Friday, May 19, 2017

IPO Chat Channel's Global FRAND Update (Europe)

The IPO IP Chat Channel will be presenting a webinar titled Global FRAND Update:  Europe next Wednesday, May 24, at 2 pm Eastern time.  Here is a link, for those who might be interested in registering, and here is a description:
This webinar will consider the impact of recent important judicial decisions and institutional initiatives in Europe concerning SEPs. The past decade has demonstrated that traditional patent jurisprudence is ill-suited for disputes involving standard-essential patents (SEPs) and the promise to license them at rates that are fair, reasonable, and non-discriminatory (FRAND). Yet the technological future, including the Internet of Things and 5G mobile networks, can only be built using standards and patent licenses. Courts and governments worldwide are straining to adapt.
Our panel includes a senior competition lawyer at both an owner of SEPs and an implementer, as well as a leading academic authority on standards. They will discuss: 
Unwired Planet v. Huawei, the recent decision of the U.K. High Court that determined the value of a worldwide FRAND portfolio license to Unwired Planet's patent portfolio, and decreed that Huawei must license it at that rate or face an injunction; 
The outcome of numerous SEP cases that have followed Huawei v. ZTE, the 2015 ruling from the European Court of Justice that spelled out conditions under which a SEP holder can ask for an injunction without infringing competition law; 
The April announcement by the European Union that it is preparing a "roadmap" to provide a framework for licensors and licensees of SEPs, and an early leak of its contents.
Panelists will include Professor Jorge Contreras, James Harlan (InterDigital), and Gil Ohana (Cisco).

Wednesday, May 17, 2017

Paris Court of Appeals Holds That Patentees Are Not Entitled to Disgorgement of Profits

Since France enacted legislation implementing the 2004 EC Enforcement Directive, French courts have been authorized to take into account the benefits to the infringer when awarding damages.  More specifically, the version of the relevant statute, article 615-7 of the Intellectual Property Code, in effect from October 29, 2007 to March 14, 2014, stated that  
For assessing damages and interest, the court takes into account the negative economic consequences, including loss of profit, suffered by the injured party, the profits realized by the infringer and the moral prejudice caused to the rightholder by the infringement.
However, the court may, alternatively, upon request by the injured party, award damages as a lump sum that shall not be less than the amount of royalties or fees that would have been due if the infringer had requested authorization for the use of the right infringed. 
(Translation courtesy of Margaret Wade and me.)  The version in effect since March 14, 2014, states (in my translation) that: 
For assessing damages and interest, the court takes into account distinctly:
the negative economic consequences, including loss of profit and the loss sustained by the injured party;
the moral prejudice incurred by the latter;
and the profits realized by the infringer, including the savings of intellectual, material, and promotional investments which the latter has derived from the the infringement. 
However, the court may, alternatively, upon request by the injured party, award damages as a lump sum.  This amount is higher than the royalties or fees that would have been due if the infringer had requested authorization for the use of the right infringed.  This amount is not exclusive of the compensation for the moral prejudice suffered by the injured party.
Whether either of these provisions permit French courts to award the prevailing plaintiff the infringer's profits from the infringement, or instead only to take those profits into account in crafting an award of compensatory damages, is a matter of some debate, though from what I've read the latter view seems to be dominant for now.  For previous discussion on this blog, see, e.g., here, here, and here.

Anyway, a recent judgment of the Cour d'appel de Paris, Carrera SARL et Texas de France SAS v. Muller et Cie, PIBD No. 1067, III, 170 (Dec. 9, 2016), appears to take the latter view, namely that IP owners are entitled to recover damages for their own losses but not an award of the infringer's profits as such.  If I'm reading the facts correctly, Muller (owner of European Patent 1,067,822 for a "Heating element manufacturing process for heating or cooking apparatus, such heating element and apparatus incorporating it") is a patent holding company that had licensed the patent, royalty-free, to six affiliated companies.  Muller prevailed on liability, but sought to recover an award of the defendants' profits rather than a reasonable royalty.  The district court awarded damages in the amounts of  €327,733 and €280,130, respectively, as well as damages for moral prejudice in the amount of €100,000.  Both parties appealed.  The Court of Appeals, however, rejected Muller's argument that  it could opt for an award of profits, stating (my translation):
Moreover, while it is true that the Law of October 29, 2007, implementing Directive 2004/48, invites the judge to take into account "the benefits realized by the infringer," it does not  authorize the confiscation of those benefits; and this taking into account is limited only to the portion relating to the losses suffered as a result of the exploitation, in order to attain a complete reparation for the loss." 
Furthermore, if I'm reading this correctly, since Muller disavowed any reliance on a reasonable royalties theory, the court also threw out that award; and it also disallowed the award for moral prejudice, concluding that there was no evidence that the infringement caused any harm to Muller's reputation.

I thank Pierre Véron for a productive discussion of this case, prior to my publishing this post.

Monday, May 15, 2017

Two More Upcoming Events on FRAND, SEPs, and Remedies

1.  As noted on Patently-O recently, the Université de Liège's Competition and Innovation Institute will be putting on a Conference on Innovation, Research and Competition in Brussels May 29-30, under the direction of Professor Nicolas Petit.  Here is a link to the program, which will focus on issues relating to standard-essential patents.  Speakers will include, among others, German Federal Supreme Court Judge Klaus Grabinski and economists Joseph Farrell and Stephen Haber (who have very different views on patent holdup).  Looks fascinating--wish I could attend.

2.  The Centre of Innovation, Intellectual Property and Competition (CIIPC) at National Law University, Delhi, is putting on the Second Annual Roundtable on Innovation, Intellectual Property and Competition Law in Bengaluru (Bangalore) India, on July 1-2.  Here is a link.  The program is not up yet, but I understand that the topics will include IP and competition law, FRAND, and remedies, among other things, and that speakers will include Arvind Subramanian (Chief Economic Advisor to the Government of India)  and Antony Taubman, the Director of the WTO's Intellectual Property Division.  This one also sounds great.

Thursday, May 11, 2017

PwC 2017 Patent Litigation Study Is Now Out

Every year around this time I look forward to reading PricewaterhouseCoopers' annual study of U.S. patent litigation.   The firm's 2017 Patent Litigation Study:  Change on the Horizon? is now out and available here.  The study's methodology, including its adjustment of median damages to 2016 dollars, is set out at p.29.  Here are some highlights: 

1.  Patent infringement litigation declined to 5,100 filings in 2016, 9% fewer than in 2015 (p.4).  (I'd note that Lex Machina's 2016 Patent Litigation Year in Review, for which if you're interested you should contact Lex Machina, reports 4,537 filings in 2016, down 15% from 2016.  I'm guessing the difference may be due at least in part to different cutoff dates.  Lex Machina reports filings through December 31, 2016, while PwC uses a September year-end (see p.4).  More generally, I'd recommend that interested readers get a copy of the Lex Machina report for purposes of comparison; see also my paper with John Golden, which at pp. 14-15 and accompanying endnotes discusses some of the differences between the two firms' analyses and methodologies relating to damages, for previous years.)

2.  Notwithstanding a record damages award of $2.5 billion in Idenix v. Gilead (noted previously here), median damages declined from $10.2 million in 2015 to $6.1 million in 2016 (p.5).  Between 1997 and 2016, however, median damages have "ranged from $2.0 million to $17.0 million, with an overall median award of $5.8 million over the last 20 years" (p.9).  "Excluding damages awarded before trial (i.e., summary judgment and default judgment), the overall median award over the last 20 years jumps to $8.0 million" (id.).  Jury awards outpace bench awards $9.5 million to $0.6 million from 2012-16, a factor of about 15 (p.10).  For the years 2007-16, reasonable royalties account for 61% of the awards to practicing entities, lost profits 21%, and mixed awards make up 19% (p.11).  

3.  Excluding ANDA-related cases, 80% of U.S. patent trials are now conducted before juries (p.6). 

4.   Patent owners' overall success rates from 1997-2016 stand at 36% for practicing entities and 25% for NPEs.  Among cases that go to trial, however, success rates are 77% and 70%, respectively.  Overall, success rates at trial before juries are 74%, before judges 52% (pp. 14-15).  Though NPEs are less likely to win overall, for those that do win the median damages awards from 2012-16 were $15.7 million, compared to $4.1 for practicing entities (p.16).  From 1997-2016, median damages awards for university or other nonprofit NPEs were $16.3 million, for "company" NPEs $13.0 million, and for individual inventors $6.7 million.  Success rates for universities and nonprofit NPEs were also the highest (52%), followed by 28% for company NPEs and 18% for individuals (pp. 16-17).    

5.   Median time to trial has crept up to about 2.5 years, with stays pending PTAB proceedings probably responsible for some of the delay (p.7).

6.  The study also presents data on the distribution of cases, damages awards, and success rates by industry (pp. 18-20), and ranks district courts according to a number of metrics at pp.22-24.  The report concludes with a section on appeals, reporting that 75% of decisions are appealed and over half of all appeals result in a reversal at least in part (pp. 25-27).

RIP William Baumol

I learned this morning that the economist William Baumol died last week, at the age of 95.  Here are his obituaries in the Washington Post and the New York Times.  As the obits note, Professor Baumol was one of the leading economists of his generation.  I mention him here in part because of his influential paper (coauthored with Daniel Swanson) Reasonable and Nondiscriminatory (RAND) Royalties, Standards Selection, and Control of Market Power, 73 Antitrust L.J. 1 (2005).  Although Norman Siebrasse and I have criticized some aspects of the Swanson-Baumol paper in our article The Value of the Standard, 101 Minn. L. Rev. 1159 (2017) (see here), the paper remains an important one  that anyone involved in this field needs to be familiar with.  In addition, as the obits point out, Professor Baumol was also well-known for his theory, nicknamed "Baumol's Disease," of why improvements in productivity do not affect the cost of labor-intensive services such as child care and live musical performances, the relative price of which therefore tends to increase over time.  He will be missed.

Wednesday, May 10, 2017

The Comparative Patent Remedies Blog Is Now Four Years Old

I should have mentioned this over the weekend, but the blog is now four years old.  I launched it on May 6, 2013, and it's still going strong at the four-year mark.  I'm pleased to say that the blog has attracted readers from all over the world, and that (to date) it's had over 400,000 page views.  Thank you to my readers, and I hope you continue to enjoy the blog.

Monday, May 8, 2017

Recovery of Attorneys' Fees and Costs in Canada

Aside from my February 13 post on Apotex Inc. v. ADIR, 2017 FCA 23 (Feb. 2, 2017), and a very brief mention one month later of Airbus Helicopters S.A.S. v. Bell Helicopter Texteron Canada Limité, I haven't been reporting as promptly as I should on developments in the law of patent remedies in Canada.  I hope over the next few weeks to catch up--in addition to Airbus, there is another recent opinion, Dow Chemical Co. v. Nova Chems. Corp., that addresses several important damages issues--but I'll start today with a discussion of a different case from this past January, involving the recovery of costs.  (Costs may include attorneys' fees as well as other disbursements, such as expert witness fees).  

As I discuss in my book (p.209 n.147), like many countries Canada routinely awards attorneys' fees to the prevailing party, in patent and other litigation--though the common wisdom is that the fees awarded are typically only a fraction of the amount actually incurred.  (As I understand it, the thinking is that fee awards aren't intended to be fully compensatory, but rather to strike a balance between compensating the prevailing party and not unduly discouraging people from attempting to vindicate what they believe to be their rights.)  Things can be a bit more complicated in some instances, however, because Rule 400(1) of Canada's Federal Courts Rules states that "The Court shall have full discretionary power over the amount and allocation of costs and the determination of by whom they are to be paid," and then in Rule 400(3) sets forth various factors that may be taken into account in exercising this discretion.  Among these are "any conduct of a party that tended to shorten or unnecessarily lengthen the duration of the proceeding," and "whether any step in the proceeding was . . . improper, vexatious or unnecessary, or . . .taken through negligence, mistake or excessive caution . . . ."  Rule 400(4) further directs that "[t]he Court may fix all or part of any costs by reference to Tariff B"--a table of rates for various services, available here, and Rule 407 states that "Unless the Court orders otherwise, party-and-party costs shall be assessed in accordance with column III of the table to Tariff B."  However, Rule 406 also permits the court to exercise its discretion to award costs against a successful party, and also to award costs on a "solicitor-and-client" basis, which I understand means, essentially, at a higher (possibly full indemnification) rate.   

Anyway, in Mediatube Corp. v. Bell Canada, 2017 FC 6 (Jan. 4, 2017), the Federal Court concluded that the patent in suit was valid but not infringed.  Both parties nonetheless sought to recover costs.  First, the plaintiff sought to recover (1) costs incurred as a result of the defendant's corrections of its initial disclosures, which the plaintiffs alleged led to delay in resolving the dispute; (2) "aggravated costs" due to the defendants' calling the plaintiffs "patent trolls," which in the plaintiffs' view was both inaccurate and an accusation of fraud or dishonesty; and (3) costs arising from the defendants' citation of 735 prior art references in their statement of defense and counterclaim of invalidity (and thereafter identifying, three months before trial was set to begin, only 62 references that they would rely upon at trial).  The court rejected these arguments, the first on the grounds that (1) the defendants acted in good faith, (2) the timing wouldn't have made a "difference between proceeding with the trial and reaching a settlement," and (3) the noninfringement argument was "so compelling," given "the absence of four distinct essential elements of claim 1 from Bell's systems," that the judge was "not prepared to accept that the plaintiffs had a reasonable belief that they had a good arguable case before receiving the Corrected Information" (pars. 232-34).  As for the "patent troll" accusation, the court concluded that the description was more a matter of opinion and in any event not tantamount to an accusation of fraud or dishonesty (para. 240).  As for the prior art disclosures, the court was "not convinced that the plaintiffs were put to unwarranted expense" (para. 245).

Second, the defendants sought elevated costs and the imposition of costs on a solicitor-and-client basis, principally on the ground that the infringement action lacked merit.  The court agreed, in part.  First, it concluded that the defendants were entitled to costs for claims made against defendant Bell Aliant, some of which were withdrawn pretrial, others during trial.  With regard to these expenses, the court did not impose solicitor-and-client costs, but it accepted that costs should be elevated in the amount of 50% for the maintenance of the claims that were withdrawn during trial, which the plaintiffs pressed "in the face of information that Bell Aliant was not infringing" (para. 253).  Similarly, the court awarded elevated costs of 50% for claims that the plaintiffs made against Bell Canada, stating that "the contortions of the claims in issue that would be required in order to find infringement indicate that the plaintiffs should have known that Bell Canada did not infringe" (para.256).  Finally, the court stated that it would award solicitor-and-client costs relating to the plaintiffs' allegation that defendants had misappropriated confidential information and therefore could be liable for punitive damages, on the ground that unfounded accusations of fraud or dishonesty are an appropriate basis for the imposition of fees on this basis (paras. 254-67).  For further discussion of this case, see Norman Siebrasse's write-up on Sufficient Description.

Without speculating whether such an award would be merited in a case like Mediatube, I've sometimes wondered whether courts should have the authority to award attorneys' fees multipliers, in cases in which an action or a defense lacked merit and an award of attorneys' fees alone might not suffice to deter such conduct in the future (perhaps because of the disparity in resources between the parties).  Ultimately I'm not sure that's a good idea, but the issue did arise, in a sense, in a Federal Circuit case I blogged about last year (see here).  Of course, the award of elevated costs in Mediatube probably won't actually consist of the actual fees multiplied by 150%, since as noted above fees in Canada (other than, perhaps, the solicitor-and-client basis costs which the court did not elevate) are usually awarded pursuant to Tariff B and in general are believed to be well below the amount actually incurred.  Still and all, an interesting issue.

For further discussion of awards of attorneys' fees in Canadian patent cases, see Mark Biernacki & Kevin Unrau, Federal Court Awards Legal Costs of $6.5 Million in Patent Infringement Case (available here, and noting a trend toward higher fee awards in Canada, above the default Tariff B column III); Federal Court of Appeal and Federal Rules Committee, Review of the Rules on Costs Discussion Paper (Oct. 5, 2015) (available here, discussing among other matters the potential inadequacy of Tariff B).  I thank Norman Siebrasse for calling these papers to my attention; see also Norman V. Siebrasse, $2.9 Million Award Is 30% of Actual Legal Fees, Sufficient Description, Feb. 5, 2016 (available here).