Thursday, December 22, 2022

Monday, December 19, 2022

Federal Circuit Affirms Denial of Instruction on Lump-Sum Damages, Exclusion of Purported Comparable Licenses

The case is ADASA Inc. v. Avery Dennison Corp., decided this past Friday in a unanimous opinion authored by Chief Judge Moore.  The patent in suit relates to RFID tags.  The district court had granted summary judgment that the claims in suit were patent-eligible, and that they were neither anticipated nor obvious.  The case proceeded to trial on infringement of claim 1 (infringement claims as to the other patent claims in suit having been severed and stayed) and on damages.  Regarding the latter, the court excluded the defendant’s expert from testifying on the basis of three licenses that the court concluded were non-comparable, and denied the defendant’s request for an instruction on lump-sum damages.  (On this last issue in particular, the defendant “had not advanced a lump-sum damages theory during trial,” but argued that the three licenses the patent owner introduced into evidence reflected lump-sum agreements.)  The jury returned a verdict for the patent owner in the amount of a running royalty of $0.0045 per infringing tag, for a total of $26,641,876.75.  After trial, the defendant discovered over two billion additional RFID tags in its database, which it stipulated (subject to appeal) also infringed.  The district court “after multiple evidentiary hearings” entered discovery sanctions in the amount of an additional $0.0025 per tag (including “both the adjudicated and late-disclosed tags”), amounting to $20,032,889.80.

On appeal, the court affirms the ruling on eligibility, but concludes that there are genuine issues of material fact on anticipation and obviousness, and therefore reverses and remands for a new trial on these issues.  Moving on to damages, the court first affirms the district court’s denial of the proffered instruction on lump-sum damages, stating:

Avery Dennison does not dispute it did not advance a lump-sum damages theory before the jury or offer any testimony that lump-sum damages were appropriate. Indeed, Avery Dennison’s expert expressly disclaimed any such opinions. . . . Instead, it contends a lump-sum instruction was required because certain admitted licenses, offered by ADASA, reflect lump-sum payments to practice the ’967 patent claims.8/

8/ The parties dispute whether each of the licenses at issue is accurately characterized as lump-sum. Because we find the district court did not err in omitting a lump-sum instruction even if the licenses are all lump-sum, we need not resolve that dispute.

It may be that in some circumstances licenses, standing alone without supporting lay or expert testimony, can support a lump-sum instruction. This is not such a case. Here, Avery Dennison clearly and repeatedly argued against the relevancy of the licenses upon which it now relies. Its damages expert opined at least two of the three licenses were not helpful to understanding the value of a hypothetical negotiation. . . . Avery Dennison’s counsel likewise characterized the licenses as unhelpful to “figur[ing] out what a reasonable royalty would have been.” . . . Avery Dennison instead focused its damages theory at trial on design-around costs, which it presented to the jury as a starting-point in a hypothetical negotiation for a running royalty, not a lump-sum payment.

Where Avery Dennison failed to present a lump-sum damages theory to the jury and, moreover, actively undermined the very evidentiary basis it now contends required a lump-sum instruction, the district court did not err in declining to include such an instruction. Further, because there was insufficient evidence to warrant a lump-sum instruction, the district court appropriately declined to include a lump-sum option on the verdict form (pp. 21-22).

As for the exclusion of the defendant’s proffered licenses and testimony thereon, the court also affirms, finding no abuse of discretion:

In support of its contention that the excluded licenses were sufficiently comparable, Avery Dennison relied on the opinions of its technical expert, Dr. Sweeney. Dr. Sweeney’s analysis, however, was inadequate to establish the technological comparability of the ’967 and licensed patents. As Dr. Sweeney acknowledges, the licenses at issue involved hundreds or thousands of patents that spanned a broad range of technologies. Nevertheless, Dr. Sweeney did not undertake any meaningful comparison of the licensed technology with the invention disclosed by the ’967 patent (pp. 24-25).

Finally, as for discovery sanctions, the court concludes that there was no abuse in the decision to award them, but that the “chosen method for calculating the remedy . . . cannot stand” (p.27).  In particular:


. . .  The district court’s award inappropriately includes in the sanction the timely disclosed RFID tags, for which there was no discovery violation and no established harm to ADASA. . . . [I]t divorced the remedy from the harm that flowed from Avery Dennison’s discovery violation. We therefore vacate the sanctions award and remand for the district court to reconsider the appropriate remedy . . . (p.27).


Thursday, December 15, 2022

From Around the Blogs

1. On the Kluwer Patent Blog, Matthieu Dhenne published the first of a projected four posts on FRAND Litigation in France, titled The Nature of the FRAND Commitment.  Under French law, commentators tend to understand the FRAND commitment as a stipulation pour autrui.  The author argues, however, that to be more doctrinally precise the commitment is not “a stipulation for the benefit of third parties for licenses,” but rather as a “stipulation of a contract for another person, whereby the standard-setter (the stipulator) makes the patentee (the promisor) promise to enter into a licensing contract on FRAND terms with a third party beneficiary who accepts it.”  He concludes that such a stipulation is legally effective under French law.

2. Several months ago, Fabio Angelini and Sara Parrello published a post on the Kluwer Trademark Blog titled Reimbursement of the legal costs for the enforcement of IP rights in the EU:  “THE WINNER TAKES IT (ALMOST) ALL.”  The post discusses two 2022 decisions of the CJEU interpreting article 14 of the Enforcement Directive.  In NovaText GmbH v. Ruprecht-Karls-Universität Heidelberg, Case C-531/20, the court held that costs incurred to retain an IP consultant are potentially recoverable, but that they “cannot be automatic and unconditioned” and must instead be reviewed for reasonableness and proportionality.  In Koch Media GmbH v. FU, Case C-559/20 (previously noted on this blog here), the court held that attorneys’ fees incurred in connection with a warning or cease-and-desist letter are potentially recoverable “other expenses,” though again subject to review for reasonableness and proportionality.

3. On Bloomberg Law, Linda Chang and Eleanor Tyler published an analysis titled Global 5G Patent Rights Search for an Arena in 2023.  The authors discuss two “hot topics to watch in worldwide 5G SEP litigation during 2023,” “jurisdictional policy on granting injunctions against implementers during licensing fights,” and “the propriety and enforcement of anti-suit injunctions,” and note pending policy assessments in the E.U. and U.K.  Also on Bloomberg this past week was a short article by Kelcee Griffis noting that the Federal Circuit had affirmed without opinion Judge Alsup’s award of $5.9 million in attorneys’ fees in a case brought by Finjan against Juniper Networks.

4. On Law360, Robert Bell and Malgorzata Janiec published an essay titled Teva Case Aims Europe’s Pharma Crackdown at IP Loophole.  The authors discuss two pending E.U. investigations involving, inter alia, allegations that a patent owner’s disparagement of competing products constitutes an abuse of dominant position in violation of TFEU article 102.  Michael Carrier has previously written on this topic under U.S. law, see here.   This is a subject I will need to devote substantial attention to in connection with my forthcoming book project on wrongful patent assertion.  Also on Law360 a few weeks back was an article by Lauren Berg titled Wash. ‘Patent Troll’ Law Survives Constitutional Challenge, discussing (and linking to) a recent decision of the U.S. District Court for the District of Washington denying Landmark Technology A, LLC’s motion to dismiss an action brought by the Attorney General of the State of Washington, which argues that Landmark’s business model constitutes “bad faith patent assertion” in violation of Washington law.

5. On JUVE Patent, Mathieu Klos published a post tiled Dutch court extends cross-border jurisdiction in Novartis and Pharmathen battle, discussing a recent decision of the Court of Appeal in the Hague which he reads as “extend[ing] the jurisdiction of the Dutch patent courts in cross-border injunctions, which have long been a specialty of the Netherlands.” 

6. On IPWatchdog, Alexander Prenter published an essay titled Bringing Unwilling Licensors to the Table.  Mr. Prenter argues that courts in Germany have misapplied Huawei v. ZTE, and sees a need for "a set of ax-ante rules that apply pre-litigation that compel licensors to enter into FRAND licensing negotiations in good faith."  Meanwhile on FOSS Patents, Florian Mueller published a post titled Huawei, Qualcomm, InterDigital agree that licensing level must not serve as pretext for driving down standard-essential patent royalties:  IAM Connect 2022 panel.  

Monday, December 12, 2022

Fee awards and PAE disclosures

Readers may recall that, about a decade ago, the USPTO and Congress considered imposing additional requirements on patent owners to disclose the identify of other persons or entities with a financial interest in the patent or patent litigation at issue.  In 2014, for example, the USPTO proposed a  rule that would have required every patent applicant to identify the assignee, any “entity necessary to be joined in a lawsuit in order to have standing to enforce the patent,” the “ultimate parent entity” of either of the preceding entities, and any entity that used any arrangement to temporarily divest itself or prevent the vesting of attributable ownership.  The applicant also would have needed to update as necessary the disclosure during prosecution, as well as upon payment of postgrant maintenance fees and in connection with any postgrant USPTO proceedings.  The Office abandoned the initiative, however, following the submission of mostly unfavorable comments on the part of patent owners, who argued (among other things) that the requirements were too burdensome.  Congress thereafter considered a similar proposal, albeit one that would have been applicable only to patents that are asserted in litigation, but it too was never enacted.  (Congress also never went forward with a bill that would have required any entity submitting more than twenty demand letters involving the same patent within a single year to disclose its ultimate parent entity to the USPTO.)  Within the USPTO, therefore, the status quo remains in place, under which a patent application must disclose the name of the inventor and, if the application is being made by the assignee, the assignee’s identity, see 37 C.F.R. §§ 1.46, 1.76, but without any obligation to provide additional information or to record subsequent assignments.  Similarly, Federal Rule of Civil Procedure 7.1 requires any nongovernmental corporate party in a federal civil action to identify “any parent corporation and any publicly held corporation owning 10% or more of its stock,” and to update this information as necessary; and parties to USPTO administrative proceedings such as IPRs must disclose the “real party in interest,”  a term that the rule leaves undefined but which has been interpreted to require consideration of various factors identified in other contexts to determine if a judgment precludes another party from litigating a matter again.   None of these existing rules expressly requires the identification of “grandparent” corporations or beyond, however, or of subsidiaries or sister companies; and Rule 7.1 does not apply at all to noncorporate entities.

Policymakers’ interest in these matters in the 2010s was attributable to the perceived abuses by patent assertion entities, which were (and still are) often enmeshed within a network of limited liability corporations (LLCs) or similar vehicles.  In particular, advocates of greater transparency argued that such measures might reduce the risk of holdup resulting from the “disaggregation” of a portfolio of patents among multiple shell corporations, as well as the ability of the beneficiaries of these arrangements to shield their assets in the event a particular assertion was found to be not only meritless but sufficiently “exceptional” to call for an award of attorneys’ fees. 

These issues are coming into prominence once again.  Earlier this year, for example, Chief Judge Colm Connelly of the District of Delaware issued two standing orders relating to litigation financing.  One is directed to implementation of Rule 7.1, the other to third-party funding.  The latter states, in relevant part, that “where a party has made arrangements to receive from a person or entity that is not a party (a ‘Third-Party Funder’) funding for some or all of the party’s attorney fees and/or expenses to litigate this action on a non-recourse basis in exchange for (1) a financial interest that is contingent upon the results of the litigation or (2) a non-monetary result that is not in the nature of a personal loan, bank loan, or insurance,” the party must disclose “(a) the identity, address, and, if a legal entity, place of formation of the Third-Party Funder(s); (b) whether the Third-Party Funder’s approval is necessary for litigation or settlement discussions in the action, and if the answer is in the affirmative, the nature of the terms and conditions relating to that approval; and (c) a brief description of the nature of the financial interest held by the Third-Party Funder(s).”  In addition, “Parties may seek additional discovery on the terms of a party’s arrangement with any Third-Party Funder upon showing that the Third-Party Funder has authority to make material litigation decisions or settlement decisions, the interest of any funded parties or the class (if applicable) are not being promoted or protected by the arrangement, conflicts of interest exist as a result of the arrangement, or such other such good cause exists.”  In this regard, and as reported in numerous other media, Chief Judge Connelly recently ordered Nimitz Technologies LLC to turn over for his inspection documents of potential relevance to third party funding, asserting his inherent authority to do so.  See Nimitz Techs. LLC v. CNET Media, Inc., 2022 WL 17338396 (D. Del. Nov. 30, 3022).  The Federal Circuit last week denied Nimitz’s petition for a writ of mandamus to vacate the order.

Where this will ultimately come to rest remains to be seen, but it is useful background information to have in mind in considering a couple of short articles recently published on Bloomberg Law and Law360.  The Bloomberg piece, authored by Richard Frenkel and Ceclia Sanabria and titled How Litigation Funding Disclosure Rules Affect NPE Filings, notes that litigation funding rules are also in place in the Northern District of California and the District of New Jersey, and asserts that courts in Illinois “have also ordered discovery relating to litigation funders, explaining that in patent cases such discovery could be relevant to the patents’ value.”  The Law360 piece, by Adam Shartzer and Josh Carrigan and titled Patent Fee-Shifting Often Leaves Prevailing Parties Unpaid, reports the results of a “survey and study of Section 285 attorney fees awards against patentees from June 2017 through June 22.”  According to the authors, there were 82 such cases, and “[t]hrough docket analysis and anonymized survey data through counsel of record” they were able to determine the outcome of 58 of these.  The  authors report that in 21 (that is, 35%) of these cases the fees assessed went unpaid, and that NPEs account for 18 (86%) of these.  They suggest that the use of the LLC form and the cost and difficulty of collecting a judgment are reasons for these results; they also note that some state anti-troll laws permit courts to require patent owners under some circumstances to post a bond (an aspect of anti-troll laws that I have never given much thought to before, but will need to look into).  Two other recent Law360 posts on Chief Judge Connelly's efforts also are worth a look; see Del. Judge's Tough Stance on Disclosure Roils Patent Bar and IP Forecast: Del. Judge to Keep Probing Patent Biz Ownership