Blogging break

I intend to take the last two weeks of the year off from blogging.  Happy holidays to my readers, and let's hope for a better 2021!

Some New Articles, Posts on FRAND, Part 5

1.  Jorge Contreras has posted a chapter from a forthcoming book, Intellectual Property Licensing and Transactions: Theory and Practice.  The chapter, titled Financial Terms in License Agreements, is available on ssrn here, and here is the abstract:

This chapter in the forthcoming casebook Intellectual Property Licensing and Transactions: Theory and Practice (2020, forthcoming), discusses the financial terms of IP licensing agreements including fixed payments, running royalties, sublicensing income, milestone payments, equity compensation and cost reimbursement, as well as most-favored and audit clauses. Numerous areas of recent controversy are addressed including the establishment of royalty rates through the entire market value rule (EMVR) versus the smallest salable patent practicing unit (SSPPU) rule, royalties for bundled rights, rules of thumb discredited by the courts, royalty escalation clauses and more. Examples are drawn primarily from biotechnology, high-tech and copyright licensing practice.  

2. Matthieu Dhenne published a post on the Kluwer Patent Blog titled Anti-suit or anti anti-suit injunctions? That is the question.  The author argues that antisuit injunctions interfere with the "fundamental right" to intellectual property under European law, and sees anti-antisuit injunctions are a necessary response.  I'm not so sure, though I plan to spend some time over the next few weeks reviewing the various antisuit and anti-antisuit injunction decisions that have come out over the past year.  Also, on Spicy IP, Mathews George recently noted that the Wuhan Intermediate People's Court has turned down InterDigital's request to reconsider the antisuit injunction it granted in favor of Xiaomi, previously noted here.

 

3.  Florian Mueller and Mathieu Klos have each published posts on Nokia's appeal of the Düsseldorf Landgericht's referral of component-level licensing and other SEP-related issues to the CJEU (see here and here), both of them noting that this would look to be an uphill battle (though Florian Mueller suggests that the appellate court might limit the questions to component-level licensing.  Also, Mr. Mueller published a post on the decision of the Munich Oberlandesgericht to increase the amount of the security that Conversant would have to post to enforce an injunction against Daimler in a SEP case that is pending on appeal, from 5.5 to 146 million euros, and another on the appellate court's decision to increase the security Nokia must pay in another case against Daimler from 2 million to 22 billion euros. 

 

4.Brian J. Love, Yassine Lefouili, and Christian Helmers have posted a paper on ssrn titled Do Standard-Essential Patent Owners Behave Opportunistically? Evidence from U.S. District Court Dockets.  Here is a link to the paper, and here is the abstract:

 

Do owners of standard-essential patents (SEPs) "holdup" companies that produce standard-compliant products? To explore this question, we use detailed information from the dockets of all U.S. patent cases filed 2010-2019 that assert or challenge SEPs to construct measures of opportunistic conduct by SEP licensors, including actions that took place before the lawsuit was filed. We find evidence of opportunistic behavior by the SEP enforcer in at least 75% of SEP assertions in court, and we analyze various factors that determine which opportunistic behaviors SEP enforcers rely on. We also show that opportunistic behavior can affect case outcomes, although the effect on settlement is ambiguous. Some behaviors increase the likelihood of a settlement, while others decrease it.

 

5. Update  (12-18-2020):  On IP Watchdog, Curtis Dodd and Chris Dubuc have published their fifth and final post in a series on FRAND, this one titled FRAND-Related Statements for Cellular Wireless SEPS: Implementer Obligations (Part V).

Some New Articles, Posts on FRAND, Part 4

1. Matthieu Dhenne published a post on the Kluwer Patent Blog titled Unwired Planet Judgment and the French Riviera: je t’aime moi non plus.  The essay argues that, although the U.K. courts have recognized that the ETSI IPR policy is governed by French law, they haven't given much consideration to the actual content of French law.  The author states that because "the FRAND commitment constitutes a form of 'stipulation for third parties', a mechanism under French civil law equivalent to a third-party beneficiary clause, this justifies, with regard to the law applicable to the commitment, the setting of a global rate," but that "on the other hand, ETSI itself and its rules would undoubtedly deserve serious reform to become truly efficient."  He concludes with the question whether France itself will become a magnet for SEP litigation.

 

2. Curtis Dodd published a piece on IP Watchdog titled Damages for Patent Infringement versus FRAND Licensing Rates. The article raises the question whether FRAND royalties and reasonable royalty damages are identical under U.S. law, and whether implementers might forfeit their entitlement to FRAND royalties or be liable for enhanced damages for willful infringement.

 

3. Luke Froeb, Bernhard Ganglmair, Gergory Werden, and Steven Tschantz have posted a paper on ssrn titled Technology Economics: Innovation, Licensing, and Antitrust, forthcoming in the Global Antitrust Institute Report on the Digital Economy.  Here is a link, and here is the abstract:

Public policy toward innovation faces a trade-off: Increasing the compensation of successful inventors increases dynamic efficiency by spurring technological progress, but it decreases static efficiency by enlarging a wedge between price and marginal cost. In making this trade-off, public policy is guided by two insights—economic growth is the prime driver of social welfare gains, and technological progress is the prime driver of economic growth. Patent and copyright law, therefore, were designed to help inventors and authors appropriate a significant share of the value of their inventions and writings. Antitrust law neither revokes nor restricts any right granted by patent law, and antitrust law can contribute little in resolving disputes arising from commitments to license on FRAND terms.

Economic theory and empirical research into innovation and the patent system reveal a complex and varied landscape. Two robust conclusions are that too little is invested in innovation and that both the innovation process and the role of patents in the process vary greatly across industries and inventions. Depending on the precise question posed, theory predicts that monopoly can enhance or retard innovation, and data generally support the hypothesis that both monopolies and unconcentrated markets are relatively inhospitable to innovation. Although patents are critical to innovation in the pharmaceutical and chemical industries, they are unimportant in many industries, and patent protection generally has been found to have no effect on the pace of innovation. 

The last part of the paper provides a theoretical discussion of the Shapley value concept with respect to FRAND royalties.

Federal Circuit Affirms Injunction, Denial of Fees

On Monday, the Federal Circuit issued a precedential decision in SiOnyx LLC v. Hamamatsu Photonics K.K., opinion by Judge Lourie, joined by Judges Reyna and Wallach.  This is a factually complex case, but basically the plaintiffs sued the defendants for breach of an NDA, patent infringement, and for correction of inventorship, all relating to a technology that involves irradiating silicon with short-burst laser pulses to create "black silicon" (which has different properties from ordinary silicon).  The jury returned a verdict for the plaintiffs.  On appeal, the Federal Circuit affirms, with one modification:  contrary to the district court’s view that it lacked the authority to assign the corresponding Japanese patents, as well as the U.S. patents, to SiOnyx, the Federal Circuit concludes that all of them should be assigned to SiOnyx. Among the issues on appeal, besides this last one, are whether the contract and unjust enrichment claims were time-barred, the propriety of the award of prejudgment interest on the damages and profits awarded on these claims, and (relevant to our purposes here) the district court's award of injunctive relief for patent infringement and its denial of a request for attorneys' fees under Patent Act § 285.

 

On the issue of injunctive relief, the court affirms, rejecting the defendants’ argument that SiOnyx was not likely to suffer irreparable harm and could be adequately compensated by money damages:

 

Hamamatsu argues that the district court erred in granting SiOnyx’s motion for a permanent injunction prohibiting Hamamatsu from “making, using, offering for sale, selling, or importing” the products held to infringe the ’467 patent. . . . Hamamatsu argues primarily that SiOnyx failed to demonstrate irreparable harm and an inadequate remedy at law. Specifically, Hamamatsu argues that SiOnyx cannot show irreparable harm because SiOnyx’s products do not compete with the accused products. And because the parties do not directly compete, according to Hamamatsu, money damages could provide adequate compensation for Hamamatsu’s continued sales of the accused products. Hamamatsu has not argued the balance of harms and public interest factors, so we need not address them.

SiOnyx responds that its products do in fact compete with the accused products. SiOnyx argues that it will suffer irreparable harm from Hamamatsu’s continued sales of the accused products because SiOnyx would be the only supplier of products practicing the technology disclosed in the ’467 patent but for Hamamatsu’s misuse of SiOnyx’s confidential information. Absent Hamamatsu’s reliance on SiOnyx’s confidential information, SiOnyx argues, Hamamatsu never could have entered the market, or at a minimum its entry would have been delayed, and therefore the court did not abuse its discretion in determining that damages at law would be impossible to quantify and inadequate.

We agree with SiOnyx. . . . In granting the injunction, the district court found that SiOnyx’s laser-processed CMOS sensors are competitive products with Hamamatsu’s accused CCD sensors. . . . The court relied on the trial testimony of SiOnyx’s expert, Dr. Ezekiel Kruglick, that CMOS sensors or CCD sensors could be used for some applications. J.A. 1438. Hamamatsu counters with the testimony of SiOnyx’s CEO, Steve Saylor, that Hamamatsu’s products “would not really get in the way of SiOnyx’s core business dramatically.” J.A. 876. But the existence of contrary testimony alone does not make the district court’s finding clearly erroneous. . . .

 

Further, we conclude that the district court did not abuse its discretion in finding that money damages would be inadequate to compensate SiOnyx. The jury found that Hamamatsu breached its NDA with SiOnyx by using SiOnyx’s confidential information and that the accused products infringe the ’467 patent. Hamamatsu does not appeal those findings, and it is therefore evident that Hamamatsu’s development of the accused products and entry into the relevant markets were aided and accelerated by its improper use of SiOnyx’s confidential information. Because SiOnyx would have otherwise had those markets to itself, at least for some period of time, we agree with SiOnyx that it was not an abuse of discretion for the court to determine that it was difficult to quantify the harm to SiOnyx due to Hamamatsu’s premature entry in those markets.

 

The defendants also appealed the jury's finding of willfulness. Because the jury awarded $0 for patent infringement, however, and in the district court’s view it was "reasonable to interpret the jury’s verdict as a rational attempt to award damages for both breach of contract and patent infringement while avoiding an award of duplicative damages,” the Federal Circuit declined to review the willfulness determination, on the ground that this would amount to an advisory opinion.  

 

The court also affirms the denial of attorneys' fees, observing among other matters that "despite the jury’s finding of willful infringement, the district court concluded that Hamamatsu’s noninfringement and invalidity defenses were not so weak as to be exceptional, in particular noting that SiOnyx failed even to move for summary judgment on those issues." 

 

*                  *                   *

 

In other news, on Wednesday the Federal Circuit published a nonprecedential decision in WPEM, LLC v. SOTI Inc.  The decision affirms an award of attorneys' fees against a plaintiff that had voluntarily dismissed claims against a defendant that marketed a product, the accused features of which pre-dated the patent in suit. According to the court, "because the Accused Technology is prior art to the ’762 patent, 'if WPEM prevailed on its assertion that the Accused Technology is covered by the Asserted Patent, it would have had the effect of invalidating, rather than infringing, the Asserted Patent.' . . . Because it is undisputed that the Accused Technology is prior art to the ’762 patent . . . WPEM could not bring a successful infringement suit."  Moreover, "a reasonable plaintiff conducting a minimally diligent infringement analysis would have become aware of [prior art] version 10 after reviewing the version 11 manual. . . . As the [district] court found, such knowledge would have tipped off a reasonable plaintiff to evaluate whether the product accused of infringement predates, and therefore potentially anticipates, the asserted patent claims."

Shenzhen Court to Set Global FRAND Rate

I learned this morning that the Shenzhen Intermediate People's Court has announced that it will determine a global FRAND rate in a dispute between Sharp and Oppo, apparently at the request of the implementer (Oppo).  Reports by Michael Renaud, James Wodarski, and Mathew Galica are available on National Law Review and also here, and also a story by Bing Zhao is said to be available on IAM here (behind a paywall, so I haven't been able to access this myself).  According to Renaud et al., the dispute involves 3G, 4G, and WLAN standards, and the court explained that "SEP licensing disputes do not fall into typical contract or infringement disputes, making it necessary to consider a wide range of factors when determining whether jurisdiction is appropriate."  The report also states that Sharp can appeal.

Some New Articles, Posts on FRAND, Part 3

There is a Federal Circuit decision today, Sionyx LLC v. Hamamatsu Photonics K.K., that addresses some topics on damages and injunctions.  Factually, it's a bit complex, so I will address it in a post later this week.  Meanwhile, here are some more recent posts and articles on FRAND: 

1.  On IP Watchdog, Curtis Dodd and Chris Dubuc published their fourth post in a series, titled SEP Owner Obligations: Analyzing FRAND Statements for Cellular Wireless SEPS (Part IV).  The article discusses, among other matters, various positions and decisions throughout the world regarding which party (SEP owner or implementer) bears the burden of proof on issues such as essentiality and invalidity.  A fifth post in the series is promised.

2.EPLaw posted a short article about a webinar it hosted titled Resolving Global FRAND/SEP Disputes Before National Courts.  Speakers included Judges Christopher Floyd, Peter Meier-Beck, and Rian Kalden, along with Cordula Schumacher and moderator Myles Jelf.  The article mentions the topics discussed, which included antisuit injunctions and several other issues, but as far as I can tell the video itself is not publicly available (at least not yet).

3. The Kluwer Patent Blog recently published an interview with Peter Chrocziel titled 'Courts cannot shy away from tackling FRAND issues."  Dr. Chrocziel is supportive of the decision of the U.K. courts in Unwired Planet, less so of what he perceives as the German courts' avoidance of providing clear guidance on the meaning of FRAND.

4. On JUVE Patent, Mathieu Klos published a post titled A New FRAND Dance Is in Sight, which discusses the pending reference to the CJEU in Nokia v. Daimler and potential future competition between the U.K. and continental European courts for FRAND cases.

5. On Law360, Theodore Stevenson, Nicholas Mathews, and Patrick Pijls published an essay titled US Courts Should Adjudicate FRAND Rates on a Global Basis.  The authors argue that, while the Federal Circuit's 2007 opinion in Voda v. Cordis constrains the jurisdiction of U.S. courts to adjudicate disputes over the infringement of foreign patent rights, U.S. courts can and should be open to adjudicating breach-of-contact claims that would result in the adjudication of whether a global license offer is FRAND.

6. Also on Law360, and taking a rather different view than that expressed in the preceding essay, Mauricio Uribe published When It Comes to SEPs, Act Locally But Enforce Globally.  Mr. Uribe poses the question whether convenience is becoming "the new licensing consideration," and notes what he perceives as the diminished concern about holdup among courts and policymakers (e.g., the USDOJ/USPTO December 2019 joint statement).  Interesting perspective, in response to the U.K. courts' concern over what they see as the "sheer madness" of setting rates on a country-by-country basis: "Given the long-standing tradition of multijurisdictional licensing programs and the sophistication of the entities participating in SEP standards organizations, it would seem to be sheer madness to believe that convenience would be the actual driving factor in requiring a single, global royalty rate determined by a single jurisdiction."

OxFirst Webinar on My Paper on Noneconomic Damages

This past June, I presented my forthcoming paper, Damages for Noneconomic Harm in Intellectual Property Law, 72 Hastings L.J. __, at an OxFirst free webinar.  The video of the webinar is now available here.  The webinar description follows below:

This talk offers a comprehensive analysis of awards of “non-economic” damages for reputational and emotional harm in intellectual property (IP) law. It discusses, among other matters, the Second Circuit’s recent decision in Castillo v. G&M Realty LP, affirming a $6.75 million award of statutory damages for the infringement of artists’ moral rights in graffiti art; the European Union’s Intellectual Property Rights Enforcement Directive and its 2016 Liffers decision, which appear to require member states to award, where warranted, non-economic (“moral prejudice”) damages across the full range of IP cases; and some recent arguments in favor of awarding damages for emotional harm in, even, patent infringement actions. Courts should recognize reputational harm as a potentially cognizable injury throughout all of the branches of IP law, but damages for emotional harm should be limited to right of publicity and moral rights matters.

I'm working on an edit of the paper this week and next week, so I'm still open to receiving any comments, criticism, or suggestions.