ITC Judge: Public Interest Weighs Against Exclusion of iPhones

Bloomberg News reports that International Trade Commission (ITC) Administrative Law Judge Thomas Pender has decided not to recommend issuing an order excluding iPhones from entry into the United States, on public interest grounds.  (The ALJ's "Final Initial Determination" is not public yet, however.)  This is the latest development in the ongoing patent feud between Qualcomm, which filed the complaint triggering the investigation, and Apple.  Although the judge found that Apple infringed one of the three patents in suit by selling phones incorporating infringing chips made by Intel, and although none of the patents at issue is standard-essential, the ALJ concluded that the public interest nevertheless weighs against entry of an exclusion order.   The five-member ITC will next review the ALJ's recommendations.  Meanwhile, the same patents are at issue in a parallel federal district court action; and another ITC investigation involving the same parties, but different patents, also remains pending.

Also according to the Bloomberg story, Qualcomm says that "it makes no sense" to find infringement and yet not enter an exclusion order, but of course the governing statute specifically authorizes withholding exclusion orders based on the public interest.  The exercise of such authority is rare, but readers will recall that the U.S. Trade Representative invoked the public interest ground five years ago to veto an exclusion order directed against Apple, in a case brought by Samsung and involving standard-essential patents.  (See here.)   I'm sure there will be the predictable hue and cry from the pro-injunction crowd, but think about it:  does it really make sense for the U.S. to make use of the Tariff Act, of all things, on behalf of one U.S. company to enjoin the importation and distribution of goods by another U.S. company--particularly when (as here, and as usually is the case) there is parallel U.S. patent infringement litigation between the same parties?  Or to put it another way, does it make sense to have one forum where injunctions are discretionary (but still awarded in 75% of cases), and another where they are mandatory absent a (rare) application of the public interest exception?  Ot to put it yet another way, if there is any logic in having such a parallel forum, why not grant that forum the same discretion that federal district courts have to grant or deny injunctions (technically, exclusion orders are not injunctions, but functionally they are pretty much the same thing) and, if necessary, award ongoing royalties?

To be sure, I don't know if ALJ Pender's findings are correct (the opinion isn't public yet, as stated above).  Injunctions often are warranted, for a variety of very good reasons.  But often is not always, and even if one thinks that U.S. courts should be granting them more frequently than they now do, it still would make little sense to have dual forums in which the standards governing injunctions can be so radically different. 

For further discussion, see Florian Mueller's write-up on FOSS Patents.  

Federal Circuit Reverses $234 Million Judgment Against Apple

The opinion in Wisconsin Alumni Research Foundation v. Apple Inc. is available here.  The Federal Circuit reverses for lack of infringement--so no new law on, or even discussion of, damages.  But a big win for Apple! 

In other news, in Gust, Inc. v. Alphacap Ventures LLC the court reverses an award of fees and costs made pursuant to 28 U.S.C. § 1927.   I'm a little pressed for time today, but I might have more to say about this one next week.

Delcamp on FRAND Principles

Henry Delcamp has published an article titled Principes économiques sous-jacents à l’estimation des niveaux de licence FRAND ("Economic principles underlying the estimation of FRAND license rates") in the July-August 2018 issue of Propriété Industrielle (pp. 19- 21).  Here is the abstract (my translation from the French):

If, today, decisions on the characteristics of a fair, reasonable, and nondiscriminatory (FRAND) license for an essential patent have mostly been rendered by North American and British jurisdictions, many nascent disputes in continental Europe give cause for considering what valuation principles can be extracted from the foreign jurisdprudence on this question.

The author distills three principles from four cases, Innovatio, Ericsson v. D-Link, Microsoft v. Motorola, and Unwired Planet.  (TCL may have come out too late for inclusion in the discussion, which is unfortunate since that court's understanding of "nondiscriminatory" is distinct from Mr. Justice Birss's in Unwired Planet.)

1.  A FRAND license should enable the elimination of hold-up, but the patent owner is entitled to expect some portion of the gains associated with standardization without being accused of hold-up.

2.  It is economically justified that the patent owner captures a portion of the value tied to the market power of the standard, even though this portion cannot be precisely defined. 

3.  The obligation to license on nondiscriminatory terms does not imply that the licensing rates must be perfectly equivalent.

The author recognizes that principle (1) isn't consistent with the Federal Circuit's statement in Ericsson v. D-Link that a FRAND rate should not include "any value added by the standard’s adoption of the patented technology (though as he also notes it is consistent with Mr. Justice Birss's view as expressed in paragraph 97 of Unwired Planet).  The author highlights statements in Microsoft v. Motorola (para. 80) that a FRAND royalty should take into account the value of the patent to the standard, and argues that a FRAND royalty should exclude any value attributable to holdup.  Overall the author's view appear consistent with the view expressed by Norman Siebrasse and me in The Value of the Standard, where we also note that the principle of excluding the value of standardization is itself somewhat ambiguous.

Some Papers on Patent Damages and Related Issues in China

1.  Judge Chen Huizhen of the Shanghai Intellectual Property Court has published an article titled Resolving the Compensation Issue in IP Infringement Judicial Practice in the June-July 2018 issue of China IP Magazine (pp.78-82) (translated into English by Yuan Renhui).  Here is the abstract:

Since it was established, regarding the difficulties incurred by litigators in receiving their compensation for intellectual property infringement, Shanghai Intellectual Property Court has actively and strictly implemented the judicial policies to protect intellectual property, carefully studied the causes to these difficulties, and steadily and effectively used litigation holds.  It  has provided strong support to the solution of the issue by considering the seriousness of the fault of the infringer, in combination with the rules on hindrances to evidence admission and on statutory compensation.  It has thus strengthened the protection of intellectual property rights.

The author goes on to discuss, among other matters, evidence preservation orders in the SIPC; the ability of Chinese courts to award statutory damages exceeding the statutory maximum of RMB500,000, where warranted; and the SIPC's efforts to award reasonable costs to the prevailing IP owner.  The author concludes with a brief discussion of the availability of punitive damages in trademark cases.  The statute expressly permits them for malicious infringement, but the meaning of this term is still evolving.

On this last note, the March-April 2018 issue of the magazine published an article by Yuan Li, titled How to Claim Punitive Damages in Trademark Infringement in China:  Interview with Mr. Minjian You, Founding Partner of Co-effort Law Firm (pp.72-75).  This one is available online, here.

2.  Also in the June-July issue is an article by Judge Zhu Jianjun of the Shenzhen Intellectual Property Court, titled To Establish FRAND Negotiation Mechanism of Standard-Essential Patent (pp.83-85) (also translated by Yuan Renhui).  Here is the abstract:

Standard-essential patent (SEP) is of great significance for any wireless communication company and the country where the company is located. The SEP technology is the most valuable technology among all technologies contained int he patent.  The larger number and higher quality of the SEP are owned by a wireless communications company, the stronger advantageous competition may be established by it in the international and domestic wireless communication market. 

The author advocates the establishment of "an ex ante prevention mechanism to prevent the occurrence of SEP disputes," on the basis of which the "parties can negotiate in good faith with clear rules and systematic constraints so that a patent license agreement on SEP can be reached and concluded in a timely manner."

3.  Xianlin Wang has published a paper titled Anti-Monopoly Regulations on the Abuse of Intellectual Property Rights in China in the August-September 2018 issue of GRUR Int. (pp. 761-66).  Here is the abstract:

As China continues to strengthen IPR protection, it is also exploring means to regulate the abuse of IPRs.  At present, the regulation of the abuse of IPRs is mainly based on the Art. 55 of the Anti-Monopoly Law of P.R.C. (2007).  Some cases of civil actions as well as administrative enforcement against monopoly concerning IPR happened in China and investigations and rulings of them have received wide-spread attention from abroad and at home.  The Provisions on the Prohibition of the Abuse of Intellectual Property Rights to Eliminate or Restrict Competition (SAIC, 2015) established the more concrete legal rules for regulating abuse of IPRs currently.  China's Anti-Monopoly Guidelines on the Abuse of Intellectual Property Rights will be published as soon as the integration of anti-monopoly enforcement agencies has completed recently.

The author quotes article 13 of the aforementioned Provisions, which states, inter alia, that "[w]ithout justifiable reasons, an undertaking with a dominant market position shall not, in the course of setting and implementing standards, engage in any of the following conducts that eliminate or restrict competition . . . after its patent has become a standard essential patent, in violation of the fair, reasonable, and nondiscrimination principle, applying any conduct which eliminates or restricts competition, such as refusing to license, tying products or imposing other unreasonable trading conditions."

Further Analysis of Power Integrations

Michael Risch posted a comment to my post from yesterday, which has caused me to rethink whether (as I stated) the Federal Circuit's revised opinion in Power Integrations articulates a stricter standard for invoking the entire market value rule.  I now think that Professor Risch (and Dennis Crouch, who appears to take the same view) are correct, and that my characterization of the revised opinion as articulating a stricter standard was wrong--though I have to say, I find this entire question very confusing.  Maybe it's just me.  Or maybe litigants should start hiring analytical philosophers as consultants or expert witnesses in patent cases . . .

Anyway, as stated yesterday the Federal Circuit altered the relevant passage from its original opinion in Power Integrations as follows (modifications shown below in boldface):

Where the accused infringer presents evidence that its accused product has other valuable features beyond the patented feature, the patent holder must establish that these features are not relevant to consumer choice do not cause  consumers to purchase the product. A patentee may do this by showing that the patented feature “alone motivates customers to purchase [the infringing product]” in the first place. See id. at 69. But when the product contains multiple valuable features, it is not enough to merely show that the patented feature is viewed as essential, that a product would not be commercially viable without the patented feature, or that consumers would not purchase the product without the patented feature. Id. at 68. When the product contains other valuable features, the patentee must prove that those other features did not influence purchasing decisions do not cause consumers to purchase the product. 

I stated that I viewed the revised opinion as making "it slightly more difficult than it already was to use the entire market value of the infringing end product as the royalty base; or, to put it another way," as rendering "the conditions under which courts may invoke the entire market value rule (EMVR) even more strict than they were before." Professor Risch's comment on my post, however, reads as follows:

I'm not sure I agree with your reading. I read this as less stringent than before. I think that it is much easier to show that a feature did not CAUSE a purchase than it is to show that a feature did not INFLUENCE a purchase.

I think the way to resolve this is to focus on the distinction between "causing" and "influencing" (or being "relevant").  Consider a hypothetical device that includes two features, A and B.  A infringes P's patent, B is in the public domain.  P wants to use the entire market value of the device (including A and B) as the royalty base; D says the base should include the value of A only.  Under the original panel opinion, P would have to show that B is not "relevant" to consumers' demand for the device.  Under the new opinion, P would have to show that the presence of B does not "cause" consumers to buy the device.  Which rule is tougher on P?   

To answer this question, I think we need to focus on what it means to be "relevant" (or "irrelevant").  One possibility is that B is irrelevant if consumers are indifferent to the presence of B.  A device with AB* is just as good as one with AB.  In that case, I think it's fair to say both that (1) B is irrelevant to consumers' purchasing decisions, and (2) B's presence does not cause consumers to buy the device.  So there's no practical difference between the two standards.  But maybe you need a B-like thing--whether it's B or B*--to sell the product at all.  That is, B and B* provide the same functionality, and you need one of them, but it doesn't have to be B; B* is just as good.  Consumers are indifferent to B over B*, and the presence of B (as opposed to B*) doesn't cause consumers to buy the device, but you have to have either B or B* in the product or it won't sell.  So, is it fair to say that B is irrelevant to consumer demand?  That it doesn't cause consumers to buy the product?  I'm honestly not sure what the right answer is, but again I'm not seeing much of a difference at all between the two standards (causation and relevance).

Alternatively, maybe all it means to say that B is "relevant" or "influences" consumers is that consumers will consider B in deciding what to buy--it's a factor they take into account--but it won't affect the purchasing decisions of an identifiable number of them.  In that case, maybe it's correct to say that the presence of B does not "cause" consumers to buy the device, but it does "influence" them or is "relevant" to them.  And in that case, the new standard for invoking the EMVR is less strict than the one articulated in the original opinion, as Professor Risch surmises.  Consumers might prefer AB to AB*, but if AB is the one on the market and AB* isn't, they will buy AB rather than some other alternative (maybe A*B?).  (Though is it fair to say that, under such circumstances, the presence of B "influences" their decisions?)

I think my own confusion over this is due to the difficulty of proving a negative.  I would think that it is harder to prove that X causes Y than it is to prove that X is "relevant" to Y as that term is used in the above paragraph.  That is, it should be harder to prove that the presence of B causes some consumers to buy the device, than it is to prove that the presence of B is something that they would consider in deciding what to buy.   But it doesn't follow that it is harder to prove that the presence of B does not cause consumers to buy the device, than it is to prove that the presence of B is something they would not consider; in fact, precisely the opposite.

All that said, I still wonder how much of a practical difference any of this will make, and whether it is worth the effort . . .

Federal Circuit Issues Slightly Revised Opinion on EMVR in Power Integrations

The revised opinion in Power Integrations, Inc. v. Fairchild Semiconductor Int'l, Inc., published today, is here.  Dennis Crouch beat me to the punch in reporting on this one, and as he notes on Patently-O the only changes are as indicated below in boldface:

1.  At p.20, the sentence reading "In some circumstances, for example, where the other features are simply generic and/or conventional and hence of little distinguishing character, it may be appropriate to use the entire value of the product because the patented feature accounts for almost all of the value of the product as a whole" has been changed to "In some circumstances, for example, where the other features are simply generic and/or conventional and hence of little distinguishing character, such as the color of a particular product, it may be appropriate to use the entire value of the product because the patented feature accounts for almost all of the value of the product as a whole."

2.  At p.22, the original opinion has been changed as follows:

Where the accused infringer presents evidence that its accused product has other valuable features beyond the patented feature, the patent holder must establish that these features are not relevant to consumer choice do not cause  consumers to purchase the product. A patentee may do this by showing that the patented feature “alone motivates customers to purchase [the infringing product]” in the first place. See id. at 69. But when the product contains multiple valuable features, it is not enough to merely show that the patented feature is viewed as essential, that a product would not be commercially viable without the patented feature, or that consumers would not purchase the product without the patented feature. Id. at 68. When the product contains other valuable features, the patentee must prove that those other features did not influence purchasing decisions do not cause consumers to purchase the product.

The bottom line is that the revised opinion appears to make it slightly more difficult than it already was to use the entire market value of the infringing end product as the royalty base; or, to put it another way, renders the conditions under which courts may invoke the entire market value rule (EMVR) even more strict than they were before. 

When I blogged about the original panel opinion on July 12, I wrote:

The result doesn't seem all that surprising to me.  (Whether it's right or wrong as a matter of policy is another matter.)  To be sure, the Federal Circuit has permitted some variations from the EMVR--for example, in CSIRO v. Cisco, where the court (in a bench trial) used the entire market value as the royalty base, because the parties themselves had done so during their own (unsuccessful) negotiations over a royalty; in Ericsson v. D-Link, where the court allowed the plaintiff's expert witness to base his opinion on comparables that used the entire market value as the base; and in Exmark, where the claim covered the end product as a whole (see discussion here).  But this case doesn't appear to have any of these distinguishing features, or at least there's no mention of any such features in the opinion.

So, maybe I should have been surprised that the original panel's language about the EMVR wasn't more stringent than it was, though I'm inclined to believe that the revised opinion's alternative linguistic formulation won't make much of a practical difference.  And at the end of the day, I'm still mildly skeptical about the virtues of the EMVR at all, given that the commutative property of multiplication means that a small rate multiplied by a large base can equal the same product as a large rate multiplied by a small base.  On the other hand, the U.S. practice of using juries to determine damages awards may counsel in favor of some version of the EMVR, as the Federal Circuit has pointed out more than once, and as my coauthors and I discuss in the Reasonable Royalties chapter of the forthcoming edited volume Patent Remedies and Complex Products: Toward a Global Consensus.

Law360 Op-ed on eBay

I am pleased to announce that Law360 has published my op-ed, titled Congress Shouldn’t Overturn EBay Patent Injunction Standard.

Patent Remedies and Complex Products: Toward a Global Consensus

As I wrote last week:

I've mentioned a couple of times previously 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 long-awaited edited volume, Patent Remedies and Complex Products:  Toward a Global Consensus (Brad Biddle, Jorge L. Contreras, Brian J. Love & Norman V. Siebrasse eds.) is now in the hands of Cambridge University Press, and we are hoping it will be available in hard cover at some point in the not-too-distant future.  Meanwhile, we will be posting the individual chapters on ssrn in the coming days, and I will try to remember to announce of each of them on this blog as they become publicly accessible. 

All of the chapters except for the introduction are now up on ssrn.  So here are links to each of the chapters (except for the introduction, which I will add as soon as I can), followed by its abstract: 

Introduction (available soon)

Chapter 1:  Reasonable Royalties (coatuhored 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.

FRAND Perspectives from India, Spain

1.  Subhajeet Roy has published a post on SpicyIP titled Deconstructing the FRAND Regime vis-à-vis Recourse to Injunctive Relief.  The author provides a brief recap of the debates for and against injunctive relief in SEP cases, notes some of the governing standards in the E.U., the U.S., China, and India, and concludes that "The key takeaway from this debate is that it is crucial to encourage the parties to engage in good-faith negotiations and induce them to reach a consensus. More often than not, in the absence of a universally acclaimed method of determining FRAND royalty rates, courts go into the negotiating history of the parties. This often turns out to be the single most important factor in grant of an injunction in FRAND encumbered patents."

Also of interest on SpicyIP is Divij Joshi's recent post tiled "Drugs Are Not Sweets"-Bombay HC Imposes Exemplary Costs for Pharma Trademark Infringement.  If I understand correctly, the court in Glenmark v. Curetech awarded 1.5 crores (about $US 200,000) in exemplary damages (not costs in the sense of attorneys' fees) to be payable to charity, which the author says is probably the largest such award in Indian trademark law.

2.  Judge Enrique Sanjuan and Professor Ana Belen Campuzano have posted a paper titled Valuation of Patents in Spanish Law.  Here is a link to the paper, and here is the abstract: 

This study deals with the necessary adaptation of Spanish law to the new European regulations on FRAND licenses and focuses on the valuation of the so-called standard-essential patents (SEP). From the criteria followed in the USA and UK, our regulations must adapt to the valuation system in these new cases given the lack of rules and according to the European Union legal ordering. However, a consideration of the nature of such licenses is necessary first, that American and European doctrine put in the contractual field.

From Around the Blogs

1.  Mark Cohen published a post on the ChinaIPR Blog about the upcoming conference at the University of Nevada-Las Vegas on Intellectual Property Rights Enforcement at Trade Shows, at which I also will be participating.  I'm looking forward to learning from Mr. Cohen about enforcement of IP rights at trade fairs in China. 

 

2. On the IAM Blog, Jacob Schindler posted an article titled Patent Litigation in Japan Should Be More Attractive Option, Says JPO Commissioner.  The article discusses a recent speech in which Commissioner Naoko Munakata "pointed out that raising damages and making evidence collection easier would benefit large Japanese firms by better preparing them for the global patent enforcement environment," and "announced the recent opening of an arbitration centre devoted to SEP disputes in Tokyo."

3.  The EPLaw Blog published a post yesterday noting the publication on my book Patent Wars:  How Patents Impact Our Daily Lives, noting correctly that I "invite[ ] readers to think for themselves, and not necessarily to agree with" me.

 

INPRECOMP

I've mentioned a couple of times previously 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 long-awaited edited volume, Patent Remedies and Complex Products:  Toward a Global Consensus (Brad Biddle, Jorge L. Contreras, Brian J. Love & Norman V. Siebrasse eds.) is now in the hands of Cambridge University Press, and we are hoping it will be available in hard cover at some point in the not-too-distant future.  Meanwhile, we will be posting the individual chapters on ssrn in the coming days, and I will try to remember to announce of each of them on this blog as they become publicly accessible. 

Karkanhalli and Kwan on Bargaining Power in Licensing

Hat tip to Michael Risch, who has an extended blog post about this recent article on Written Description.  The paper is by Gaurav Karkanhalli and Alan Kwan, and is titled An Empirical Analysis of Bargaining Power in Licensing Contract Terms.  Here is a link, and here is the abstract:

This paper studies a new, large sample of intellectual property licensing agreements, sourced from filings by public corporations, under the lens of a surplus-bargaining framework. This framework motivates several new empirical findings on the determinants of royalty rates. We find that licensors command premium royalty rates for exclusivity (particularly in competitive industries), and for exchange of know-how. Licensors with differentiated technology and high market power charge higher royalty rates, while larger-than-rival licensees pay lower rates. Finally, using this framework, we study how the nature of disclosure by public firms affects transaction value. Firms transact at lower royalty rates when they redact contracts, preserving pricing power for future negotiations. This suggests that practitioners modeling fair value in transfer pricing and litigation contexts based on publicly-known comparables are over-estimating royalties, potentially impacting substantial cumulative transaction value. 

I've only just started reading the paper myself, so I don't have anything to add at this point; but in addition to reading the paper, I'd recommend that anyone interested in the topic also take a look at Professor Risch's post, above.

Federal Circuit Affirms Award of All Litigation Fees and Costs

The nonprecedential opinion in Large Audience Display Systems, LLC v. Tennman Productions, LLC, authored by Judge Linn and joined by Chief Judge O'Malley and Judge Hughes, was handed down on August 20.  The court finds no abuse of discretion in the finding of exceptionality and the award of $755,000 in fees and costs.  The principal bases for the finding of exceptionality were (1) the plaintiff's opposition to a motion to transfer venue from the Eastern District of Texas to the Central District of California; (2) arguments relating to claim construction, made to the USPTO in the context of a reexamination; and (3) the plaintiff's use of a privileged email.  The court concludes that "While we may have reached a different conclusion regarding exceptionality if we were evaluating the  parties’ arguments in the first instance, our review is limited to whether the district court, in considering the totality of circumstances, abused its discretion in reaching the conclusion that LADS’s conduct was exceptional under § 285. See Octane Fitness, 134 S. Ct. at 1756" (p.6).  The court then goes on to find no abuse of discretion in the amount of the award:

LADS next argues that the district court erred in awarding Tennman all of its requested fees, rather than those directly caused by LADS’s exceptional conduct. To support this proposition, LADS relies on Kilopass Tech., Inc. v. Sidense Corp., 738 F.3d 1302, 1313 (Fed. Cir. 2013), in which we explained that fees should “compensate a defendant for attorneys’ fees it should not have been forced to incur.” Tennman responds that nothing in § 285 requires a direct nexus between the exceptional litigation misconduct and the award, and that full fees are unavailable only where particular litigation misconduct forms the basis of the exceptional case determination and where the moving party only prevails on some of its patent claims, but that neither of these situations applies here. . . . 

The district court applied a Lodestar analysis, which provides a presumptively reasonable fee award. . .  .  In addition to this presumption, we note that the district court has “considerable discretion” to determine the amount of fees under § 285, owing to its “superior understanding of the litigation and the desirability of avoiding frequent appellate review of what essentially are factual matters.” Bywaters v. UnitedStates, 670 F.3d 1221, 1228 (Fed.Cir.2012) (internal quotations omitted).

The district court did not abuse its considerable discretion in awarding fees for the entire litigation. To begin, nothing in § 285 or our case law precludes such an award. . . .  The district court concluded that the factual bases for the exceptionality finding—from the venue fight, to the unreasonable claim constructoins [sic], to the use of the privileged email—“permeated” the entire litigation. As we have recognized, full fees may be awarded in such circumstances. . . . As discussed above, none of these findings were clearly erroneous (pp. 7-8).

One thing the court notes in passing that I wasn't aware of:  in discussing (and ultimately rejecting) the plaintiff's arguments against the amount of the award, the court writes:

Finally, LADS argues that the district court’s Lodestar analysis was flawed because . . . Tennman failed to prove its hourly rates, because the rates of timekeepers other than Langsam were supported solely by inadmissible hearsay from attorney website bios and the 2013 AIPLA Survey previously found unreliable by the Central District of California in Perfect 10, Inc. v. Giganews, Inc., No. 11-07098, 2015 WL 1746484 (C.D. Cal. March 24, 2015) . . . (p.9).

The AIPLA Report of the Economic Survey, for those of you who aren't aware of it, is an annual publication that provides survey evidence of the mean and median costs of various types of IP proceedings.  I cite it myself all the time as it relates to nationwide medians and means.  I looked at the district court opinion cited above, and while it does express some reluctance to use the survey to determine typical rates in a specific location, it doesn't say that the AIPLA survey is unreliable as it applies to nationwide medians and means:

iii. The AIPLA Economic Survey

Perfect 10's reliance on the AIPLA Economic Survey comes slightly closer to the mark in that it indicates average and median rates for intellectual property lawyers practicing in the Los Angeles area. (See Dkt. No. 650–2, Exh. 7.) However, in Los Angeles, the AIPLA survey only differentiates between partners and associates, without any differentiation based on years of experience. (Id.) And even in those two categories, the survey's results are based on the reported rates of only 13 partners and 13 associates, hardly a representative sample of “prevailing market rates” in the Central District. (Id.)

iv. Other Evidence of Prevailing Market Rates

Because Mr. Mausner's rates, the Laffey Matrix, and the AIPLA survey offer little to no insight on the actual prevailing market rates in the Central district of California for attorneys of equal experience, skill, and reputation, the Court looks to other evidence and concludes Defendants rates are reasonable. . . .

UNLV to Host a Conference on IP Enforcement at Trade Shows

The University of Nevada Las Vegas, William S. Boyd School of Law, will be hosting an event titled "Intellectual Property Rights Enforcement at Trade Shows:  International Perspectives and Best Practices Conference" on October 4, 2018.  Much of the discussion will focus on remedies, and I will be moderating one of the panels.   Here is the conference webpage, from which you can download the schedule, and here is the conference description:

Trade shows are frontiers of innovation and creativity, but they can also be catalysts for disputes over intellectual property, such as trademarks, copyrights, trade secrets, and patents on inventions and designs. Enforcement of intellectual property rights is of vital importance at trade shows – where in one venue and in just a few days products and services receive the attention of a wide international audience. With some 260 million visitors attending trade shows worldwide annually, the annual global trade shows audience, taken as a group, would constitute the fifth most populated country in the world. This conference brings together intellectual property law experts from the United States and other countries – attorneys, judges, representatives of trade show operators, and others – to discuss best practices for intellectual property rights enforcement at trade shows, including practices in courts and alternative dispute resolution mechanisms.

The keynote speaker will be USPTO Director Andre Iancu. Should be a great event!

Innovators Network Foundation

Today I am happy to inform readers that the Innovators Network Foundation, in partnership with ACT | The App Association, has chosen me to serve as an Intellectual Property Fellow for the coming year.

A Couple of Interesting Damages Cases Out of Texas

1.  On the Essential Patent Blog, David Long has published a post on a patent dispute between PanOptis (assignee of certain patents that once belonged to Ericsson, Panasonic, and LG) and Huawei.  In August, a jury in the Eastern District of Texas found that Huawei willfully infringed four FRAND-committed SEPs and one non-SEP, and awarded damages of $2.8 million (total) for the four SEPs and $7.7 million for the non-SEP.  The matter now proceeds to a bench trial on whether PanOptis breached its FRAND commitment and, I would assume, on whether damages should be enhanced.  Mr. Long writes that many of the details of the case remain under seal.  One thing that strikes me as unusual is that, according to the write-up, Huawei is arguing that PanOptis breached its FRAND commitment and that, as a result, the court should hold that the SEPs in suit as unenforceable.  That would be an unusual application of . . . what, the patent misuse doctrine?  As I've noted before, in some countries implementers have succeeded in invoking the somewhat-similar "abuse of right" doctrine as a tool for avoiding injunctions in FRAND cases, but I think that courts normally still award damages--as was the case when Japan's IP High Court ruled in the Apple v. Samsung dispute a few years ago.  Anyway, the further proceedings in this case should be make for interesting reading.  Further discussion can be found on Law360 here, and here is a copy of the verdict form.

2.  Also in the Eastern District of Texas, Judge Schroeder has declined to award VirnetX enhanced damages in a dispute with Apple (the actual damages were $502.6 million, and VirnetX had asked the court to double them to $1 billion).  Here is a link to the story on Law360, and here is a link to the opinion.  (Note that this is a different case from the one Judge Schroeder decided last October, in which the actual damages were $302 million and the judge awarded a $41 million enhancement; for discussion, see here.)  From the opinion:

Having considered each Read factor, the Court concludes that enhancement is inappropriate. In favor of enhancement are the facts that Apple is a large, successful company, that Apple “copied” VirnetX’s ideas in a redesign and that an Apple engineer and corporate witness misled VirnetX in depositions about key infringement facts. The Court should not be interpreted as condoning such conduct. At the same time, however, this case was close, the misconduct brief and the remediation effort significant.

Aside from the Read factors, the Court also considers the size of the jury verdict. Enhanced damages inherently deter future, similar conduct. Affinity Labs of Texas, LLC v. BMW N. Am., LLC, 783 F. Supp. 2d 891, 899 (E.D. Tex. 2011) (“General deterrence of infringing activity is also a factor to be considered.”). The jury’s damages number is supported by the evidence in this case. But the Court is not persuaded that any enhancement of the verdict would lead to any additional deterrence of future conduct (p.45). 

The court also denies an injunction, and sets an ongoing royalty rate equal to the prejudgment rate (pp. 46-51).

Update:  Florian Mueller has some further analysis of the Huawei case on FOSS Patents, and Dennis Crouch of the VirnetX case on Patently-O.

New Book: "Multi-dimensional Approaches Towards New Technology"

Ashish Bharadwaj, Vishwas H. Devaiah, and Indranath Gupta recently published a new edited volume titled Multi-dimensional Approaches Towards New Technology:  Insights on Innovation, Patents, and Competition (Springer Singapore 2018).  The book is available in hardcover, but also has been licensed under the terms of the Creative Commons Attribution 4.0 International License, which permits use, sharing, distribution, and reproduction in any medium of format, as long as appropriate credit and citation are given.  You can download it here.  Here is the book description:

This open access edited book captures the complexities and conflicts arising at the interface of intellectual property rights (IPR) and competition law. To do so, it discusses four specific themes: (a) policies governing functioning of standard setting organizations (SSOs), transparency and incentivising future innovation; (b) issue of royalties for standard essential patents (SEPs) and related disputes; (c) due process principles, procedural fairness and best practices in competition law; and (d) coherence of patent policies and consonance with competition law to support innovation in new technologies.

Many countries have formulated policies and re-oriented their economies to foster technological innovation as it is seen as a major source of economic growth. At the same time, there have been tensions between patent laws and competition laws, despite the fact that both are intended to enhance consumer welfare. In this regard, licensing of SEPs has been debated extensively, although in most instances, innovators and implementers successfully negotiate licensing of SEPs. However, there have been instances where disagreements on royalty base and royalty rates, terms of licensing, bundling of patents in licenses, pooling of licenses have arisen, and this has resulted in a surge of litigation in various jurisdictions and also drawn the attention of competition/anti-trust regulators. Further, a lingering lack of consensus among scholars, industry experts and regulators regarding solutions and techniques that are apposite in these matters across jurisdictions has added to the confusion. This book looks at the processes adopted by the competition/anti-trust regulators to apply the principles of due process and procedural fairness in investigating abuse of dominance cases against innovators.