A Couple of Upcoming Speaking Engagements

1.  In two weeks, Chung-lun Shen and I will be presenting our paper Destruction, Proportionality, and Sustainability: A Law-and-Economics Analysis at the 2023 ATRIP Congress in Tokyo.  Here is a link to the conference program.  I am looking forward to getting some feedback on our paper, meeting some old friends (including my former colleague Professor Ruth Okediji), and making some new ones.  I'm also particularly interested in hearing the other presentations on remedies, including Łukasz Żelechowski's Damages for IP infringement: What is the interface between the general principles of liability in civil law and liability for damages in IP law from a European perspective?, and some of the papers discussing the enforcement of IP rights through criminal law.

2. On October 12, I will be on a panel titled "Major U.S. Supreme Court Patent Decisions," at IPIC 2023's annual conference in Winnipeg, Canada (program here).  My co-panelists will be William Milliken and Lilian Wallace, with Ben Hackett moderating.  I'm looking forward to it-- never been to Winnipeg before.  

Love and Helmers on Holdout

Brian Love and Christian Helmers have posted a paper on ssrn titled Patent Hold-Out and Licensing Frictions: Evidence from Litigation of Standard Essential Patents, forthcoming in the International Journal of Industrial Organization.  Here is a link to the paper, and here is the abstract:

The theory of patent “hold-out” posits that frictions in the market for licensing standard-essential patents (SEPs) provide incentives for prospective licensees to opportunistically delay taking licenses with the goal of avoiding or reducing royalty payments. We construct measures of pre- and in-litigation hold-out from information disclosed in U.S. cases filed 2010-2019. Relying on both SEP and a matched control set of non-SEP disputes, we explore whether frictions in the market for licensing are associated with hold-out. We find some evidence of an association between hold-out and both SEP portfolio size and enforcement uncertainty; however, we find no evidence associating pre- or in-litigation hold-out with the international breadth of SEP rights.

 

From Around the Blogs

1. I've been on vacation, but while I was away word leaked out that Mr. Justice Marcus Smith had authored a (until just recently still unpublished) 283-page decision in in Optis v. Apple.  (Two of the commentaries mentioned below state that the citation for the decision is [2023] EWHC 1095 (Ch.), but I'm still not seeing the decision listed on BAILII's website.  However, the EPLaw Blog today published a a copy of the redacted decision, which I can now begin reading for myself.)  According to commentary on EPLaw, FOSS Patents, JUVE Patent, and Kluwer Patent, the decision awards Optis $56.43 million ($5.13 million per year) plus interest for Apple's past and future global access to Optis' portfolio of FRAND-committed SEPs; rejects the SSPPU rule and Apple's assertion that Optis abused a dominant position; but also rejects Optis' argument that Apple was an unwilling licensee, and Optis' proposed comparables as a basis for calculating the royalties due.  283 pages will be a lot to slog through, but I am looking forward to reading the decision and intend to provide some commentary on it in due course.  

2. On Bloomberg Law, Michael Shapiro published an article titled Idaho’s Anti-‘Patent Troll’ Law Challenged in Federal Appeal.  The article discusses an appeal recently filed by Longhorn IP LLC and Katana Silicon Technologies LLC from a judgment finding that Idaho’s anti-troll law is not preempted by federal law, and requiring the posting of an $8 million bond to continue litigation.  The appeal will go to the Federal Circuit, which has not yet addressed this issue. 

3. On JUVE Patent, Mathieu Klos published an article titled 10x Genomics and Bardehle achieve rare AASI in biotech dispute against NanoString.  The case implicates infringement actions filed by 10x Genomics against NanoString in the U.S. and Germany; the patent in suit in Germany relates to "compositions and methods for analyte detection."  In April, NanoString had filed, in the U.S. District Court for the District of Delaware, an application for an antisuit and antienforcement injunctions relating to the German actions.  The author states that the Munich Regional Court issued an anti-antisuit injunction, and that this may be the first such case in a patent dispute in Europe outside the mobile telecommunications/SEP sector.

4.  On IP Watchdog, Tobias Wuttke published the fifth installment of his series on the UPC, titled Countdown to the Unified Patent Court, Part V: Five Predictions for the UPC on Day One.  The article predicts, among other matters, that “the UPC will adopt a generous practice for preliminary injunctions (PIs),” in the wake of the CJEU’s decision in Phoenix Contact (previously discussed on this blog here, here, and here); will not impose a strict urgency requirement (as has generally been the practice in Germany, as recently discussed on this blog here); and may adopt a liberal cross-border injunction practice patterned after Dutch practice.

5. On Law360, Eliana Garces, Joshua White and John Jarosz published an article titled Global Issues In EU's Licensing Plans For Essential Patents, regarding the European Commission' s draft SEP regulation; and Alex Baldwin published Top UK Court To Hear Apple's Appeal In Global FRAND Spat.  At issue in the latter is whether the owner of a FRAND-committed SEP can obtain an injunction unless the implementer agrees to a court-determined FRAND license, and whether such an injunction is proper where the implementer alleges that the owner abused its dominant position.  A bit hard to imagine how this could come out differently than Unwired Planet, but we'll see.

Blogging Break

 I will be taking a blogging break the next two weeks, with plans to resume the week of June 19. 

Cotter and Shen on Destruction, Proportionality, and Sustainability

Chung-lun Shen and I have posted a paper on ssrn titled Destruction, Proportionality, and Sustainability: A Law-and-Economics Analysis.  We will be presenting it at the 2023 ATRIP Congress at the University of Tokyo in July.  Here is a link to the paper, and here is the abstract:

 This paper undertakes a law-and-economics analysis of the remedy of destruction (and, subsidiarily, the related remedies of recall and removal) of products that infringe intellectual property (IP) rights. We begin with a brief survey of international, regional, and domestic law and practice, observing that (1) courts generally are believed to be more likely to order the destruction of copyright- and trademark-infringing than of patent-infringing goods, and (2) the frequency with which courts order the destruction of patent-infringing goods varies from one country to another. Our observations lead us to present two principal theses.

 

The first is that a comparative reluctance to order the destruction of patent-, as opposed to copyright- or trademark-infringing goods, would be consistent with economic considerations. From an economic standpoint, destruction can be viewed as both a complement to injunctive relief, and as a substitute (albeit an imperfect one) for the ongoing monitoring of an infringer's compliance with the terms of an injunction. The social benefits arising from substituting destruction for monitoring, however, are likely to be lower—on average, and perhaps subject to regional variation—for patent-infringing goods than for products that infringe other IP rights. In addition, although observers have long noted that the private and social costs of destruction provide a rationale for withholding that remedy when it would cause disproportionate harm to the defendant or third parties, these costs may be unusually high in patent cases—particularly that subset of cases in which the risk of patent holdup is substantial. In view of these factors, the social costs of ordering the destruction of patent-infringing goods are likely to outweigh the social benefits in a comparatively broader swath of cases.

 

Our second thesis can be best understood if we first pose a question: given that courts generally have authority to consider proportionality when deciding whether to order the destruction of infringing goods, why are legislatures and courts (other than in the United States, and to some degree other common-law countries) so unwilling to consider proportionality when deciding whether to grant injunctive relief? One obvious reason is that a stay or denial of injunctive relief imposes greater costs on the judiciary, insofar as a court that stays or denies an injunction must be prepared to set the terms of an interim or ongoing royalty; in addition, a stay or denial may introduce additional error costs, to the extent courts impose over- or undercompensatory royalties. We propose, nonetheless, that the factors that sometimes persuade courts to deny requests for destruction should render them at least marginally more receptive than they currently are to staying or denying injunctions, particularly when there is a substantial risk of holdup. In addition, environmental costs may be reduced if, in appropriate cases, courts were more willing to stay injunctions pending the sell-off or design-around of infringing products, rather than requiring their destruction or long-term storage.

Comments welcome.  Thanks also for a shout-out from Professor Larry Solum, on his Legal Theory blog earlier this week!

Unified Patent Court Agreement Enters into Force This Week

On Thursday, June 1, to be precise.  So far, 17 EU members have ratified the agreement. Seven others (Cyprus, the Czech Republic, Greece, Hungary, Ireland, Romania, and Slovakia) are signatories but haven't yet ratified it.  This day has been a long time coming, and I hopeful that the court will prove to be a great success. 

The remedies provisions of the UPCA, articles 59-69, include as one would expect provisions on injunctions (permanent and provisional), corrective measures, and damages.  They are similar, though not identical in every respect, to the provisions found in the Intellectual Property Rights Directive.  In this regard, I published a post in March titled Some Resources on Damages in the UPC, which included a JUVE Patent article titled UPC: How are damages dealt with; an OxFirst article titled Considering Patent Infringement Damages Calculations under the Unified Patent Court and a very good OxFirst webinar titled Legal underpinnings of patent damage calculations in Germany, featuring Dietrich Kamlah; and what I described as "a brief discussion of damages under the UPC in Paul England's book A Practitioner's Guide to European Patent Law:  For National Practice and the Unified Patent Court (2d ed. 2022), at pp. 235-36."  I also noted that Dr. England had recently published another book titled A Practitioner's Guide to the Unified Patent Court and Unitary Patent, which I did not yet have a copy of but now do; it has an extensive discussion of remedies available from the UPC at pp. 155-160, and in chapters 15, 16, and (especially) 18.  Also relevant is chapter 12, which discusses declarations of noninfringement.  (Of course, it may be a while before any of these provisions, other than perhaps the ones on orders to produce evidence and inspect premises, freezing orders, and provisional and protective orders get used.)  I should also note that Pierre Véron has a webpage titled Unified Patent Court Document Repository, which you might want to bookmark for its handy links to the Unitary Patent Regulations, the UPCA, and other relevant documents.

Federal Circuit Affirms Denial of Attorneys’ Fees

The precedential decision, handed down yesterday, is OneSubsea IP UK Ltd v. FMC Techs., Inc., opinion by Judge Clevenger, joined by Chief Judge Moore and Judge Dyk.  The patents in suit relate to the ”subsea recovery of production fluids from an oil or gas well” (p.3).  The case was ultimately decided in favor of FMC, on noninfringement grounds, at least in part because the trial court found the plaintiff’s expert testimony in support of its theory of liability inadmissible.  The facts of the case, including its tortuous procedural history, are exceptionally prolix and exceptionally boring, but unfortunately for FMC that doesn’t make this an “exceptional case” meriting attorneys’ fees under 35 U.S.C. § 285.

For present purposes, I’ll just note a couple of takeaways.  First, according to the Supreme Court’s decision in Highmark Inc. v. Allcare Health Mgt. Sys. Inc., 572 U.S. 559 (2014), the standard of review on appeal from an order denying an award of fees is abuse of discretion.  The rationale for this standard is that “the district court ‘is better positioned’ to decide whether a case is exceptional . . . because it lives the case over a prolonged period of time.”  FMC argued that this standard doesn’t apply where, as here, the district judge who decided the fee motion took over the case at its end, after the original judge had retired (p.16).  Not surprisingly, the Federal Circuit doesn’t buy it.  Second, the fact that the original district judge had indicated skepticism that he was going to grant FMC’s motion for summary judgment following the Markman hearing, after which the case was stayed for three years while the PTAB decided various IPRs, itself suggests that this wasn’t an exceptional case (p.20).  Third, this wasn’t a case, the Federal Circuit says, in which the plaintiff “produced no evidence at all to support its case” (p.21).  Specifically:     

OSS produced evidence from two experts, with the evidence based on the first expert’s declaration sufficient to undermine FMC’s initial summary judgment motion. The second expert’s report, on which OSS’s challenge to FMC’s 2020 summary judgment motion relied, repeated the same theory of infringement as the first expert. The second expert, however, emphasized the retrievability of FMC’s Flow Module, leading the expert into the error of failing to appreciate the stipulated construction of “tree,” which in turn led to the district court’s exclusion of the expert’s report. As the district court noted, OSS adduced evidence to support its infringement theory, but the shortcomings of its expert undermined the admissibility of that evidence. In the district court, FMC did not offer any authority for finding a case exceptional simply because a party offered and relied on evidence that was ultimately found to be inadmissible. FMC has likewise produced no such authority here. There was no abuse of discretion in the district court’s finding that OSS’s reliance on inadmissible evidence failed to make this case exceptional (p.21).

Finally, the court rejects arguments that the plaintiffs engaged in litigation misconduct, and that the district court misapplied the Octane Fitness standard for finding a case exceptional (pp. 21-22).

Dennis Crouch has a very good analysis of the case on Patently-O.