Monday, January 22, 2018

New Book, "Complications and Quandaries in the ICT Sector: Standard Essential Patents and Competition Issues"

Drs. Ashish Bharadwaj, Vishwas Devaiah, and Indranath Gupta, recently published a book (available here under an open access CC BY 4.0 license), titled Complications and Quandaries in the ICT Sector:  Standard Essential Patents and Competition Issues (Springer 2018).  Here is the book description:
With technology standards becoming increasingly common, particularly in the information and communications technology (ICT) sector, the complexities and contradictions at the interface of intellectual property law and competition law have emerged strongly. This book talks about how the regulatory agencies and courts in the United States, European Union and India are dealing with the rising allegations of anti-competitive behaviour by standard essential patent (SEP) holders. It also discusses the role of standards setting organizations / standards developing organizations (SSO/SDO) and the various players involved in implementing the standards that influence practices and internal dynamics in the ICT sector. This book includes discussions on fair, reasonable and non-discriminatory (FRAND) licensing terms and the complexities that arise when both licensors and licensees of SEPs differ on what they mean by “fair”, “reasonable” and “non-discriminatory” terms. It also addresses topics such as the appropriate royalty base, calculation of FRAND rates and concerns related to FRAND commitments and the role of Federal Trade Commission (FTC) in collaborative standard setting process. This book provides a wide range of valuable information and is a useful tool for graduate students, academics and researchers.
The eight chapters are as follows:
  • National Disparities and Standard Essential Patents: Considerations for India
    Contreras, Jorge L.
  • FRAND Commitments and Royalties for Standard Essential Patents
    Scott Bosworth, D. (et al.)

  • The Policy Implications of Licensing Standard Essential FRAND-Committed Patents in Bundles
    Layne-Farrar, Anne (et al.)

  • Calculating FRAND Licensing Fees: A Proposal of Basic Pro-competitive Criteria
    Ghidini, Gustavo (et al.)

  • Selected Issues in SEP Licensing in Europe: The Antitrust Perspective
    Grasso, Roberto

  • Competition, Intellectual Property Rights and Collaboratively Set Standards: Federal Trade Commission Advocacy and Enforcement
    Dubiansky, John E.

  • Standard Setting Organizations and Competition Laws: Lessons and Suggestions from the United States
    Knebel, Donald E.

  • CCI’s Investigation of Abuse of Dominance: Adjudicatory Traits in Prima Facie Opinion
    Gupta, Indranath (et al.)

Friday, January 19, 2018

Recent Case Notes on IWNComm v. Sony, Unwired Planet v. Huawei

1.  Last year I published several posts on IWNComm v. Sony, in which the Beijing IP Court issued an injunction for the infringement of a FRAND-committed standard essential patent (see here, here, here, here, here, here, and here).  Ashish Bharadwaj and  Dipinn Verma have now published a case note titled China’s first injunction in standard essential patent litigation, 12 JIPLP 717 (2017).  Here is a link to the paper, and here is the abstract: 
Xian Xidian Jietong Wireless Communication Co., Ltd (IWNComm) v SONY mobile communication products (China) Co. Ltd., Beijing Intellectual Property Court, 22 March 2017
The first injunction in a Chinese case concerning standard essential patents was recently granted by the Beijing Intellectual Property Court to a Chinese company that owns a standard essential patent for WLAN access.
2.  I've also published several posts on the 2017 decision in Unwired Planet v. Huawei (Patents Court of England and Wales).  (See here, here, here, here, here, here, here, here, here, here, here, here, and here.)  Following the above case note by Bharadwaj and Verma is a case note by Tommy Chen and Ian Karet titled UK High Court sets FRAND rates: first substantive decision on SEP licence terms in Europe, 12 JIPLP 719 (2017).  Here is a link, and here is the abstract:
Unwired Planet International Ltd v Huawei Technologies Co. Ltd & Ors, High Court of England and Wales, [2017] EWHC 711 (Pat), 5 April 2017
The UK Patents Court has decided that the commitment made by a holder of standards essential patents (SEPs) to license on fair, reasonable and non-discriminatory (FRAND) terms is enforceable separately from any obligation to license based on competition law and that there can be only one set of FRAND licence terms in a given set of circumstances.
In addition, Pat Treacy and Matthew Hunt have published, simul;taneously in the January 2018 issue of GRUR Int. (pp. 91-96) and in 13 JIPLP 124-31 a paper titled Litigating a 'FRAND' Patent Licence:  The Unwired Planet v. Huawei JudgmentHere is a link, and here is the abstract:
  • Companies holding standard essential patents (SEPs) are required to license those patents at a fair, reasonable and non-discriminatory (FRAND) rate.
  • The judgment of the High Court of England and Wales in Unwired Planet v Huawei is very significant: it is the first time an English court has determined a FRAND royalty rate.
  • This article unpacks the key findings of the judgment: (i) the enforceability of FRAND, (ii) the ability of a court to declare that terms are FRAND, (iii) the existence of only one set of FRAND terms in any given circumstances, (iv) the FRAND obligations placed on SEP holders and implementers, (v) the principle that not all offers made need to be FRAND, (vi) how a FRAND rate can be calculated, (vii) ‘hard-edged’ non-discrimination, (viii) the geographic scope of a FRAND licence, (ix) the availability of injunctive relief and damages and (x) whether an abuse of dominance has been committed.

Wednesday, January 17, 2018

Petitions for Certiorari Relating to Patent Damages, Part 2

As I mentioned last week, the U.S. Supreme Court has granted cert in WesternGeco LLC v. ION Geophysical Corp., No. 16-1011, in which the question presented is "Whether the U.S. Court of Appeals for the Federal Circuit erred in holding that lost profits arising from prohibited combinations occurring outside of the United States are categorically unavailable in cases where patent infringement is proven under 35 U.S.C. § 271(f)."  Here is a link to the Scotus Blog's webpage for the case.  I'm guessing there will be a fair number of amicus briefs filed in this one, on both sides.  Meanwhile, Dan McDonald has published an interesting essay on the case in Law360, and Tim Holbrook has posted a thoughtful analysis on Patently-O, both of which I commend to readers' attention.

In addition, as I noted last month, there is also a petition for certiorari pending in EVE-USA, Inc. v. Mentor Graphics Corp., No. 17-804, petition filed Nov. 30, 3017, in which the two questions presented are "(1) Whether, and under what circumstances, assignors and their privies are free to contest a patent's validity; and (2) whether the U.S. Court of Appeals for the Federal Circuit erred in holding that proof of but-for causation, without more, satisfies the requirement that damages be apportioned between patented and un-patented features."  The briefs filed thus far--in addition to the petitioner's brief, there are four amicus briefs--are available for download from Scotus Blog hereI joined the brief on the assignor estoppel issue, but definitely not on the damages issue.  (For my views on the latter, see here and here).

Monday, January 15, 2018

Drafting Around the Entire Market Value, Part 2?

Nearly three years ago I published a post titled Drafting Around the Entire Market Value Rule?, in which I wrote:
Over at the Patent Damages blog, Chris Marchese published an interesting post a few weeks back titled Damages base--is the name of the game the claim? . . .
. . . suppose an inventor invents component ABC, and that ABC serves as a small component in a larger, multicomponent product such as a smartphone.  Would the inventor be well-advised to include at least one dependent claim comprising "ABC incorporated into a smartphone"?  In a case in which a defendant infringes by incorporating ABC into a smartphone, could the inventor then assert that, with respect to the infringement of the dependent claim, the "smallest salable patent-practicing unit" is ABC plus smartphone?  Sure, the inventor would have to apportion the value of the patented feature further, under VirnetX.  But now the jury has heard the entire market value of the end product, which is what the EMVR is supposed to prevent.
According to Mr. Marchese, the case law thus far is not very clear on this issue.  But perhaps it wouldn't be surprising if patent owners started to include claims like the hypothetical dependent claim above, just in case it could come in handy later on in the event of litigation.  Indeed, in Ericsson the Federal Circuit was willing to allow the jury to hear about comparable licenses that use the EMVR as the royalty base as long as the court, on request, gives an appropriate cautionary instruction.
Well, we now have a Federal Circuit opinion in which (although it wasn't a dependent claim that was at issue) the court to some degree vindicates Mr. Marchese's speculation.  The case is Exmark Mfg. Co. v. Briggs & Stratton Power, decided last Friday (opinion by Judge Stoll, joined by Judges Wallach and Chen) and involving a patent "directed to a lawn mower having improved flow control baffles."  The district court "entered summary judgment that claim 1 . . . was not invalid because the claim survived multiple reexaminations involving the same prior art," and also denied summary judgment of indefiniteness.  The matter proceeded to trial on infringement and damages, and the jury awarded $24 million in compensatory damages, which the judge doubled following a jury determination of willfulness.  On appeal, the court vacates and remands for further consideration the summary judgment of invalidity based on prior art, and affirms the judgment as to definiteness.  On damages, which is what I will focus on, the court vacates and remands.

The first, and to my mind most important, damages issue relates to the royalty base, and the court's resolution of this issue arguably pulls back a bit from cases like LaserDynamics and VirnetX (as well as last week's opinion in Finjan, see discussion here).  Here are the most relevant portions of the court's discussion:
Briggs first argues that the district court erred by allowing Exmark to compute a royalty rate without properly identifying a royalty base to apportion the value of the patentee’s invention in comparison to the value of the whole lawn mower. The parties do not dispute that apportionment is required in this case. Although claim 1 of the ’863 patent is broadly directed to “a multiblade lawn mower,” our law recognizes that a reasonable royalty award “must be based on the incremental value that the patented invention adds to the end product.” Ericsson, Inc. v. D-Link Sys., Inc., 773 F.3d 1201, 1226 (Fed. Cir. 2014). Here, the patent makes clear that the patented improvement relates to the mower’s flow control baffle, which through its structure and orientation within the mower deck purportedly efficiently directs grass clippings toward a side discharge and thereby improves the quality of grass cut in a manner that distinguishes it from prior art. See, e.g., ’863 patent col. 1 l. 30–col. 2 l. 9. The remaining limitations of claim 1 recite conventional features of a lawn mower, including a mower deck, a side discharge opening, and a power means for operating the mower. In these circumstances, the patent owner must apportion or separate the damages between the patented improvement and the conventional components of the multicomponent product. . . .
On appeal, Briggs argues that Exmark’s expert should have apportioned or separated the value of the baffle from the other features of the mower through the royalty base rather than the royalty rate. We disagree. We have held that apportionment can be addressed in a variety of ways, including “by careful selection of the royalty base to reflect the value added by the patented feature [or] . . . by adjustment of the royalty rate so as to discount the value of a product’s non-patented features; or by a combination thereof.” Ericsson, 773 F.3d at 1226. So long as Exmark adequately and reliably apportions between the improved and conventional features of the accused mower, using the accused mower as a royalty base and apportioning through the royalty rate is an acceptable methodology. Id. (citing Garretson, 111 U.S. at 121). “The essential requirement is that the ultimate reasonable royalty award must be based on the incremental value that the patented invention adds to the end product.” Id.
Using the accused lawn mower sales as the royalty base is particularly appropriate in this case because the asserted claim is, in fact, directed to the lawn mower as a whole. The preamble of claim 1 recites a “multiblade lawn mower.” ’863 patent col. 5 l. 60. It is not the baffle that infringes the claim, but rather the entire accused mower. Thus, claim 1 covers the infringing product as whole, not a single component of a multi-component product. There is no unpatented or non-infringing feature of the product. Nonetheless, “[w]hen a patent covers the infringing product as a whole, and the claims recite both conventional elements and unconventional elements, the court must determine how to account for the relative value of the patentee’s invention in comparison to the value of the conventional elements recited in the claim, standing alone.” AstraZeneca AB v. Apotex Corp., 782 F.3d 1324, 1338 (Fed. Cir. 2015) (citing Ericsson, 773 F.3d at 1233). We hold that such apportionment can be done in this case through a thorough and reliable analysis to apportion the royalty rate. We have recognized that one possible way to do this is through a proper analysis of the Georgia-Pacific factors. . . .
Finally, we note that Exmark’s use of the accused lawn mower sales as the royalty base is consistent with the realities of a hypothetical negotiation and accurately reflects the real-world bargaining that occurs, particularly in licensing. As we stated in Lucent Technologies, Inc. v. Gateway, Inc., “[t]he hypothetical negotiation tries, as best as possible, to recreate the ex ante licensing negotiation scenario and to describe the resulting agreement.” 580 F.3d 1301, 1325 (Fed. Cir. 2009). “[S]ophisticated parties routinely enter into license agreements that base the value of the patented inventions as a percentage of the commercial products’ sales price,” and thus “[t]here is nothing inherently wrong with using the market value of the entire product, especially when there is no established market value for the infringing component or feature, so long as the multiplier accounts for the proportion of the base represented by the infringing component or feature.” Id. at 1339. This is consistent with the settlement agreement relied on by Exmark’s damages expert, which the parties agree provided an effective royalty of 3.64% of the sales of the accused mowers (pp. 21-24).
Second, however--and I don't think I need to go into as much detail on this issue--the court agrees with the defendant that 5% royalty rate proposed by the plaintiff's expert was not sufficiently tied to the facts, stating that her report did not "tie the relevant Georgia-Pacific factors to the 5% royalty rate or explain how she calculated the . . . rate using these factors" (p.24).  In addition, the court holds that the district court erred by excluding evidence relating to certain prior art, which went to the question of whether the patent in suit was a major or minor advance over the state of the art (pp. 28-30).  

Moving on to willfulness:
Before trial, the district court found that Briggs’ litigation defenses were unreasonable. Based on that finding, the district court precluded Briggs from presenting any evidence regarding the validity of claim 1 or how closely the prior art tracks claim 1. Briggs argues that it should have been allowed to present such evidence to mitigate any finding that it acted with an objectively high risk of infringement. Briggs further argues that the district court’s exclusion of this evidence is inconsistent with Halo, which mandates that the inquiry into the degree of risk of infringement is for the jury, not the district court, to decide. We agree with Briggs that the district court erred to the extent it excluded this evidence without also determining whether it was relevant to Briggs’ state of mind at the time of accused infringement. . .  (p.31).
Finally, the court affirms the judgment dismissing the defendant's laches defense, noting that
The Supreme Court recently held in SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, that laches is no longer a defense against damages for patent infringement that occurred within 35 U.S.C. § 286’s six-year statute of limitations period. 137 S. Ct. 954 (2017). Because Exmark only seeks damages for the six-year period prior to filing its complaint against Briggs, we agree with the district court that Briggs cannot assert laches as a defense (p.32).

Friday, January 12, 2018

U.S. Supreme Court Grants Cert in WesternGeco

The case is WesternGeco LLC v. ION Geophysical Corp., No. 16-1011, and here is the question presented:  "Whether the U.S. Court of Appeals for the Federal Circuit erred in holding that lost profits arising from prohibited combinations occurring outside of the United States are categorically unavailable in cases where patent infringement is proven under 35 U.S.C. section 271(f)."  I've blogged about this case several times now, most recently here, and it appears this will not be the last time.  I may have more to say next week, but for now here is a link to today's Supreme Court order list, courtesy of Scotus Blog, and here is a link to a story on Law 360 that alerted me to this development.

Thursday, January 11, 2018

Losing on Summary Judgment Doesn't Make a Case "Exceptional" for Purposes of Fee Award

Dennis Crouch has already blogged about this morning's nonprecedential opinion in Honeywell Int'l Inc. v. Fujifilm Corp., and the opinion itself is only five pages long, so I won't take much space discussing it here.  Basically, Honeywell asserted a patent against Fujifilm, but the latter succeeded in proving on a motion for summary judgment that the patent was invalid under the on-sale bar (Patent Act section 102(b)).  The Federal Circuit subsequently affirmed that judgment, and the matter eventually returned to the district court on Fujifilm's motion for attorneys' fees.  The district court applied the Octane Fitness standard for determining "exceptional case" and denied the motion, engaging in what the Federal Circuit refers to as "a detailed and structured analysis."  In this appeal, Fujifilm argues that it was an abuse of discretion for the district court to deny the few award, but the Federal Circuit disagrees:
. . . we cannot say that the district court abused its discretion in denying fees. The district court applied the correct legal test under § 285 and Octane. Indeed, it examined the totality of the circumstances—including all of the circumstances raised by appellants on appeal—to determine whether this case stood out from others. . . . The district court’s analysis demonstrated the totality-of-the-circumstances approach, detailing the reasons why Honeywell’s positions on the merits and litigation tactics did not make this case, in its judgment, exceptional. The district court’s fact findings on the issue are not clearly erroneous. Further, we agree with the district court that losing a summary judgment motion should not automatically result in a finding of exceptional conduct. The district court did not abuse its discretion in denying appellants’ motions for attorneys’ fees. We affirm.

Shenzhen Court Enters Injunction Against Samsung for Infringement of Huawei SEPs

I just learned that the Intermediate People's Court in Shenzhen, China has awarded Huawei an injunction against the infringement of two Huawei SEPs.  (Hat tip to Yijun Ge.)  Here is a link to what I understand is the court's official WeChat announcement.  There is coverage so far by Jacob Schindler on IAM and by Kelvin Chan on USNews. This is the second case in which a Chinese court has awarded an injunction against infringement of a SEP, the first being last year's decision in IWNComm v. Sony (for previous coverage on this blog, (see here, here, here, here, here, here, and here).  According to the above reports, the court concluded that Huawei was a willing licensor but that Samsung was not a willing licensee, having "maliciously delayed" negotiating with Huawei.  I'm sure I will have to more to say about this matter as further information, including I would hope a translation of the opinion into English, trickles in.