Monday, July 31, 2023

Gugliuzza on State Anti-Patent Troll Statutes and the Federal Circuit

Paul Gugliuzza has posted a short paper on ssrn titled State Anti-Troll Statutes at the Federal Circuit. Or Not.  Here is a link to the paper, and here is the abstract:

The Federal Circuit recently received notices of appeal in two cases raising questions about the constitutionality of state statutes prohibiting bad faith assertions of patent infringement. The cases could give the Federal Circuit an opportunity to clarify whether, or to what extent, state “anti-troll” statutes can be used to police how owners of federal patents allege infringement.


But, as this paper shows, it’s not clear the Federal Circuit will actually decide the cases on the merits, both because the appeals may be untimely and because one of the appeals may belong in the Ninth Circuit, not the Federal Circuit. If the Federal Circuit does issue a ruling on the merits, it may be because the preemption and federalism issues raised by the cases are too interesting and important to let doubts about jurisdiction get in the way.

Thursday, July 27, 2023

Gómez-Arostegui and Bottomley on Injunctions and Jury Trials

Tomás Gómez-Arostegui and Sean Bottomley have posted a paper on ssrn titled Patent Infringement Suits and the Right to Jury Trial, 72 Am. U. L. Rev. 1247 (forthcoming 2023).  Here is a link to the paper, and here is the abstract: 

This Article analyzes whether the Seventh Amendment affords a right to a jury trial in suits in which the owner of a patent seeks only equitable relief against an accused infringer. The existence of jury rights carries important consequences for litigants. Like many issues involving application of the Constitution, the availability and scope of the right to a jury depends on eighteenth-century English legal history. Current doctrine holds that litigants in equity had no right to a jury in patent cases in England c.1791 and therefore that litigants today who seek only injunctive relief possess no such right either. But as we demonstrate here, the relevant historical record shows the contrary, and thus many litigants have a constitutional right to a jury where the courts presently deny them. We reach our conclusion after undertaking the most comprehensive treatment of the subject to date, which includes marshaling hundreds of eighteenth-century records (mostly in manuscript) from the National Archives of the United Kingdom and elsewhere.

I haven’t read too far into the article yet, but this sounds very interesting.

Monday, July 24, 2023

Patent Assertion as Abuse of Economic Dependence

A few months back, I noted a couple of blog posts (on EPLaw and JUVE Patent) discussing a July 2022 decision of the Tribunal de l'entreprise de Brussels francophone, Chamber of Injunctions, Tunstall Group Holdings Limited v. Victrix Socsan S.L.  This was a patent infringement case in which the court applied the doctrine of "abuse of economic dependence," as enacted into Belgian law in August 2020.  More specifically, although there was no finding of abuse of dominant position in violation of applicable competition (antitrust) law, the court ordered the owner of a (non-standard essential) telecommunications patent (Tunstall) to license two infringement defendants (Victrix Socsan and Télé-Secours) on the alternative ground that the refusal to license constituted an abuse of economic dependence, in violation of Belgium’s CDE (Code de droit économique).  I never got around to blogging about the case in depth, but now that my new book project on wrongful patent assertion is underway I thought it would be worthwhile to revisit the matter, if for no other reason than to clarify my thoughts on where exactly this doctrine fits or could fit within the universe of tools for regulating the assertion of patents.  I’ll quote below a few passages from the decision, mostly using the English-language translation provided by EPLaw, but with corrections where appropriate.  (The English-language version is clearly a machine translation, and has a few errors, e.g., repeatedly translating the word “belge” as “beige,” where it should be “Belgian.”  The repeated references to the “beige” market are kind of funny, though.)

The basic facts, as far as I can gather, are as follows.  (The decision could be a bit more clear on the facts, in my opinion, but I think I have pieced things together correctly.)  Tunstall is the owner of EP 2 160 038 B2 (“Tone signalling”), validated in Belgium, which the court describes as “protecting the protocols used in the televigilance sector that it has developed.”  Télé-Secours, which I understand markets televigilance services for elderly and vulnerable people, has been a customer of Tunstall since 2006; Tunstall, as far as I can tell, markets telecare devices (reception units) and also the software that implements a platform and protocols for use with the devices.  Télé-Secours was unhappy with Tunstall’s delay in providing an updated platform and/or product (see para. 64), and sought to hire Victrix, a Spanish firm, as a replacement.  Tunstall refused to license Victrix, however, although it licenses other firms against which Tunstall competed in the Belgian market.  (Again, the opinion is not a model of clarity, but apparently Victrix cannot simply do a deal with one of these other Tunstall-licensed firms without Tunstall’s consent.  At least, I infer that that must be the case or the decision doesn’t make any sense.)  Tunstall then filed suit against Télé-Secours and Victrix for patent infringement.  The two defendants counterclaimed for abuse of dominant position and abuse of economic dependence.  According to the court, the evidence obtained by means of a saisie-description “showed without any ambiguity that VICTRIX SOCSAN had not used the patented protocols,” and thus apparently hadn’t yet serviced any Belgian customers.  See para. 75.  It’s not clear to me whether Télé-Secours was infringing or was still keeping to the terms of the preexisting agreement with Tunstall while it shopped around for a new supplier.  Anyway, on to the counterclaims.    

First, on the abuse of dominant position claim, the court concludes that the relevant geographic market is the EU, rather than Belgium specifically, and that Tunstall does not have a dominant position in either the European market for televigilance platforms/software or the protocols that ensure “communication between the reception units and the telecare software.”  The abuse of dominant position argument therefore fails.

The defendants prevail, however, on the abuse of economic dependence claim.   According to the court, the difference between the two theories (abuse of dominant position versus abuse of economic dependence) is as follows:

“. . . the offence of abuse of a dominant position is established if it is ‘exercised, on the market concerned, towards all customers or suppliers and towards all competitors’. However, situations of relative power on the market can occur and lead to economic dependence on the part of undertakings. Indeed, ‘the dependence of certain customers or suppliers on a certain undertaking does not make it possible to consider that the latter is in a dominant position; nor does an undertaking have a dominant position vis-à-vis small and medium-sized competitors when it itself is exposed to real competition on the part of a larger enterprise’ . . . . Therefore, for an infringement of the prohibition of abuse of economic dependence to be established, an unequal balance of power between particular economic actors - irrespective of their dominance in the market in general - must be demonstrated” (para. 56; emphases in original).”

More specifically, an abuse of economic dependence claim requires that the following three conditions be satisfied:

“1. The position of economic dependence of one company on another;


“2. The abuse of this situation;


“3. The effect on competition on the Belgian market concerned or a substantial part of it” (para. 57).

As for the first element, “economic dependence is based on two intrinsically linked criteria that must be assessed in concreto,” namely “the lack of alternatives,” and “the fact that a company may impose abnormal performance or conditions.  This examination is not the same as that required to determine the existence of dominance on a market:  an undertaking may be in a situation of economic dependence while a satisfactory level of competition remains on the market’ (N. Neyrinck, op. cit., p. 441)” (para. 58).  Applying these criteria, the court states that “the patented technology is necessary for the proper functioning of TÉLÉ-SECOURS and for the quality of the services offered to its subscribers” (para. 61), and that “Under normal market conditions, TÉLÉ-SECOURS should have been able to definitively break away from TUNSTALL and contract with another platform provider. However, TÉLÉ-SECOURS remains captive to TUNSTALL since only the latter has the patented technology needed to ensure the connection between the vast majority of TÉLÉ-SECOURS' subscriber reception units and the future platform to be implemented” (para. 65).  As for alternatives, the court states that “platform providers capable of satisfying TÉLÉ-SECOURS . . . must have the patented technology in order to provide the same level of service to their subscriber,” and that “[t]he alternative company pointed out by TUNSTALL is in fact one of its licensees, which therefore uses the patented technology” (para. 68).  Thus:

“. . . TÉLÉ-SECOURS is necessarily dependent on TUNSTALL or its licensees. At present, there are only two options available to it:


“- either it maintains its relationship with TUNSTALL, but in this case TÉLÉ-SECOURS would not have a platform with all the necessary functions to provide the services proposed to its subscribers [because, as above, it hasn’t been satisfied with the Tunstall software it had been using];


“- or it breaks off its relationship with TUNSTALL (or its licensees), but in this case TÉLÉ-SECOURS would no longer have the patented technology, and therefore no longer have an operational platform, which would be particularly detrimental to it” (para. 70).

Moving along to Victrix, the court concludes that the absence of a contractual relationship between Tunstall and Victrix is not dispositive to the applicability of the abuse of economic dependence doctrine (despite some authority apparently seeing it as such), and concludes that Victrix too is dependent on Tunstall if it wants to enter the Belgian market (para. 75).  Moreover, “TUNSTALL does not provide any other justification for this refusal of a licence. It therefore imposes abnormal conditions of refusal on VICTRIX SOCSAN, while the latter offers to pay the market price to obtain this licence” (id.).  The actual justification appears to be, however, that Tunstall wanted the business for itself, as the court later refers to “TUNSTALL’s corporate strategy” as being “to develop an end-to-end solution for TÉLÉ-SECOURS (which it did to the end, by proposing to TÉLÉ-SECOURS the implementation of the ‘PNC 8’ platform, following the failure of the ‘PNC 7’)” (para. 86).

The court concludes that Tunstall had abused both parties’ economic dependence, and that in doing so it had affected competition in the Belgian market to an extent sufficient to satisfy the elements of the claim.  On abuse, the court states that Tunstall may have “conceal[ed] the patented nature of the technology” from Télé-Secours (I’m not sure what to make of that—is that really relevant?), but beyond that

“the history and intensity of the relationship between the two companies had the insidious effect of placing TÉLÉ-SECOURS' commercial development at the mercy of TUNSTALL. . . .   Finally, TUNSTALL is able to upset the financial balance of its partner and can charge high prices to TÉLÉ-SECOURS .  This seems to be the case since, in TÉLÉ-SECOURS ' opinion, TUNSTALL charges 50% more for the supply of the platform than VICTRIX SOCSAN or 15% more than ESI FRANCE (pp. 37-38 of the defendants' summary conclusions). This statement is not contradicted by TUNSTALL. This behaviour shows that TUNSTALL is abusing the economic dependence of TÉLÉ-SECOURS . The latter is obliged to pay a high price for the provision of a platform that it considers obsolete, because no alternative platform provider that is viable in its eyes has the right to use the patented technology on which it is captive” (para. 86).

As for Victrix, “It is on the basis of a false pretext of patent infringement that TUNSTALL refuses to grant VICTRIX SOCSAN the patent licence it has applied for. This refusal is therefore abusive. In addition, TUNSTALL's conduct towards VICTRIX SOCSAN is also abusive in that all of the latter's competitors on the Belgian market have requested a licence for its patent from TUNSTALL, which TUNSTALL does not dispute. The unjustified and discriminatory refusal of the licence constitutes an abuse of the position of economic dependence in which VICTRIX SOCSAN finds itself vis-à-vis TUNSTALL” (para. 89).  Finally, as for the effect on competition, the court cites an article describing the legislation enacting the economic dependence doctrine as intended to “protect small and medium-sized enterprises, not competition.  Thus, effect on competition may be real or potential” (para. 92).  The court also cites with approval a commentary stating that “abuse also occurs in the case of self-preferencing behaviour,” which is also present here (para. 94).  “TUNSTALL is therefore in a position to increase its position in markets where TÉLÉ-SECOURS is specifically seeking more competition. . . . TUNSTALL's behaviour is likely to affect competition in the Belgian market or a substantial part of it” (para. 95-96).

For a remedy, the court gave the parties three months to conclude a license, stating that the price “shall be in line with market value” (para. 97).  The JUVE Patent article referenced above states that Tunstall planned to appeal, so if anyone knows the current status of the case, I would like to know if an appeal is in fact pending.

*                    *                   *

A few observations.  First, I must confess that I still don't know a great deal about the doctrine of abuse of economic dependence generally.  For starters, though, here is an article by Vassili Moussis and Atsushi Yamada from Concurrences, and here is another from K&L Gates.  If anyone can point me to some other articles or books or economic analyses, I would appreciate it.  Second, I wonder whether the court was correct to conclude that there could be no abuse of dominant position on the facts presented, because the relevant geographic market was Europe, and Tunstall lacked a dominant position throughout that entire market?  Couldn’t there be a discrete Belgian geographic market in which Tunstall dominated?  (I’d appreciate any commentary on this point from readers too.)  Second,  in thinking about how such a case would come out in the U.S., I would note that we don’t have an “abuse of dominant position” doctrine in our antitrust law, but that in Sherman Act § 2 monopolization cases the relevant geographic market does not have to be the entire United States.  This case actually reminds me a bit of Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985), where the defendant was found (whether correctly or not) to have monopoly power in the market for skiing services in the Aspen, Colorado area, and to have an antitrust duty not to terminate a collaborative relationship with its competitor, Highlands.  Of course, later case law (Trinko) has described Aspen Skiing as “at or near the outer boundary of § 2 liability,” and U.S. courts are even less likely to find an antitrust duty to license one’s IP, at least absent a FRAND commitment (and even then, well, see the Ninth Circuit’s decision in Qualcomm).  On the other hand, there is reason to believe that a U.S. court wouldn’t enter an injunction against defendants who are locked in to a particular technological environment; an ongoing royalty might suffice, though it’s not a sure thing if the patent owner (as here) wants the business for itself, and the defendants would be knowing infringers if they went ahead anyway.  Or are there any other doctrines that might fit?  I need to brush up on my knowledge of the civil law “abuse of right” doctrine, which isn’t mentioned in the decision; I don’t know whether under Belgian law an argument along those lines would have worked here.  (Again, I would be interested in hearing from readers on this point.  I know that Amandine Léonard and Krista Rantasaari, among others, have both written on abuse of right as it relates to IP, and I need to reread their work.)

There is also some old U.S. case law involving the tort that is sometimes referred to as “interference with prospective business relations,” to the effect that intentionally causing a third party to cease doing business with another is unlawful, even if the means employed are independently lawful, if the purpose was solely to injure the victim (see, e.g., Tuttle v. Buck, 119 N.W. 946 (Minn. 1909)); but my understanding is that this is no longer the favored view in the U.S., given the risk of nuisance suits if such a rule were to be followed.  (In any event, in the Belgian case it would appear that Tunstall's motive was to advance its own business interest, not solely to harm the defendants/counterclaimants.)  In addition, as I noted in an article with Roger Blair some years ago, "A few states . . . recognize a cause of action for 'prima facie tort,' defined as intentionally causing harm to another without justification. See, e.g., Kitchell v. Public Serv. Dep't, 972 P.2d 344, 348 (N.M. 1998) (listing elements of tort as “(1) an intentional and lawful act, (2) an intent to injure the plaintiff, (3) injury to the plaintiff as a result of the intentional act, and (4) the absence of justification for the injurious act”) (citations omitted); Jonas v. N.Y. Cent. Mut. Fire Ins. Co., 665 N.Y.S.2d 189, 191 (App. Div. 1997) (listing elements as 'intentional infliction of harm, (2) resulting in special damages, (3) without excuse or justification, and (4) by an act or series of acts that would otherwise be lawful'). Similarly, the French Civil Code states that anyone who intentionally causes harm to another is obligated to pay damages. See Code Civil art. 1382 (Fr.) ('Tout fait quelconque de l'homme, qui cause à autrui un dommage, oblige celui par la faute duquel il est arrivé, à le réparer.')."  Of course, a lot hangs on the meaning of terms such as "without excuse or justification."

A final note:  the part of the Belgian decision that talks about the protection of small and medium-sized enterprises seems to have an affinity with the neo-Brandeisian perspective on antitrust, which now appears to be in vogue within the U.S. antitrust enforcement agencies (see, e.g, the recently announced draft Merger Guidelines)—though is not likely to make much headway in U.S. courts, I think (and thank goodness for that).  

Postscript: I found a few additional write-ups on the Tunstall case, here and here

Post-postscript:  It occurs to me that one might challenge the title of this post, on the ground that a refusal to license alone isn't "patent assertion" (though in the Belgian case, the patent owner did assert an infringement claim).  But . . . if I refuse to license, and that refusal is backed up by an explicit or implicit threat that I will sue if you proceed without a license, I don't think it stretches the term too far to say that I am "asserting" my patent.  In any event, I don't want to get too hung up on semantics:  all I am hoping to do in the project I am working on is investigate the various ways in which one's use of a patent, including one's refusal to license it, might constitute an abuse of some sort.  I hasten to add that I'm not at all convinced that it is a good idea to have a doctrine of abuse of economic dependence, or to characterize a refusal to license a patent as such an abuse.  But it is worthwhile, I think, to map out all the different ways in which courts have sometimes characterized patent owner conduct as "wrongful" or "abusive," before proceeding to analyze the merits of such characterizations as a matter of policy.