Monday, August 2, 2021

Chao and Donovan on Conjoint Analysis

Bernard Chao and Sydney Donovan have published a paper titled Does Conjoint Analysis Reliably Value Patents?, 58 Am. Bus. L.J. 225 (2021).  Here is a link (the paper is behind a paywall, however) and here is the abstract:

Modern technology products are often covered by thousands of patents. Yet awards for a single component have averaged a surprisingly high 9.98% of the infringing product's price. To curb such disproportionate awards, the law insists that damages reflect the contribution made by the patent. But determining how to apportion damages in this way has proved to be elusive. One emerging technique that appears to offer rigor is conjoint analysis, a type of survey borrowed from the marketing world. This article explores the validity of the conjoint analysis technique by running two conjoint analysis surveys. Unfortunately, we found serious problems. First, the results of our surveys yielded irrationally high numbers. Most survey features suffered from bizarrely high valuations. Second, we demonstrate how experts can manipulate the results by selecting among a number of different ostensibly reasonable statistical choices and picking the one that yields the most desirable outcome. Based on these findings, we provide several recommendations. First, we argue that courts should not allow evidence of conjoint analysis to show the monetary value of specific features. However, we recognize that there is support for using conjoint analysis to provide relative valuations (i.e., feature A is worth significantly more than feature B). To the extent that courts permit this use, we suggest ways to ensure that experts employ the best science available. These recommendations include assuring that experts accurately depict variability in their results and requiring experts to “preregister” the approach they intend to use with the court.

 I read this in draft last year and thought it was very good--check it out.

Friday, July 23, 2021

Thursday, July 22, 2021

Rantasaari on Wrongful Patent Enforcement in the E.U.

I've been working recently on a book proposal relating to wrongful patent enforcement--something I've been thinking about, off and one, for a long time (see, e.g., this post and thispost, both from 2013, the second of which cites Christopher Heath's important article Wrongful Patent Enforcement—Threats and Post-Infringement Invalidity in Comparative Perspective, 39 IIC 307 (2008)).  Anyway, just the other day I came across a new paper by Krista Rantasaari titled Abuse of Patent Enforcement in Europe:  How Can Start-Ups and Growth, 11 JIPITEC – Journal of Intellectual Property, Information Technology and E-Commerce Law 358 (2020).  Here is a link to the paper, and here is the abstract:

The aim of this article is to examine whether smaller companies have any adequate measures to defend themselves against abusive claims. Patent holders can assert their patents inappropriately, thus going against the functions of patents, and going outside the claims and boundaries of what is protected. This is more damaging for smaller companies as they have fewer financial resources. As a corollary, start-ups and growth companies must be able to defend themselves against abusive claims. This article evaluates the abuse of patent enforcement and analyses the abuse of rights principle, the abuse of dominant position, the Enforcement Directive (IPRED) and unjustified threats. The article analyses whether these elements provide tools for start-ups and growth companies when acting as defendants in patent infringement cases that could be considered abusive. The abuse of patent enforcement is increasing for several reasons, such as, the increase in the number of patents, the fact that they are becoming more valuable, the emergence of a growing market for the sale of patents, and the introduction of new entities specialised in patent licensing and litigation. The article argues that the elements presented in this study mitigate, to a certain extent, the potential ill effects of abusive legal proceedings. However, there are limitations and uncertainties; for example, the case law often only applies to specific circumstances, and national practices vary. As a corollary, these legal tools are rather complicated for start-ups and growth companies to apply.

The article provides a good overview of European law as it relates to the concepts of abuse of right, abuse of dominant position, and unfair competition/unjustified threats, as applied to allegedly abuse enforcement of patent rights.

Tuesday, July 20, 2021

Congratulations to Judge Tiffany Cunningham!

I was pleased to hear that the Senate has confirmed Tiffany P. Cunningham as a United States Circuit Judge for the Federal Circuit.  A graduate of MIT and Harvard, she is the first African-American to be appointed to this court.  Congratulations, Judge Cunningham!

Monday, July 19, 2021

Some Recent (and Not-So-Recent) Scholarship on Patent Injunctions, and a Comment

1. Tomás Gómez-Arostegui and Sean Bottomley have posted a paper on ssrn titled The Traditional Burdens for Final Injunctions in Patent Cases c.1789 and Some Modern Implications, 71 Case Western Reserve Law Review 403 (2020).  I had previously noted a draft hereHere is a link to the paper, and here is the abstract:  

 

This Article reassesses the first two eBay factors for final injunctions—irreparable injury and the inadequacy of legal remedies—in light of traditional equitable principles. Tracking most closely with tradition would require the Federal Circuit to recognize that in patent cases: (1) an injury it seeks to redress with a final injunction is future infringement itself, not just follow-on harms caused by future infringement; (2) it can presume future infringement from past infringement; (3) it can presume that legal remedies are inadequate to remedy future infringement; and (4) it need not require a plaintiff to show that alternative equitable remedies, like ongoing royalties, would inadequately redress future infringement. Moreover, the Federal Circuit can recognize, without relying on presumptions, that the burden on the first two eBay factors is not onerous. A patentee can satisfy them by showing that a defendant is likely to infringe again and that any legal damages awarded at trial did not fully compensate the patentee for the life of the patent.

2. The above article also alerted me to an article I hadn't seen yet, Adam Mossoff's The Injunction Function: How and Why Courts Secure Property Rights in Patents, 96 Notre Dame L. Rev. 1581 (2021).  Here is the abstract:

This Essay addresses one aspect of this legal and policy debate concerning remedies in patent law: how and why courts presumptively secured patent owners with injunctions against ongoing or willful infringements of their property rights. Prompted by the United States Supreme Court’s 2006 decision in eBay v. MercExchange, which created a new four-factor test for issuing injunctions on a finding of ongoing infringement of a valid patent, there is a growing body of scholarly commentary on the role of injunctive remedies in securing property rights in new technological innovations. Much of this commentary focuses on how eBay has resulted in a significant reduction in availability of injunctive remedies for patent infringements, especially in the context of patents on standardized technologies, such as standard essential patents covering WiFi or 5G telecommunications technologies in mobile devices.

 

This Essay builds upon this scholarly work by addressing more generally the legal and policy function of injunctive remedies in patent law, detailing newly identified primary sources in historical caselaw that courts presumptively secured to patent owners an injunction to redress ongoing or willful infringements of their property. The Essay proceeds as follows. First, it summarizes the 2006 eBay decision and how it led to courts significantly reducing injunctions as a remedy for ongoing or willful infringement of valid patents. It describes how eBay changed the legal doctrine for issuing injunctions from a presumptive remedy to a four-factor test and why this change matters. Second, it discusses the nature and function of injunctions as a presumptive remedy in securing property rights, both for landowners and for owners of new and useful inventions. Historical patent decisions confirm the legal doctrine, and, even more importantly, the policy and commercial function of injunctions as essential backstops in the efficient functioning of markets. Of course, an essay cannot address every legal and policy issue in the historical cases and in the economic and philosophical literature. The contribution here is narrow but important: it confirms that eBay indeed changed remedies doctrine in patent law, and that the resulting reduction in injunctions undermines the function of these property rights in spurring economic activities in the U.S. innovation economy.

3.  Meanwhile, in the course of doing some research for a paper I'm writing, I came across a student note by Herbert F. Schwartz, Injunctive Relief in Patent Infringement Suits, 110 U. Penn. L. Rev. 1024 (1964).  Although the author concludes that "except in areas of specific overriding public interest, the long entrenched stress on not impairing the patentee's right to exclude has overshadowed the diffused and disputed public interest in immediate introduction of all technological advances into the economy" (p.1048), one thing I found interesting in this paper was its citation to nineteenth and twentieth century cases in which courts recognized the power to stay an injunction, for reasons of undue hardship to the defendant, conditional upon the payment of damages (see pp. 1042-44).

4.  Finally, my comment.  In the course of the research I mentioned above, the following point struck me.  Until the "reasonable royalty" remedy for firmly established in the 1910s, a patent plaintiff suing in a court of law could obtain its lost profit, if proven, or an "established royalty," as discussed in Rude v. Westcott, 130 U.S. 152 (1889).  Apparently an established royalty could be for the entire term of the patent, see 3 William C. Robinson, The Law of Patents for Useful Inventions § 1058, at 331 (1890); and "where the plaintiff has chosen to seek his recompense for the enjoyment of the patented invention through an established license fee, and the infringing acts of the defendant raise an implied acceptance of the offer of the plaintiff, the sum which the plaintiff is entitled to recover is fixed and certain, the remedy at law is adequate, and equity can have no jurisdiction," id. § 1087, at 398.  See also id. § 1065, at 359. Proving an "established license" wasn't easy, though.  According to the Rude decision, it had to "be accepted as a measure of damages against an infringer, who is a stranger to the license establishing it, it must be paid or secured before the infringement complained of; it must be paid by such a number of persons as to indicate a general acquiescence in its reasonableness by those who have occasion to use the invention; and it must be uniform at the places where the licenses are issued.”  And if you couldn't prove either a lost profit or an established royalty, you would be left with just nominal damages.  (There were some cases, such as Suffolk Co. v. Hayden, 70 U.S. 315 (1865), that seemed to validate what we might today call a reasonable royalty, but again my understanding is that the reasonable royalty concept wasn't clearly accepted in the case law until the 1910s.)  Given this background, is it any surprise that courts  of equity were receptive to granting injunctions for patent infringement (and, once the jurisdiction of the equity court was established, an accounting of the defendant's profits), on the ground that patent owners had no adequate remedy at law?  But at the same time, shouldn't a court today take into account the fact that reasonable royalties have pretty much supplanted established royalties as a common form of monetary relief, and often may be adequate to compensate the patent owner for past--and, in the form of ongoing royalties, for future--infringement?  Compare Gómez-Arostegui & Bottomley, supra, at 436-41 (arguing that reasonable royalties are rarely awarded as "legal" relief for future injuries, and noting that the Federal Circuit has characterized ongoing royalties as equitable relief), with Mark A. Lemley, Ongoing Confusion over Ongoing Royalties. 76 Mo. L. Rev.695, 695-99 (2011) (arguing that "while the question is not free from doubt, there are reasonable arguments for treating ongoing royalties as within either the law or the equity power of the courts rather than resorting to a series of continuing lawsuits for past damages"). 

It also probably stands to reason that products today are more likely to embody multiple patents--sometimes numbering in the thousands, if we are talking about smartphones and other complex devices--than was the norm decades ago.  This should affect the balance of hardships issue, I would think, if not irreparable harm or inadequate remedy at law, insofar as implementers have to clear more patents, and any one patent that has not been cleared in advance could potentially hold up sales, resulting in unrecoverable losses for the defendant.