Augenstein on the German UPC Decision

Hat tip to Benjamin Rätz, who passed along a detailed analysis of the German Constitutional Court's UPC decision by Dr. Christof Augenstein, titled Will the Unified Patent Court be established?  The analysis is also available on this webpage, which links to an English-language translations of the majority decision and the dissent.  For previous discussion on this blog, see here and here.

Marshall on Unjustified Threats

From time to time I have blogged about how different legal systems regulate the wrongful assertion of patent rights:  by means of competition law (e.g., claims for monopolization by means of asserting fraudulently procured patents, or by sham litigation; abuse of dominant position); unfair competition law (e.g., claims for commercial disparagement, that is, misrepresenting noninfringing goods as infringing, or for false patent marking); remedies law (e.g., compensation for a wrongly issued preliminary or permanent injunction); other doctrines sounding in tort, equity, or general civil law (abuse of process, malicious prosecution, abuse of right, the various types of fraud, equitable defenses such as estoppel, etc.).  About six years ago it occurred to me that a book-length treatment of the comparative law and policy of wrongful enforcement would be an interesting project, but I've continued to put it aside while I've worked on other things.  Maybe this will be the year I at least start putting together some sort of detailed proposal on the topic, now that I've gotten some of the other books and papers I wanted to write out of the way.  In any event, these musings are prompted by an interesting paper just published by Joshua Marshall, Unjustified Threats as a Cause of Action, 42 E.I.P.R. 150 (2020).  Here is the abstract:

This article seeks to categorise unjustified threats as a cause of action. Hitherto, unjustified threats have been treated as tortious and the threat-maker deemed a legal wrongdoer. This article argues that orthodox principles of tort law cut against the unjustified threats regime. It is suggested that it is more analytically attractive to treat the regime as a form of estoppel or as a sui generis cause of action.

As explained by Mr. Marshall, under English law liability for making an unjustified or groundless threat to sue a secondary infringer hinges on, among other things, whether the express or implied representation that the recipient of the threat was infringing is wrong, not on whether it is reasonable; in addition, there is no liability if the threat is followed by the filing of an actual infringement suit against the recipient, before the recipient asserts a claim for unjustified threat.  The claim also doesn't apply if the threat is made to the primary infringer (and if I understand correctly, in this context the primary infringer would be the manufacturer of the infringing goods, while a secondary infringer would be a user or reseller).  So described, the cause of action (if that's what it is) does sound rather odd, and perhaps prone to unintended consequences (e.g., sue first, negotiate later).  Anyway, Mr. Marshall's paper makes for interesting reading, and as stated above causes me think that the time may be ripe for an extended analysis of the various ways the law might regulate wrongful enforcement; the various interests at stake; and the potential remedies.

From Around the Blogs: More Reactions to the German UPC Decision

As I noted last Friday, the German Constitutional Court has invalidated the German law approving the Unified Patent Court, on the ground that the law needed 2/3 approval of a quorum of the German Bundestag.  Here is an English-language press release from the court itself, and here are some more reactions from around the blogosphere:

1.  On IPKat, Léon Dijkman published a post titled Willem Hoyng: today's decision sets back UPC at least five years.

2.  On JUVE Patent, Mathieu Klos published a post titled Dark day for UPC: Europe reacts to surprise judgment.

3. Striking a more optimistic note, on FOSS Patents Florian Mueller published a post titled Practitioners and companies far from giving up on Unified Patent Court -- intergovernmental renegotiation will open door to improvements.

4. The Kluwer Patent Blog has published four posts, titled Federal Constitutional Court voids the German UPCA Ratification Law; The German Law Ratifying the Agreement on a Unified Patent Court is Void; Reactions to ruling FCC in case Unified Patent Court: ‘positive’ and ‘great disappointment’; and What is behind the FCC Judgment?

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In other IP-related news, the U.S. Supreme Court today held in Allen v. Cooper that Congress lacked the authority to abrogate state sovereign immunity for copyright infringement.  Justice Kagan wrote the opinion.  I may have more to say about this decision in due time, particularly Justice Thomas's concurring opinion relating to whether IP rights are property.  In addition, the Federal Circuit denied a petition for rehearing en banc in Arthrex, over some dissenting opinions.  See here; for previous discussion on this blog, see here.

Breaking News: German Constitutional Court Declares Law Approving UPC Void

Hat tip to Martin Stierle, who forwarded me a copy of the decision declaring the German law approving the Unified Patent Court void (here).  I've only skimmed the first couple of pages myself thus far, but there is further coverage on JUVE Patent (which explains that because law would have resulted in a change to the German constitution, it needed a 2/3 vote of a quorum in the German Bundestag; the law passed unanimously, but there wasn't a quorum), IPKat, IP Watchdog, and Bloomberg.  According to JUVE, it may be possible to obtain the needed vote when the Bundestag can meet again, but raising a quorum under present circumstances (coronavirus) would be a challenge.  Looks like there is a dissenting opinion, which I understand is permissible for the Constitutional Court in Germany, by three of the judges.  Recall that the U.K. a few weeks ago announced it would not go forward with the UPC post-Brexit.

From Around the Blogs, Part 2

1.  On Law360, Charlotte Jacobsen, Filko Prugo, and Ryan Sullivan published an article titled Does Willful Blindness Beget Enhanced Patent Damages?  The article notes that, under the Federal Circuit's January 2020 decision in Eko Brands LLC v. Adrian Rivera Maynez Enterprises Inc., the trier of fact determines whether the infringement was "willful," a concept that "requires a jury to find no more than deliberate or intentional infringement."  Citing that case, the authors then state that if the jury finds the infringement to have been willful, then "the court must consider whether the infringer's conduct was egregious and worthy of punishment."  The question the authors address is whether "willful blindness" can substitute for knowledge of the patent.  They review the district court cases that have discussed this topic, and which have concluded that an allegation of willful blindness is sufficient to get past a motion to dismiss a request for enhanced damages.  As the authors note, however, the courts so far have not addressed whether willful blindness is enough to demonstrate egregiousness.  The authors conclude with a couple of best practices for patent litigators who have to grapple with these issues.

I may seek permission to include this article in the next revision of my patent damages casebook; it's quite informative. 

For previous discussion of the willful blindness issue on this blog, see here and here. 

2.  IPWatchdog published an interesting pair of articles taking opposite positions on whether eBay should be overruled.  Arguing in favor was IPWatchdog founder Gene Quinn (see here); arguing against, Evan Langdon (see here).    

3.  On the Kluwer Patent Blog, Anders Valentin published a post titled The Danish Maritime and Commercial High Court dismisses claim regarding preliminary injunction with extraterritorial effect.  As the author states, "the decision shows that there are strict criteria [that] must be met in order to obtain a preliminary injunction with extraterritorial effect."  For previous discussion of cross-border preliminary injunctions within the E.U., see, e.g., here; see also my comparative patent remedies book at p.253

Federal Circuit Affirms Dismissal of First-Filed Declaratory Judgment Action

The case is Communications Test Design, Inc. v. Contec, LLC, opinion by Judge O'Malley.  The patent owner, Contec, based in New York, initiated communications with Communications Test Design, Inc. (CDTI), based in Pennsylvania, regarding the possible infringement of two Contec patents.  As described in the opinion:

In September 2018, Contec’s counsel sent a letter to CTDI stating that “the parties’ extrajudicial process for obtaining information about CTDI’s systems, without the full discovery obligations that would be imposed during litigation, has proved unsatisfactory.” . . . The letter asked CTDI to indicate, by September 19, 2018, whether it was willing to “discuss potential terms for a patent license agreement.” . . . Contec warned that, if it did not receive such confirmation, it would sue for patent infringement. . . . Contec attached to its letter a draft of its proposed complaint. . . .

On September 19—Contec’s stated deadline—Jerry Parsons, CTDI’s Chairman and chief executive officer (CEO), spoke on the phone with Hari Pillai, Contec’s CEO, about a possible license for Contec’s patents. During that conversation, Pillai proposed initial terms, and the executives agreed to talk again on September 24, when Parsons would make a counterproposal. . . .

Later that same day, CTDI’s counsel sent an email to Contec’s counsel, confirming that “CTDI will consider potential terms as requested in your most recent letter.” . . .

On September 21—two days after accepting Contec’s request to discuss licensing terms—CTDI filed a declaratory judgment action in Pennsylvania. . . . 

On September 24—the day the CEOs were scheduled to talk—CTDI’s counsel emailed Contec’s counsel a copy of the declaratory judgment complaint. Counsel stated that official service would be held for a period of time to allow further discussion between the executives.

Contec thereafter filed its infringement action in federal district court in New York, and moved to dismiss the declaratory judgment action in Pennsylvania.  The Pennsylvania court dismissed the action, and CDTI appealed.

The Federal Circuit affirms, stating:

When one of two competing suits in a first-to-file analysis is a declaratory judgment action, district courts enjoy a “double dose” of discretion: discretion to decline to exercise jurisdiction over a declaratory judgment action and discretion when considering and applying the first-to-file rule
and its equitable exceptions. . . .

Here, the district court carefully considered the record of the parties’ dispute, up to and including the competing filings, and concluded that several factors warranted departure from the first-to-file rule. Specifically, the court found that: (1) CTDI filed its declaratory judgment complaint in anticipation of Contec’s patent infringement complaint; (2) CTDI’s suit interfered with ongoing negotiations between the parties and did not serve the objectives of the Declaratory Judgment Act; and (3) on balance, the Northern District of New York is a more convenient forum. As explained below, we find no abuse of discretion in the district court’s analysis.

Reviewing the record, the court further finds that a remand for an evidentiary hearing is not warranted.  

From Around the Blogs, Part 1

1.  On IPKat, Léon Dijkman has published a post titled Proportionality and FRAND in France - Paris appeal court upholds anti-anti-suit injunction but first instance court refuses PI in IPCom v. Lenovo.  As the title indicates, the post discusses, first, a decision of the Paris Court of Appeal affirming a decision last fall granting IPCom an anti-anti suit injunction prohibiting Lenovo from seeking an anti-suit injunction in the U.S.  Second, it discusses a decision of the court of first instance denying IPCom a preliminary injunction against Lenovo, on the ground, inter alia, that such relief would be disproportionate and therefore contrary to article 3 of the Intellectual Property Rights Enforcement Directive.  According to Mr. Dijkman, the latter case is, to his knowledge, "among the first decisions of this kind in France."

2.  On Sufficient Description, Norman Siebrasse published a post titled Determining the Rate of Return for Compound Interest Damages, discussing Eli Lilly and Co v Apotex Inc 2019 FC 1463 Zinn J [Cefaclor Interest].  The post discusses how the Canadian courts sometimes manage to work around of a statutory prohibition on awards of compound interest, by allowing parties to claim the time value of money as an element of damages, and how the court in the Eli Lilly case went to great lengths to determine an appropriate compound interest rate.  Professor Siebrasse concludes with a suggestion that "it might be preferable to amend the Act to allow the plaintiff to claim compound interest at a modest statutory rate which would be low enough as to rarely or never result in overcompensation."

I may have more to say about prejudgment interest in an upcoming post. 

3.  Florian Mueller published a post earlier this week discussing Damien Geradin's recent article SEP Licensing After two Decades of Legal Wrangling: Some Issues Solved, Many Still to Address.  I haven't read the article yet myself, but plan to do so sometime this month.

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In other news, I hope that my readers stay healthy during the coming weeks.  I will be moving to online teaching for at least the next couple of weeks, and what with that and other disruptions I may be blogging a little less than usual for a while.

Gilbert and Hillson on Remedial Flexibility in the U.K.

Penny Gilbert and William Hillson have published an interesting paper titled Exceptions that prove the rule--flexibility of remedies for patent disputes in the UK courts, in the January 2020 issue of the German journal Mitteilungen der deutschen Patentanwälten (pages 1-5).  The article is in English.  Here is the abstract:

The UK courts have traditionally adopted a flexible, case-by-case approach to granting remedies for patent disputes, in which the specific circumstances of the patentee, infringer and (increasingly) third parties are taken into account.  UK judges have been willing to stay, vary  or grant exceptions from final injunctions or orders for product recall/destruction, or even grant wholly new remedies, where this is deemed necessary to properly balance the legitimate interests of all parties.  In some circumstances, this may mean that certain infringing acts are permitted to continue.

I don't know how widely this journal circulates outside of Germany, but if you're interested in gaining a better understanding of the topic, you should try to get a copy.  As the abstract states, the article discusses the U.K. practice regarding injunctions, which in recent years sometimes involves a consideration of proportionality.  This will occasionally lead to a stay or carve-out of an injunction, as in Edwards LifeSciences LLC v. Boston Scientific Scimed Inc. (see previous discussion here) and Regeneron v. Kymab and Novo Nordisk (discussed here), though in other cases not (as in TQ Delta v. ZyXel, discussed here).  One of the major issues in Germany right now is whether to amend the Patent Act to make it explicit that courts may grant these stays pending design around or sell-off (known as Aufbrauchfristen)--though as noted previously (see, e.g., here and here), German courts may remain unenthusiastic about doing so, and the commentary accompanying the draft legislation in Germany generally disavows consideration of third-party interests other than in connection with compulsory licensing.  The Gilbert & Hillson article also provides a good summary of Arrow declarations (see previous discussion on this blog here), which are a type of declaratory judgment available under circumstances in which the patentee is engaging in "obstructive or evasive behaviour," for example by prosecuting  multiple applications all covering largely the same subject matter, and the defendant seeks assurance that its products are identical to or obvious in view of the prior art.    

On a somewhat related note, I guess by now everyone's heard the news that the U.K. won't be part of the Unitary Patent and Unified Patent Court systems?    

Some Additional Commentary on the December 2019 USPTO/DOJ/NIST Policy Statement on Injunctions and SEPs

Shortly before Christmas, the USPTO, the Antitrust Division of the Department of Justice, and the National Institute of Standards and Technology issued a new Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments.  The new statement replaced the USDOJ/USPTO 2013 Policy Statement on Remedies for the Standards-Essential Patents Subject to Voluntary F/RAND Commitments.  I blogged about the new policy statement a couple of times in January (here and here), first calling attention to a critical analysis I published in Law360 titled Gov't Policy Statement on SEP Remedies Should be Cabined, and second to an analysis published by Michael Carrier on Bloomberg News titled New Statement on Standard-Essential Patents Relies on Omissions, Strawmen, Generalities.  Here are a couple more recent analyses, both of which make some excellent points:

1.  Herb Hovenkamp has published a short piece titled Justice Department's New Position on Patents, Standard Setting, and Injunctions, Reg. Rev., Jan. 6, 2019.  Here is a link to the paper, and here is the abstract:

A deep split in American innovation policy has arisen between new economy and old economy innovation. In a recent policy statement, the Antitrust Division of the Justice Department takes a position that tilts more toward the old economy. Its December, 2019, policy statement on remedies for Standard Essential Patents issued jointly with the U.S. Patent and Trademark Office and the National Institute of Standards and Technology reflects this movement.

The policy statement as a whole contains two noteworthy problems: one is a glaring omission, and the other is a mischaracterization of the scope of antitrust liability. Both positions are strongly relevant to the pending Qualcomm litigation in the Ninth Circuit.

First, the Statement say nothing about the conduct of patent holders. The Patent Act authorizes patent injunctions “in accordance with the principles of equity.” Under the equitable principle of “unclean hands,” a patentee who is in serious default of its own legal obligations cannot obtain an injunction, at least not until its own bad conduct has been terminated.

Second, the Statement’s declaration that FRAND disputes do not raise antitrust issues is false. In the first instance FRAND disputes are about contracts. But if a firm’s anticompetitive use of FRAND-encumbered patents meets the power and conduct requirements of the antitrust laws it can be unlawful under them as well.

Guidelines from the government are very useful when they state the law or an agency’s own enforcement position, or when they clarify ambiguities. But they are not legislation. They do not bind courts, other government agencies, or private plaintiffs, particularly not when they conflict with clearly established law. 

2.  Jay Jurata and Emily Luken have published a piece on Law360 titled USPTO, DOJ Downplay Essential Patents' Licensing Terms.  The authors wonder whether "the new policy statement is a solution searching for a problem," and like Hovenkamp note that "the new policy statement minimizes the significance of a patent holder's voluntary FRAND commitment."  They also argue that the policy statement's "actual effect should not be overstated," seeing how "has no force or effect of law" and "does nothing to alter the noteworthy and significant decisions issued by U.S. courts interpreting the scope and meaning of the FRAND commitment that emerged after the original 2013 statement."

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On a somewhat related topic, Mathieu Klos has an interesting article on JUVE Patent titled Sisvel vs. Haier judgment could see FRAND standardised in Germany.

Some Additional Commentary on the Proposed Amendment to the German Patent Act Relating to Injunctions

In January, I blogged several times about the BMJV's (German Ministry of Justice and Consumer Protection's) draft of a proposed set of amendments to the German Patent Act.  (See here, here, here, and here.)  Among the proposals is an amendment to § 139 para. 1, which would add the sentence in boldface:

Wer entgegen den §§ 9 bis 13 eine patentierte Erfindung benutzt, kann von dem Verletzten bei Wiederholungsgefahr auf Unterlassung in Anspruch genommen werden. Der Anspruch besteht auch dann, wenn eine Zuwiderhandlung erstmalig droht.  Der Anspruch ist ausgeschlossen, soweit die Durchsetzung des Unterlassungsanspruchs unverhältnismäßig ist, weil sie aufgrund besonderer Umstände unter Beachtung des Interesses des Patentinhabers gegenüber dem Verletzer und der Gebote von Treu und Glauben eine durch das Ausschließlichkeitsrecht nicht gerechtfertigte Härte darstellt.

In English, the highlighted portion says:

The claim [to injunctive relief] is precluded, insofar as the enforcement of a claim to injunctive relief is disproportionate because, due to special circumstances and taking into account the interest of the patent holder against the the infringer and the obligation to act in good faith, enforcement of the right of exclusion would present an unjustified hardship.

The BMJV is soliciting comments through March 10.  Meanwhile, here's some recent commentary from scholars and other pundits:

 

1.  Martin Stierle has published a paper in the March 2020 issue of GRUR (pp. 262-67) titled Discussionsentwurf eines Zweiten Gestezes zur Vereinfachung und Modernisierung des Patentrechts:  Ein erster Schritt in die richtige Richtung ("Discussion draft of a second law for the simplification and modernization of patent law:  A step in the right direction").  Here is the abstract, in my translation from the German:

In mid-January, the BMJV presented the Discussion Draft of a Second Law for the Simplification and Modernization of Patent Law.  Quite significantly, the therein proposed implementation of a proportionality condition in § 139 I of the Patent Law sticks out.  The present essay sketches out the origin of the Discussion Draft, and critically engages the proposals that concern patent infringement actions.  The main focus of the analysis rests on the suggested proportionality condition for a claim to an injunction.  The conclusion is in principle positive, but with regard to certain details critical.

Professor Stierle suggests, among other things, that the parallel provision in the Utility Model Law should be similarly amended (p.263); that, rather than simply trying to insert the holding of the Wärmetauscher decision (which authorizes stays of injunction under some limited circumstances) into the statute, the legislature should modify the wording to clarify that the ground for staying an injunction is the patent owner's impermissible exercise of its rights; that it be made clear that the patent owner may be compensated for the period of time it is denied an injunction; and that courts should be allowed to directly take third-party interests into account.

2.  Several blogs have been keeping track of reactions to the proposed amendment.  Florian Mueller has an interesting post titled German patent litigators comment on minimal (if any) impact of proposed reform bill on patent injunctions, on FOSS Patents.  On the more pro-injunction side are posts by Matthieu Klos on JUVE Patent ("Car industry can be content with patent law compromise"), and  Haris Tsilikas on IAM ("Cause for concern in German patent reform proposals").

Lex Machina Patent Litigation Report 2020

Lex Machina recently published its Patent Litigation Report 2020.  Law360 published a short piece on the report last week, noting that "the number of new cases filed in U.S. district [in 2019] remained stable from 2018," but that the PTAB "saw the number of petitions . . . slow," for a variety of reasons.  Law360 also published a couple of follow-up pieces (here and here).

The report itself discusses, among other matters, changes in the litigation landscape over the past decade, such as changes in most popular venues (D. Del. is now number one) and grounds for resolution (as you'd expect, subject matter was mostly irrelevant in 2010, but not anymore).  For present purposes, I'll just briefly mention the highlights regarding remedies:

1.  The report lists the total damages awarded each year top from 2010 to 2019, and the top 20 damages awards over that period (pp. 25-26).  The awards are not adjusted for inflation, and some of them were reversed on appeal.  Three of the top 20 were entered last year (and we've had a few big ones already this year, which presumably will make their way into next year's report).

2.  As for injunctive relief, if we omit consent and default judgments, there were 13 entered on the merits last year and 2 denied on the merits (p.27).  A few pages earlier (p.21, specifically), we see that there were 47 patentee wins at trial, 18 wins on summary judgment, 1 win on a motion for judgment on the pleadings, and 1 win on a motion for judgment as a matter of law.  My question:  did the prevailing patent owners in the cases in which there was no merits resolution on injunctive relief not request injunctive relief?  Did some of the defendants, having lost at the district court level, consent to the entry of an injunction as part of a settlement?  Do readers have any insights into this? 

3.  Unless I missed it, unlike last year's report there's no breakdown of damages types or discussion of preliminary injunctions.  For my posts from last year, see here and here.