Papers from PatDam 2; Punitive Damages in Korea; Qualcomm v. Apple

1.  As I mentioned on Wednesday, at least some of the papers presented at the February 2017 University of Texas Patent Damages Conference Part 2 have now been published.  At present, there doesn't appear to be a page on either the Texas Intellectual Property Law Journal (TIPLJ)'s or The Review of Litigation (TROL)'s website dedicated to all of the papers from this conference, as there was for PatDam 1.  (See here--though it now appears that some of the links on that page are dead.  The students running the site need to fix this, and to post all of the papers from PatDam2 which, after all, took place nearly two years ago.)  But here are the ones I've been able to locate.  All of the papers below are available on Westlaw, and some are probably available, perhaps in earlier versions, on ssrn.

John M. Golden, Foreword:  Channeling Patent Damages, 26 TIPLJ v (2018). 

Jennifer L. Blouin & Melissa F. Wasserman, Tax Solutions to Patent Damages, 26 TIPLJ 1 (2018).

Anne Layne-Farrar, The Patent Damages Gap:  An Economist's Review of U.S. Statutory Patent Damages Apportionment Rules, 26 TIPLJ 31 (2018).

Hon. Arthur J. Gajarsa, William F. Lee & A. Douglas Melamed,  Breaking the Georgia-Pacific Habit:  A Practical Proposal to Bring Simplicity and Structure to Reasonable Royalty Damages Determinations, 26 TIPLJ 51 (2018).

Oskar Liivak, Beyond Circularity:  Licensing for Innovation, 26 TIPLJ 113 (2018). 

There is also a commentary on Blouin & Wasserman's paper by Susan C. Morse, titled Seeking Comparable Transactions in Patent and Tax, in The Review of Litigation--The Brief (which I think is that journal's online companion), available here.

2.  On the IAM Blog earlier this week, Bing Zhao published a post titled Korea Adopts Treble Damages in Bid to Curb "Technology Extortion."  According to the post, treble damages will be available for willful patent infringement and trade secret misappropriation.  Courts will consider various factors ("recognition of infringement by the infringer or potential loss on the part of a patent owner," etc.) as relevant to willfulness.  Korea thus joins Taiwan and, possibly this coming year, China, in authorizing awards of treble damages.

3.  As many readers are aware, courts in China and Germany recently entered injunctions against certain models of iPhones in patent litigation initiated by Qualcomm.  Florian Mueller has had a series of posts on the German litigation, and his post today goes into some detail on the nature of the injunction, the possibility of Qualcomm being liable for wrongful enforcement damages if the trial court judgment is reversed on appeal, etc.  For other coverage, see, e.g., this article in the Wall Street Journal.

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I plan to take a blogging break through the end of the year, and to resume after January 1.  Best wishes to my readers for the holiday season!

Two New Articles on Patent Remedies in the U.S.

In addition to the papers cited below, it appears that at least some of the papers presented at the February 2017 University of Texas Patent Damages Conference Part 2 have now been published.  I'll have a separate post on these shortly.

1.  Daniel Harris Bream has posted a paper on ssrn titled Grading Patent Remedies:  Dependent Claims and Relative Infringement, 84 Brooklyn L. Rev __ (forthcoming 2018).  Here is a link to the paper, and here is the abstract:

Patents define an inventor’s exclusive rights by reciting essential aspects of the invention in sentences called claims. The claims are drafted in varying degrees of technical specificity, such that each claim is legally distinct—some may be valid or infringed while others are not. Most commonly, this variation is accomplished by using a combination of “independent” and “dependent” claims. Independent claims stand alone, while dependent claims incorporate by reference all the features recited in the independent claims but go on to add further features or details. The result is a range of potential infringing activity that triggers liability, from the broadest, most conceptual claims to the narrowest, most concrete claims.

Yet when it comes time to remedy infringement, this range of infringement is too often treated as meaningless. Parties rarely bother to distinguish between claims when assessing damages or injunctive relief. And courts hold, for example, that damages owed for infringing one claim is no different than the damages for infringement of any other claim in the patent. This is not consistent with the law or common sense. Not every claim is of equal technological or societal value, nor is infringement of every claim equally harmful to the patent owner. Parties and courts should start paying more attention to the relative significance of the patent claims involved.

This article focuses on dependent claims as a particularly useful vehicle for evaluating relative patent remedies between claims. Any two patent claims can be compared, though their relative scopes can be debatable when, for example, two claims are directed to alternative embodiments. But dependent claims are, by definition, narrower in scope than their base independent claims. Dependent claims also are commonly employed to expressly cover commercial products or preferred embodiments of inventions. As a result, dependent claims often protect the core and most detailed disclosures of the patent specification, occupying the most important competitive space to the patent owner. The relative value of those claims to patent owners, infringers, and the public, should be evaluated as part of any sound patent remedies assessment. 

2.  Adam MacLeod has posted a paper titled Patent Infringement as Trespass, 69 Ala. L. Rev. 723 (2018).  Here is a link, and here is the abstract: 

The now-conventional account of patent law holds that infringement is a strict liability offense, meaning that intent is not an element of an infringement claim. This account heightens the apparent injustice of patent law’s special knowledge problem, that as ambiguous descriptions of intangible resources, patent claims do not sufficiently make potential infringers aware of a patentee’s right to exclude. Particularly in the age of so-called “patent thickets,” clusters of patents of variable merit which are indistinguishable from each other and from prior art, strict liability for infringement seems rather hard.

These problems reflect a conceptual misunderstanding. When infringement is understood as a species of trespass, as it was long described in American law, the various aspects of infringement doctrine fall into place. Common law traditionally recognizes three forms of trespass. Together, those three forms explain all of infringement doctrine as a coherent whole and resolve the apparent injustices that seem problematic on the conventional account of infringement. The only aspect of infringement doctrine that does not fit the trespass picture is the four-factor interpretation of eBay, which is contrary to the Justices’ insistence in eBay that they were neither overturning patent infringement doctrine nor disturbing traditional equitable maxims.

News on Patent Remedies in China

1.  Zhang Guangliang, Tao Jun, Peng Wenyi, Chen Yong, and S. Sam Li have published a very interesting article titled A Study on the Improvement of Remedies for Patent Infringement in China Patents & Trademarks No. 4, 2018, pp. 83-91.  The authors review the general state of the law regarding permanent injunctions (which are normally granted for infringement, though subject to exceptions when an injunction would disserve the public interest, would be difficult to enforce, or "would result in [an] imbalance of interests") and damages (noting, among other things, the prevalence of awards of statutory damages in China).  With regard to injunctions, the authors recommend that the "meaning of the state and public interests" be defined, that courts take into account whether an injunction would be disproportionate (as it might be where the patent in suit "concerns only a tiny and non-essential component of a product" or would have a much greater adverse impact on the defendant), and also take into account the parties' good or bad faith.  With regard to damages, they recommend that courts be authorized to award punitive damages for willful infringement, that evidence-gathering and burden allocation rules be reformed to better enable an accurate calculation of damages (and thus obviate such frequent recourse to statutory damages), and "clarify the application of the technical apportionment" principle, to ensure that damages are awarded based on the contribution of the patent in suit.  

The article does not appear to be available online, but if your institution can get a copy of this publication, the article is worth reading.  (The magazine's general website is here.)

2.  There has been much discussion over the past week over the decision of a court in Fujian to enter a preliminary injunction against Apple in an ongoing patent infringement suit initiated by Qualcomm.  Jacob Schindler's article on the IAM Blog titled Revealed:  The Chinese Patents That Earned Qualcomm an iPhone Injunction goes into some depth concerning the matter, and also has a useful discussion of the rate at which courts in China and in Fujian in particular grant preliminary injunctions in patent cases.  (For previous discussion on this blog, see, e.g., here.)

3. Mark Cohen published a post on the China IPR Blog titled State Council Clears Patent Law Amendments, Forwards to NPC, Patent Linkage Is Not Referenced ….  The post references proposed amendments which, according to Mr. Cohen's rough translation of the draft's description, would among other things "increase the severity of penalties for intellectual property infringement . . . significantly increase the amount of compensation and fines for willful infringement and counterfeiting of patents, and significantly increase the cost of infringement to deter illegal acts," as well as "clarif[y] the burden of proof for the infringer to cooperate in providing relevant information . . . ."

News on Enhanced Damages in the U.S.

1.  Jeremy Taylor, Sarah Guske, and Wayne Stacy recently published an article on Law360 titled The New Reality of Patent Trials Post-Halo.  According to the authors, in the wake of the Supreme Court's 2016 Halo decision "juries now find infringement much more often when willfulness is tried to the jury," and there is "a strong correlation  between the two causes of action . . . . juries seem to run the two findings together."  Further, while "juries found infringement in roughly half of all trials" pre-Halo, post-Halo "infringement findings jumped to 77 percent when willful infringement and infringement were tried together."  In addition, post-Halo "juries found willful infringement 74 percent of the time overall, and almost 90 percent of the time when the same jury found all asserted claims infringed."  The correlation disappears, however, "when infringement and willfulness are decided separately . . . or when a jury finds only some claims infringed . . . ."  The authors don't state how many cases their analysis is based on or whether their findings are statistically significant, but if they hold out this seems pretty disturbing to me (though perhaps not surprising).  

The authors also state that courts across the country have begun using the jury instructions developed in Polara Engineering, Inc. v. Campbell Co., Case No. 8:13:cv:00007 (C.D. Cal. June 29, 2016).  Here is a link to those instructions, number 56 of which address wilfulness, and here is the text of a version of them that is now included in the Federal Circuit Bar Association's Model Patent Jury Instruction B.3.10:

In this case, [patent holder] argues both that [alleged infringer] infringed and, further, that [alleged infringer] infringed willfully. If you have decided that [alleged infringer] has infringed, you must go on and address the additional issue of whether or not this infringement was willful. Willfulness requires you to determine whether [patent holder] proved that it is more likely than not that the infringement by [alleged infringer] was especially worthy of punishment. You may not determine that the infringement was willful just because [alleged infringer] knew of the [ ] patent and infringed it. Instead, willful infringement is reserved for only the most egregious behavior, such as where the infringement is malicious, deliberate, consciously wrongful, or done in bad faith.

To determine whether [alleged infringer] acted willfully, consider all facts. These may include, but are not limited, to:

(1) Whether or not [alleged infringer] acted consistently with the standards of behavior for its industry;

(2) Whether or not [alleged infringer] intentionally copied a product of [patent holder] that is covered by the [ ] patent;

(3) Whether or not [alleged infringer] reasonably believed it did not infringe or that the patent was invalid;

(4) Whether or not [alleged infringer] made a good-faith effort to avoid infringing the [ ] patent, for example, whether [alleged infringer] attempted to design around the [ ] patent; and (5) Whether or not [alleged infringer] tried to cover up its infringement.

[Give this instruction only if [alleged infringer] relies upon an opinion of counsel as a defense to an allegation of willful infringement:

[Alleged infringer] argues it did not act willfully because it relied on a legal opinion that advised [alleged infringer] either (1) that the [product] [method] did not infringe the [ ] patent or (2) that the [ ] patent was invalid [or unenforceable]. You must evaluate whether the opinion was of a quality that reliance on its conclusions was reasonable.]

2.  The blogs have also noted some recent significant cases on willfulness and/or enhanced damages, including the $130 million enhancement awarded in Alfred E. Mann Fdn. v. Cochlear Corp. (write-ups available on IP Watchdog and Law360); the trial judge's reaffirmation that Briggs & Stratton willfully infringed Exmark's patent in Exmark Mfg. Co. v. Briggs & Stratton Corp. following a remand from the Federal Circuit (write-up on Law360); a recent award of double damages (amounting to just under $12 million) in Fitness Anywhere LLC v. WOSS Enterprises (write-up on IP Watchdog); a recent finding of wilfulness in Bio-Rad Labs., Inc. v. 10X Genomics, Inc., which could lead to an enhancement of an actual damages award in the amount of $24 million (write-up on IP Watchdog); and the Federal Circuit's affirmance without opinion in Stryker v. Zimmer (write-up on Patently-O).

From Around the Blogs Part 2: FRAND Issues in China, Preliminary Injunctions in Spain and Ukraine

1.  On the IAM Blog, Jill Ge recently published a post titled How a Chinese Court Would Have Decided the Unwired Planet Appeal.  Ms. Ge concludes that (1) as in Unwired Planet, "it is probable that Chinese courts can adjudicate a global FRAND licence"; (2) unlike Unwired Planet, Chinese courts would probably adopt the hard-edged non-discrimination principle (which is what the EWCA thought too); and (3) Chinese courts "would consider the parties' negotiation behaviours as well as the reasonableness of the offers made during negotiation," as reflected for example in the Shenzhen court's recent Huawei v. Samsung decision. 

(Interestingly, Justice Carr of the Patent Court for England and Wales had concluded in April 2018 that Chinese courts can't set a global FRAND rate.  See the write-up on IPKat here.  Interesting.)

Also of interest on IAM is an opinion piece by Jonathan Stroud titled It's Time to Sort Out the Connected Car Disconnect, discussing some recent FRAND-related developments as they relate to connected cars.  Both pieces are highly recommended.

2.  On the Kluwer Patent Blog, Miguel Montañá published a post titled Court of Appeal of Barcelona revisits to what extent validity may be analysed in preliminary injunction proceedings.  According to the post, in the mid-2000s judges of the Commercial Courts of Barcelona had largely come around to the view that, on a motion for a preliminary injunction, courts could not "examine validity in depth," but rather that validity should be presumed absent "very robust indicia," presented by the opposing party, supporting invalidity.  More recent decisions, however, had departed from this practice and began "holding profound validity discussions," involving expert testimony and cross-examination.  According to the author, however, an October 2018 decision of the Court of Appeal concluded that the court of first instance's analysis of validity was excessive, potentially displacing the analysis that would take place in the main proceedings.  To the same effect is a discussion of an April 2018 decision of the same court, as described in a post on Kluwer by Adrian Crespo.  According to the author, this decision too "clarifies that, while validity may be discussed, the analysis should not reach the same level of depth as in the main proceedings."

3.  And again on Kluwer, here is a post by Ilarion Tomarov titled Ukraine:  Interim Injunctions in Pharma Cases, discussing a decision of the Ukrainian Supreme Court in Merck Sharp & Dohme Corp. v. Aurobindo Pharma Ltd.  I won't try to summarize the post here, but the upshot is that the court appears to be more favorable towards allowing patent owners to obtain interim injunctions, particularly where a refusal to grant such relief would mean that the patent owner, if successful at trial, would face "considerable expenses to remove from the market and . . . destroy the infringing products."

My Law360 Article on Makan Delrahim's December 7 Speech

Here is a link to the article, titled DOJ Speech May Leave SEP Implementers In Dire Straits.

IP Chat Channel Webinar on Enforcing Patents Globally

On Thursday, December 13, from 2-3 p.m. Eastern Time, the IP Chat Channel will be hosting a webinar titled Enforcing Patents: Global Strategies and Tactics.  Here is a link, and here is the description:

Considering the invalidation risk of AIA post-grant proceedings, the uncertainty about patent eligibility after the Alice and Mayo U.S. Supreme Court decisions, as well as the difficulty in getting an injunction after eBay, many experts have concluded that successfully enforcing a patent in the U.S. is a much harder task than it was a dozen years ago.

Some patent owners with international patent portfolios have decided to litigate in other countries which they see as more patent friendly, instead of, or in addition to, pursuing litigation the U.S. This shift has seemingly contributed to a documented spike in patent cases filed in EU countries, most of them in Germany.

This webinar features a U.S.-based IP executive who has carried out a successful patent enforcement campaign in Europe, a litigator based in Silicon Valley with experience in European courts on behalf of U.S. clients, and a leading German patent litigator with many multinational clients. Drawing on their first-hand experiences, they will discuss:

• The decisions necessary before launching foreign litigation
• Important differences between legal systems
• Using foreign litigation to encourage global settlement
• The reality of what it takes to enforce an injunction in Germany
• Whether European decisions make any impact on U.S. courts
• The risk that foreign litigation could backfire in the U.S.

Speakers:

• Steven Carlson, Robins Kaplan LLP 
• Johannes Heselberger, Bardehle Pagenberg Partnerschaft MbB
• Boris Teksler, Conversant Intellectual Property Management Inc.

Breaking News: USDOJ Pulls Out of the 2013 USDOJ/USPTO Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments

Here is a link to USDOJ Antitrust Chief Makan Delrahim's speech today in Palo Alto, California, announcing the withdrawal.  Here is a copy of the Policy Statement, which is still available on the USPTO's website (but not the DOJ's), and here is backup copy I just made, in case it goes missing from USPTO's website.  

I will have more to say about this before long.  For now, Ill just say that I don't think the withdrawal is a good idea . . . .

Update:  On Friday night, Law360 published a short write-up on Mr. Delrahim's speech, and I will be publishing an analysis on Law360 myself in a few days.  I'll provide a link when it is available.

From Around the Blogs Part 1: Damages in Canada, Spain, Taiwan, and the U.S.

1.  On the Sufficient Description blog, Norman Siebrasse has posted a four-part series (here, here, here, and here) on a recent decision of Canada's Court of Appeal, Apotex Inc. v. Eli Lilly & Co.  The decision holds, among other things, that (1) in assessing patent damages a court must consider whether an alleged noninfringing alternative (the existence of which would reduce the amount of damages) was objectively economically viable (thus rendering irrelevant Apotex's assertion that, but-for the infringement, it would have turned to an alternative that was unprofitable); (2) where, as here, use of the asserted noninfringing alternative would have infringed another of the plaintiff's patents, it would not have been an available alternative; and (3) compound interest is available as a "head of damages," but that there is no presumption in favor of its use.  Professor Siebrasse has some insightful observations about the first two of these holdings in particular.

2.  On the Kluwer Patent Blog, Miguel Montañá published a post titled Damages may be considered proven when the facts speak for themselves.  The post discusses a July 2018 decision of the Barcelona Court of Appeal holding that in some instances the "facts speak for themselves," that is, "the existence of damages if intrinsic to the nature of the infringement and does not require special proof."  If I understand correctly, however, the patent owner would still bear the burden of coming forward with evidence as to the amount of its injury, even if the fact of injury is presumed.  Apparently the facts of this particular case showed that the plaintiff was in negotiations with a customer when the defendant supplied that customer with an infringing product.

On a personal note, I will be speaking at one or two forums in Barcelona in late March 2019.  I'm looking forward to returning to one of my favorite cities.

3.  On the IAM Blog, Yulan Kuo published a post titled Taiwan Supreme Court Issues Decision on Unfair Enrichment in Patent Infringement Case.  According to the author, in Koninklijke Philips NV v. Gigastorage Corp. the court reversed the Taiwan IP Court's award of NT$1 billion for unjust enrichment and remanded for further consideration in light of various factors.  If I understand correctly, the court also wants the lower court to consider whether delay in enforcing one's rights might reduce the award, even if the statute of limitations has expired (compare with the U.S. Supreme Court's view in SCA Hygiene).  On a personal note here, I may be visiting Taiwan in the fall of 2019, so perhaps I will have an opportunity to discuss this case then. 

4.  On IP Watchdog, Mark Pedigo published a post titled Use of the Book of Wisdom in Reasonable Royalties, recapping the relevant Federal Circuit and lower court decisions permitting (or not) the use of information post-dating the date of the first infringement, for purposes of calculating reasonable royalties.  Mr. Pedigo concludes that "[u]se and acceptance of the book of wisdom can be relevant and useful, but it is not always allowed by the courts."

For some papers I have coauthored arguing that courts should be more open to the admissibility of such evidence, see here and here.

Some New Papers, Posts on FRAND Issues (Part 3)

1. Richard Stern has published a paper titled TCL v Ericsson:  US Court Determines Top-Down FRAND Royalty Rate for SEPs and Insists on Similar Percentage-of-Sale-Price Payments for High and Low Priced Devices, 40 E.I.P.R. 557-69  (2018).  Here is the abstract:

In TCL v Ericsson a district court issued a second major US FRAND judgment endorsing the "top-down" methodology and rejecting the "bottom-up" methodology for determining SEP royalties. The court also required substantially equal percentage-of-sales-price royalty payments for large and small competitors, and for upmarket and downmarket sellers alike, to satisfy FRAND’s nondiscrimination requirement. The court’s top-down approach may neutralise a trend among owners of large SEP portfolios to split up and diffuse their SEPs among many "privateers" in order to inflate total royalty payments. 

2. Gregory J. Werden and Luke M. Froeb have posted a paper on ssrn titled Why Patent Hold-Up Does Not Violate Antitrust Law.  Here is  a link, and here is the abstract:

Owners of standard essential patents (SEPs) are cast as villains for engaging in “patent hold-up,” i.e., taking advantage of the fact that they negotiate royalties with implementer-licensees that already have made sunk investments in the standard. In contrast to “patent ambush,” patent hold-up involves no standard-setting misconduct or harm to any competitive process, and thus cannot violate antitrust law. Commentators taking a contrary positions confuse the ends of antitrust law with its means. Antitrust law promotes consumer welfare only by protecting competition. Casting aside this core principle would expose business decisions, including ordinary price setting, to judicial oversight. Commitments made by SEP owners in the standard-setting process, however, should be enforced, and they are enforced. Without an antitrust cause of action, implementers invoke the powers of the courts to resolve royalty disputes over SEPs.

3. Kelce Wilson has posted a paper on ssrn titled Designing a Standard Essential Patent (SEP) Program, 53 les Nouvelles 202 (Sept. 2018).  Here is a link, and here is the abstract:

Standard Essential Patents (SEPs) are a unique form of intellectual property rights (IPR), due to various considerations that can notably impact their value and usage options. Some of these considerations include:
1. Potentially simplified infringement case, when litigated;
2. Easily-detectable potential infringement, to facilitate drafting claim charts prior to litigation discovery;
3. Readily-identifiable potential infringers, to facilitate identifying targets for an enforcement program;
4. Possibly global licensee pool, to financially incentivize multi-national prosecution;
5. Potentially limited enforcement options, such as a potential unavailability of an injunction;
6. Potentially limited royalty rates, due to (fair) reasonable and non-discriminatory ((F)RAND) limitations; and
7. Affirmative commitments to license SEPs on FRAND terms in some standards setting organizations (SSOs).
8. Disclosure obligations of related patents and applications in some SSOs.
Some helpful, excellent articles explain advantages for organizations in certain industries pursuing SEPs as part of a patent portfolio. Described herein are some issues to consider when designing a SEP program for patent portfolio growth.

4.  Also of interest are recent posts (1) by Raymond Millen and Jan Schnitzer on the IAM Blog titled The EPO should rule on SEPs, say top European auto patent players (more specifically, the proposal is for the EPO to decide on whether patents declared essential are in fact essential; the EPO wouldn't be making FRAND determinations); and (2) on the IPKat and World Intellectual Property Review, both discussing a recent session at AIPPI 2018 titled Standard Essential Patents--Maximizing Value Before Enforcement.

IP Chat Channel Webinar on FRAND

On Thursday, December 6, from 2-3 p.m. Eastern Time, the IP Chat Channel will be hosting a webinar titled FRAND:  The Latest Developments and Predicting the Future SEP Landscape.  Here is a link, and here is the description:

In recent months, case law is continuing to develop in the evolving jurisprudence surrounding standard essential patents (SEPs) in the U.S. and elsewhere.

In November, the U.S. District Court for the Northern District of California issued an order granting in part the FTC’s bid for summary judgment in its unfair competition case involving Qualcomm. The order addressed the issue of whether, under industry agreements to license SEPs at rates that are fair, reasonable, and nondiscriminatory (FRAND), Qualcomm had to license its essential patents to competing modem chip suppliers. Some experts say this decision could tee up similar licensing fights against other SEP holders.

Unwired Planet International Ltd. v. Huawei Technologies Co. Ltd. is another decision some experts view as having wide implications. In October, the Court of Appeal of England and Wales issued its much-anticipated ruling, finding Huawei may be barred from selling its smartphones in the U.K. if it refuses to pay a global license fee for Unwired Planet’s technology. The Court also rejected Huawei's suggestion that the license Unwired Planet offered was not on "nondiscriminatory terms" because the royalty rate was higher than that which Unwired Planet previously agreed to with Samsung. The judgment could impact not only the terms of future licenses, but also the way that parties negotiate licenses and make offers to SEP owners.  

Our panelists, which include lawyers who represent both SEP owners and implementers, will discuss:

• Whether global licenses will come to dominate FRAND negotiations in the future

• If there is any consensus emerging on how to calculate license terms that are fair, reasonable, and nondiscriminatory for SEP patents

• The strengths and weaknesses of the differing valuation approaches of TCL and Unwired Planet

• The impact of the availability of injunctions for the infringement of a SEP in Europe and China on litigation strategy

The speakers will be:

• Logan Breed, Hogan Lovells LLP
• Dave Djavaherian, PacTech Law
• Matteo Sabbatini, Ericsson

I would also note that the IP Chat Channel's December 13 webinar is titled Enforcing Patents: Transnational Tactics and Global Strategies.  When I have more information on that, I will pass it along.

Federal Circuit Affirms $140 Million Award in Favor of Sprint

The case is Sprint Communications Co. v. Time Warner Cable, Inc., and the nonprecedential majority opinion is authored by Judge Bryson, joined by Judge Chen.  Judge Mayer dissents on validity and therefore doesn't address the damages issue.

As explained by the court, "[t]he technology at issue . . . involves methods for linking circuit-switched and packet-switched networks within a communications system" (p.3).  Without going into more detail than is necessary for purposes of discussing the damages portion of the case, Time Warner argues that the district court erred (1) in allowing the jury to hear about an earlier case Sprint had brought against Vonage, involving the same technology, and (2) by not properly apportioning the verdict.  The Federal Circuit isn't convinced.

As for the first issue, the court concludes that the district court acted within its discretion in letting the jury hear about the earlier case:

The district court ruled that the Vonage evidence was relevant to the jury’s assessment of reasonable royalty damages under a hypothetical negotiation theory. The court gave the jury an instruction limiting the use of that evidence to the jury’s consideration of the issues of damages and willfulness.

Although Time Warner argues that the introduction of evidence of a jury verdict from another case is invariably improper, that is not the rule that this court has applied. Instead, the court has held that such evidence can be admissible if it is relevant for some legitimate purpose. . . .

In this case, the court admitted the prior verdict evidence as relevant to willfulness, to Time Warner’s equitable defenses, and “to the extent that it informs Sprint’s executives concerning what [they] might expect as a reasonable royalty.” Thus, as the court explained, the verdict would be a factor of which the parties would have been aware at the time of their hypothetical negotiation in 2010, and a reasonable jury could well conclude that the verdict and the amount of damages awarded in a similar prior litigation would have influenced the outcome of a hypothetical negotiation in the case at bar.

Importantly, the district court gave the jury limiting instructions that the Vonage evidence was to be considered only on the issues of damages and willfulness. . . (pp. 4-7).

The Vonage verdict also was properly admissible on the hypothetical bargain issue, notwithstanding Time Warner's arguments that that verdict suffered from certain defects, and that Sprint failed to properly apportion:

The jury assessed damages against Time Warner in the amount of $1.37 per VoIP subscriber per month. Time Warner complains that the district court erred in several respects in handling the issue of damages. . . .

In addition to the previously raised objections to the admission of evidence of the Vonage verdict, Time Warner argues that the use of the Vonage verdict in the expert’s damages calculation was improper because the Vonage verdict was legally flawed. Time Warner argues that Sprint’s expert in the Vonage case improperly relied in part on the 25 percent “rule of thumb” that was frequently used in reasonable royalty cases prior to this court’s decision in Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1315 (Fed. Cir. 2011), which held that “the 25 percent rule of thumb is a fundamentally flawed tool,” and that the Vonage verdict was therefore tainted. . . .

As for Time Warner’s argument that the Vonage verdict was tainted by the testimony in that case regarding the 25 percent rule, Sprint’s expert made clear that he was not relying on that rule in this case, and the jury in the Vonage case did not return a verdict that was based on the 25 percent rule as
the measure of damages. . . .

Time Warner next argues that the Vonage verdict should not have been admitted because the jury in that case awarded a royalty based on all of Vonage’s VoIP revenues, without determining which portions of the revenues were attributed to patented technology as opposed to unpatented features. But the fact that the jury in the Vonage case awarded a royalty based on total VoIP revenues does not make that verdict inadmissible; the jury in that case was called on to make a determination as to the appropriate royalty for the patented technology—the same technology at issue in this case—and it did so in the form of a lump sum royalty award. The reasonable royalty award in the Vonage case was based on the jury’s determination of the value of the technology that was taken as a result of Vonage’s infringement. By operation of the hypothetical negotiation method of calculating damages, the award compensated Sprint for the incremental value of Sprint’s technology, not for the value of unpatented features of Vonage’s VoIP system. The evidence showed that the damages award in the Vonage case of $1.37 per subscriber per month was approximately five percent of Vonage’s total VoIP revenues for the infringement period. The jury settled on the same amount for the damages award in this case as in the Vonage case. The Vonage verdict did not stand alone, however. In addition to the Vonage verdict, the jury had before it two licenses from Sprint to other communications companies for the patented technology, both of which were for approximately five percent of the companies’ VoIP revenue. The evidence showed that those licenses, like the Vonage verdict, were based on the value of the patented technology and not the value of other aspects of the companies’ VoIP technology that were not covered by Sprint’s patents. . . .

Time Warner argues that Sprint’s damages case was flawed because Sprint did not apportion the damages award to the incremental value that the patented invention added to the end product. See Ericsson, Inc. v. D-Link Sys., Inc., 773 F.3d 1201, 1226 (Fed. Cir. 2014). That argument, however, ignores that the objective of apportionment can be achieved in different ways, one of which is through the determination of an appropriate royalty by application of the so-called Georgia-Pacific factors. See Exmark Mfg. Co. v. Briggs & Stratton Power Grp., LLC, 879 F.3d 1332, 1349 (Fed. Cir. 2018) (“[T]he standard Georgia-Pacific reasonable royalty analysis takes account of the importance of the inventive contribution in determining the royalty rate that would have emerged from the hypothetical negotiation.”) (quoting AstraZeneca AB v. Apotex Corp., 782 F.3d 1324, 1338 (Fed. Cir. 2015)). Such an analysis often considers rates from comparable licenses, and we have explained that “otherwise comparable licenses are not inadmissible solely because they express the royalty rate as a percentage of total revenues, rather than in terms of the smallest salable unit.” Commonwealth Sc. & Indus. Research Organisation v. Cisco Sys., Inc., 809 F.3d 1295, 1303 (Fed. Cir. 2015). The fact that two other licenses were granted for the same technology, together with the Vonage verdict—all of which were for the same royalty rate as the rate utilized in the Vonage case to yield the $1.37 per VoIP subscriber per month damages assessment—provides strong support for Sprint’s argument that the damages award in this case reflected the incremental value of the inventions and thus satisfied the requirement of apportionment. See Ericsson, 773 F.3d at 1227–28 (damages testimony regarding real-world relevant licenses “takes into account the very types of apportionment principles contemplated in Garretson [v. Clark, 111 U.S. 120 (1884)]).” . . .

Finally, Sprint introduced evidence from which the jury could conclude that Time Warner did not have available to it any reasonable non-infringing alternatives to Sprint’s patented technology for connecting PSTN networks to IP networks (pp. 8-12).

Georgetown-Berkeley Conference on Patent Law and Policy

Two weeks ago I spoke at the Tenth Annual Conference on the Role of the Courts in Patent Law and Policy at Georgetown Law's Washington campus (see my conference announcement here).  CLE materials, including some that I assembled on FRAND issues, are available here.  Slides, also including some prepared by me, are available here (scroll down toward the bottom of the page).  A transcript of the conference is available here.  Finally, readers who are interested in viewing my presentation on FRAND issues can access the video here. (I'm at the beginning of this segment.)  I'm not sure if there is any video available of earlier portions of the conference, but if I find any I will pass it along.

Patent Remedies and Complex Products: Toward a Global Consensus

I have previously mentioned my involvement, along with several other scholars from around the world, in the International Patent Remedies for Complex Products (INPRECOMP) project.  (INPRECOMP began as a joint venture between the Center for Law, Science and Innovation (CLSI) at Arizona State University's Sandra Day O'Connor College of Law and the Dickson Poon School of Law at King's College London, and is primarily funded by a gift to CLSI from Intel.)  The manuscript of our edited volume, Patent Remedies and Complex Products:  Toward a Global Consensus (Brad Biddle, Jorge L. Contreras, Brian J. Love & Norman V. Siebrasse eds.) is in the hands of Cambridge University Press, and should be available in hardcover sometime in the coming months.  I mention this project again today because the Introduction to the volume is now, at long last, available on ssrn, along with all of the other chapters.  And I really do recommend reading the Introduction, which provides a useful framework for understanding the assumptions underlying the rest of the book.

Here are links to each of the chapters, followed by the abstract: 

Introduction - Patent Remedies and Complex Products: Toward a Global Consensus (coauthored by Brad Biddle, Jorge L. Contreras, Thomas F. Cotter, Brian J. Love, and Norman Siebrasse):

This introductory chapter to the forthcoming book Patent Remedies and Complex Products: Toward a Global Consensus describes how innovative companies routinely bring products to market that implicate tens or even hundreds of thousands of individual patents issued by patent offices across the globe, and identifies a number of challenging questions with respect to how the law should value patents and provide remedies for their infringement in this context. For example, how should courts and, where applicable, juries calculate damages for infringement of one patent out of the thousands of (often complementary) inventions incorporated in a device? How can courts and juries tell if one feature among hundreds drove the sale of the entire product? Should patent law take into consideration that it might not be possible, let alone cost effective, for a product manufacturer in a fast-moving field to license all of the thousands of patents embodied in its product, even prior to beginning development? Should an injunction be granted to prevent the use of a patented technology that covers a minor feature of a complex product, when the effect of the injunction would be to keep the entire product itself off the market? How (if at all) can the risks of patent holdup be reduced without generating substantial error costs or other unintended negative consequences? This chapter describes the broader goals of the book - to begin to addressing these questions systematically by setting forth both the current state of the law and an agenda for future research - and identifies a set of foundational premises applicable across all of the book's chapters.

Chapter 1:  Reasonable Royalties (coauthored by Thomas F. Cotter, John M. Golden, Oskar Liivak, Brian J. Love, Norman Siebrasse, Masabumi Suzuki, and David O. Taylor):

This chapter (1) describes the current state of, and normative basis for, the law of reasonable royalties among the leading jurisdictions for patent infringement litigation, as well as the principal arguments for and against various practices relating to the calculation of reasonable royalties; and (2) for each of the major issues discussed, provides one or more recommendations. The chapter’s principal recommendation is that, when applying a “bottom-up” approach to estimating reasonable royalties, courts should replace the Georgia-Pacific factors (and analogous factors used outside the United States) with a smaller list of considerations, specifically (1) calculating the incremental value of the invention and dividing it appropriately between the parties; (2) assessing market evidence, such as comparable licenses; and (3) where feasible and cost-justified, using each of these first two considerations as a “check” on the accuracy of the other.

Chapter 2:  Lost Profits and Disgorgement (coauthored by Christopher B. Seaman, Thomas F. Cotter, Brian J. Love, Norman Siebrasse, and Masabumi Suzuki):

This book chapter addresses two types of monetary remedies for patent infringement: (1) recovery of the patentee’s lost profits and (2) disgorgement of the infringer’s profits. Both remedies make a comparison between what actually happened and a hypothetical “but for” world in which no infringement occurred. But the two remedies have substantially different objectives: lost profits are intended to compensate the patentee by restoring it to the position it would have occupied absent infringement, while disgorgement may serve other purposes, including deterrence, recapturing wrongful gains, and encouraging ex ante licensing of patented technology.

Part II addresses several key issues regarding lost profits awards, including the availability and standard of proof, the role of non-infringing alternatives, potential recovery for the sale of related but unpatented goods, whether and how to apportion lost profits awards for complex products, and potential recovery for other infringement-related harms. Part III describes the justifications for, and availability of, the disgorgement (accounting) remedy in major patent systems and, additionally, analyzes a number of questions related to calculating such awards. In both sections, we make recommendations and identify areas for further research.

Chapter 3:  Enhanced Damages, Litigation Cost Recovery, and Interest (coauthored by Colleen V. Chien, Jorge L. Contreras, Thomas F. Cotter, Brian J. Love, Christopher B. Seaman, and Norman Siebrasse):

This chapter discusses the law and policy of monetary awards—including exemplary damages and litigation cost recoveries—that go beyond the compensatory damages to which prevailing parties in patent litigation are normally entitled. Up to treble damages are authorized in the United States for knowing infringement, but attorney fees are awarded only in exceptional cases. The rest of the world tends towards the opposite: attorney fees are awarded as a matter of course, but punitive damages are generally prohibited as against public policy. In this chapter we discuss the theory, law, and policy of enhanced damages and attorney fee awards in the U.S., Europe, and Asia. While the availability of enhanced damages and fees can bring accused infringers that might otherwise “holdout” to the table, care must also be taken to ensure that it does not discourage productive learning from patents or challenges to overbroad and vague patents. Rather than endorsing any single set of doctrinal rules, we recommend further research into a number of unanswered questions about current and potential future configurations, in order to inform future policy-making.

Chapter 4:  Injunctive Relief (coauthored by Norman Siebrasse, Rafał Sikorski,  Jorge L. Contreras, Thomas F. Cotter, John M. Golden, Sang Jo Jong, Brian J. Love, and David O. Taylor): 

Patent systems commonly empower courts to order accused or adjudged infringers to refrain from continuing infringing conduct in the future. Some patentees file suit for the primary purpose of obtaining and enforcing an injunction against infringement by a competitor, and even in cases in which the patentee is willing to license an invention to an accused infringer for an agreed price, the indirect monetary value of an injunction against future infringement can dwarf the amount a finder of fact is likely to award as compensation for past infringement. In some of these cases, an injunction, if granted, would impose costs on accused infringers or third parties that go well beyond the more intrinsic value of the patented technology. This chapter explores the theory behind injunctive relief in patent cases, surveys the availability of this remedy in major patent systems, and suggests a general framework for courts to use when deciding whether injunctive relief is appropriate in individual cases.

Chapter 5:  The Effect of FRAND Commitments on Patent Remedies (coauthored by Jorge L. Contreras, Thomas F. Cotter, Sang Jo Jong, Brian J. Love, Nicolas Petit, Peter Georg Picht, Norman Siebrasse, Rafał Sikorski, Masabumi Suzuki, and Jacques de Werra):

This chapter addresses a special category of cases in which an asserted patent is, or has been declared to be, essential to the implementation of a collaboratively-developed voluntary consensus standard, and the holder of that patent has agreed to license it to implementers of the standard on terms that are fair, reasonable and non-discriminatory (FRAND). In this chapter, we explore how the existence of such a FRAND commitment may affect a patent holder’s entitlement to monetary damages and injunctive relief. In addition to issues of patent law, remedies law and contract law, we consider the effect of competition law on this issue. 

Chapter 6:  The Effect of Competition Law on Patent Remedies (coauthored by Alison Jones and Renato Nazzini):

Although competition law and IP law probably pursue complementary goals, competition laws can (i) affect remedies available for patent infringement; and/or otherwise (ii) limit the conduct of patentees, particularly when transferring or licensing their patents. This chapter discusses the cases in which tensions between the protection of patents in complex products and the competition laws have arisen or may arise, particularly as regards the ability of owners of standard essential patents (SEPs) to monetise their patents either by seeking an injunction against implementers or by refusing to grant licences complying with previously given commitments—generally, commitments to license on fair, reasonable and nondiscriminatory (FRAND) terms. This chapter also examines potential competition law constraints on the pricing of patent licences, other licensing terms, multi-level licensing and level discrimination, patent pools, sale of patent portfolios and patent acquisitions.

Chapter 7:  Holdup, Holdout and Royalty Stacking: A Review of the Literature (authored by Norman Siebrasse):

This article provides a critical review of the theoretical and empirical literature on holdup, holdout, and royalty stacking, as they relate to remedies for patent infringement.

Conference on Injunctions and Proportionality

On March 22, 2019, the Institute of Law and Technology at Friedrich-Alexander-Universität Erlangen-Nürnberg will be hosting a conference titled Enforcing Patents Smoothly: From Automatic Injunctions to Proportionate Remedies.  (I will be one of the speakers.)  Here is a link to the conference flyer, and here is the description:

The granting of an injunction is a remedy that is available to patent holders to enforce their rights. In many EU Member States, injunctions are conceived as default remedies. However, granting an injunction irrespective of the particular facts of the case can lead to hardship for stakeholders and the public. “One size fits all solutions” such as automatic injunctions are not necessarily fair and equitable.

First and foremost, the EU’s Intellectual Property Rights Enforcement Directive requires that remedies granted must be “fair and equitable” and be “effective, proportionate and dissuasive”. Scholars more and more accept that especially in patent cases, an injunction should not necessarily be granted in every case. Even the German Federal Court considered that under certain circumstances an injunction (temporarily) is not available (BGH, 10.5.2016 – X ZR 114/13 – Wärmetauscher). And the US Supreme Court´s decision eBay Inc. v. MercExchange, L.L.C., 547 U. S. 388 (2006), demonstrates that the competing interests can also be balanced via the means of remedies.

Against this backdrop many questions arise: e.g., How can patents be enforced instead so that the remedy granted is equitable and takes into account the range of different interests? Which factors need to be considered in deciding which remedy to grant? Is it possible to identify certain kind of cases where granting an injunction is inappropriate? Does a patent proprietor have to be compensated and, if so, how?

During the international symposium, these questions will be analysed from an international, European and national perspective.

I'm really looking forward to this conference, as well as another conference on injunctions to be held in Munich a couple of weeks later (I'll have more details about that one soon.) 

Some New Papers, Posts on FRAND Issues (Part 2)

1.  Dr. Spiros Makris and Dr. Claudia Tapia have posted a paper titled Confidentiality in FRAND Licensing After Huawei v ZTE: National Courts in Europe Searching for Balance, 53 les Nouvelles 210 (2018).  Here is a link to the paper, and here is the abstract:

In a landmark decision in the matter Huawei v ZTE, the Court of Justice of the European Union (CJEU) established a well-balanced framework for the licensing of Standard Essential Patents (SEPs) on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions. Following this judgement, national courts in Europe have been providing further guidance on several key questions related to the ruling, as illustrated in summary infographic starting on page 215. A significant portion of this case law has been developed in Germany. In their effort to interpret the Huawei v ZTE FRAND framework, German courts have repeatedly addressed an issue with significant practical relevance for the licensing of SEPs, which the CJEU did not expressly raise in its decision: The protection of confidentiality in the context of FRAND licensing negotiations and FRAND related litigation. The present paper examines whether the efforts of the German jurisprudence have produced viable solutions in this respect so far.

2.  J. Gregory Sidak and Urška Petrovčič have published a paper titled Will the CJEU's Decision in MEO Change FRAND Disputes Globally?, 3 Criterion J. Innov. 301 (2018).  Here is a link to the paper, and here is the abstract:

In April 2018, the Court of Justice of the European Union (CJEU) issued a decision in MEO v. Autoridade da Concorrência that clarified the circumstances in which price discrimination would trigger liability under Article 102(c) TFEU. The decision in MEO has so far received sparse attention from lawyers, academics, and competition law commentators. Yet, it represents an important addition to the analysis of price discrimination under EU competition law. The CJEU emphasized that Article 102(c) TFEU does not categorically prohibit a dominant firm from engaging in price discrimination, but instead prohibits only price discrimination that “tends to distort competition on the downstream market.�? The CJEU also said that one cannot assume that price discrimination will have that prohibited effect, but rather one must examine the circumstances of each case to determine whether the challenged practice has a prohibited effect on the downstream market and thus violates Article 102(c) TFEU.

Although MEO concerned the licensing of copyrights, for two reasons it has important implications for disputes concerning standard-essential patents (SEPs) that are subject to the owner’s commitment to offer to license them on fair, reasonable, and nondiscriminatory (FRAND) terms. First, MEO clarifies that an SEP holder’s differential offers to its licensees are discriminatory within the meaning of Article 102(c) TFEU only when that differential treatment is so substantial as to be capable of distorting competition in the market in which the licensees compete. Thus, after MEO, scrutiny of an SEP holder’s licensing practices under Article 102(c) TFEU turns on the potential effects of the differential treatment. Second, to the extent that the prohibition against discrimination in the FRAND contract is equivalent to the prohibition against discrimination contained in Article 102(c) TFEU, MEO will require an effects-based analysis in cases alleging a breach of the FRAND contract. In those cases, MEO provides guidance for scrutinizing an SEP holder’s discharge of its duties under the FRAND contract, not only in the European Union, but also in foreign jurisdictions where a court must construe and enforce the nondiscrimination requirement of an SEP holder’s FRAND contract.

3.  J. Gregory Sidak and Jeremy O. Skoh have published a paper titled Citation Weighting, Patent Ranking, and Apportionment of Value for Standard-Essential Patents, 3 Criterion J. Innov. 201 (2018).  Here is a link to the paper, and here is the abstract:

In patent-infringement litigation involving standard-essential patents, one must apportion the value of the patents in suit by deriving an appropriate measure of each patent’s value relative to the value of other patents that are also declared essential to the standard. Using data on patents declared essential to the LRDIMM standard, we have analyzed multiple methodologies that purport to measure the relative value of patents. We conclude that the choice of a particular patent-valuation methodology is secondary to the apportionment inquiry. In other words, we find that the particular weighting method that a researcher chooses to use is of secondary importance to the researcher’s decision to use some weighting method, rather than none. A simplistic patent-counting methodology that assigns each patent equal value relies on assumptions that are rarely satisfied in the real world. It produces a result that meaningfully differ from the results of any of the methods that rely on forward citations to measure a patent’s value.

We propose a half-life citation-weighting method that researchers might decide to use, in addition to adjustments for technology fields or unweighted citation counts. By placing greater weight on more recent citations, our proposed method attempts to account for the increasing number of citations and patents over time and the importance of speed during the standard setting process. Our proposed method might be particularly appropriate for standards in which the declared-essential patents cover similar technologies or in cases where innovation (and, consequently, the standards-development process) occurs rapidly.

4.  D. Daniel Sokol recently noted on the Antitrust & Competition Policy Blog that Professor Peter Picht will be presenting a webinar on industry challenges after recent case-law on confidentiality of FRAND agreements, and other relevant aspects of FRAND case law, on November 22 from 4-5 p.m. CET.  Details here.  

Federal Circuit Vacates Damages Award for Lack of Substantial Evidence

This morning the court handed down its opinion in Enplas Display Device Corp. v. Seoul Semiconductor Co. (majority opinion by Judge Stoll, with Judge Newman concurring in part and dissenting in part).  As described by the court, the patents in suit are "directed to methods of backlighting display panels, particularly LED displays used in televisions, laptop computers, and other electronics" (p.2).  Enplas filed an action for a declaratory judgment of noninfringement and invalidity, and Seoul Semiconductor counterclaimed for induced infringement.  The court affirms the district court's determination that the patents were not anticipated by the prior art, and that Enplas induced third parties to infringe; but it vacates and remands the damages award for lack of substantial evidence.  From the opinion:

Enplas argues that the district court erred when it denied JMOL that the damages award was not supported by substantial evidence. Specifically, it contends that the only evidence supporting the $4 million award was testimony from SSC’s damages expert that explicitly and improperly included non-infringing devices in the royalty calculation. Before trial, Enplas filed a Daubert motion to exclude this testimony. The district court deferred full consideration of that motion, stating that it was more appropriate for a motion in limine. Enplas filed a motion in limine, seeking to exclude SSC’s damages expert’s testimony regarding “other lenses” not at issue in this case. The district court denied that motion, holding:

Consistent with this Court’s prior rulings, [SSC’s expert] cannot assume that infringement can be proven for the lenses not in this case. However, [SSC’s expert] may present evidence that under a lump-sum royalty negotiation, [Enplas] would seek to cover all of its potentially infringing products. As long as [the] ultimate damages determination is adequately adjusted to only recover for those lenses in the case, [the] testimony is permitted.

J.A. 13144 (emphasis added). Thus, the district court’s order limited SSC’s expert to a damages theory based on infringing and “potentially infringing products.” Id. It did not allow a damages theory based on sales of nonaccused products.

At trial, SSC’s expert opined that Enplas would have agreed to a lump sum royalty in a hypothetical negotiation for the ’554 and ’209 patents. She testified that “[i]f the license [were] limited only to the accused lenses . . . the reasonable royalty for the ’554 Patent [would be] $500,000, and for the ’209 Patent $70,000.” J.A. 15539 at 722:3–5. She explained that “the $570,000 covers the[] five products” accused of infringement in this case. J.A. 15534 at 717:1–3. SSC’s expert did not stop there, however. She went on to testify that Enplas and SSC would not have limited the license to just the accused products “if there [were] a risk of infringing the patent by manufacturing other products that are similar in nature.”J.A. 15534 at 717:11–13 (emphasis added). The “more pragmatic approach,” explained SSC’s expert, would have been for the parties to agree to a premium “freedom to operate” license to avoid the need to test and negotiate licenses for additional or future potentially infringing lenses that Enplas might sell. J.A. 15534–35 at 717:22–718:3.

To determine the premium that Enplas would pay, SSC’s expert assessed the volume of sales of all nonaccused lenses made by Enplas. Because none of this information had been produced during discovery, SSC’s expert found “some publicly-available information from the Enplas website” and used that to “determine what that volume of sales would be.” J.A. 15535 at 718:17–25. SSC’s expert testified that “the volume of sales” for Enplas’s unit that sells lenses “is eight to ten times the sales of the specific products that we’re here to talk about today”—i.e., the accused infringing products. J.A. 15537 at 720:3–7.

Based on this information and theory, SSC’s expert testified that Enplas and SSC would have agreed to pay $2 to 4 million depending on the ultimate “volume of sales of potentially infringing products beyond the ones in this case.” J.A. 15538 at 721:2–5 (emphases added). SSC’s expert did not present any explanation or evidence whatsoever to show how the past revenue from Enplas’s noninfringing lenses could reasonably estimate the future revenue from Enplas’s infringing or potentially infringing lenses. . . .

Here, SSC’s expert opined that Enplas and SSC would have agreed to a $2 to 4 million royalty based on a royalty base comprising sales of non-accused lenses. J.A. 15538 at 721:2–5. This testimony cannot support the jury’s damages award, for § 284 and our precedent proscribe awarding damages for non-infringing activity. Thus, the jury’s $4 million award for infringement of the ’554 patent cannot stand (pp. 16-23).

Judge Newman dissents, arguing inter alia that the court should defer to the expert's testimony that a hypothetical ex ante license would have been in the amount of "$2 to 4 million for a freedom to operate license . . . to alleviate business uncertainty" (dissent p.9).  The dissent also makes more of the fact that the plaintiff did not challenge this testimony at trial or offer a rebuttal case on damages (p.12), and views the majority as permitting Enplas to "challenge admissibility under the guise of substantial evidence," rather than "under the framework of the Federal Rules of Evidence . . . through a Daubert challenge" (p.7).

Stierle on Non-Practiced Patents

Martin Stierle has published a book titled Das nicht-praktizierte Patent ("The non-practiced patent") (Mohr Siebeck 2018), based on his Ph.D. thesis (for which I understand he was awarded the Faculty Prize of the Law Faculty at Ludwig Maximilian University in Munich).  Here is a link to the book's Amazon webpage, and here is the book description (my translation from the German):

Patent trolls have become an essential part of patent law discussions over the past decade.  Inspired by developments in the U.S., the prevailing scholarly opinion in Germany is critical of the availability of injunctive relief for non-practicing entities, while the German case law on the subject nevertheless continues to afford claims for injunctive relief even to NPEs.  Martin Stierle undertakes a change in perspective.  He frees himself from the perspective of the patent owner and considers the problem from the standpoint of protective rights.  In the center stands the non-practiced in all its facets (blocking patents, licensing patents, sleeping patents, etc.).  With the use of patent function theory, he proposes the adoption of a legal obligation to practice one's patent, which would apply regardless of the type of patent holder.  He underpins his theory with legal history, comparative law, and law & economics considerations.

I haven't started reading it yet, but my library has obtained a copy.

IP Chat Channel Webinar on Enforcing IP at Trade Shows

I should have mentioned this earlier, but today at 2 p.m. Eastern time the IP Chat Channel will be presenting a webinar titled Trade Shows: IP Rights Enforcement in the U.S. and Internationally.  Here is a link, and here is the description:

Live trade shows are thriving, even in this age of digital marketing — and even for intangible products.  In fact, a poll of marketing professionals at a recent leading IT trade fair for cloud computing, AI, and blockchain illustrated their strong belief that trade shows still are cost-effective at generating leads and/or increasing brand awareness.
But trade shows can also be places where IP right holders frequently discover that their IP rights are being infringed.  Moreover, standing disputes can escalate, because IP owners have an opportunity to interact with alleged infringers on the exhibitors’ floor.
This webinar will give a global perspective on enforcing IP at trade shows, including trademarks, trade dress, design patents, and utility patents, as well as address the U.S. landscape related to these issues.  The panel includes a law professor who has done extensive research and analysis of the remedies available worldwide for infringement at trade shows, a law firm attorney who has won a number of temporary restraining orders from U.S. courts requiring the immediate removal of infringing exhibits, and an in-house patent counsel with experience dealing with infringers and counterfeiters at trade shows.  They will discuss:

• Obtaining an TRO post-eBay, now that U.S. courts may no longer presume the existence of irreparable harm in patent infringement cases
• The proper preparation before a trade show that will strengthen an IP owner’s legal case and allow rapid enforcement
• When it is necessary to alert the local U.S. Attorney and the best ways to work with law enforcement
• What kind of recourse is available at trade fairs in other countries that often host trade fairs
• The pros & cons of ADR mechanisms recently established by some trade fair organizers
• The opposite side of the coin for trade show exhibitors: What to do if a competitor files an action against your company

Speakers:

• Scott Markow, Stanley Black & Decker Inc.
• Michael McCue, Lewis Roca Rothgerber Christie LLP
• Prof. Marketa Trimble, University of Nevada Law School

This was also the topic of Professor Trimble's recent conference at UNLV, at which I too participated.

As for me, on Friday, I will be a panelist for a session on patent remedies at the Tenth Annual Conference on the Role of the Courts in Patent Law and Policy, at Georgetown Law's Washington campus (see here).  I believe I will mostly be addressing FRAND issues.

Two New Papers by Koren Wong-Ervin

1.  Koren Wong-Ervin and Georgios Effraimidis have posted a paper on ssrn titled Recommendations Following the FTC’s October 2018 Hearings on IP and Innovation.  Here is a link to the paper, and here is the abstract:

On October 23-24, 2018, the U.S. Federal Trade Commission (FTC) held hearings on intellectual property (IP) and innovation as part of its broader ongoing hearings on Competition and Consumer Protection in the 21st Century. The hearings focused on the role of IP protection in promoting innovation, as well as the foundational question of whether the FTC (and the government more broadly) should play a role in advancing or supporting innovation and, if so, what role. The Commission is seeking further public input through its consultation process on this important (and commendable) inquiry, including asking whether the FTC currently uses its enforcement and policy authority to advance innovation, and what factors it should consider in attempting to achieve this objective. The hearings also included sessions on the role of IP in business and investment decisions, emerging trends in patent quality and litigation, and industry and economic perspectives on current U.S. IP and innovation policy.

This short article summarizes some of the major themes from these hearings and provides an economic and legal analysis of the relevant testimony. We conclude with recommendations for the FTC to consider when evaluating possible future enforcement and policy work in this area. Our recommendations focus primarily on certain concerning positions taken in the Commission’s 2003 and 2011 IP Reports, namely with respect to patent quality and the recommendation that courts adopt an ex-ante incremental value approach when calculating patent damages.

2.  Ms. Wong-Ervin also has posted a paper titled The 2018 FTC Hearings on IP & Innovation: Key Testimony, Economic Learnings, and Recommendations for Further Study.  Here is a link, and here is the abstract:

This Article provides a summary of some of the key testimony from the U.S. Federal Trade Commission’s October 23-24, 2018 hearings on intellectual property (IP) and innovation, followed by insights from the economics literature and recommendations for future study. Covered topics include: the role and importance of IP rights in promoting innovation; the role of IP in business and investment decisions, including data on recent investment trends; and effects of recent patent law reforms, including U.S. Supreme Court decisions restricting patent eligible subject matter (2012 Mayo and 2014 Alice decisions) and weakening patentees’ ability to obtain injunctive relief (2006 eBay decision); the high invalidity rate of patents following the 2011 American Invents Act and its creation of post-grant challenges through the Patent Trial and Appeal Board (PTAB); and the general trend towards lower patent damages awards. Key testimony covered includes remarks by the Commissioner for Patents at the U.S. Patent and Trademark Office, the Acting Chief Judge of the PTAB, investors and other industry participants, and leading academics.  

For video of the aforementioned hearings, at which I was one of the participants, see here.