Wednesday, October 31, 2018

Inventor Protection Act

Not long ago, I published an op-ed on Law360 titled Congress Shouldn’t Overturn EBay Patent Injunction Standard.  In the course of the op-ed, I noted two pending bills (the STRONGER Patent Act and the Restoring America's Leadership in Innovation Act) which, if enacted, would to some degree overturn the Supreme Court decision (eBay) holding that the decision whether or not to enter an injunction is discretionary.  Although I have been critical of some aspects of the eBay decision as it has been implemented, on balance I firmly believe that it has done more good than harm, and that any proposals to return to a system of near-automatic injunctions would be a bad idea.

Anyway, I somehow managed to miss another pending bill, the Inventor Protection Act, filed in July by Congressman Dana Rohrabacher and discussed recently on IPWatchdog.  The bill would amend the Patent Act by defining an "inventor-owned patent" as "a patent held entirely by the inventor of the claimed invention," and conferring various protections upon inventor-owned patents, including (1) forbidding the USPTO from reexamining, reviewing, or otherwise making "a determination about the validity of an inventor-owned patent unless voluntarily agreed to by the inventor"; (2) allowing inventors to file suit for the infringement of inventor-owned patents in any judicial district in which "the defendant is subject to the court's personal jurisdiction or where the defendant has committed an act of infringement, regardless of whether the defendant has a regular and established place of business in such district," thus overruling TC Heartland as it applies to inventor-owned patents (hello, forum shopping!); (3) forbidding transfers of such actions "to another district for convenience without consent of the inventor"; and (4) promising an expedited trial and limitations on discovery.  Most relevant for purposes of this blog, however, are the proposed changes to the law of remedies.  These would include not only restoring the presumption of irreparable harm (which could be overcome by clear and convincing evidence), but also permitting the inventor to opt for "simplified damages" in lieu of (nonsimplified, everyday) damages under section 284.  Here's what the bill says:
If a request for relief under this subsection is made, the following provisions apply:
“(A) IN GENERAL.—Upon a finding of infringement, the court shall award damages equal to the sum of—
“(i) the greater of—
“(I) the total profits attributable to the infringing party’s use of the patented invention; or

“(II) 25 percent of the sales attributable to the infringing party’s use of the patented invention; and

“(ii) any interest and costs as fixed by the court.

“(i) TREBLE DAMAGES AVAILABLE.—If the court finds the infringement to be willful, the court may award damages equal to no more than three times the amount of any damages found in subparagraph (A), but shall not include any royalty payments.

“(ii) PRESUMPTION OF WILLFULNESS.—Infringement shall be presumed willful if the infringing party is an expert in the field of the invention.

“(C) ATTORNEYS FEES.—If an inventor successfully brings a claim for infringement of their inventor-owned patent, the court shall award the inventor any amount of their attorneys fees that exceeds 10 percent of the amount of any damages the court awards to the inventor.”
This just boggles the mind.  Although, as I have written elsewhere on several occasions, there is a theoretical argument to be made in favor of requiring an intentional infringer to disgorge its profits attributable to the infringement (that is, the profit it earned above what it would have earned from the use of the next-best available noninfringing alternative), perhaps as an alternative to enhanced damages, I don't think it makes sense as a remedy for infringement generally due to its potential overdeterrent effect.  And as the above text indicates, the bill contemplates that courts could award disgorgement and still award (up to) treble damages for willful infringement (and there would be that "presumption of willfulness" where the defendant "in an expert in the field of invention").  And why award, as an alternative to disgorgement, 25% of the sales (revenue?) attributable to the infringing party's use of the patented invention?  What's so magic about 25%?  Would any of this be tied into the economic value of the invention, that is, the value to the user over and above the value the infringer would have accrued from using the next-best noninfringing alternative?  

More to the point, have any of the sponsors of this bill thought at all about the rent-seeking and gaming that would ensue from enacting a class of protections solely for the benefit of inventor-owned patents?  Or about how any of this would affect consumers?  

I certainly understand that patent litigation (including, most definitely, the damages portion of trial) can be enormously expensive, and that there may be benefits in considering reforms that would simplify some aspects of it, particularly when the stakes are comparatively small.  (I talk about some of this stuff in my Patent Damages Heuristics paper; and I would suggest in addition that reforms such as creating a small(er)-claims-type court patterned after the Intellectual Property Enterprise Court in the U.K. might be worth considering.)  But the proposals floated in the Inventor Protection Act strike me as rather poorly thought out.  Fortunately, I can't imagine that this bill stands much of a chance of passing . . .  

Monday, October 29, 2018

"Patent Wars" on Sale

Amazon Prime is now offering my book Patent Wars:  How Patents Impact Our Daily Lives for sale for $17.39 $11.55 (down from the list price of $34.95).  Get your copy here.


Georgetown-Berkeley Conference on Patent Law and Policy

Georgetown Law's Institute for Technology Policy and the Berkeley Center for Law & Technology will be putting on the Tenth Annual Conference on the Role of the Courts in Patent Law and Policy, at Georgetown Law's Washington campus on Friday, November 16.  I will be participating in a panel on remedies.  Keynote speakers will be Federal Circuit Judge Alan Lourie and USPTO Director Andre Iancu.  Registration is available here.  Here is the schedule:

8:30 – 9:00 AM
Continental Breakfast
9:00 – 9:10 AM
Alexandra Givens, Executive Director, Institute for Technology Law & Policy at Georgetown Law
Professor John Thomas, Georgetown Law
9:10 – 9:40 AM
Opening Keynote
The Honorable Alan Lourie, Judge, U.S. Court of Appeals for the Federal Circuit
9:45 – 11:00 AM
Panel 1: Developments in Case Management
Professor Peter Menell, Berkeley Law (moderator)
 The Honorable Leonard Stark, Chief Judge, U.S. District Court for the District of Delaware
The Honorable Cathy Ann Bencivengo, Judge, U.S. District Court for the Southern District of California
The Honorable Liam O'Grady, Judge, U.S. District Court for the Eastern District of Virginia
11:15 AM –12:30 PM
Panel 2: Developments at the PTAB and the ITC
Erika Arner, Finnegan LLP, President PTAB Bar Association (moderator)
Scott Boalick, Acting Chief Judge, Patent Trial and Appeals Board
Katherine Burke, Baker Botts LLP
Shamita Cummings, White & Case LLP
Suzanne Michel, Google
12:30 – 1:30 PM
Luncheon Keynote
The Honorable Andrei Iancu, 
Undersecretary of Commerce and Director of the U.S. Patent & Trademark Office
1:30 – 2:45 PM
Panel 3: Remedies
Professor Amy Landers, Drexel School of Law
Professor Tom Cotter, University of Minnesota School of Law
John Mancini, Mayer Brown
Kelsey Nix, Jones Day
Professor Sarah Wasserman Rajec, William & Mary School of Law
3:00 – 4:30 PM
Panel 4: Case Law in Review
Professor Jay Thomas, Georgetown Law (moderator)
Professor Jeff Leftsin, U.C. Hastings School of Law
Professor Mark Lemley, Stanford Law School
Professor Sapna Kumar, University of Houston Law Center
4:30 – 5:30 PM
Cocktail Reception

Saturday, October 27, 2018

Law360 Piece on FRAND and Antitrust

I am happy to announce that on Monday Law360 will be publishing my analysis, titled FRAND and Antitrust:  Misconceptions Vs. Reality.  A copy is available here.

Wednesday, October 24, 2018

A Brief Analysis of the EWCA's Decision in Unwired Planet

As previously noted, the England and Wales Court of Appeal published its decision yesterday dismissing the appeal in Unwired Planet In'l Ltd. v. Huawei Techs. Co. (opinion by Lord Kitchin, joined by Lord Justice Floyd and Lady Justice Asplin).  Huawei did not appeal Mr. Justice Birss's method of calculating a FRAND royalty, so the three issues on appeal were whether Mr. Justice Birss erred (1) in concluding that a FRAND license would be global in scope; (2) in his interpretation of the "nondiscriminatory" aspect of the ETSI FRAND obligation; and (3) in concluding that Unwired Planet had not abused its dominant position, in violation of EU competition law, by instituting a proceeding for injunctive relief without following to the letter the steps set forth in the CJEU's 2015 decision in Huawei v. ZTE (e.g., "without giving any notice of which SEPs were said to be infringed or why, and without having made any licensing offer").

1.  As for the first issue, the court concludes that there was no error.  In particular, the court accepted Mr. Justice Birss's determination that a global agreement is consistent with industry practice, and that it would be inefficient (and conducive to holdout) for the parties to negotiate royalties on a country-by-country basis.  The court further concludes that awarding a global FRAND royalty does not violate comity--or unduly leverage the infringement of the two U.K. patents in suit that were expressly found to be valid and infringed--insofar as (1) Mr. Justice Birss was not adjudicating the validity and infringement of any foreign patents, but rather determining what the parties' obligations were under ETSI's FRAND obligation; (2) Huawei retained the ability to contest validity of any of these patents; and (3) Huawei did not have to accept the global FRAND resolution, but could instead choose to be bound by the U.K. injunction (applicable only within the U.K.) and continue litigating infringement and validity in other countries.

I'm inclined to think this is right--it doesn't seem very efficient to proceed on a country-by-country basis--though I do worry a bit about the potential for forum shopping/races to the courthouse.  Would it be better to have some sort of private institution for establishing global FRAND rates, as Jorge Contreras argues in a recent paper?  On the other hand, note that the court is not shutting the door on the possibility (in other cases) of staying or dismissing a request for a global FRAND agreement on the ground of forum non conveniens (though it says that in this case Huawei raised this objection too late, see para. 112). 

2.  One point on which the court disagrees with Mr. Justice Birss, though it winds up not mattering, is with regard to the question of whether there is one FRAND rate or a range.  The court concludes that FRAND is a range (see paras. 119-25), which I too think makes more sense.  

3.  On the nondiscrimination issue, the court finds no error in Mr. Justice Birss's view that a rate is FRAND if it is "generally nondiscriminatory," that is, if it is consistent with a fair and reasonable benchmark, even if some other licensees are offered a lower rate (unless the offer of a lower rate to some violates competition law, which was not the case here).  The court (and Mr. Justice Birss) rejected the "hard-edged nondiscrimination" principle, under which a rate is non-FRAND if does not treat all similarly situated licensees the same and there is no objective reason for the difference.  The court notes that its position on this issue differs from that of some decisions in Germany, China, and the U.S. (TCL v. Ericsson), but given the early stage in the evolution of this body of law it does not believe it should be bound by these other decisions.

4.  On the abuse of dominant position issue,  the court agrees with Mr. Justice Birss that the steps the CJEU established in Huawei v. ZTE issue constitute a "safe harbor" against a competition law violation.  They do not establish the only means by which a SEP owner who seeks an injunction can avoid liability for abusing its dominant position.  Thus, the fact that Unwired Planet did not follow the Huawei v. ZTE steps to a tee do not necessarily lead to the conclusion that Unwired Planet has violated competition law.  See paras. 251-85.
5. For other coverage, see the IAM Blog, IPKat (here and here), and Kluwer.  There are surely many more blog posts and papers to come . . . 

Federal Circuit Orders Sua Sponte Oral Argument in WesternGeco

In May I published a post titled Is WesternGeco Moot?, in which I wrote:
This morning the Federal Circuit published its opinion in WesternGeco LLC v. ION Geophysical Corp., affirming the PTAB's determination that certain claims of three WesternGeco patents are invalid.  On Twitter, Janice Mueller asks "Does this moot the Supreme Court’s pending consideration of offshore LP damages if the WG patents are gone??"  I think the answer is no, because if I understand the facts correctly there were four patents in suit in the infringement proceeding, all of which were found to be valid and infringed; and according to today's Federal Circuit's opinion (p.3 n.2) one of these four, U.S. Patent. No. 6,691,038, was "not at issue here," that is, in the appeal from the PTAB.  Also, although I have not immersed myself in the record of this case, I believe that one of the infringed claims of one of the instituted patents also was not an issue in the PTAB appeal (claim 23 of the '520 Patent).  So as long as some portion of the damages award could have been based on the infringement of these noninstituted claims, I think the Supreme Court still has jurisdiction (though I hasten to note that I am not an expert on federal jurisdiction).  
The Supreme Court issued its decision in the case in June, stating that 
Under the Patent Act, a company can be liable for patent infringement if it ships components of a patented invention overseas to be assembled there. See 35 U.S.C. § 271(f)(2). A patent owner who proves infringement under this provision is entitled to recover damages. § 284.The question in this case is whether these statutes allow the patent owner to recover for lost foreign profits. We hold that they do.
See my analysis here.

Last week,  the Federal Circuit issued the following order sua sponte:
Oral argument for these appeals is scheduled for November 16, 2018, at 10:00 a.m. in Courtroom 201. The parties shall notify the court via ECF by November 2, 2018, of the names of counsel who will present oral argument. At oral argument, counsel should be prepared to address the following questions:
(1) In view of this court’s affirmance of the invalidation of ’967 Claim 15, ’607 Claim 15, ’520 Claims 18 and 19 in inter partes review, WesternGeco LLC v. ION Geophysical Corp., 889 F.3d 1308 (Fed. Cir. 2018), is Claim 23 of U.S. Patent No. 7,293,520 the only claim that could support the lost profits award?
(2) In the event that all lost profits could not be awarded because ION and WesternGeco do not compete in the same market, would it be appropriate to apportion any award of lost profits attributable to the sale and use of the device of ’520 Claim 23 and profits attributable to other, nonpatented, aspects of survey services?
(Hat tip to Dmitri Karshtedt for passing this along.)  Here is a link to the '520 Patent, and here is a link to '038.  Claim 18 of '520, from which Claim 23 depends, reads: 
An apparatus comprising:
(a) an array of streamers each having a plurality of streamer positioning devices there along;
(b) a control system configured to use a control mode selected from a feather angle mode, a turn control mode, a streamer separation mode, and two or more of these modes.
Claim 23 reads:
The apparatus of claim 18 wherein the towing comprises ending one pass, turning a towing vessel having the streamers attached thereto while throwing out the streamers before beginning another pass, with the control mode in the turn control mode during the turning and throwing out.
Here is claim 14 of '038, which is the one found valid and infringed:
A seismic streamer array tracking and positioning system comprising:
a towing vessel for towing a seismic array;
a seismic streamer array comprising a plurality of seismic streamers;
an active streamer positioning device (ASPD) attached to each seismic streamer for positioning each seismic streamer;
a master controller for issuing vertical and horizontal positioning commands to each ASPD for maintaining a specified array geometry;
an environmental sensor for sensing environmental factors which influence the towed path of the towed array;
a tracking system for tracking the streamer horizontal and vertical positions versus time during a seismic data acquisition run;
an array geometry tracking system for tracking the array geometry versus time during a seismic data acquisition run, wherein the master controller compares the vertical and horizontal positions of the streamers versus time and the array geometry versus time to desired streamer positions and array geometry versus time and issues positioning commands to the ASPDs to maintain the desired streamer positions and array geometry versus time.
I'd have to delve more deeply into the facts and the record to hazard a guess as to why the court doesn't mention '038, or to predict how the Federal Circuit will rule.  Any ideas, readers?

Tuesday, October 23, 2018

FTC Hearings on Competition and Consumer Protection

As mentioned before, the Federal Trade Commission is in the process of holding a series of Hearings on Competition and Consumer Protection in the 21st Century.  I spoke on a panel on Innovation and IP Policy this morning.  Sessions continue this afternoon and tomorrow. You can catch the hearings on a live webcast, and after 24 hours you can view a replay.

Unwired Planet Decision Is Out

And available here.  Right now, I'm heading over to the FTC, but I will read the decision later today and comment on it sometime this week (I hope). In summary, though, there are three grounds for appeal, and the Court of Appeal dismisses the appeal on all three grounds:
Para. 129:  "The judge was entitled to find that in all the circumstances only a global licence would be FRAND. He fell into error in one aspect of his reasoning but this had no material effect on the conclusion to which he came. Ground one must therefore be dismissed."
Para. 210: "In the result, Huawei's appeal on ground 2 [nondiscrimination] fails.
Para. 290:  "It follows that ground 3 [Huawei v. ZTE and proportionality] must be rejected.
Para. 291:  "For all of the reasons we have given, this appeal must be dismissed."

Monday, October 22, 2018

Enhanced Damages: Willful Infringement, "Should Have Known," Willful Blindness

As reported by Dennis Crouch recently on Patently-O, on October 2 the Supreme Court denied a petition for a writ of certiorari in Bombardier Recreational Producers Inc. v. Arctic Cat Inc., in which the question presented was
Whether a finding of willful infringement based on In re Seagate’s “should have been known” negligence standard violates the requirement that subjective willfulness must be “intentional or knowing,” as set forth by the Supreme Court in Halo Electronics Inc. v. Pulse Electronics Inc.
For previous discussion of the Federal Circuit opinion on this blog, see here; see also the Scotus Blog webpage for this case, here.  As Professor Crouch also noted, however, another petition raising essentially the same issue, plus one more, was filed in Corning Optical Communications v. PPC Broadband.  Here are the questions presented:
1. In determining whether to enhance damages for “egregious” infringement under §284, must courts consider all relevant circumstances, including evidence that the defendant’s position was objectively reasonable?
2. Does a finding of willful infringement based on a “should have known” standard violate the requirement that willfulness be “intentional or knowing”? 
It will be interesting to see if the Supreme Court decides to pick this one up.  On a related note, Professor Dmitry Karshtedt recently called to my attention an Order Denying Defendant's Motions to Dismiss in Corephotonics, Ltd. v. Apple, Inc., in which Judge Lucy Koh concludes that willful blindness is sufficient to satisfy the "intentional and knowing" standard:
. . . to state a claim for willful infringement, Corephotonics must allege that Apple knew of Corephotonics’ patents and then acted or continued to act even though it knew that it was infringing Corephotonics’ patents or that the risk of such infringement was obvious. Arctic Cat, 876 F.3d at 1371. . . .
. . . it has been well-established both before and after the Halo decision that knowledge of a pending patent application does not confer knowledge of an existing patent. . . .
However, Corephotonics also alleges that in 2016, Apple cited to one of Corephotonics’ issued patents. . . .
Moreover, Corephotonics also alleges in its pleadings that Apple was “willfully blind” to a high risk that it was infringing Corephotonics’ patents. . . . In Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. 754 (2011), the United States Supreme Court concluded that the doctrine of willful blindness applied to the requirement, in the induced infringement context, that a defendant know its induced acts constitute patent infringement. Id. at 768–69 & n.9. The Global-Tech Court stated that “a willfully blind defendant is one who takes deliberate actions to avoid confirming a high probability of wrongdoing and who can almost be said to have actually known the critical facts.” Id. at 769.
Apple contends that allowing willful infringement claims based on a defendant’s willful blindness contradicts the Federal Circuit’s statement that “[k]nowledge of the patent alleged to be willfully infringed continues to be a prerequisite for enhanced damages.” WBIP, 829 F.3d at 1341. . . . However, the United States Supreme Court made clear in Global-Tech that a finding of willful blindness is, in effect, a finding of knowledge. 563 U.S. at 770 (discussing how the willful blindness doctrine “permits a finding of knowledge”). Post-Halo, courts have recognized that allegations of willful blindness can satisfy the knowledge requirement for willful infringement. See Straight Path IP Grp., Inc. v. Apple Inc., 2017 WL 3967864, at *4 (N.D. Cal. Sept. 9, 2017) (denying motion for judgment on the pleadings on an enhanced damages claim predicated on plaintiff’s willful blindness allegation). The Court therefore considers Corephotonics’ willful blindness claims.
Here, Corephotonics contends that its allegations that Apple knew about Corephotonics’ technology, knew about Corephotonics’ patent applications, and then instructed Corephotonics not to share Corephotonics’ issued patents with Apple raise the inference that Apple “believed that there was a high probability that it was infringing the Asserted Patents, and that Apple took deliberate actions to avoid learning of that fact.” Opp. at 12. Specifically, Corephotonics alleges that after Corephotonics offered to share its patents with Apple’s technical and business personnel, Apple sent Corephotonics an email in October 2016 stating, “Please do not send any patents to us until further notice. Legal counsel might reach out with any questions.” FAC ¶ 35. At that time, Corephotonics’ ’291 and ’032 patents had issued. FAC ¶¶ 3, 5.
The Court agrees with Corephotonics that the allegations in the FAC and the ’18 Complaint raise the inference that Apple was at least willfully blind to a high risk that it was infringing Corephotonics’ patents. . . .
I'm inclined to think Judge Koh is right.  Whether courts will ever go farther, as Professor Karshtedt has urged, and conclude that a reckless failure to search for potentially relevant patents in advance of product launch is relevant to willfulness might be a tougher sell . . . .

Thursday, October 18, 2018

Principles and Guidance for Licensing SEPs in 5G and IoT

Last week IP Europe Alliance--an association whose larger corporate members include, among others, Ericsson, Nokia, and Qualcomm--released a draft CEN-CENELEC Workshop Agreement (CWA) titled "Principles and Guidance for Licensing Standard Essential Patents in 5G and the Internet of Things (IoT)."  Here is a link to the press release, and here is a link to the CWA itself.  The document is open for public comment until December 13 (see the press release for more information).  Here are the six principles:
Principle 1: Owners of patent rights which are essential for using standardised technologies (SEPs) should allow access to that patented technology for implementing and using the standard.
Principle 2: Both the SEP owner and the potential licensee should act in good faith with respect to each other with the aim of concluding a FRAND licence agreement in a timely and efficient manner.
Principle 3: Each party should provide to the other party, consistent with the protection of confidentiality, information that is reasonably necessary to enable the timely conclusion of a FRAND licence.
Principle 4: "Fair and reasonable" compensation should be based upon the value of the patented standardised technology to its users.
Principle 5: A SEP owner should not discriminate between similarly situated competitors.
Principle 6: If the parties are unable to conclude a FRAND licence agreement within a reasonable 1 timeframe they should seek to agree to third party determination of a FRAND licence either by a 2 court or through binding arbitration.
Each principle is followed by Guidance.  For example, Principle 2's Guidance states:
• When a SEP owner believes that a party implementing a standard is infringing its SEPs and would  require that party to take a licence, the SEP owner should notify that party, describe the alleged  infringement and ask it to enter into negotiations over a FRAND licence.
• The SEP owner should provide the potential licensee with information about its SEP portfolio and  why a licence is needed.
• The SEP owner should make an initial licence offer, and explain why it believes that the offer is  FRAND. If the potential licensee does not agree, it should promptly provide a counter-offer, and  explain why it believes that the SEP owner's offer is not FRAND and that its counter-offer is  FRAND.
• The potential licensee is free to challenge the essentiality or validity of the SEP owner's patents, in parallel to the negotiation, but that should not be used to unnecessarily delay negotiations over a licence. 
Principle 4's Guidance discusses compensation:
• Fair and reasonable compensation balances the incentive to contribute technology to standards with the cost of access to the standardised technology.
• Fair and reasonable compensation should be evaluated considering the facts and circumstances  that reasonable commercial parties would take into account when negotiating a patent licence.
• Comparable licences which result from commercial negotiations are often reliable indicators for  determining the value of the patented standardised technology to users of the licensed product or service.
• Other indicators which may be considered include consumer demand, measurable benefits of the patented standardised technology, and the price difference between substantially identical products with and without the standardised technology.
• As a cross-check when evaluating whether compensation is fair and reasonable, the aggregate of  fair and reasonable royalties likely to be borne by users for the standard concerned may also be  considered.
• Such aggregate royalties may be too high if wide access to the standard is prevented or too low if  the royalties are not sufficient to incentivise the contribution of technology to standards.
The draft concludes with a series of questions and answers (e.g., "What is a patent?"  "What is an injunction and how might this affect my organisation?").

For further discussion, see Joff Wild's recent write-up on the IAM blog here.

Tuesday, October 16, 2018

Damages for Extraterritorial Losses: Does WesternGeco Overrule Power Integrations?

As readers will recall, a few months back the Supreme Court in WesternGeco v. ION held that
Under the Patent Act, a company can be liable for patent infringement if it ships components of a patented invention overseas to be assembled there. See 35 U.S.C. § 271(f)(2). A patent owner who proves infringement under this provision is entitled to recover damages. § 284.The question in this case is whether these statutes allow the patent owner to recover for lost foreign profits. We hold that they do.
So, suppose we have a replay of Power Integrations or Carnegie-Mellon.  The infringing conduct at issue is a manufacture, use, or sale that occurs in the United States, in violation of § 271(a), but which triggers a chain of events resulting in (1) the U.S. patent owner losing a sale to the defendant in another country, or (2) the defendant obtaining higher profits on the sales it makes in another country.  Is the U.S. patent owner entitled to its lost profit in case (1), or a higher reasonable royalty in case (2), as long as the causal chain is not too remote--that is, as long as the sales the defendant made abroad were proximately caused by the infringement?  As I've noted previously, I've come around to the view that the answer is yes, and I'm inclined to read Justice Thomas's statements as quoted above as supporting that result.  He says that the "focus" of § 284 is "the infringement," and that § 284 is intended to provide "full compensation" for such infringement; and  § 271(a) defines infringement as the unauthorized domestic manufacture, sale, or use of the patented invention.  In other words, "the conduct relevant to" § 284's "focus" is domestic conduct, and as long as that is so § 284 provides for full compensation for the harm flowing from that domestic conduct (subject, surely, to normal proximate cause limitations, even if the Court stubbornly refuses to address that topic).  So there's no need to fret about whether whether the presumption against extraterritoriality applies, I guess.
On October 4, Judge Leonard Stark (D. Del.) reached the same conclusion.  (Hat tip:  Michael Risch.)  In ruling on what he construes as a motion for relief from judgment pursuant to Fed. R. Civ. P. 60(b)(6), Judge Stark writes in Power Integrations, Inc. v. Fairchild Semiconductor Int'l, Inc.:
In the Court's view, the Supreme Court's WesternGeco II decision implicitly overruled the Federal Circuit's Power Integrations opinion. . . . The Supreme Court's analysis of  the patent damages statute, § 284, has equal applicability to the direct infringement allegations pending here, as governed by§ 271(a), as it did to the supplying a component infringement claims at issue in WesternGeco II, which were governed by§ 271(f)(2). Fairchild has identified no persuasive reason to conclude that the interpretation of § 284 should differ here from what was available in WesternGeco II just because the type of infringing conduct alleged is different. Instead, as Power puts it, "Section 271(a) 'vindicates domestic interests' no less than Section 271(f)." (D.I. 977 at 2) (quoting WesternGeco II, 138 S. Ct. at 2138). Moreover, the Federal Circuit's WesternGeco I decision was based almost entirely on the Federal Circuit's Power Integrations decision. It logically follows that when the Supreme Court expressly overruled WesternGeco I it also implicitly overruled Power Integrations.
Judge Stark also certified the issue for interlocutory appeal.

Taking a decidedly different view is Professor Tim Holbrook, who in a paper he just posted to ssrn titled Extraterritoriality and Proximate Cause after WesternGeco, writes in the abstract:
The Supreme Court’s decision WesternGeco LLC v. ION Geophysical Corp. appeared to be a narrow case about a rather obscure patent law provision. In reality, however, it had the potential to reach into a number of trans-substantive areas, including the nature of compensatory damages, proximate cause, and extraterritoriality. Instead of painting with a broad brush, the Supreme Court opted to take a modest, narrow approach to the issue of whether lost profits for foreign activity were available to a patent holder for infringement under 35 U.S.C. § 271(f)(2). In addressing this issue, the Court utilized its two-step framework for assessing the extraterritorial reach of U.S. law adopted in RJR Nabisco Inc. v. European Community. The Court skipped step one, but its analysis of step two confirmed that the territorial limits of damages is tied to the corresponding liability provision. Ultimately the Court allowed the damages for the relevant foreign activity.
This decision clarified a few things about the extraterritorial application of US law. By skipping step one, the Court made it clear that the presumption against extraterritoriality is distinct from the focus analysis of step two. The Court passed on the opportunity to further elaborate on step one and to answer definitely whether the presumption applies to remedial provisions. The Court also elaborated on step two and embraced a methodology that tied extraterritorial reach of a general remedy provision to the corresponding liability provision.
The Court’s decision also leaves a number of questions open. Specifically, it remains unclear whether the Federal Circuit’s Power Integrations and Carnegie Mellon decisions survive WesternGeco. I contend that they do, in disagreement with other professors. The Court also failed to explore the important role that proximate cause may play in future patent cases, particularly those involving global theories of damages, and issue that I take up here. The Federal Circuit could – and should – embrace a narrower conception of proximate cause to limit these types of global theories of patent damages.
Law360 also has an article on the Power Integrations order, available (by subscription) here.

In other news, IPKat reports that the England and Wales Court of Appeal will publish its opinion in Unwired Planet v. Huawei on Tuesday, October 23.  I guess that will give me something to read on my flight home after the FTC hearing that morning . . . .

Monday, October 15, 2018

McGuire on FRAND

I mentioned a few weeks back that Professor Mary-Rose McGuire had published titled Wer bestimmt, was FRAND ist?  Über Rahmenbedingungen, Maßstab und Zuständigkeit für die Beurteilung der FRAND Konformität ("Who decides what FRAND is?  On conditions, standards, and jurisdiction for the determination of FRAND conformity"), in the July-August 2018 issue of Mitteilungen der deutschen Patentanwälten (pp. 297-308).  Here is my translation of the abstract:
With the Standard-Spundfass, Orange-Book-Standard, and Huawei/ZTE decisions, the case law has developed a roadmap for the assertion of the competition-law based compulsory license defense, which simulates the typical sequence of licensing negotiations.  So long as the rightsholder submits a FRAND-offer, the compulsory license defense should succeed only if--in order to avoid delay tactics--if the prospective licensee responds appropriately to it, that is, proves its willingness to license by rendering an accounting and posting security.  In place of accepting the offer, the prospective licensee can also present its own counteroffer.  This raises the question, what happens, if both rightsholder and prospective licensee submit FRAND offers, but cannot reach agreement.  This article addresses the open question, whether the court hearing the infringement action can determine FRAND-conformity, or even--as represented by the UK Patent Court in Unwired Planet--must set a concrete royalty rate.  To adopt the latter procedure, however, would unnecessarily jeopardize the efficiency of the infringement process.
I stated that I might have more to say about the article after I had reviewed it more carefully, so here is the gist.  Professor McGuire argues, among other things, that the terms "fair, reasonable, and nondiscriminatory" each have specific meanings in other bodies of law, which should inform the analysis of what they mean in this context.  Specifically, she argues that "fair" is distinct from "reasonable" and is a procedural concept, requiring the parties to have access to the same information (and thus ties into the CJEU's requirement that the patent holder make the implementer an offer prior to filing suit).  "Reasonable," by contrast, is more of a result-oriented, contract-law concept, and should be read in a manner that will provide the patent owner a lawful return on its investment.  She is not enthusiastic about having courts determine FRAND rates--indeed, doesn't think that this would be an appropriate job for a German court hearing an infringement case--but rather views the Huawei/ZTE framework as a tool for encouraging the parties to work things out on their own.  Under this view, the courts' authority is limited to determining whether each party has presented the other with FRAND-conforming terms.  She thus takes issue with other authors, including Kurtz & Straub (see here)--and, I would imagine, Schaefer & Czychowski, whose article came out at about the same time as Professor McGuire's--who would like German courts to determine FRAND royalties, based on a top-down method or something similar.  Professor McGuire argues that such methodologies would be antithetical to the contractual framework of the FRAND commitment, and would require statutory authorization (of the type Schaefer & McGuire contemplate, perhaps).  She concludes that, if both parties exchange FRAND offers but cannot reach agreement (including an agreement to have a third party determine the terms), the patent owner cannot obtain an injunction (as long as the defendant is complying with its obligations under Huawei) but (if I am understanding correctly) could recover normal patent damages for any resulting infringement.  Perhaps those damages could exceed the FRAND royalty, e.g., if they were in the nature of disgorgement of the defendant's profits?