Nieder and Kabisch’s Commentary on the Munich LG’s October 20 2022 FRAND Decision

In its Judgment of October 20, 2022, Case No. 7 O 13016/21, the Munich Regional Court I held that it is permissible to infer that a defendant is not a willing licensee for purposes of the FRAND defense, if the defendant has previously threatened or obtained an antisuit (ASI) or anti-enforcement injunction (AEI) against the SEP holder.  The inference is not appropriate, however, just because the defendant has sought or obtained an ASI or AEI against another entity, in another proceeding or because the patent owner had previously obtained an anti-antisuit injunction (AASI) or anti-antienforcement injunction (AAEI) based on the risk that the defendant might seek an ASI or AEI in the current proceeding.  (This is one of the many cases, by the way, that is discussed in the forthcoming edited volume FRAND: German Case Law and Global Perspectives (Peter George Picht, Erik Habich & Thomas F. Cotter eds., Edward Elgar Publishing Ltd.), which I expect will be out in the coming months.)   Michael Nieder and Andreas Kabisch have published a short commentary on the decision in the October 2023 issue of Mitteilungen der deutschen Patentanwälte, pp. 461-62.  The authors note that the court nevertheless rejected the defendant’s FRAND defense, because of the length of time the defendant had delayed reaching terms (over five years).  The defendant had made two counteroffers during the litigation, the first based on its own (lower than industry average) sales price and the second based on a substantial discount from the industry average, but the court did not consider whether the second offer was, in fact, FRAND; the fact that having to pay a royalty that would put the defendant at a competitive disadvantage based on its lower selling price was, in the court’s view, the defendant’s own fault.  The authors question whether this is consistent with Huawei v. ZTE, which in their view would require consideration of whether the second counteroffer was FRAND.

 

 

Comments Filed in Response to Agencies’ Request for Input on SEP Licensing

I mentioned back in September that the U.S. International Trade Administration (ITA), the National Institute of Standards and Technology (NIST), and the USPTO had published a notice, titled "Joint ITA-NIST-USPTO Collaboration Initiative Regarding Standards; Notice of Public Listening Session and Request for Comments," in which they stated they were "seeking stakeholder input on the current state of U.S. firm participation in standard setting, and the ability of U.S. industry to readily adopt standards to grow and compete, especially as that relates to the standardization of critical and emerging technologies."  The notice also included a list of twelve questions, which I quoted on this blog, which they suggested commenters might wish to discuss.  The agencies held a listening session on September 20 and originally stated that they would accept public comments until September 29; the deadline was later extended to November 6.

Here is a link to the page hosting the 57 comments submitted.  I have had a busy month, and haven’t read very many of these myself yet.  Law360 published an article earlier this month, however, summarizing and linking to some of the comments from tech companies and others.  As that article discusses, Dell Technologies' comment makes an argument that mirrors one that Mr. Justice Mellor made in InterDigital v. Lenovo (see my blog post here), and that I have previously made in another blog post myself, namely that the lack of transparency regarding FRAND royalty rates that licensors charge makes it very difficult to know whether the “nondiscriminatory” aspect of FRAND is being satisfied. 

Also on Law360 in October was an article by David McAdams and David Katz, titled Why US Should Help European Efforts to Fix SEP Licensing.  Whether one agrees with that premise or not (relating to the European Commission’s draft SEP regulation--and while I'm thinking of it, Enrico Bonadio and Shreya Sampathkumar have an interesting post up today on the Kluwer Patent Blog, titled Countering Criticisms to the Proposed EU SEPs Regulation), there is an interesting argument about how SEP licensing may function as a market for “lemons” (referring to Nobel laureate George Akerlof’s famous paper on that subject), given the asymmetric information vis-à-vis licensors and licensees regarding “the quality of SEP portfolios.”  That’s an angle that had not previously occurred to me in quite that fashion.

Helmers and Love: Empirical Assessment of eBay, PTAB, and Alice

Christian Helmers and Brian J. Love have posted a paper on ssrn titled Patent Law Reform and Innovation:  An Empirical Assessment of the last 20 Years.  Here’s a link, and here is the abstract:

We ask whether the most important U.S. patent system reforms of the last 20 years—elimination of presumptive injunctive relief for victorious patent enforcers in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006), creation of the Patent Trial and Appeal Board (PTAB) in the America Invents Act, and restriction of software’s eligibility for patent protection in Alice Corp. v. CLS Bank Int’l, 573 U.S. 208 (2014)—had a measurable impact on innovation in the U.S. Specifically, we construct firm-level measures of innovation and of exposure to each reform and adopt a variety of dif-in-dif approaches that assesses how innovation-related activities changed post-reform at relatively exposed versus relatively unexposed firms. We find: a positive association between eBay and R&D spending by firms that were relatively more exposed to patent litigation prior to the Court’s decision; a positive association between the introduction of PTAB proceedings and both R&D expenditures and patent filings by firms that innovate in tech classes where PTAB has been most active; and a positive association between Alice and both R&D spending by software firms and patenting by firms that held relatively more software patents prior to the Court’s opinion.

With regard to eBay, the authors’ reported findings are consistent with results reported by Filippo Mezzanotti & Timothy Simcoe, Patent Policy and American Innovation After eBay: An Empirical Examination, 48 Rsch. Pol’y 1271 (2019) (finding no evidence that eBay has hindered innovation), and Filippo Mezzanotti, Roadblock to Innovation: The Role of Patent Litigation in Corporate R&D, 67 Mgmt. Sci. 7362 (2021) (finding that eBay had a positive impact on R&D spending by established firms) (previously noted here, along with another paper reporting similar findings by Bersekin, Hsu & Wang).  At the end of the paper, however, the authors note some possible limitations, stating “we caution that the nature of our analysis requires that we source data from publicly traded firms and our results should be considered with that limitation in mind. While it is reassuring that patenting and R&D spending trends among our panel of firms closely mirror those seen in aggregate statistics, the reactions of publicly traded firms may not be representative of the reactions of privately held firms, which may tend to be relatively smaller and newer on average.”