Noninfringing Alternatives and Wins Above Replacement

A recent article in the Wall Street Journal, titled "A Nerdy Baseball Stat Is Going Mainstream. The Wonks Aren’tHappy," discusses a statistic, created by baseball analysts for purposes of evaluating and comparing baseball players' performances, called "Wins Above Replacement" or "WAR."  Major League Baseball's website defines WAR as a measurement of "a player's value in all facets of the game by deciphering how many more wins he's worth than a replacement-level player at his same position (e.g., a Minor League replacement or a readily available fill-in free agent).  For example, if a shortstop and a first baseman offer the same overall production (on offense, defense and the basepaths), the shortstop will have a better WAR because his position sees a lower level of production from replacement-level players."  According to the Wall Street Journal article, discussions are underway about "creating a performance-based bonus pool of money for young players who don’t yet qualify for salary arbitration" that would involve tying payouts to a player's WAR.  The article also discusses some possible problems with using the statistic to determine compensation, among them that different stats organizations use different formulas to compute player WARs, and these organizations are not necessarily willing to bear responsibility for what players get paid.  I can imagine some interesting IP questions as well, among them whether the statistics themselves are subject to copyright protection; as I recall, the case law on copyright protection for statistics like these is rather confusing.

 All of this may seem to have absolutely nothing to do with patent remedies, but it occurs to me that the WAR statistic is conceptually very similar to the "noninfringing alternative" concept that plays such a big role in the U.S. law of patent damages.  As I discussed recently at the OxFirst webinar on patent damages calculations in the United States, for over a century U.S. courts have taken noninfringing alternatives into consideration for purposes of calculating monetary awards for patent infringement (as illustrated, for example, in cases such as  Grain Processing Corp. v. American Maize-Products Co., 185 F.3d 1341 (Fed. Cir. 1999)).  The basic logic is twofold.  First, if the defendant could have avoided infringement by employing a noninfringing alternative to the patented technology, and would have made some or all of the sales it actually made using the patented technology, the infringement did not cause the patentee to lose those sales.  Second, the economic value of a technology is the value it confers upon the user in excess of what the infringer would have earned using the next-best available noninfringing alternative.  Ignoring noninfringing alternatives therefore would place the patentee in a better position than it would have occupied, but for infringement, and would risk overcompensating the patentee for its contribution to the state of the art.  All of this is, as I said, pretty standard in U.S. law, and courts in Canada and France have employed it as well.  Nevertheless, courts in the U.K. so far have adhered to a nineteenth century precedent, United Horse-Shoe & Nail Co. v. John Stewart & Co., (1888) 5 RPC 260 (H.L.), which rejected the relevance of non-infringing alternatives to patent damages calculations; and even in the U.S., practical considerations may limit the applicability of the principle in other types of IP cases, such as copyright.  (For discussion, see my article on extraterritorial copyright damages here. Moreover, other policy considerations may limit its applicability in other bodies of law, as discussed by Professor Yelderman here.)  That said, the concept makes a lot of sense as an indicium of value, and so it's interesting to see something like it being deployed in another context for an analogous purpose.  Perhaps if they start applying it to compare cricket players, as well as baseball players, the concept will eventually make its way into English patent law . . .

Of course, as in the law of patent damages, there is often plenty of room for debate about exactly how to determine the value of something or someone over the next-best alternative (as the article points out in the baseball context, where estimates of individual players can differ substantially).  I imagine there also may be difficulties determining what or who the next-best alternative is, as in the patent-law context where my coauthors and I have noted the lack of any good answer (so far) to the question of how to calculate value when the next-best alternative is itself patented.  In the baseball context, is a minor-league ballplayer analogous to a nonpatented alternative?

EU Initiates WTO Procedure Regarding China's Antisuit Injunction Practice

The E.U.'s press release, titled "EU challenges China at the WTO to defend its high-tech sector," can be found here, and its Request for Consultations here.   The principal point of dispute, as stated in the press release, appears to be the E.U.'s claim that  "Chinese courts have been issuing decisions – known as 'anti-suit injunctions' – to exert pressure on EU companies with high-tech patents and to prevent them from rightfully protecting their technologies. Chinese courts also use the threat of heavy fines to deter European companies from going to foreign courts."  The legal basis for the request is set forth at page 7 of the request, to wit:

The measures described above appear to be inconsistent with China’s obligations under the covered agreements, in particular: 

Article 1.1, first sentence, of the TRIPS Agreement, in conjunction with Article 28.1 of the TRIPS Agreement, because China’s measures restrict, or seek to restrict, the exercise by patent owners of their exclusive rights to prevent third parties not having the owner’s consent from making, using, offering for sale, selling, or importing the product that is the subject matter of a patent or that is obtained directly by a patented process. 

Article 1.1, first sentence, of the TRIPS Agreement, in conjunction with Article 28.2 of the TRIPS Agreement, because China’s measures, by prohibiting access to non-Chinese courts for the owners, of the type of patents at issue, restrict, or seek to restrict, the exercise by patent owners of their right to conclude licensing contracts. 

Article 41.1, second sentence, of the TRIPS Agreement, because China’s measures create barriers to legitimate trade and fail to provide for safeguards against the abuse of enforcement procedures. China’s measures create barriers to legitimate trade because they prevent, or seek to prevent, patent owners in other Members from availing themselves of enforcement procedures that permit effective action against any act of infringement of intellectual property rights covered by the TRIPS Agreement, including expeditious remedies to prevent infringements and remedies, which constitute a deterrent to further infringements. Moreover, by granting worldwide anti-suit injunctions with little consideration of their impact on the enforcement procedures in other Members, China fails to provide for safeguards against the abuse of litigation procedures. 

Article 1.1, first sentence, of the TRIPS Agreement, in conjunction with Article 44.1 of the TRIPS Agreement, because China's measures prevent, or seek to prevent, the judicial authorities of the other Members from ordering a party to desist from an infringement at the request of patent owners involved in patent litigation in China. 

Section 2(A)(2) of the Protocol on the Accession of the People's Republic of China, as China, by issuing worldwide anti-suit injunctions for act preservation in patent litigation and imposing maximum penalties on a daily basis, has not applied and administered its laws, such as, inter alia, the Civil Procedure Law of the People’s Republic of China, in a uniform, impartial and reasonable manner.

There are also claims based on China's alleged violation of article 63 for "failure to publish final decisions pertaining to the subject matter of the TRIPS Agreement" and to "supply information on final judicial decisions of general application pertaining to the subject matter of the TRIPS Agreement."

It is unclear to me what is likely to happen as a result of all this.  I would note, however, that (1) to  my knowledge, Chinese courts haven't issued any more antisuit injunctions since the German courts started engaging in a little "self-help" last year, by intimating that a request for such relief would result in a  company being deemed an unwilling licensee and therefore vulnerable to injunctive relief, notwithstanding the SEP owner's FRAND commitment; and (2) the WTO's appellate body hasn't had enough members to hear appeals since November 2020 (though to be sure, we're a long way away from even having an initial decision, let alone an appeal).  

For further discussion, see these write-ups on Bloomberg Law, China IPR, IPKat, and Law360.   

From Around the Blogs

1.  On Law360, Fei Dang, Yi Chang, and Hong Qiao have published an article titled A Look at Chinese Courts’ New Approach to IP Damages.  The article principally focuses on case law (involving not only patents but also other forms of IP) in which Chinese courts have begun to award substantial damages.  The authors observe “a shifting trend away from the traditional default reliance on statutory damage awards, which tend to be relatively small,” and devote specific attention to case law grappling with apportionment.  They also note that, for now, “it is less common to find an assessment of noninfringing alternatives,” although this is clearly relevant to determining the value of an infringing technology.

2.  Also on Law360 is an article by Caroline Simpson titled Austrian Pharma Co.'s €142M Award Nixed In Germany.  The article discusses a recent decision of the BGH finding said to have found “procedural flaws” in an arbitration award against a Taiwanese company (arising out of a patent licensing dispute) “with respect to product supply and damage quantification.”  I’ll have to see if I can find the BGH decision itself, after which I may have more to say about the case.

3. On China IPR, Mark Cohen published a piece titled China in the DOJ Draft Policy:  A Summary of the Comments.  The piece summarizes the author’s and others’ comments on the draft policy (previously noted, e.g., here), specifically as it relates to Chinese policy towards SEPs.  There have been several pieces published recently in various forums and blogs regarding the comments submitted on the draft policy prior to the February 4 deadline; for readers who want to access all of publicly posted comments, see here.

4. FOSS Patents published an article titled European Commission launches public consultation on standard-essential patents and potential SEP legislation:  feedback requested until May 9.  This follows similar calls for public consultation on matters related to SEPs in the U.K. and, as above, the U.S.  Also of interest is this piece discussing a decision by the Düsseldorf Oberlandesgericht holding that there was no specific threat of Xiaomi pursuing an antisuit injunction in China, sufficient to justify issuance of an anti-antisuit injunction in Germany.

5. On the Kluwer Patent Blog, Anders Valentin published a post titled Either/or – must the patentee chose between a PI or a main action in Denmark?  The post discusses a recent appellate decision holding that a patent owner had waited too long (15 months after filing the main action) to obtain a preliminary injunction, despite the owner’s argument that during that time it had obtained additional evidence through discovery obtained in the U.S.  The author expresses concern over the formalistic nature of the ruling, “without due consideration of the many practicalities necessary to prepare and initiate legal action.”  I guess patent law doesn’t get more Kierkegaardian than that . . .

6.  On IP Watchdog, Peter Damerell and Tess Waldron published English FRAND Developments to Watch Out for in 2022, discussing some pending/upcoming FRAND trials in the U.K.

 

OxFirst Webinar on Patent Damages in the United States

I mentioned this upcoming event a couple of weeks ago, but here is an update.  I will be speaking at an OxFirst free online webinar next week (Thursday, February 24) titled Damages Calculations in Patent Infringement Actions in the United States.  The webinar will run from 15:00-16:00 BST (16:00-17:00 CET, or 9:00-10:00 a.m. Central Time in the U.S.).  Former Federal Circuit Chief Judge Randall Rader will be moderating.   Here is the webinar description:

            This webinar offers insights into damage calculations in patent infringement cases in the U.S.A., with an emphasis on important recent developments relating to the law of reasonable royalties; extraterritorial damages; awards of profits for design patent infringement; and enhanced damages.

Registration is available here.  I hope many of my readers can join us!