Thursday, March 31, 2016

Federal Circuit Approves Reduction of Damages Due to Laches in Romag v. Fossil

In other news today, the Federal Circuit in Romag Fasteners, Inc. v. Fossil, Inc.  affirmed a judgment of patent and trademark infringement against Fossil and other defendants, as well as the district court's judgment reducing the amount of the patent award due to laches and refusing to allow the disgorgement of the defendants' profits as a remedy for non-willful trademark infringement.  According to the opinion (authored by Judge Dyk, joined by Judges Wallach and Hughes), the patent in suit is "U.S. Patent No. 5,777,126 (“the ’126 patent”) on magnetic snap fasteners, which Romag sells under its registered trademark, ROMAG."  Following a finding of liability, the jury awarded "a reasonable royalty of $51,052.14" for the patent infringement, and for the trademark infringement "an advisory award of $90,759.36 of Fossil’s profits under an unjust enrichment theory, and $6,704,046.00 of Fossil’s profits under a deterrence theory," even though it also found that the infringement was not willful (pp. 3-4).  The district court thereafter concluded that "Romag’s delay in bringing suit until just before 'Black Friday' constituted laches, and reduced the jury’s reasonable royalty award for patent infringement by 18% to exclude sales made during the period of delay. . . . The district court also held as a matter of law that, because Fossil’s trademark infringement was not willful, Romag was not entitled to an award of Fossil’s profits" (p.4).

On appeal, the court first rejects Romag's argument that damages cannot be reduced under the equitable doctrine of laches, citing its recent en banc decision in SCA Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC to that effect (p.5).  (For previous discussion of SCA Hygiene Products on this blog, see here.)  Second, the court holds that willfulness remains a prerequisite for awards of infringer's profits under the Second Circuit's interpretation of the Lanham Act (the federal trademark and unfair competition statute), though it notes that there is a circuit split on this issue (pp. 5-17).  I'm inclined to think this is right as a matter of policy, and would note only that this is an important issue of federal trademark law; and that at some point it might be useful either for Congress to clarify the law in this regard or for the Supreme Court to resolve the circuit split.  For further discussion, see, e.g., Barton Beebe, Thomas F. Cotter, Mark A. Lemley, Peter S. Menell & Robert P. Merges, Trademarks, Unfair Competition, and Business Torts 295-99, 511 (Aspen Publishers 2011) (second edition coming soon!)   Of course, when it comes to U.S. patent law, disgorgement of profits is off limits except in design patent cases, and the Supreme Court will be addressing the matter as it relates to design patents later this year in Apple v. Samsung (see here).

Federal Circuit Denies Rehearing En Banc in ClearCorrect v. ITC

This past November, a panel of the Federal Circuit held in ClearCorrect Operating, LLC v. International Trade Commission that digital data are not "articles," and thus that section 337 of the U.S. Tariff Act (which renders unlawful the importation of infringing "articles" into the United States, subject to certain conditions) does not confer jurisdiction on the U.S. International Trade Commission (ITC) to issue a cease and desist order directed against the electronic transmission of such data into the United States.  (For my post on the original panel opinion, see here.)  This morning the court denied a petition for rehearing en banc (order and opinions here).  Judge Newman filed a dissenting opinion, arguing inter alia that "Section 337 does not distinguish between infringing goods imported electronically and infringing goods imported on a physical medium," and that the ITC's interpretation of the statute (that articles do include digital data) is entitled to deference under the Chevron doctrine.  Chief Judge Prost, the author of the original panel opinion, filed an opinion (joined by Judges O'Malley and Wallach) concurring in the order denying the petition for rehearing and responding to certain points raised in Judge Newman's dissent.  

Wednesday, March 30, 2016

Delhi High Court Allows Competition Law Investigation of Ericsson's SEP Licensing Practices to Proceed

Story here from Shamnad Basheer of the Spicy IP Blog; opinion available here.  Bottom line appears to be that complaints filed by Micromax and Intex with the Competition Commission of India (CCI), alleging abuse of dominant position by Ericsson in relation to its FRAND-committed SEPs, may proceed.  Key portion of the opinion (paras. 199-200, pp. 151-52):
. . . there is good ground to hold that seeking injunctive reliefs by an SEP holder in certain circumstances may amount to abuse of its dominant position. The rationale for this is that the risk of suffering injunctions would in certain circumstances, clearly exert undue pressure on an implementer and thus, place him in a disadvantageous bargaining position vis-a-vis an SEP holder. A patent holder has a statutory right to file a suit for infringement; but as stated earlier, the Competition Act is not concerned with rights of a person or an enterprise but the exercise of such rights. The position of a proprietor of an SEP cannot be equated with a proprietor of a patent which is not essential to an industry standard. While in the former case, a non-infringing patent is not available to a dealer/manufacturer; in the latter case, the dealer/manufacturer may have other non-infringing options. It is, thus, essential that bargaining power of a dealer/manufacturer implementing the standard be protected and preserved.
In the present case, apart from instituting suits for infringement against Micromax and Intex, Ericsson has also threatened Micromax with complaints to SEBI, apparently, while Micromax was contemplating and/or in the process of floating a public offer of its shares. Such threats were, undoubtedly, made with the object of influencing Micromax to conclude a licensing agreement. It is not necessary for this Court to examine whether in the facts of this case, such threats also constitute an abuse of Ericsson's dominant position. Suffice it to state that in certain cases, such threats by a proprietor of a SEP, who is found to be in a dominant position, could be held to be an abuse of dominance. Clearly, in certain cases, such conduct, if it is found, was directed in pressuring an implementer to accept non-FRAND terms, would amount to an abuse of dominance.
The court then holds that the CCI has jurisdiction to proceed with its investigation, though the judge is careful to say that he is not taking a position on the merits of the allegations.  After discussing the CJEU's decision in Huawei v. ZTE among other matters, the judge also expresses the view--consistent with Huawei, and at odds with the German courts' pre-Huawei Orange-Book-Standard framework--that one can be a willing licensee and still reserve the right to challenge the validity of the licensor's patent (see pp. 155-58, paras. 204-07).

*                 *                 *

Elsewhere in the blogosphere today, Florian Mueller has an interesting post on FOSS Patents on the disgorgement of profits remedy at issue in the U.S. Apple v. Samsung case (now pending before the U.S. Supreme Court, see here) and the U.S. Oracle v. Microsoft copyright case.

Monday, March 28, 2016

Two More Papers on the Smallest Salable Patent Practicing Unit

The question of whether the royalty base for standard-essential or other patents should normally be the smallest salable (or saleable--according to Webster's, either spelling is acceptable) patent practicing unit (SSPPU) is one that has elicited scholarly commentary recently.  The other day I mentioned Nicolas Petit's new article The Smallest Salable Patent-Practicing Unit ('SSPPU') Experiment, General Purpose Technologies and the Coase Theorem and The IEEE-SA Revised Patent Policy and Its Definition of 'Reasonable' Rates: A Transatlantic Antitrust Divide? (see post here); and others including Greg Sidak and Richard Stern have also weighed in (see here and here).  Here are two more recent papers on the topic:

1. David Teece and Edward Sherry have posted a paper titled On the ‘Smallest Saleable Patent Practicing Unit’: An Economic and Public Policy AnalysisHere is a link to the paper.  From the introduction:
The “smallest saleable patent practicing unit” (SSPPU) doctrine was developed in the context of patent infringement damages awards. It provides that, in calculating patent infringement damages, the damages base should be the imputed revenues that the infringer would have earned had all of the actual sales been made of the “smallest saleable patent practicing unit” containing the patented invention. This article does not attempt to summarize the SSPPU doctrine from a legal perspective or examine its legal foundations (or lack thereof). A good summary of the doctrine, which the author characterizes as arising from “a recent series of confusing and contradictory opinions,” and many of the decisions, is found in Sidak (2014).
We show that the doctrine makes no economic sense and is completely at odds with the long standing view that in determining reasonable royalties one should mimic licensing practices in the real world. Such practice usually specify percentages removing royalties on the device revenues or per unit device royalties, but never a SSPPU. The reason is that the value from patented technology is manifested in many places besides components; moreover, transaction cost considerations make SSPPU licenses difficult to monitor and enforce. Accordingly, mandating SSPPU licensing would be a fool’s errand if the goal is a properly functioning natural (or global) system of innovation.
2.  Anne Layne-Farrar has posted on ssrn a paper titled The Practicalities and Pitfalls of the Smallest Saleable Patent Practicing Unit Doctrine: A Review of Teece and SherryHere is a link to the paper, and here is the abstract:
In early 2016, David Teece and Edward Sherry released a new paper assessing the economics of the “Smallest Saleable Patent Practicing Unit” (SSPPU) doctrine. The doctrine was first espoused in 2009 by Judge Randall Rader in Cornell v. Hewlett Packard. In the simplest terms, the SSPPU doctrine calls for setting the revenue base for reasonable royalty patent infringement damages at the smallest possible product level that still reflects the patented invention. In their new paper, Teece and Sherry walk through the justifications expressed in support of applying the SSPPU doctrine and discuss the assumptions embedded within those justifications. The authors also explain a number of the limitations of the doctrine, both logical and practical. In this brief review, I summarize the key findings reported in the Teece and Sherry paper and highlight the policy implications.

Friday, March 25, 2016

FRAND Royalty Issues in Metaswitch v. Genband

The Patent Damages Blog recently published a post on Magistrate Judge Roy S. Payne's recent Memorandum Order in response to a motion to exclude certain opinions of the plaintiff's proposed expert in Metaswitch Networks Ltd. v. Genband US LLC, a case now pending in the Eastern District of Texas.  Reminiscent of Microsoft v. Motorola, the magistrate will allow the expert to rely "on the W-CDMA patent pool as evidence of the FRAND rate in this case," and to apply a multiplier of three to that rate, "based on real-world factors such as the participation rate and the value of expected cross-licenses" (Order p.4).  Reminiscent of In re Innovatio IP Ventures LLC, the expert also wanted to apply, in the alternative, a "top-down" approach that would "allocat[e] the available profit on the smallest saleable unit ('SSU') across an estimate of the minimum number of all relevant SEPs" (Order p.5).  The court excluded this testimony, however, stating:
the way Mr. Lynde determines the “proportion of Genband’s ’006 patent to total SEPs for the Metaswitch accused product” is by counting the number of companies that provided intellectual property disclosures to the IETF standard setting organization, and assuming that the value of each participant company’s patent portfolio is the same. (Dkt. No. 177-3 at ¶ 48). This approach ignores the size of each company, the number of patents in each company’s portfolio, and the differences in value between patents—his approach necessarily assumes that every participant company’s patent portfolio was exactly the same as Nortel’s. Mr. Lynde’s only justification for glossing over these details is that “Nortel is one of many large technology companies with significant patent portfolios in this area.” (Id.). He does not attempt to quantitatively (or even qualitatively) compare Nortel’s portfolio to the portfolios of the other participant companies.
Mr. Lynde’s top down approach is highly speculative and not supported by sufficient “facts or data.” See In re Innovatio IP Ventures, LLC, 2013 U.S. Dist. LEXIS 144061 at *168 (N.D. Ill. Sept. 27, 2013) (top down approach “requires verifiable data points, such as the number of 802.11 standards-essential patents”). Mr. Lynde admits in his report that “there is no information available with regard to the specific patents that may be covered under the blanket declaration by a given company.” (Dkt. No. 177-3 at ¶ 48). An absence of information is not a license to speculate. Mr. Lynde’s opinions relating to the “top down” approach are excluded (Order pp. 5-6).
As I've stated in a couple of recent papers coauthored with Norman Siebrasse (see here and here), I am somewhat sympathetic to some version of a top-down approach to estimating FRAND royalties (though not necessarily to the Innovatio approach in every particular).  At the same time, I recognize that it may be problematic to apply such an approach when the evidence as to the number of (valid and infringed) SEPs and the relative importance of the SEPs at issue in comparison with the others is lacking.  In a sense, the issue boils down to whether courts should allow the use of certain shortcuts or assumptions--what I might refer to as "soft presumptions"--because, notwithstanding their shortcomings, they are better than any other alternative.  I'm not yet sure what the right answer is, but I plan to being addressing this issue in a forthcoming article.

Thursday, March 24, 2016

Vringo v. ZTE Brazil SEP Case

As a follow-up to this post on the Romanian Vringo v. ZTE matter, here is a link to the original and an English-language translation of a November 2015 decision from Brazil's Superior Court of Justice in ZTE do Comércio, Serviços e Participações Ltda v. Vringo Infrastructure Inc., dismissing an appeal from the entry of a preliminary injunction against ZTE's Brazilian subsidiary.  Again, thanks to David Cohen of Vringo for passing this along.

For previous discussion on this blog of FRAND issues in Brazil, see here, here, here, and here.

Wednesday, March 23, 2016

Vringo v. ZTE Romania SEP Case

I mentioned in January (here) that I had read of an October 2015 Romanian appellate decision allowing a preliminary injunction Vringo had obtained against ZTE relating to a standard-essential patent to remain in effect.  David Cohen of Vringo has now passed along to me a copy of the appellate court decision translated into English, available here.  According to the court, Vringo had originally obtained a preliminary injunction against ZTE Romania in 2014, and an appeal from this judgment was dismissed in January 2015.  In August 2015, a district court denied ZTE Romania's motion to lift the preliminary injunction in view of the CJEU's July 16, 2015 judgment in Huawei v. ZTE, and in October 2015 the appellate court dismissed ZTE Romania's appeal.  Specifically, the appellate court held that Huawei v. ZTE did not alter the status of the preliminary injunction as res judicata; and, as a "secondary consideration," that the January 2015 judgment "complie[d] with the requirements of [Huawei], based on the de facto elements that [the appellate court] was aware of when the decision was given."

Monday, March 21, 2016

U.S. Supreme Court to Decide Design Patent Damages Question in Apple v. Samsung

Order here, granting cert limited to question 2 only.  The questions presented in the petition were:
1. Where a design patent includes unprotected non-ornamental features, should a district court be required to limit that patent to its protected ornamental scope?
2. Where a design patent is applied to only a component of a product, should an award of infringer’s profits be limited to those profits attributable to the component?
Still pending is the cert petition in Systems, Inc. v. Nordock, Inc., in which the questions presented are:
1.  Where a patented design is applied to only a component of a product, should an award of infringer's profits be limited to those profits attributable to the component?
2.  Is the Federal Circuit's interpretation and application of 35 U.S.C. § 289 inconsistent with this Court's prior precedent?
For previous discussion on this blog, see here, here, herehere, here, and here.

Friday, March 18, 2016

Recent Blog Posts on Patent and Antitrust Issues by Bai and Ge, ChinaIPR

Benjamin Bai and (my former student) Yijun Ge have published an interesting post on the Kluwer Patent Blog titled Crossing the Rubicon:  When Does IP Owner Become IP Abuser?  The post discusses the antitrust/IP interface in China, including the Huawei v. InterDigital standard essential patent case, abuse of dominant position, and refusals to deal.  Bai & Ge's post is also quoted, in the context of a discussion on IP/antitrust matters, in this recent post on ChinaIPR (which also posits a "disproportionality" between patent and antitrust damages in China).  Another recent ChinaIPR post discussed the paper by Love, Helmers & Eberhart on patent damages in China, which I blogged about here

Thursday, March 17, 2016

CJEU: IP Owners Can Recover Damages for Moral Prejudice in Addition to Reasonable Royalties

Today the Court of Justice for the European Union (CJEU) held in the Liffers case that, under article 13(1) of the EC Enforcement Directive, the owner of an IP right may recover damages for moral prejudice (e.g., harm to the reputation of the IP owner resulting from the infringement) in addition to a reasonable royalty.  (Here is a link to the judgment, and here is a link to a more extensive write-up on IPKat.)  Article 13(1) reads:
Member States shall ensure that the competent judicial authorities, on application of the injured party, order the infringer who knowingly, or with reasonable grounds to know, engaged in an infringing activity, to pay the rightholder damages appropriate to the actual prejudice suffered by him/her as a result of the infringement.
When the judicial authorities set the damages:
(a)      they shall take into account all appropriate aspects, such as the negative economic consequences, including lost profits, which the injured party has suffered, any unfair profits made by the infringer and, in appropriate cases, elements other than economic factors, such as the moral prejudice caused to the rightholder by the infringement;
(b)      as an alternative to (a), they may, in appropriate cases, set the damages as a lump sum on the basis of elements such as at least the amount of royalties or fees which would have been due if the infringer had requested authorisation to use the intellectual property right in question.
The question posed was:
May Article 13(1) of Directive 2004/48 be interpreted as meaning that the party injured by an intellectual property infringement who claims damages for pecuniary loss based on the amount of royalties or fees that would be due if the infringer had requested authorisation to use the intellectual property right in question cannot also claim damages for the moral prejudice suffered? (Judgment para. 12)
Or, as paraphrased by the court,
whether Article 13(1) of Directive 2004/48 must be interpreted as not permitting a person injured by an intellectual property infringement, who claims compensation for the material damage suffered as calculated, in accordance with heading (b) of the second subparagraph of Article 13(1) of that directive, on the basis of hypothetical royalties, also to claim compensation for his moral prejudice as provided for under heading (a) of the second subparagraph of Article 13(1) of that directive (Judgment para. 13).
According to the court:
. . . the reply to the question referred is that Article 13(1) of Directive 2004/48 must be interpreted as permitting a party injured by an intellectual property infringement, who claims compensation for his material damage as calculated, in accordance with heading (b) of the second subparagraph of Article 13(1) of that directive, on the basis of the amount of hypothetical royalties, also to claim compensation for the moral prejudice that he has suffered, as provided for under heading (a) of the second subparagraph of Article 13(1) of that directive (Judgment para. 27).
The court therefore concludes by ruling that:
Article 13(1) of Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights must be interpreted as permitting a party injured by an intellectual property infringement, who claims compensation for his material damage as calculated, in accordance with heading (b) of the second subparagraph of Article 13(1) of that directive, on the basis of the amount of royalties or fees which would have been due to him if the infringer had requested his authorisation to use that right, also to claim compensation for the moral prejudice that he has suffered, as provided for under heading (a) of the second subparagraph of Article 13(1) of that directive.
Liffers is a copyright case out of Spain, but since it is based on an interpretation of the Enforcement Directive the principle announced would apply in patent and other IP cases throughout the EU as well.  French courts in particular sometimes do award damages for moral prejudice in patent cases, though according to a recent article by Fox et al. such damages often do not involve "examining whether the inventor's reputation has suffered damages," but rather are "used to 'round up' the final damages following an overall assessment" (see my post here).

Wednesday, March 16, 2016

Two Recent Cases on Wrongful Enforcement from the U.K. and Japan

1.  Claire Phipps of Jones, Bristow published a post on EPLaw on February 10 about a recent decision of the Intellectual Property Enterprise Court (England & Wales) in Global Flood Defence Systems Ltd  v. Johann van den Noort Beheer BV (opinion here).  Plaintiff sued defendant for breach of a license agreement, and defendants counterclaimed for, inter alia, "groundless threats" to sue for patent infringement.  The patent at issue hadn't been granted yet but was the subject of a pending EPO application.  The court decided to stay proceedings on the groundless threats counterclaim pending the EPO's (believed to be imminent) grant of the patent, so that the plaintiff could mount a justification defense based on what the issued patent's claims actually cover.  The result that seems sensible to me. 

2.  The November 2015 issue of AIPPI-Journal of the Japanese Group of AIPPI has a summary  (at pages 422-24) by Yosuke Kurita of Tachibana Eletech Co. v. Nichia Corp., Judgment of Feb. 19, 2015, Case No. 2014 (Wa) 3119, Osaka D. Ct.  According to Mr. Kurita, Nichia holds a patent for a light-emitting diode.  Tachibana offers for sale on its website products made by a Taiwanese company, Everlight.  Nichia sued Tachibana for patent infringement (actually two cases, which were consolidated) and posted a press release about the patent infringement case on its website.  More specifically, the press release announced the filing of the patent infringement case against Tachibana; it also stated that Nichia had filed lawsuits against other companies and that another company had admitted to the infringement and discontinued sales of the products.  Tachibana then filed the present suit against Nichia, alleging unfair competition.  The Osaka District Court concluded that the press release's mere mention of the filing of the infringement lawsuit was not actionable, because it would simply "notify[ ] readers of the filing of lawsuits and explain[ ] the defendant's allegations and interpretations"; but that in combination with the other statements the press release could be interpreted as "imply[ing] that the plaintiff's act of importing and selling products manfactured by Everlight . . . constitutes infringement," and thus "would cause significant damage to the plaintiff's business.  The defendant had a duty of care and was obliged to obtain evidence by conducting a fact-finding study before posting the Press Release."  At the same time, the act of filing the patent infringement lawsuits was not an act of unfair competition, because Nichia obtained samples of Tachibana's products prior to filing the suit and its conduct was not unreasonable.  To be actionable, the filing of the infringement suit would have to be "extremely unreasonable in light of the objectives and purposes of the judicial system."

The summary does not indicate the outcome of the infringement suit.  I should think it would be very difficult or impossible for the filing of the lawsuit to be an an act of unfair competition if the patentee won that lawsuit.  I'm also not clear on why notifying the public about the infringement suit is permissible (as it should be, assuming there is a good faith basis for the lawsuit) but implying that the accused is infringing is not, since the former would seem to imply the latter.  I wonder what kind of a "fact-finding study" related to the press release the court had in mind?

This issue of the AIPPI-Japan journal also has a shorter write-up (by Yasufumi Shiroyama) of this case at p.418, as well as of the Imation case that was discussed at greater length in the September issue (see post here).

Monday, March 14, 2016

Two New Papers by Nicolas Petit

Nicolas Petit has posted two new papers on ssrn, The Smallest Salable Patent-Practicing Unit ('SSPPU') Experiment, General Purpose Technologies and the Coase Theorem and The IEEE-SA Revised Patent Policy and Its Definition of 'Reasonable' Rates: A Transatlantic Antitrust Divide?Here is a link to the SSPPU paper, and here is the abstract:
In the last years, some Standard-Setting Organizations (“SSOs”) active in wireless communications have experimented new pricing principles for standard essential patents (“SEPs”). One of those experiments is the “SSPPU” rule. Under SSPPU, the licensing rates paid to owners of SEPs for the use of their technology shall reflect the “value that the functionality of the claimed invention or inventive feature…contributes to the value of the relevant functionality of the smallest saleable Compliant Implementation that practices the Essential Patent Claim”. This paper reviews the SSPPU experiment through the lenses of the Coase theorem. It finds that SSPPU interferes with the efficient operation of the price system, and is likely to reduce investment in socially beneficial activities, including in General Purpose Technologies (“GPTs”) which are key drivers of economic growth.
Here is a link to the IEEE-SA paper, and here is the abstract:
The IEEE-SA updated patent policy and the Business Review Letter issued by the US DoJ have caused much discussion in the US (Sidak, 2015). The purpose of this paper is to assess whether a similarly lenient antitrust approach to Standard Setting Organizations’ (“SSOs”) rate setting policies would prevail under the European Union (“EU”) competition rules. Recent EU competition case-law has promoted a very hard line in the area of coordinated conduct. Cases such as Dole Food Company, T-Mobile or Expedia have expanded the scope of the per se prohibition rule found in Article 101 TFEU to forms of horizontal coordination with less than obvious anticompetitive potential, such as "cheap-talk" pre-pricing communication (Dole Food Company), episodic collusion (T-Mobile) and horizontal agreements with limited market coverage (Expedia). Those judgments, and others, share a common rationale: that of deterring any coordinated interference with the price system. In the EU courts' view, joint interference by competitors with the price system seems to be a sin in itself, regardless of actual or potential market effects. Horizontal coordination is thus increasingly prohibited on its face, and punished as a means to set an example. From an enforcement standpoint, this trend in the case-law trend has pros (lower enforcement costs) and cons (deters pro-competitive coordination). But perhaps more importantly, it has a major normative implication, which is that it raises the antitrust risk for all forms of coordination, including arrangements of the type found in the IEEE-SA updated patent policy. This paper explains that the antitrust risk generated by SSOs rate setting policies is presumably higher in the EU than in the US, where the case-law on horizontal coordination is less stringent. From a methodological standpoint, the paper choses to discuss this issue on the sole basis of the case-law of the EU courts, instead of focusing on Commission Guidelines and other soft law instruments, whose binding value on parties other than the Commission itself has been considerably degraded in recent judgments.

Friday, March 11, 2016

Interesting Discussion Today on 43(B)log

Professor Rebecca Tushnet's excellent 43(B)log primarily discusses matters relating to trademarks, unfair competition, and copyright, but today she is live-blogging a conference at Harvard Law School on Private Law and Intellectual Property, the first panel of which touches on (among other things) patent remedies, the patents vs. prizes debate, and the IP-as-property debate.  This post reports on the first panel discussion as moderated by Professor Tushnet and involving Professors T.J. Chiang, Gideon Parchomovsky, Oskar Liivak, Adam Mossoff, Molly Van Houweling, and Julie Cohen, with further discussion from Ted Sichelman, Rachel Sachs, Henry Smith, Brett Frischmann, Jonathan Barrett, Patrick Goold, Greg Vetter, Oren Bracha, Michael Meurer, and former USPTO Director David Kappos.  Very interesting.

Update:  Additional posts on panels at this conference--some of them addressing matters relating to IP licensing, remedies, and standardization--can be accessed here, here, here, here, here, and here.  

Thursday, March 10, 2016

IPO Chat Channel Webinar on SEP, FRAND Issues in China, Korea, and Japan

On Wednesday, March 15 at 2 p.m. EST, the IPO Chat Channel is presenting a webinar titled Antitrust in Asia: SEPs and New IP Guidelines in China, Korea, and JapanHere is a link to the webpage, and here is a description of the webinar: 
For all the scrutiny the U.S. government has given to standard essential patents (SEPs) in recent years and to the commitment to license them under fair, reasonable and non-discriminatory (FRAND) terms, the U.S. Department of Justice has also taken care to express broad approval of patent standards. But in Asia, the governments of China, Korea, and Japan recently have taken a more punishing attitude toward SEPs. All three have either issued or have drafted new guidelines that create a competition law sanction for conduct involving SEPs, based on presumptive rules rather than the effects-based approach of the U.S.
Those same guidelines also blur the distinction between SEPs and valuable patents that are not in a standard, setting the stage for compulsory licensing of the latter. And in China, a draft guideline suggests that a dominant patent holder abuses its market position if it imposes a license that limits the licensee's ability to challenge the validity of the patent. Our panelists include a founder of a Chinese law firm specializing in technology; a U.S. law-firm expert on the intersection of antitrust and IP; and the director of a global antitrust institute who formerly served at the FTC. They will discuss the guidelines and how corporations can best navigate this new environment in Asia.
Personally, I would not characterize the attitudes of competition authorities in China, Korea, and Japan so negatively (e.g., "punishing,"), but the program may be an interesting one nonetheless.  Panelists will be Jay Jurata of Orrick, Herrington & Sutcliffe LLP; Gabriella Liu, head of the IP practice group of the Beijing-based IParagon Law Firm; and Koren Wong-Irvin , the Director of the Global Antitrust Institute at George Mason University.

Wednesday, March 9, 2016

Articles on Remedies, Warning Letters in Sept/Oct 2015 China IP Magazine

The September/October 2015 issue of China IP magazine has a couple of articles that may be of interest to readers of this blog.  

The first, authored by Liu Wei and translated by Yuan Renhui, is titled The Boundary for Proper IP Warning Letter--An Analysis of the Supreme People's Court Decision in the Edan Case, and discusses a March 19, 2015 decision of that court in Edan Co. v. Mindray Co. interpreting the circumstances under which a patent owner's sending a warning letter to customers or clients of an alleged infringer violates article 14 of China's Unfair Competition Law.  According to the author, Mindray sent such a letter to Edan's clients and gave a public interview accusing Edan of infringement.  Mindray thereafter prevailed on its infringement claims with respect to eleven Edan products (though all but one such matter was appealed and the appeal still pending), but it withdrew some other infringement claims against Edan.  The lower courts rejected Edan's trade disparagement claims, and the Supreme Court affirmed, reasoning that the facts showed that Minday had engaged in sufficient due diligence and the statements did not constitute "false pretense."  

The second, authored by Wang Guiling (Lucy Wang) is entitled Proposals for Improving Remedies Available for Patent Infringement in China.  The article discusses the principal remedies available throughout the world's major patent systems (damages in the form of lost profits, infringer's remedies, reasonable royalties, and in a few countries such measures as punitive or statutory damages; permanent and preliminary injunctions), with a special emphasis on the relevant law as it relates to these matters in China and the U.S.  (The author says that post-eBay U.S. courts have granted injunctions to victorious patent owners 60% of the time; in reality it's probably more like 75%.)  The author urges Chinese courts not to award permanent injunctions automatically (a call that others have made, see my blog post here) and to have more formal proceedings for determining whether to award preliminary injunctions.  She also argues that the Chinese courts should provide more detailed guidance for awarding damages for price erosion, lost profits on convoyed sales, and damages due to the defendant's accelerated market entry (sometimes referred to as "springboard" damages).  In addition, she would like to see more awards of attorneys' fees, the introduction of treble damages for intentional infringement (rather than the "two to three" times as stated in the pending draft fourth amendment to the Patent Act), and an enhancement of the amount awardable as statutory damages (right now the cap comes to about $160,000 in U.S. money).    

Monday, March 7, 2016

Love, Helmers and Eberhardt on Patent Litigation in China

Brian Love, Christian Helmers, and Markus Eberhadt have posted a paper on ssrn titled Patent Litigation in China: Protecting Rights or the Local Economy?, which is forthcoming in the Vanderbilt Journal of Entertainment and Technology Law.  Here is a link to the paper, and here is the abstract:
Though it lacked a patent system until 1985, China is now the world leader in patent filings and litigation. Despite the meteoric rise of the Chinese patent system, many in the West believe that it acts primarily to facilitate local protectionism rather than innovation. Recent high-profile patent suits filed by relatively unknown Chinese firms against high-profile foreign tech companies, like Apple, Samsung, and Dell, have only added fuel to the fire. Surprisingly, given how commonplace assertions of Chinese protectionism are, little empirical evidence exists to support them. This Article fills this gap in the literature by analyzing five years of data (2006-11) on patent suits litigated in courts with the fifty most active intellectual property (IP) dockets in China. Among other things, we find that Chinese patent suits are highly concentrated in a handful of major urban jurisdictions — not in smaller inland cities where protectionism is most often alleged to take place — and also have rates of success and appeal very similar to those of US patent suits. We also observe that foreign companies appear in Chinese patent suits most often as patent enforcers, not as accused infringers, and win their cases roughly as often as Chinese patentees. Finally, we find that patents litigated in China are generally more than five years old at the time of assertion and frequently have family members issued by foreign patent offices. Together, these findings contradict conventional wisdom that China’s patent system has been structured to benefit domestic industry at the expense of foreign firms.
The study is based on data collected by CIELA (China IP Litigation Analysis, a database created by the Rouse law firm) from which the authors were able to identify 471 IP suits "that included at least one claim for patent infringement"--meaning invention patent infringement, not utility model or design patent infringement--from 2006-11 (p.10).  The authors' finding that concerns over bias in patent litigation involving Western firms cannot be substantiated is consistent with the empirical literature I cited in my book in 2013 at pp. 345-46.  Among the authors' findings relevant to remedies are that "Seven of the top eight jurisdictions have an injunction grant rate of roughly 90 to 100 percent and a median damages award between 80,000 and 150,000 RMB" (p.14; see also p.16 tbl. 3).  In addition, and relevant to the first point noted above, the authors report that "Successful foreign patentees received a median damages award of 100,000 RMB in suits against private Chinese firms, exactly the same amount that private Chinese patentees received when they sued private domestic parties. Interestingly, Chinese patentees received 20 percent less in suits against foreign companies and 60 percent more in suits against state monopolies. Similarly, foreign patentees received a permanent injunction in every case they won, while victorious domestic patentees were denied injunctions 5 to 10 percent of the time" (p.18).  Finally, the authors note that "a surprisingly small number of asserted patents faced a parallel validity challenge" (p.22)-- another finding that apparently hasn't changed since 2013, when I noted the low rate of validity challenges and my inability to come up with a convincing reason for it (see my book pp. 361-62).  Finally, the authors noted some limitations of their study (pp. 10, 25) but assert that "the data presented . . . is the best empirical information made available to date" (p.25). Interesting paper.

Thursday, March 3, 2016

Ghosh and Sokol on FRAND in India

Shubha Ghosh and Danny Sokol have posted a paper on ssrn titled FRAND in IndiaHere is a link to the paper, and here is the abstract:
This paper examines FRAND issues in India. From an institutional perspective, India's FRAND cases do not effectively establish the appropriate role for antitrust in FRAND. On the one hand, there is the potential for hold-up and anti-competitive conduct in the FRAND setting. Such situations would be very fact specific but the CCI orders to date use sweeping language and analysis based on per se like rules of illegality. On the other hand, the creation of per se like rules of illegality create the possibility that CCI will act as a price regulator rather than antitrust enforcer. Over time and with greater use of economic analysis (and greater reliance on the economic staff at CCI), CCI may improve its institutional capabilities. However, the role of jurisdiction as between CCI and the judiciary remains unclear. How best to treat FRAND disputes will take time but the hope is that through greater experience and learning by doing, the Indian competition system will set out a set of economically informed principles for sound FRAND enforcement. 
On the issue of institutional design and deference, one question that has not yet been reached (and may not for some time) is how the courts should handle deference when CCI has developed the necessary economic skills to undertake complex cases of antitrust and technology. Should the judiciary defer to agency as expert once expertise developed? This is potentially a chicken and egg problem on developing expertise and rules of deference in need of further study. Complicating matters further is that the economics on competition and patents is complex. Creating an administrable economic model that is coherent remains a work in progress.
Overall the Indian FRAND cases suggest that the current mix of Indian institutions may not yet be well suited to address complex issues of antitrust enforcement. Consequently, such cases should be approached cautiously with a mind on how to think through the economics of innovation, and the implications of enforcement on technology, IP and competition to yield optimal results and the right institutional structure for improved enforcement.

Tuesday, March 1, 2016

First German Appellate Decision Interpreting Huawei v. ZTE

In July of last year, the CJEU issued its decision in Huawei v. ZTE, which sets out the conditions under which E.U. competition law precludes the owner of a FRAND-committed standard-essential patent (SEP) that enjoys a dominant position in the market from seeking injunctive relief for the unauthorized use of its patent.  In relevant part, the court stated:
[60]  Accordingly, the proprietor of an SEP which considers that that SEP is the subject of an infringement cannot, without infringing Article 102 TFEU, bring an action for a prohibitory injunction or for the recall of products against the alleged infringer without notice or prior consultation with the alleged infringer, even if the SEP has already been used by the alleged infringer.
[61]  Prior to such proceedings, it is thus for the proprietor of the SEP in question, first, to alert the alleged infringer of the infringement complained about by designating that SEP and specifying the way in which it has been infringed. . . .
[63]  Secondly, after the alleged infringer has expressed its willingness to conclude a licensing agreement on FRAND terms, it is for the proprietor of the SEP to present to that alleged infringer a specific, written offer for a licence on FRAND terms, in accordance with the undertaking given to the standardisation body, specifying, in particular, the amount of the royalty and the way in which that royalty is to be calculated. . . . 
[64]  As the Advocate General has observed in point 86 of his Opinion, where the proprietor of an SEP has given an undertaking to the standardisation body to grant licences on FRAND terms, it can be expected that it will make such an offer. Furthermore, in the absence of a public standard licensing agreement, and where licensing agreements already concluded with other competitors are not made public, the proprietor of the SEP is better placed to check whether its offer complies with the condition of non-discrimination than is the alleged infringer.
[65]  . . . [I]t is for the alleged infringer diligently to respond to that offer, in accordance with recognised commercial practices in the field and in good faith, a point which must be established on the basis of objective factors and which implies, in particular, that there are no delaying tactics.
[66]  Should the alleged infringer not accept the offer made to it, it may rely on the abusive nature of an action for a prohibitory injunction or for the recall of products only if it has submitted to the proprietor of the SEP in question, promptly and in writing, a specific counter-offer that corresponds to FRAND terms.
[67]  Furthermore, where the alleged infringer is using the teachings of the SEP before a licensing agreement has been concluded, it is for that alleged infringer, from the point at which its counter-offer is rejected, to provide appropriate security, in accordance with recognised commercial practices in the field, for example by providing a bank guarantee or by placing the amounts necessary on deposit. The calculation of that security must include, inter alia, the number of the past acts of use of the SEP, and the alleged infringer must be able to render an account in respect of those acts of use.
[68]  In addition, where no agreement is reached on the details of the FRAND terms following the counter-offer by the alleged infringer, the parties may, by common agreement, request that the amount of the royalty be determined by an independent third party, by decision without delay.

The judgment nevertheless leaves many unanswered questions, which scholars have begun to document (see posts here, here, and here).  One of the most important of these is whether the patent owner must make a FRAND offer to the implementer in the manner recited above; or whether instead the implementer’s failure to respond without delay, to submit a counteroffer, or to provide appropriate security means that the patentee may obtain an injunction even in the absence of evidence that its own offer was FRAND.  As I have noted in three other posts (see here, here, and here), in two recent decisions the district courts in Düsseldorf and Mannheim interpreted Huawei as not requiring them to determine whether the patentee’s offer was FRAND because, in the courts’ view, the defendants failed to comply with their Huawei-imposed obligations; thus, the competition-law defense would not prevent an injunction from issuing.

In a judgment rendered on January 13, 2016, however, an appellate court—the Oberlandesgericht Düsseldorf—reversed the Düsseldorf district court on this issue (judgment available here, in German).  (The matter came up on a motion for an interim stay of enforcement of the district court judgment.)  According to the appellate court, “the view that the patent infringer must independently fulfill [Huawei] conditions 3-5 would turn the decision of the CJEU on its head” (para. 38; my translation).  Rather, the patent owner’s initial offer must be FRAND.  The court bases its reading of Huawei in part on the CJEU’s reference in para. 65 to “this offer,” which in the court’s view indicates that the initial offer must be on FRAND terms.

This judgment came to my attention by way of a short article on the decision published in the February 2016 issue of Mitteilungen der deutschen Patentanwälten (pages 62-65) by Tilman Müller and Volkmar Henke titled Erste Rezeption des EuGH-Urteils „Huawei-ZTE durch die InstanzgerichteZugleich Besprechung von OLG Düsseldorf, Beschluss vom 13.1.2016, I-15 U 65/15 (“First Reception of the CJEU Judgment in Huawei v. ZTE by the Courts of First Instance:  Together with Discussion of the Decision of the OLG Düsseldorf of Jan/ 13, 2016, I-15 U 65/15”).  The abstract reads as follows (again, my translation):

The present article discusses the first court of first instance decisions which have received the CJEU judgment in Huawei v. ZTE.  In particular, the courts have had to address the question whether the first offer by the patent owner must already, in terms of its content, satisfy the FRAND criteria or not.  The Düsseldorf  and Mannheim district courts had concluded not, but the Düsseldorf appellate court has now concluded that the answer is yes.  The authors show that this certainly could be correct—but that a full evaluation of the contents of the offer leads to heightened procedural problems and does not fit into the Huawei framework.  The authors propose as a solution that both parties’ offers should merely be submitted for a reasonableness evaluation.

More precisely, the authors argue that courts should simply consider whether, on summary examination, the patentee’s offer falls within the range of reasonableness, and if so whether (again on summary examination) the defendant’s does as well.  If the initial offer is not FRAND based on this evaluation, then the patent owner cannot obtain an injunction.   If it is, and the defendant’s counteroffer is not FRAND, the patent owner may obtain an injunction; but if the counteroffer is FRAND, then rather than having the court determine the appropriate FRAND terms the matter should be submitted to a third party, as suggested in the Huawei  excerpt above.