Upcoming B.U. Technology & Policy Research Initiative IP Day conference

Boston University will be hosting its Ninth Annual Boston University Technology & Policy Research Initiative IP Day conference on Monday, July 14.  I’ll be on the Patent Litigation Discussion Panel at the end of the day.  I’m looking forward to seeing some old friends, included Mike Meurer, Tim Simcoe, and George Chondrakis, and meeting some new ones.  The conference description follows, and registration is available here.

The Ninth Annual Boston University Technology & Policy Research Initiative IP Day conference will highlight new research relating to intellectual property, the economics of innovation, technology commercialization and litigation. IP Day panels focus on emerging research themes, from both a legal and economic perspective, with an emphasis on topics that are relevant to both business and policy. Previous sessions have examined on patent prosecution, third-party litigation finance, standard essential patents, IP and antitrust, pharmaceutical patenting, and University technology transfer.

Unfair Competition by Publicizing a Pending Infringement Action

Both ip fray and JUVE Patent have recently reported on the decision of the Tribunal des Activités Économiques de Lyon (available here) awarding bioMérieux SA €10,000, after Qiagen N.V. published a press release concerning Qiagen’s having filed a patent infringement suit against bioMérieux in the Düsseldorf Local Division of the UPC.  Since the topic of whether, or under what circumstances, an IP owner may be found liable for disparagement (and/or in violation of unfair competition or other law) for accusing another firm of infringement is one of the topics I address in my forthcoming book Wrongful Patent Assertion, I thought I should say something about this decision, which highlights some of the risks posed under the relevant French law.  

As I discuss in the book, France is hardly the only country in which IP owners need to be careful about sending warning letters, especially when the recipient of the latter is an alleged “secondary infringer” (i.e., a customer, distributor, or supplier of an alleged “primary infringer,” that is, an alleged infringing manufacturer).  The U.K., for example, has a statutory cause of action known as “unjustified threats” that is intended to protect secondary infringers from groundless threats of infringement liability; and there is also a rather complex body of German decisions differentiating between permissible inquiry letters and potentially impermissible warning letters.  (For detailed discussion, see Minyu Zheng, Legal Responses to Unjustified Threats of Patent Infringement – Intellectual Property Approach or Unfair Competition Approach? (Edward Elgar Publ. 2024), previously noted on this blog here.)  On the other hand, it is extremely difficult to win such cases in the U.S., in part because of perceived First Amendment protections.

More relevant here, previous French caw law has found that it also can be a violation of unfair competition law to publicize a pending action, at least prior to the rendering of a first instance judgment. To illustrate, consider this 2004 Cour de cassation decision holding that Défi France had violated unfair competition law by reporting its own pending (and ultimately successful) unfair competition lawsuit, against a firm called LVP partner’s, to Défi France’s client Nissan.  The recent decision of the Lyon court seems consistent with this earlier case, in finding that the publication of the press release can constitute dénigrement (disparagement) and unfair competition.  The decision states, inter alia, that the press release informed the technical sector and the general public of the filing of the complaint, “without communicating any data as to the context and the nature of the facts giving rise to the dispute,”  apart from any adversarial proceeding and in the absence of  any judicial decision, in relation to a patent in a very sensitive field in the health care sector (my translation from the French).  The court awarded damages as noted above; ordered Qiagen not to make further public comments about the case prior to a judicial decision; and ordered Qiagen to post the Lyon court’s decision on its own website.  As the above commentators suggest, this aspect of French law may not be well-known to companies outside of France, and questions may still remain regarding exactly how to comply with French law while also satisfying obligations to keep one’s own shareholders informed of material information.    

Some Thoughts on EcoFactor

As previously noted, yesterday the Federal Circuit issued its en banc decision in EcoFactor, Inc. v. Google LLC.  As readers will recall, the court requested that the parties address “the district court’s adherence to Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), in its allowance of testimony from EcoFactor’s damages expert assigning a per-unit royalty rate to the three licenses in evidence in this case.”  I joined the law professors’ amicus brief urging reversal.  The 8-2 majority opinion by Chief Judge Moore “reverse[s] the district court’s denial of Google’s motion for a new trial on damages,” but “reinstate[s] the portions of the panel opinion that pertain to issues other than damages” (p.23).    There are two separate opinions concurring in part and dissenting in part, one by Judge Reyna joined by Judge Stark, and one by Judge Stark joined by Judge Reyna.  These two judges concur in reinstating the non-damages portion of the panel opinion, and in the majority’s conclusion that the en banc proceeding was proper notwithstanding the non-participation of Judge Newman.

The relevant facts, as I discussed in my post on the original panel opinion last June, are as follows (with page cites to that opinion):

The case involves U.S. Patent No. 8,738,327, which “relates generally to the operation of smart thermostats in computer-networked heating and cooling systems” (p.2).  The case was tried in the W.D. Texas and the jury returned a verdict that claim 5 of the asserted patent was valid, that Google infringed, and that Google should pay $20,109,300. . . . The questions mostly boil down to whether the court should have excluded the opinion of EcoFactor’s expert Mr. Kennedy “because it lacked any reliable methodology or underlying calculations,” or because of a “lack of comparability and apportionment” (p.9). 

Mr. Kennedy premised his opinion on EcoFactor having “entered the hypothetical negotiation with the expectation of receiving a royalty in the amount of $X per unit,” and on this basis his proposed damages amount was $Y (p.10).  (The per-unit royalty rate is said to be “confidential business information subject to a protective order,” and thus is denominated “X.”  Similarly, the proposed damages amount is said to be confidential information and is designated “Y” (p.10 nn. 4, 5).  So we don’t know what X and Y are, but we are told that the amount the jury awarded ($20,019,300) was “significantly less than” $Y (p.13).)  The $X rate was based on “three licensing agreements EcoFactor entered into with third-party smart thermostat manufacturers—the Schneider and Daikin licenses in 2020, and the Johnson license in 2021,” as well as testimony from EcoFactor’s CEO Mr. Habib (p.11).  The majority opinion states that “Each of these agreements included the same $X royalty rate at issue here. Each license agreement provided in a whereas clause that the licensee would pay EcoFactor a lump sum amount “set forth in this Agreement based on what EcoFactor believes is a reasonable royalty calculation of [$X] per-unit for . . . estimated past and [] projected future sales of products accused of infringement in the Litigation” (id.) and that Mr. Habib  testified that the lump sums contained in each of the three license agreements were based on the $X royalty rate” (id.). 

The Federal Circuit granted the rehearing en banc in September.  In December, it clarified that apportionment would not be an issue in the en banc proceeding.  It heard oral arguments in March.

On my reading, the majority opinion essentially holds that a self-serving recital that a licensor believes that a lump-sum royalty reflects a royalty rate of $X per unit is not a sufficient basis for an expert to opine that $X per unit is a reasonable royalty rate—though it can still be relevant evidence, insofar as it may reflect what the licensor would have agreed to in the hypothetical negotiation.  (See majority opinion p.12 (“We hold the existing licenses upon which Mr. Kennedy relied were insufficient, individually or in combination, to support his conclusion that prior licensees agreed to the $X royalty rate”); p.14 (“Mr. Kennedy could have relied upon the Schneider license as evidence of the amount EcoFactor would agree to as the willing licensor, but the license cannot be read to support Mr. Kennedy’s testimony that Schneider was agreeing to pay the $X royalty”; p.16 (“The licenses, individually or in combination, do not support Mr. Kennedy’s opinion that the licensees were paying the $X rate, agreed to pay the $X rate, or agreed that the $X rate was a reasonable royalty”).)  In my view, that is a sensible rule.  The consequence of ruling to the contrary would be that a licensor’s self-serving recital would always provide adequate support for an expert’s opinion, no matter how divorced from reality that recital may be.  To put it another way—as I did in my discussion of Judge Prost’s dissent from the June 2024 panel opinion—in evaluating whether an expert’s opinion has a sufficiently reliable basis, perhaps we should focus on whether the expert asked the right questions:  that is, if you were an independent expert tasked with estimating an appropriate royalty for the technology in suit, what questions would you ask to find the right number?  Under this rule, if such a hypothetical independent expert wouldn’t rely on self-serving recitals as indicative of value, but the real-world expert did, then there is a problem, unless either there is other evidence confirming the reliability of the recitals, or the expert limits their reliance to the issue of what the real-world licensor would have accepted.

In the present case, the majority and dissents disagree not only on where to draw the line between gatekeeping and fact finding, but also on whether the expert’s opinion was sustainable based on other evidence in the record, including the testimony of EcoFactor CEO Mr. Habib; if so, whether any error in admitting Mr. Kennedy’s testimony was merely harmless; whether the district court’s failure to provide reasons for denying a new trial was an abuse of discretion; and whether the appellate court should be interpreting the three purportedly comparable licenses as a matter of law.  I’m not going to address these latter issues here, other than to state that in my view the majority reached the right decision in sending this back for a new trial on damages.           

EcoFactor Decision Is Out Too

Here is the decision.  (Hat tip to Michael Risch, who just posted this on the ipprofs listserv.)   The court reverses the panel's decision on damages and remands for a new trial.  Chief Judge Moore writes the majority (8-2) opinion.  Concurring in part and dissenting in part are Judge Reyna joined by Judge Stark, and Judge Stark joined by Judge Reyna.

I have plans this evening but will be reading this first thing tomorrow morning, and plan to offer some comments.

The WTO’s Panel Report on China’s ASI Policy

As I noted on this blog a few weeks ago, the European Union has two matters pending before the WTO against China.  The first of these, which started with a request for consultations in 2022, argues, among other things, that China's policy regarding antisuit injunctions (ASIs) violates articles 1, 41, and 63 of the TRIPS Agreement.  See WT/DS611—China—Enforcement of Intellectual Property Rights.  In the second, more recent, matter, the EU principally contends that China’s practices with regard to establishing the terms of global FRAND licenses violates Paris Convention article 4bis, as incorporated under TRIPS article 2.1, as well as TRIPS articles 1, 28, and 63. See WT/DS632-1—China—Measures Concerning Patent Licensing Terms:  Request for Consultations by the European Union, Jan. 22, 2025.  Anyway, as I noted last month, the panel released to the parties its report in the first case in February, but as of the date of my post the report had not yet been made publicly available; and the parties had agreed to arbitrate the appeal, because there has been no functioning WTO appellate body for at least the last five years.  

The report is now publicly available.  And as it turns out, both the EU and China are appealing, but the EU lost the principal issue, regarding the legality of China's ASI policy.  Here is a link to the EU’s notification of appeal, which appends the Panel Report, and here is China’s notification of appeal.  I have not read very much of this material myself yet, though I plan to do so over the next few weeks in between finishing up my book projects; but I thought readers who haven’t seen these yet may as well have a look now, if they wish.   And, to bring everyone up to speed, here is the conclusion of the WTO's "Summary of Key Findings":

With respect to the unwritten ASI policy, the Panel found that (1) it was properly within its terms of reference, and that (2) the European Union had proved its existence. As to the consistency of the ASI policy with the TRIPS Agreement, the Panel found that the European Union had not demonstrated an inconsistency with: Article 28.1, whether or not read in conjunction with Article 1.1, first sentence (concerning certain exclusive rights of patent holders); Article 28.2 read in conjunction with Article 1.1, first sentence (concerning patent holders' right to licence their patents); Article 41.1 (concerning intellectual property enforcement procedures); and Article 44.1, first sentence, read in conjunction with Article 1.1, first sentence (concerning injunctions). In particular, the Panel found that the obligation in Article 1.1, first sentence stating that Members must “give effect” to the provisions of the TRIPS Agreement requires Members to implement the provisions of the TRIPS Agreement within their own domestic legal systems. The Panel concluded that Article 1.1, first sentence contains no additional obligation relating to frustrating the object and purpose of the TRIPS Agreement or other WTO Members' implementation of the TRIPS Agreement.

With respect to the consistency of the five individual Chinese court decisions granting ASIs with the TRIPS Agreement, the European Union had advanced identical claims and arguments as those raised with respect to the ASI policy. The Panel therefore declined to make findings on these claims concerning the five individual decisions, as any findings would be duplicative of the findings on the ASI policy.

With respect to the transparency obligations under the TRIPS Agreement, the Panel found that China had acted inconsistently with the publication obligation in Article 63.1 of the TRIPS Agreement by failing to publish the decision issuing an ASI in Xiaomi v. InterDigital, read together with the reconsideration decision in the same case. The Panel found that China was not prepared to supply information requested by the European Union and had thus acted inconsistently with Article 63.3, first sentence. The Panel found that the European Union's claim with respect to the provision of specific judicial decisions under Article 63.3, second sentence was outside its terms of reference.

Finally, with respect to the European Union's claims that the five ASI decisions by Chinese courts were inconsistent with Section 2(A)(2) of China's Accession Protocol, the Panel found that the European Union had not demonstrated that Chinese courts had applied China's laws, regulations, or other measures in a non-uniform, not impartial, or unreasonable manner.