is a link to Amazon's webpage, and here is the book description:
Technical standards are ubiquitous in the modern networked economy. They allow products made and sold by different vendors to interoperate with little to no consumer effort and enable new market entrants to innovate on top of established technology platforms. This groundbreaking volume, edited by Jorge L. Contreras, assesses and analyzes the legal aspects of technical standards and standardization. Bringing together more than thirty leading international scholars, advocates, and policymakers, it focuses on two of the most contentious and critical areas pertaining to standards today in key jurisdictions around the world: antitrust/competition law and patent law. (A subsequent volume will focus on international trade, copyright, and administrative law.) This comprehensive, detailed examination sheds new light on the standards that shape the global technology marketplace and will serve as an indispensable tool for scholars, practitioners, judges, and policymakers everywhere.
Norman Siebrasse and I contributed a chapter titled Judicially Determined FRAND Royalties.  Congratulations, Jorge, and good work on shepherding this project through to completion!

Tuesday, December 12, 2017

Federal Circuit Affirms Award of Attorneys' Fees for Entire Case, Including Appeal

The case is Inventor Holdings, LLC v. Bed Bath & Beyond, Inc., released this past Friday (opinion by Judge Chen, joined by Judges Wallach and Stoll)In a nonprecedential opinion last year, the Federal Circuit affirmed a judgment that the patent in suit (which "relates to a method of purchasing goods at a local point-of-sale system from a remote seller" (p.2)) was invalid under section 101, and now it affirms the district court's conclusion on remand that the plaintiff should have to pay attorneys' fees, including fees incurred on appeal, stating that "the district court acted within the scope of its discretion in finding this case to be exceptional based on the weakness of IH’s § 101 arguments and the need to deter similarly weak arguments in the future. . . . There were obvious issues with the ’582 patent’s claims that IH should have recognized post-Alice, and these issues persisted throughout the § 101 appeal. The district court was in a position to readily assess these issues as a collective whole and did not abuse its discretion in awarding BBB its appellate attorney fees" (pp. 9, 14).

Monday, December 11, 2017

Federal Circuit Clarifies Burden of Production on Patent Marking

In a decision handed down last Thursday, Arctic Cat Inc. v. Bombardier Int'l, the Federal Circuit addressed several issues relating to patent damages.  The opinion is authored by Judge Moore, joined by Judges Plager and Stoll.

The patents in suit "disclose a thrust steering system for personal watercraft ('PWC') propelled by jet stream" (p.2).  The principal substantive issue on appeal is nonobviousness, and the Federal Circuit affirms the district court's judgment that the inventions are nonobvious.  On damages, the major issue surrounds patent marking.  As I explained in this post of April  19, U.S. Patent Act section 287(a) reads as follows: 
Patentees, and persons making, offering for sale, or selling within the United States any patented article for or under them, or importing any patented article into the United States, may give notice to the public that the same is patented, either by fixing thereon the word “patent” or the abbreviation “pat.”, together with the number of the patent, or by fixing thereon the word “patent” or the abbreviation “pat.” together with an address of a posting on the Internet, accessible to the public without charge for accessing the address, that associates the patented article with the number of the patent, or when, from the character of the article, this cannot be done, by fixing to it, or to the package wherein one or more of them is contained, a label containing a like notice.In the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter, in which event damages may be recovered only for infringement occurring after such notice. Filing of an action for infringement shall constitute such notice.
Generally speaking, then, a patent owner can recover damages for patent infringement that occurs only after the owner has put the defendant on either actual notice (e.g., by sending an appropriately worded cease-and-desist letter, or serving a complaint for infringement) or constructive notice (by complying with the patent marking statute). By encouraging patent owners to provide public notice of the patent-protected status of their products, the statute is said to help both implementers and the general public to identify which products are subject to patent protection. The rule has many complications and exceptions, however, and for what it's worth my view is that we'd be better off if we didn't condition the availability of damages on marking. . . . 
Anyway, in the present case the question was whether one of the patent owner's licensees had substantially complied with the marking statute (because if it didn't, then the damages would accrue only from the point in time at which the defendant was put on actual notice). As the court explains:
A patentee’s licensees must also comply with § 287, because the statute extends to “persons making or selling any patented article for or under [the patentee].” . . .  Recognizing that it may be difficult for a patentee to ensure his licensees’ compliance with the marking provisions, we have held that where third parties are involved, courts may consider “whether the patentee made reasonable efforts to ensure compliance with the marking requirements.” . . .
There is no dispute that the patentee bears the burden of pleading and proving he complied with § 287(a). . . . There is no dispute that Arctic Cat did not require Honda to mark; in fact, it expressly authorized Honda to sell licensed products without marking. And it is likewise undisputed that Honda did not mark any of its PWCs with the patent numbers at issue. Thus, if Honda sold PWC products covered by the patents at issue, Arctic Cat has failed to satisfy the marking requirements. The only dispute between the parties is whether any of the Honda PWCs was covered by the patent claims at issue. . . (pp. 20-21).
Resolution of this issue, however, may depend on who has the burden of identifying the relevant unmarked products, and exactly what that burden entails:
There is a split among the district courts regarding which party must initially identify the products which it believes the patentee failed to mark. Some courts require the alleged infringer to initially identify products it believes practice the asserted patents. . . .
We hold an alleged infringer who challenges the patentee’s compliance with § 287 bears an initial burden of production to articulate the products it believes are unmarked “patented articles” subject to § 287. To be clear, this is a low bar. The alleged infringer need only put the patentee on notice that he or his authorized licensees sold specific unmarked products which the alleged infringer believes practice the patent. The alleged infringer’s burden is a burden of production, not one of persuasion or proof. Without some notice of what market products BRP believes required marking, Arctic Cat’s universe of products for which it would have to establish compliance would be unbounded. . . . Permitting infringers to allege failure to mark without identifying any products could lead to a large scale fishing expedition and gamesmanship. Once the alleged infringer meets its burden of production, however, the patentee bears the burden to prove the products identified do not practice the patented invention.
We do not here determine the minimum showing needed to meet the initial burden of production, but we hold in this case it was satisfied by BRP. At trial BRP introduced the licensing agreement between Honda and Arctic Cat showing Honda’s license to practice “Arctic Cat patents that patently cover Arctic Cat’s Controlled Thrust Steering methods, systems and developments.” . . .  BRP identified fourteen Honda PWCs from three versions of its Aquatrax series sold between 2002 and 2009. . . .  BRP’s expert testified that he “review[ed] information regarding those models” and believed if BRP’s OTAS system practiced the patents, so did Honda’s throttle reapplication system in the Aquatrax PWCs. . . . This was sufficient to satisfy BRP’s initial burden of production (pp.22-24).
The court then remands to determine if the plaintiff can prove that the Honda PWCs do not practice the patents in suit.
As for other damages issues, the court rejects the defendant's challenge to the plaintiff's expert's estimate of a reasonable royalty rate (without any extended discussion of the expert's methodology) and affirms the granting of an ongoing (future) royalty rate in lieu of an injunction at a higher rate (the actual rate awarded is not disclosed).   I've argued many times in the past that sound economic analysis would result in awarding the same rate for both pre- and postjudgment infringement (see, e.g., here), but for now the Federal Circuit continues to adhere to its silly precedent on this issue.
Finally, the court affirms the jury's finding of willfulness and the judge's grant of treble damages, noting among other things that post-Halo a finding of subjective willfulness will suffice:
. . . The jury’s willfulness finding is supported by substantial evidence. In denying BRP’s motion for judgment as a matter of law on willfulness, the district court found substantial evidence demonstrated that BRP knew about the patents before they issued, conducted only a cursory analysis of the patents, waited years before seeking advice of qualified and competent counsel, and unsuccessfully tried to buy the asserted patents through a third party. . . .
Finally, the district court did not abuse its discretion by trebling damages. While the district court initially trebled damages without much explanation . . . it explained its decision in a subsequent thorough and well reasoned opinion. See J.A. 99–116 (applying the factors outlined in Read Corp. v. Portec, Inc., 970 F.2d 816 (Fed. Cir. 1992)). Although the district court did not allow the parties to brief the issue, we will not adopt a blanket rule that a district court abuses its discretion by deciding an issue without receiving briefing from the parties. . . (pp. 29-30).

Thursday, December 7, 2017

AIPPI Resolution on Quantification of Monetary Relief

In early October I mentioned that the AIPPI World Congress would be meeting in Sydney to discuss, among other matters, the quantification of monetary relief for the infringement of IP rights.  My post also included  a link to the AIPPI webpage on this topic, which in turn included links to forty individual country reports.  Anyway, if you go to that link now you will also find a link to the resolution AIPPI adopted on October 17.  I won't quote it in full, but here are some of the more interesting parts of the AIPPI resolution.

First, point (1) of the resolution sets out the general principle that "Damages should compensate the right holder: a) for its lost profits in respect of sales of products or services that the right holder would have made but for the infringement; and/or b) for its lost profits in respect of price erosion; and/or c) by a reasonable royalty in respect of infringing sales that are not proved to have been lost sales of the right holder, save that the right holder cannot recover twice for the same loss."  Proceeding from these premises, point (2) notes that "the task is by its nature one of estimation," and point (3) then lists various factors that may be relevant to the calculation of lost profits, including "the availability of other substitutable products or services in the market."  This last point would, if adopted in the U.K., require the overruling of the old United Horse-Shoe case, which stands for the proposition that noninfringing alternatives are not relevant to the calculation of lost profits--and would therefore be a welcome change in the law.  (For my critique of United Horse-Shoe, see, e.g., here.)  Interestingly, I don't see any discussion of this specific issue in the U.K country report.  In addition, point (6) states that "Damages should also be recoverable where sales of goods or services of the right holder that compete with the infringement but do not embody the IP right have been lost because of the infringement, as long as the right holder proves a causal nexus between the infringement and the lost sales. The court may take the degree or strength of causation into consideration when considering the appropriate quantum of damages."  This is the rule followed in the U.S. under the Rite-Hite case, and although it remains controversial among some scholars it has always seemed correct to me if the overarching goal is to ensure that the patent owner is no worse off as a result of the infringement. 

Second, point (9) lists various factors that may be relevant to determining a reasonable royalty:
a) other licence agreements of the same IP right as the IP right in suit (but taking due account of the circumstances in which any such other licence agreement was negotiated and, in particular, but not limited to, whether infringement and/or validity of the IP right in suit had been determined);
b) other licence agreements of similar IP rights to the IP right in suit;
c) the cost of non-infringing alternatives;
d) advantages of the IP right in suit when compared with alternatives (including any applicable licence fees for alternatives);
e) profitability of the products or services encompassing the IP right in suit;
f) development costs of the IP right in suit; and
g) the absence and/or circumstances of prior licensing discussions between the
Up to a point, this is a reasonable distillation of two of what in my view should be the three most relevant factors:  comparables (a and b), and the advantage of the IP over alternatives (c and d).  The other major consideration, in my view, is apportionment (to what extent does the invention contribute to the profitability of the end product), and I don't see subpoint "e" fully addressing this issue.  (Neither does point (13), which states "Where the IP right in suit relates to a part of a multi-component product or service sold by the infringer, the value to be attributed to the IP right in suit (and the compensation available by way of lost profits or reasonable royalty) should be assessed having regard to the extent to which the infringing component provides the basis for customer demand for that multi-component product or service.")  I think it would have good to make that issue clearer.  I also don't agree with subpoint (f), since patents and other IP rights (again, in my view) are a reward for success, not effort, though I realize there is a robust debate (see, e.g, Ted Sichelman's work) on the question of whether damages should be based more on the cost of development. 

In addition, point (10) states that "In assessing a reasonable royalty, the parties should be considered as if they were willing licensor and licensee respectively, with the attributes of the actual right holder and infringer, but disregarding the fact that one or both parties would not in practice have agreed to license the IP right in suit," and point (11) correctly observes that "A reasonable royalty should be assessed on the basis that the IP right in suit is valid and infringed where validity and infringement have been determined in the same proceeding or, otherwise, if warranted in the circumstances." That corrective is necessary to avoid a double discounting problem, as I have observed many times elsewhere (and the observation is hardly original to me).  And point (16) notes the possibility of ongoing royalties when no injunction is granted (though it doesn't address whether injunctions should always or almost always be granted--that's not the topic of the resolution), stating that "In assessing a reasonable royalty where no injunction is granted, the royalty should include a royalty in respect of future infringements, if any."  It might have been good to add that, contrary to current U.S. practice, the rate should be the same rate used for pre-judgment royalties (a point I've made before, see, e.g., here), but so it goes.  Overall, though, I'd say this is a reasonably good resolution.

Monday, December 4, 2017

Assistant AG Delrahim's Speech on FRAND, Patents, and SSOs

A speech delivered on November 10 by the new head of the Department of Justice's Antitrust Division, Makan Delrahim, has gotten a fair amount of publicity from a number of sources, with for example the IAM Blog reporting that former USPTO Director David Kappos referred to the speech as "the most important DOJ antitrust speech on IP during my decades practising law, ” and similar praise coming from Judge Douglas Ginsburg and Koren Wong-Ervin in a paper titled The Department of Justice's Long-Awaited and Much Needed Course-Correction on FRAND-Assured Standard-Essential Patents.  Though I could be wrong, my own somewhat contrarian view is that the speech isn't nearly as significant as some of these observers seem to think.

First, while it's true that Mr. Delrahim's speech is very pro-patent-owner in its orientation--arguing, for example, that "holdout" on the part of prospective licensees is "a more serious impediment to innovation" than is "holdup" on the part of  patent owners, and suggesting that injunctive relief should be more widely available in SEP/FRAND cases--it's important to recognize that these views, while deserving of consideration and respect, are not binding on any court.  The Antitrust Division has no more of a say over the conduct of patent infringement litigation than does any other unrelated entity or person.

Second, while the speech clearly indicates that the DOJ won't view alleged violations of FRAND commitments as antitrust violations, or seek to penalize patent owners for seeking injunctions, this is hardly a change in course for the DOJ.  I don't believe there were any cases during the previous administration in which the DOJ challenged these practices as antitrust violations.  As I discussed in this paper in 2014, among the reasons why U.S. antitrust law wouldn't be conducive to such claims are that U.S. antitrust law generally doesn't condemn monopoly exploitation as opposed to expansion or maintenance, and (as Mr. Delrahim points out) doesn't regulate prices; there's also might be a Noerr-Pennington problem in basing liability based on a non-sham request for injunctive relief.  True, in 2013 the DOJ and USPTO jointly published a document titled Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary FRAND Commitments, which addressed "whether injunctive relief in judicial proceedings or exclusion orders in investigations under section 337 of the Tariff Act of 19301 are properly issued when a patent holder seeking such a remedy asserts standards-essential patents that are encumbered by a RAND or FRAND licensing commitment."  This document was cited by USTR Froman later that year in his veto of an exclusion order entered by the ITC.  And in two cases (Robert Bosch and Google/Motorola) the FTC (by a 3-2 vote) conditioned its acquiescence in a corporate acquisition on the acquiring party's commitment to not to seek injunctive relief for the infringement of FRAND-committed patents by willing licensees.  Still and all, there are lots of reasons why U.S. antitrust law hasn't gone any further than this, and probably wouldn't have done so under a President Hilary Clinton administration.  

Antitrust law in other countries, of course, may take a different approach, though one reason for this (as I have argued) is that in most other countries injunctions remain the default remedy for patent infringement, thus leaving antitrust (or the "abuse of right" doctrine, or something else) to pick up the slack.  But I don't view Mr. Delrahim's speech as presenting a big change in U.S. antitrust law on this issue (and even if it did, of course, his comments would bind at most the DOJ, not the FTC or the courts or the course of private antitrust litigation).

Mr. Delrahim's commentary could be significant in two other respects, however.  First, his comments may suggest that at the margin the DOJ will take a more hands-off approach to other types of cases at the intersection of IP and antitrust law.  Second, and more explicitly, Mr. Delrahim's comments suggest that the DOJ may take a harder look at the conduct of standard-setting organizations (SSOs) as potential violations of the Sherman Act.  The obvious implication here is the DOJ will be less likely going forward to take a favorable view of policies like those adopted by the IEEE in 2015, under which the SSO requires members not to seek injunctive relief against willing licensees and to calculate FRAND royalties using the SSPPU as the royalty based.  (See the  February 2, 2015 Business Review Letter from Renata Hesse, Acting Assistant U.S. Attorney General, to Michael Lindsay, available here.)  That shift in policy is potentially of some consequence, though to my knowledge no other SSO has followed the IEEE's lead in this regard (perhaps due to the controversy, whether deserved or not, that that policy engendered).

All told, then, while I could surely be proven wrong, I don't think the speech merits quite the reaction it has received among some of the commentators. 

Thursday, November 30, 2017

Further News from the European Commission on IP Enforcement

Annsley Merelle Ward of IPKat published a post last night on the Communication from the Commission to the Institutions on Setting out the EU approach to Standard Essential Patents (about which I also blogged yesterday, see here), stating that "neither of the camps who were intensely lobbying in advance of the publication seem able to declare an outright victory in respect of their primary positions . . . . It seems to be a score-draw."  The IPKat post also notes that the Commission published two other communications yesterday relevant to IP enforcement, a Communication from the Commission to the Institutions on Guidance on certain aspects of Directive 2004/48/EC of the European Parliament and of the Council on the enforcement of intellectual property rights and a Communication from the Commission to the Institutions - A balanced IP enforcement system responding to today's societal challenges. I will try to make some time over the next few days to read these and provide some comments here; IPKat also promises a future post on these two additional communications.  A busy end to the month!

Wednesday, November 29, 2017

European Commission Publishes Communication on the EU Approach to SEPs

Hat tip to Joff Wild of the IAM Blog, for reporting on the publication this morning by the European Commission of a document titled Communication from the Commission to the Institutions on Setting out the EU approach to Standard Essential Patents.  It's not terribly long (just 13 pages), but in the interests of time I'll just reproduce the bullet points as presented in the document itself while noting two things in particular that caught my attention.

First, the Commission urges an improvement in the quality and accessibility of information recorded in SDO (standard development organization) databases: 
The Commission: 
- calls on SDOs to urgently ensure that their databases comply with the main quality features described above and will co-operate with SDOs to facilitate this process; 
- calls on SDOs to transform the current declaration system into a tool providing more up-to-date and precise information on SEPs and will co-operate with SDOs in order to facilitate that process; 
- considers that declared SEPs should be subject to reliable scrutiny of their essentiality for a standard, and will launch a pilot project for SEPs in selected technologies with a view to facilitating the introduction of an appropriate scrutiny mechanism.
Second, the Commission sets out certain general principles for FRAND licensing terms for SEPs.  Among other things, this portion of the document states (at pages 6-7) that "Licensing terms have to bear a clear relationship to the economic value of the patented technology. That value primarily needs to focus on the technology itself and in principle should not include any element resulting from the decision to include the technology in the standard. In cases where the technology is developed mainly for the standard and has little market value outside the standard, alternative evaluation methods, such as the relative importance of the technology in the standard compared to other contributions in the standard, should be considered." The part about the value not including "any element resulting from the decision to include the technology in the standard" is consistent with a principle some of the U.S. case law has adopted, but inconsistent with Mr. Justice Birss's statement in Unwired Planet v. Huawei and with an argument made by Norman Siebrasse and me in our paper The Value of the Standard(For previous discusion of this matter on this blog, see here.)  The bullet points for this section are as follows:
- There is no one-size-fit-all solution on what FRAND is: what can be considered fair and reasonable can differ from sector to sector and over time. Efficiency considerations, reasonable licence fee expectations on both sides, the facilitation of the uptake by implementers to promote wide diffusion of the standard should be taken into account. 
- Determining a FRAND value should require taking into account the present value added of the patented technology. That value should be irrespective of the market success of the product which is unrelated to the value of the patented technology. 
- In defining a FRAND value, parties need to take account of a reasonable aggregate rate for the standard. 
- The non-discrimination element of FRAND indicates that rightholders cannot discriminate between implementers that are 'similarly situated'.
- For products with a global circulation, SEP licences granted on a worldwide basis may contribute to a more efficient approach and therefore can be compatible with FRAND. 
The Commission calls on SDOs and SEP holders to develop effective solutions to facilitate the licensing of a large number of implementers in the IoT environment (especially SMEs), via patent pools or other licensing platforms, while offering sufficient transparency and predictability. 
The Commission will monitor licencing practices, in particular in the IoT sector. It will also set up an expert group with the view to deepening expertise on industry licensing practices, sound IP valuation and FRAND determination.
Third, in a section titled "A Predictable Enforcement Environment for SEPs," the Commission states that "When assessing the availability of injunctive relief, courts are bound by Article 3(2) of the IPR Enforcement Directive, and notably the requirement to ensure that injunctive relief is effective, proportionate and dissuasive. Given the broad impact an injunction may have on businesses, consumers and on the public interest, particularly in the context of the digitalised economy, the proportionality assessment needs to be done carefully on a case-by-case basis. The Commission feels that considerations need to be given to the relative relevance of the disputed technology for the application in question and the potential spill-over effects of an injunction on third parties" (p.10, section 3.2).  I wonder if courts within the E.U., where injunctive relief still remains the default remedy for patent infringement at least outside the SEP context, will take this as a signal that they should be somewhat less wedded to that approach in a case in which an injunction would impose disproportionate harm on the infringer or the general public?  If so, I for one would welcome that development.  In any event, the bullet points for this section are:
The Commission considers that the FRAND process requires both parties to negotiate in good faith, including responding in a timely manner. Injunctive relief can, however, be sought against parties acting in bad faith (i.e. parties unwilling to take up a licence on FRAND terms), but it must be used proportionally. 
The Commission will: 
- work with stakeholders to develop and use methodologies, such as sampling, which allow for efficient and effective SEP litigation, in compliance with the industry practice of portfolio licensing; 
- further facilitate the roll-out of mediation and alternative dispute resolution tools; and 
- monitor the impact of PAEs in Europe.
Finally, the last (brief) section on open source and standards concludes with a bullet point stating that "The Commission will work with stakeholders, open source communities and SDOs for successful interaction between open source and standardisation, by means of studies and analyses."

Tuesday, November 28, 2017

Yesterday's oral argument in Oil States

This blog addresses the law and economics of patent remedies, and thus the constitutionality of inter partes review is a bit far afield; so I won't dwell on that matter, except to note one aspect of the oral argument that troubled me, from an economic perspective.  I'm referring to the comments made by Justice Breyer at pp. 29-31, where he states 
. . . suppose that the patent has been in existence without anybody reexamining it for 10 years and, moreover, the company's invested $40 billion in developing it. And then suddenly somebody comes in and says: Oh, oh, we -- we want it reexamined, not in court but by the Patent Office. Now, that seems perhaps that it would be a problem or not? . . .
. . . [D]o people gain a kind of vested interest or right after enough time goes by and they rely on it sufficiently so that it now becomes what? Is there something in the Constitution that protects a person after a long period of time and much reliance from a reexamination at a time where much of the evidence will have disappeared?
Later, at page 50, Justice Breyer appears to back away from a "vested right theory," but a related argument is taken up by Justice Gorsuch at pp. 47-48:
Mr. Stewart, let's say we had a land patent. Let's say the land patent said it becomes invalid if  anybody in -- uses the land in an improper way, in violation of an environmental law, labor law, you choose. 
Let's say the land then gets developed and turns into a housing development outside of, I don't know, Philadelphia. And it turns out, though, that a great-grandfather who owned the land originally back when it was a farm, indeed violated a labor or environmental law, rendering the land patent invalid on its terms. 
Could -- couldn't the Bureau of Land Management, for example, or some other department, Interior, official just pull back the patent?
The implication here, particularly of the latter quote from Justice Gorsuch, seems to be that invention patents and land patents should be treated the same way, and thus that at some point reliance interests should trump the public's interest in seeing that invalid patents are cancelled.  And yet from an economic perspective this makes no sense, because (as economists have been noting for decades) unlike land or personal property intellectual property is nonrivalrous.  Only a limited number of people can inhabit or use the same real or personal property at the same time, but an infinite number of people could use the inventive principle that is the subject of an invention patent without depleting it.  Or, to think of it another way, in Justice Gorsuch's example if my land is taken away I have to find another place to live.  If my patent is invalidated, I may suffer a financial loss (I can't license the patent any more, or use it to exclude competitors), and that's obviously undesirable from my point of view; but unless some other body of law (such as FDA regulation) prevents me there is nothing stopping me from continuing to use the inventive principle as much as I want.  

This seems like a pretty fundamental distinction to me, and I certainly hope that the outcome of Oil States does not hinge on such a weak analogy between real and intellectual property.  Comments?

Monday, November 27, 2017

Federal Circuit Places Burden of Proof on Noninfringing Alternatives on Patentee

At least that's the most important point that I would take away from the Federal Circuit's decision last week in Presidio Components, Inc. v. American Technical Ceramics Corp., an opinion authored by Judge Dyk (joined by Judges Moore and Taranto).  The patent in suit is for a type of capacitor, and the opinion discusses a variety of topics, among them claim definiteness and intervening rights (i.e., whether an amendment made during the course of reexamination was significant enough to excuse the defendant from liability for the period of time preceding the amendment).  I'll pass over those substantive matters, however, and focus on the remedies issues, which involve (1) lost profits, (2) enhanced damages, and (3) injunctive relief.  To cut to the chase, the district court (1) awarded $2,166,654 in lost profits, (2) awarded no enhanced damages despite a jury finding of willfulness, and (3) granted a permanent injunction.  The Federal Circuit reversed on (1), affirmed on (2), and vacated and remanded on (3).

As for the first of the remedies issues, the plaintiff argued that it was entitled to lost profits on sales it would have made but for the infringement.  During the period in question, the defendant sold two types of capacitors, one of which (the "550" capacitor) infringed and the other of which (the "560L") did not.  The relevant question therefore was whether purchasers of the infringing product would have purchased the noninfringing alternative from the defendant, had the defendant not produced the infringing model; if so, then the infringement didn't deprive the patentee of any sales, and it would be entitled only to a reasonable royalty.  (As I've noted before, this is correct as a matter of economics and is standard law in the U.S. and France, though not in the U.K.)  A subsidiary question centers on which party has the burden of proof:  is it the patentee's burden to demonstrate the absence of an adequate noninfringing alternative, or the defendant's burden to show that purchasers would have considered the alleged alternative to be adequate?  As several coauthors and I write in a draft of a forthcoming chapter of an edited volume titled Patent Remedies and Complex Products: Toward a Global Consensus (Cambridge University Press, forthcoming 2018):
. . . although U.S. law appears to place the burden of proving the absence of non-infringing alternatives on the patentee, to our knowledge there is little discussion in the legal or economic literature addressing whether this allocation of the burden of proof is optimal. One might speculate that the infringer often would be better placed than the patentee to propose and substantiate the existence of feasible alternatives (though perhaps patent owners have unique insights into the matter that are not apparent at first blush); or maybe the allocation of the burden of proof on this issue does not matter much in practice, since both parties often will be motivated to present the evidence that best favors their position. Further consideration in the scholarly literature would be welcome.
Anyway, the Presidio opinion pretty clearly follows the practice of placing the burden on the patentee, while also stating (1) that the relevant question is whether consumers would have viewed the alternative as an adequate substitute for the product the plaintiff was selling, and (2) that an alternative doesn't have to be on the market to be "available" (pp. 16-18):
ATC argues that the district court erred by finding that substantial evidence supported that Presidio had satisfied the second prong of Panduit analysis—the absence of an acceptable, non-infringing alternative. To prove the absence of acceptable, non-infringing alternatives, the patentee may prove either that the potential alternative was not acceptable to potential customers or was not available at the time. Grain-Processing Corp. v. Am. Maize-Prod. Co., 185 F.3d 1341, 1353–55 (Fed. Cir. 1999). . . .
The district court’s analysis and Presidio’s argument were flawed. The correct inquiry under Panduit is whether a non-infringing alternative would be acceptable compared to the patent owner’s product, not whether it is a substitute for the infringing product. “The ‘but for’ inquiry therefore requires a reconstruction of the market, as it would have developed absent the infringing product, to determine what [sales] the patentee ‘would . . . have made.’” Grain Processing, 185 F.3d at 1350. The district court erred by relying on evidence about sales of the 560L capacitor in competition with the currently infringing product, rather than comparing the 560L capacitor to Presidio’s BB capacitor in a  hypothetical market without the infringing 550 capacitor. There was not substantial evidence in the record upon which a jury could conclude that the 560L was not an acceptable, noninfringing  alternative for Presidio’s BB capacitors. Undisputed evidence showed that the 560L capacitor was less expensive than Presidio’s BB capacitor and also had lower insertion loss for at least some  frequencies, which indicates better performance.
On the question of availability, the district court determined that sufficient evidence supported the finding that the 560L capacitor was not an available substitute because unlike the infringing 550  capacitors, ATC sold the 560L capacitor only to a single customer and did not list it on its website. An alternative does not need to be on the market to be available. Grain Processing, 185 F.3d at 1356. But here, the alternative was on the market. The undisputed evidence shows ATC sold 88,000 560L capacitors to the customer. The fact that ATC only sold the 560L capacitor to a single customer does not establish that it was unavailable. Moreover, the fact that the 560L capacitor was not widely advertised when sold in a market with the 550 capacitor does not show a lack of availability. In a hypothetical market including the 550 capacitors, ATC may have chosen not to advertise the 560L capacitor. . . .
In summary, Presidio failed to provide evidence that the 560L capacitor was either not an acceptable or available substitute to Presidio’s BB capacitor. We reverse the denial of judgment as a matter of law. The jury’s award of lost profits is set aside; Presidio is only entitled to receive a reasonable royalty award. . . . Under these circumstances, a new trial is needed to determine the reasonable royalty award.
As for enhanced damages, the court affirms the district judge's decision not to award any notwithstanding the jury's finding of willfulness, noting the judge's conclusion "that the present case was a 'garden-variety' hard-fought patent case, rather than an egregious case of misconduct" (pp. 19-20), and holding that the court is not required to discuss the Read v. Portec factors (which can be relevant in determining the extent to which damages should be enhanced) (p.20).

Finally, on injunctive relief, the court holds that where lost profits are not proven is is less likely that the patentee will be faced with the prospect of irreparable harm--though not impossible, hence the need for a remand:
To prove irreparable injury, a patentee must show “1) that absent an injunction, it will suffer  irreparable harm, and 2) that a sufficiently strong casual nexus relates the alleged harm to the alleged infringement.” Apple Inc. v. Samsung Elecs. Co., 695 F.3d 1370, 1374 (Fed. Cir. 2012). To determine whether the patentee will suffer irreparable harm absent an injunction, the court may consider factors such as the nature of competition between the patentee and the infringer, the willingness of a patentee to license, and any lost sales the patentee has proven. . . .
Where irreparable injury is based on lost sales, “a likelihood of irreparable harm cannot be shown if sales would be lost regardless of the infringing conduct.” Apple Inc. v. Samsung Elecs. Co., 678 F.3d 1314, 1324 (Fed. Cir. 2012). Here, the district court correctly pointed out that a jury award of lost profits may support a finding of irreparable harm because it necessarily results in a finding that the patentee lost sales and would continue to lose sales in the future. Presidio, 702 F.3d at 1363. The district court then based its conclusion as to irreparable injury on the jury’s lost profits award. The district court reasoned that “[t]he jury’s lost profits award also supports a finding of irreparable injury” because “the jury necessarily found ATC’s [550] capacitor sales caused Presidio to lose BB capacitor sales.” J.A. 87. In light of our reversal of the lost profits award for lack of proof of past lost sales, we must vacate the injunction.
However, we do not decide whether this should be the end of the matter. The district court has  discretion to determine whether other evidence could support a finding of irreparable injury. In this respect, on remand, the district court should reopen the record and consider current evidence of irreparable harm. Since March 17, 2017, the injunction against ATC from selling 550 capacitors has been in effect. Based on the arguments and evidence presented to this court, it appears that this injunction may have created the hypothetical market necessary to determine whether consumers would purchase Presidio’s BB capacitors in the absence of ATC’s 550 series capacitors. On remand, the district court should consider whether consumers have turned to noninfringing alternatives to the BB capacitor, such as the 560L capacitor, after the 550 series capacitors became unavailable or whether Presidio’s sales of the BB capacitor have increased because the 550 series is no longer on the market. Based on this further evidence and other relevant evidence, the district court should determine whether Presidio has established irreparable injury and the appropriateness of an injunction. 
*                  *                   *

In other news, the U.S. Supreme Court is hearing two cases today on inter partes review:  Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, on the constitutionality of inter partes review, and SAS Institute Inc. v. Matal, on the narrower question of whether the PTAB is obligated "to issue a final written decision as to every claim challenged by the petitioner."

Saturday, November 4, 2017

Blogging Hiatus

I'm going to take a blogging hiatus for the next few weeks, while I devote some time to some other matters.  I hope to resume the blog before too long.  Meanwhile, I've published 837 posts since May 2013, so for those of you who are new to the blog, there's plenty of back reading.

Friday, November 3, 2017

More New Papers on FRAND, SEPs

1.  Joseph A. Alfred has published a paper titled Licensing Standards Essential Patents in les Nouvelles, Sept. 2017, pp. 223-28.  Here is a link to the paper, and here is the abstract:
This article reviews the progress of cellular standards and compares that rise with the increase of standards essential patents because of the smartphone. Relevant case law is examined including the seminal Georgia-Pacific fifteen factors and how they were cited in 95 cases since 1995. Relevant articles are reviewed concerning the smartphone royalty stack, GATT and standards and in particular the case law surrounding device licensing represented by the key factors deciding the Microsoft v. Motorola case. A way forward is proposed that industry once again take the lead to determine reasonable royalty when licensing standards essential patents.  
2.  Roberto Grasso has published a paper titled Standard Essential Patents:  Royalty Determination in the Supply Chain, 8 J. Euro. Comp. L. & Prac. 283 (2017).  Here is a link to the paper, which lists among its "key points" the principles that royalties should be calculated based on the SSPPU and on incremental ex ante value; that for complex products, one must take into account the aggregate royalty demand; and that SEP owners "must negotiate with and provide a FRAND license to anyone who requests it, regardless of which level of the value chain it operates."

3.   David Kappos published a paper in the May 2017 issue of AIPPI-Japan (pp. 111-17) titled Patent Hold-Up and Royalty Stacking--From Theory to Data to Rethink.  From the conclusion:
Scientific inquiry begins with hypotheses--it does not conclude with them. . .  [W]e must accept that the latest and most robust empirical studies dispatch with the theories of patent holdup and royalty stacking, and point towards a future where patents and standard play an enduring, viral and harmonious, role.
The paper cites to papers by Galetovic, Haber, and others that I have from time to time criticized on this blog.

Wednesday, November 1, 2017

Some Recent Articles, Posts on Unwired Planet v. Huawei

Readers will recall that back in April Mr. Justice Birss concluded in Unwired Planet v. Huawei (paras. 148-61) that FRAND is a point, not a range--one reason being to avoid a situation where both parties make FRAND offers and the court then has to decide which (if either) to accept.  I'm not sure I find that reasoning compelling; it seems to me more sensible to think of FRAND as a range, even if one consequence of this view is that courts sometimes will need to (somehow) select a rate within that range to decide a specific case.  One of Greg Sidak's papers that I mentioned on this blog recently (see here, heading number 6) also argues that FRAND is better conceived as a range, not a rate.  Anyway, the papers and posts listed below also address this issue, among others.

1.  Jorge Contreras has published a paper titled Global Markets, Competition, and FRAND Royalties:  The Many Implications of Unwired Planet v. Huawei, in the August 2017 issue of The Antitrust Source.  Here is a link to the article, and here is the abstract:
The recent UK decision in Unwired Planet v. Huawei addresses, for the first time, several key issues arising from the international nature of SEP licensing transactions and the manner in which national court decisions can impact global business and litigation strategies. The court's analysis is deeply rooted in competition law principles, often at the expense of the contractual underpinnings of the FRAND commitment. Most importantly, the court's willingness to establish global license terms covering patents outside the UK has serious implications for international commercial litigation and licensing transactions.  
Professor Contreras critiques the single FRAND rate rule at pages 2-4.

2.  Maximilian Haendicke published an article titled Lehren aus der Huawei v. Unwired Planet-Entscheidung für das deutsche Patentrecht ("Teachings of the Huawei v. Unwired Planet Decision for German Patent Law") in the August-September 2017 issue of GRUR Int. (pp. 661-69).  Here is the abstract (my translation):
On April 5, 2017, the Patents Court (England and Wales) has in the person of Judge Birss has reached a decision on numerous questions that must be confronted in connection with standard essential patents.  From a German perspective, the decision deserves special consideration because it touches on themes which up to now have not been decided, either at all or not explicitly but rather only partially and in divergent ways, by the German courts.  These concern in particular the methods for determining the FRAND rate as well as the conditions under which a competition-law based compulsory license defense can be applied.  The present article illuminates the English decision with a focus on the suggestions that the German courts may take away from it, especially with regard to the design of FRAND licensing contracts and the determination of FRAND rates.  
Dr. Haendicke is not enthusiastic about the one-FRAND-rate concept either.
3. On the IAM Blog, Richard Lloyd recently published a post titled Microsoft v Motorola judge criticises recent UK Unwired Planet SEP licensing decision.  According to the post, Judge Robart stated at a recent IPO annual meeting that Mr. Justice "Birss was wrong to offer specific royalty rates for the technology in question, rather than offering a range, and stated that he did not expect the judgment to be particularly influential in US courthouses."

4.  Two recent papers in the Journal of European Competition Law & Practice provide an overview of the Huawei decision: Sophie Lawrence and Francion Brooks's Unwired Planet v. Huawei:  The First UK FRAND Determination, 8 Euro. J. Comp. L. & Prac. (forthcoming 2017), and Damien Neven & Pierre Régibeau's Unwired Planet vs Huawei: A Welcome Clarification of the Concept of FRAND and of the Role of Competition Law Towards SEP Licencing, 8 Euro. J. Comp. L. & Prac. 463 (2017), and Sophie Law.  In contrast to the above sources, neither appears to be critical of Mr. Justice Birss's one-single-FRAND-rate rule.   

Monday, October 30, 2017

Some Recent Papers on Injunctions, Stays in the U.S.

1.  Steven M. Amundsen has published a paper titled Federal Circuit Decisions Concerning Smartphones Have Created Uncertainty Regarding the Evidence Needed to Prove Irreparable Harm and Establish Entitlement to Injunctive Relief, 42 Rutgers Comp. & Tech. L.J. 232 (2016).  From the introduction:
In four decisions by the Court of Appeals for the Federal Circuit in two patent cases that Apple filed against Samsung, the court has appeared to flip-flop when describing the evidence needed to prove an essential element for injunctive relief: irreparable harm. A patentee must establish irreparable harm, among other things, to obtain a preliminary or permanent injunction. And to establish irreparable harm, a patentee must demonstrate a sufficiently strong connection-or causal nexus-between the patent infringement and the alleged irreparable harm.
In its Apple v. Samsung decisions, the Federal Circuit explained that "[s]ales lost to an infringing product cannot irreparably harm a patentee if consumers buy that product for reasons other than the patented feature."' So if "the accused product would sell almost as well without incorporating the patented feature," the infringement injures the patentee only insubstantially even if the accused product's sales cause substantial damage commercially.' Thus, the causal-nexus requirement (1) ensures that the infringement causes the irreparable harm "in the first place"' and (2) prevents the patentee from "leverag[ing] its patent for competitive gain beyond that which the inventive contribution and value of the patent warrant."
This article discusses the causal-nexus requirement's evolution at the Federal Circuit based on two cases initially filed in April 2011 and February 2012. This article also discusses how various trial courts have applied the causal-nexus requirement when considering the propriety of injunctive relief. It then discusses points to consider when seeking to show or refute a causal nexus.
The most recent Federal Circuit decision in this series is currently awaiting a cert. decision from the U.S. Supreme Court.  For discussion, see, e.g., this post and this post by Florian Mueller on FOSS Patents. 

2.  J. Gregory Sidak has published a paper titled Irreparable Harm from Patent Infringement, 2 Criterion J. on Innov. 1 (2017).  Here is a link to the paper, and here is the abstract:
The Patent Act empowers a court to issue an injunction “to prevent the violation of any right secured by patent.” Whether a court will permanently enjoin an infringer depends on whether (1) the patent holder would suffer irreparable harm otherwise, (2) its legal remedies are inadequate, (3) the balance of hardships favors the patent holder, and (4) the injunction would not disserve the public interest. Similar factors inform the grant of a preliminary injunction. The Federal Circuit often says that the harm from patent infringement is irreparable if it cannot be measured. I say that such harm is irreparable because it irreversibly destroys wealth.
Patent infringement irreversibly obliterates wealth when it impedes society’s technical progress. Patent infringement does more than transfer wealth involuntarily from the patent holder to the infringer; it also harms third parties by devastating the surplus that consumers would derive from using the product practicing the new technology. Damages are impotent to cure that harm to the public interest. A court’s order of damages can no more recreate the wealth that has been or will be destroyed by an act of patent infringement than it can restore an ancient redwood after the axeman has felled it.
3.   Jonathan Stroud has published a paper titled NFC Technology LLC v. HTC America, Inc.:  Judge Bryson's Sitting-by-Designation Guide to Securing Stays in Light of Inter Partes Review, 65 Am. U. L. Rev. 1075 (2016).  Here is a link to the paper, and here is the abstract:
Federal Article III judges may stay civil litigation. Stays are most appropriate where another court or authority may resolve a part of or the entire dispute. Some statutes guide the courts on when to stay; some case law and appellate precedent guide judges on when a stay is appropriate. But the interlocutory nature of such decisions makes precedential decisions scarce. The Patent Trial and Appeal Board (PTAB), an administrative body tasked with patent post-grant review, efficiently reviews patentability of and can estopp later validity arguments. Stays in light of these proceedings are particularly favored. Although it will be some time before a body of appellate precedent develops surrounding these stays, one senior appellate judge from the patent-focused U.S. Court of Appeals for the Federal Circuit, sitting by designation, has issued a district court decision in a contentious district, where he exhaustively compiled district court stay cases and offered a guide for other judges faced with determining whether to stay. This Essay analyzes that decision.
Here is a copy of the decision itself.