Saturday, November 4, 2017

Blogging Hiatus

I'm going to take a blogging hiatus for the next few weeks, while I devote some time to some other matters.  I hope to resume the blog before too long.  Meanwhile, I've published 837 posts since May 2013, so for those of you who are new to the blog, there's plenty of back reading.

Friday, November 3, 2017

More New Papers on FRAND, SEPs

1.  Joseph A. Alfred has published a paper titled Licensing Standards Essential Patents in les Nouvelles, Sept. 2017, pp. 223-28.  Here is a link to the paper, and here is the abstract:
This article reviews the progress of cellular standards and compares that rise with the increase of standards essential patents because of the smartphone. Relevant case law is examined including the seminal Georgia-Pacific fifteen factors and how they were cited in 95 cases since 1995. Relevant articles are reviewed concerning the smartphone royalty stack, GATT and standards and in particular the case law surrounding device licensing represented by the key factors deciding the Microsoft v. Motorola case. A way forward is proposed that industry once again take the lead to determine reasonable royalty when licensing standards essential patents.  
2.  Roberto Grasso has published a paper titled Standard Essential Patents:  Royalty Determination in the Supply Chain, 8 J. Euro. Comp. L. & Prac. 283 (2017).  Here is a link to the paper, which lists among its "key points" the principles that royalties should be calculated based on the SSPPU and on incremental ex ante value; that for complex products, one must take into account the aggregate royalty demand; and that SEP owners "must negotiate with and provide a FRAND license to anyone who requests it, regardless of which level of the value chain it operates."

3.   David Kappos published a paper in the May 2017 issue of AIPPI-Japan (pp. 111-17) titled Patent Hold-Up and Royalty Stacking--From Theory to Data to Rethink.  From the conclusion:
Scientific inquiry begins with hypotheses--it does not conclude with them. . .  [W]e must accept that the latest and most robust empirical studies dispatch with the theories of patent holdup and royalty stacking, and point towards a future where patents and standard play an enduring, viral and harmonious, role.
The paper cites to papers by Galetovic, Haber, and others that I have from time to time criticized on this blog.

Wednesday, November 1, 2017

Some Recent Articles, Posts on Unwired Planet v. Huawei

Readers will recall that back in April Mr. Justice Birss concluded in Unwired Planet v. Huawei (paras. 148-61) that FRAND is a point, not a range--one reason being to avoid a situation where both parties make FRAND offers and the court then has to decide which (if either) to accept.  I'm not sure I find that reasoning compelling; it seems to me more sensible to think of FRAND as a range, even if one consequence of this view is that courts sometimes will need to (somehow) select a rate within that range to decide a specific case.  One of Greg Sidak's papers that I mentioned on this blog recently (see here, heading number 6) also argues that FRAND is better conceived as a range, not a rate.  Anyway, the papers and posts listed below also address this issue, among others.

1.  Jorge Contreras has published a paper titled Global Markets, Competition, and FRAND Royalties:  The Many Implications of Unwired Planet v. Huawei, in the August 2017 issue of The Antitrust Source.  Here is a link to the article, and here is the abstract:
The recent UK decision in Unwired Planet v. Huawei addresses, for the first time, several key issues arising from the international nature of SEP licensing transactions and the manner in which national court decisions can impact global business and litigation strategies. The court's analysis is deeply rooted in competition law principles, often at the expense of the contractual underpinnings of the FRAND commitment. Most importantly, the court's willingness to establish global license terms covering patents outside the UK has serious implications for international commercial litigation and licensing transactions.  
Professor Contreras critiques the single FRAND rate rule at pages 2-4.

2.  Maximilian Haendicke published an article titled Lehren aus der Huawei v. Unwired Planet-Entscheidung für das deutsche Patentrecht ("Teachings of the Huawei v. Unwired Planet Decision for German Patent Law") in the August-September 2017 issue of GRUR Int. (pp. 661-69).  Here is the abstract (my translation):
On April 5, 2017, the Patents Court (England and Wales) has in the person of Judge Birss has reached a decision on numerous questions that must be confronted in connection with standard essential patents.  From a German perspective, the decision deserves special consideration because it touches on themes which up to now have not been decided, either at all or not explicitly but rather only partially and in divergent ways, by the German courts.  These concern in particular the methods for determining the FRAND rate as well as the conditions under which a competition-law based compulsory license defense can be applied.  The present article illuminates the English decision with a focus on the suggestions that the German courts may take away from it, especially with regard to the design of FRAND licensing contracts and the determination of FRAND rates.  
Dr. Haendicke is not enthusiastic about the one-FRAND-rate concept either.
3. On the IAM Blog, Richard Lloyd recently published a post titled Microsoft v Motorola judge criticises recent UK Unwired Planet SEP licensing decision.  According to the post, Judge Robart stated at a recent IPO annual meeting that Mr. Justice "Birss was wrong to offer specific royalty rates for the technology in question, rather than offering a range, and stated that he did not expect the judgment to be particularly influential in US courthouses."

4.  Two recent papers in the Journal of European Competition Law & Practice provide an overview of the Huawei decision: Sophie Lawrence and Francion Brooks's Unwired Planet v. Huawei:  The First UK FRAND Determination, 8 Euro. J. Comp. L. & Prac. (forthcoming 2017), and Damien Neven & Pierre Régibeau's Unwired Planet vs Huawei: A Welcome Clarification of the Concept of FRAND and of the Role of Competition Law Towards SEP Licencing, 8 Euro. J. Comp. L. & Prac. 463 (2017), and Sophie Law.  In contrast to the above sources, neither appears to be critical of Mr. Justice Birss's one-single-FRAND-rate rule.   

Monday, October 30, 2017

Some Recent Papers on Injunctions, Stays in the U.S.

1.  Steven M. Amundsen has published a paper titled Federal Circuit Decisions Concerning Smartphones Have Created Uncertainty Regarding the Evidence Needed to Prove Irreparable Harm and Establish Entitlement to Injunctive Relief, 42 Rutgers Comp. & Tech. L.J. 232 (2016).  From the introduction:
In four decisions by the Court of Appeals for the Federal Circuit in two patent cases that Apple filed against Samsung, the court has appeared to flip-flop when describing the evidence needed to prove an essential element for injunctive relief: irreparable harm. A patentee must establish irreparable harm, among other things, to obtain a preliminary or permanent injunction. And to establish irreparable harm, a patentee must demonstrate a sufficiently strong connection-or causal nexus-between the patent infringement and the alleged irreparable harm.
In its Apple v. Samsung decisions, the Federal Circuit explained that "[s]ales lost to an infringing product cannot irreparably harm a patentee if consumers buy that product for reasons other than the patented feature."' So if "the accused product would sell almost as well without incorporating the patented feature," the infringement injures the patentee only insubstantially even if the accused product's sales cause substantial damage commercially.' Thus, the causal-nexus requirement (1) ensures that the infringement causes the irreparable harm "in the first place"' and (2) prevents the patentee from "leverag[ing] its patent for competitive gain beyond that which the inventive contribution and value of the patent warrant."
This article discusses the causal-nexus requirement's evolution at the Federal Circuit based on two cases initially filed in April 2011 and February 2012. This article also discusses how various trial courts have applied the causal-nexus requirement when considering the propriety of injunctive relief. It then discusses points to consider when seeking to show or refute a causal nexus.
The most recent Federal Circuit decision in this series is currently awaiting a cert. decision from the U.S. Supreme Court.  For discussion, see, e.g., this post and this post by Florian Mueller on FOSS Patents. 

2.  J. Gregory Sidak has published a paper titled Irreparable Harm from Patent Infringement, 2 Criterion J. on Innov. 1 (2017).  Here is a link to the paper, and here is the abstract:
The Patent Act empowers a court to issue an injunction “to prevent the violation of any right secured by patent.” Whether a court will permanently enjoin an infringer depends on whether (1) the patent holder would suffer irreparable harm otherwise, (2) its legal remedies are inadequate, (3) the balance of hardships favors the patent holder, and (4) the injunction would not disserve the public interest. Similar factors inform the grant of a preliminary injunction. The Federal Circuit often says that the harm from patent infringement is irreparable if it cannot be measured. I say that such harm is irreparable because it irreversibly destroys wealth.
Patent infringement irreversibly obliterates wealth when it impedes society’s technical progress. Patent infringement does more than transfer wealth involuntarily from the patent holder to the infringer; it also harms third parties by devastating the surplus that consumers would derive from using the product practicing the new technology. Damages are impotent to cure that harm to the public interest. A court’s order of damages can no more recreate the wealth that has been or will be destroyed by an act of patent infringement than it can restore an ancient redwood after the axeman has felled it.
3.   Jonathan Stroud has published a paper titled NFC Technology LLC v. HTC America, Inc.:  Judge Bryson's Sitting-by-Designation Guide to Securing Stays in Light of Inter Partes Review, 65 Am. U. L. Rev. 1075 (2016).  Here is a link to the paper, and here is the abstract:
Federal Article III judges may stay civil litigation. Stays are most appropriate where another court or authority may resolve a part of or the entire dispute. Some statutes guide the courts on when to stay; some case law and appellate precedent guide judges on when a stay is appropriate. But the interlocutory nature of such decisions makes precedential decisions scarce. The Patent Trial and Appeal Board (PTAB), an administrative body tasked with patent post-grant review, efficiently reviews patentability of and can estopp later validity arguments. Stays in light of these proceedings are particularly favored. Although it will be some time before a body of appellate precedent develops surrounding these stays, one senior appellate judge from the patent-focused U.S. Court of Appeals for the Federal Circuit, sitting by designation, has issued a district court decision in a contentious district, where he exhaustively compiled district court stay cases and offered a guide for other judges faced with determining whether to stay. This Essay analyzes that decision.
Here is a copy of the decision itself.   

Thursday, October 26, 2017

Two New Papers on SSPPU

Following up on a post from last month on the IEEE's Patent Policy, here are two more papers discussing whether it is preferable for the royalty base to be the sales revenue from the sale of the end product, or rather the smallest saleable patent practicing unit (SSPPU):

1.  Anne-Layne Farrar published The Practicalites and Pitfalls of the Smallest Saleable Patent Practicing Unit in the December 2016 issue of les NouvellesHere is a link to the paper, and here is the abstract:
Dr. Anne Layne-Farrar reviews a paper by Teece and Sherry who assess the economics of the SSPPU doctrine. She summarizes each argument made in support of the application of SSPPU and evaluates their logical underpinnings. She also discusses the practical difficulties that arise in applying the SSPPU doctrine and discusses the policy implications. Many limitations raised by Teece and Sherry caution against a broad, automatic application of the SSPPU doctrine and suggest and more careful use of the doctrine when it is applied. 
For another recent paper by Dr. Layne-Farrar on this topic, see here.

2.  Gerard Llobet and Jorge Padilla have published The Optimal Scope of the Royalty Base in Patent Licensing, 59 J. L. & Econ. 445 (2016).  Here is the abstract:
Legal scholars debate the merits of using the total value of the product, as opposed to the value of the component to which the technology contributes, as the base for a royalty in licensing contracts. In this paper we make use of the fact that these two royalty bases are equivalent to using ad valorem and per-unit royalties, respectively. We abstract from implementation and practicability considerations to analyze the welfare implications of the two rules. Ad valorem royalties tend to lead to lower prices, particularly in the context of successive monopolies. They benefit upstream innovators and do not necessarily hurt downstream producers. This benefit increases when there are multiple innovators contributing complementary technologies, as is typical of standard-setting organizations. Ad valorem royalties are even more desirable when enticing upstream investment is optimal. Our findings explain why most licensing contracts include royalties based on the value of the product.

Tuesday, October 24, 2017

Minnesota Law Review Symposium on Pharmaceutical Drug Development

Though not directly related to the topic of patent remedies, this upcoming event may be of interest to some of my readers, particularly as it relates to the law and economics of patent protection for drugs.  On Friday of this week, the Minnesota Law Review will be hosting a symposium titled "A Prescription for Pharmaceutical’s Future: Balancing Industry and Consumer Concerns in Pharmaceutical Drug Development" at the University of Minnesota Law School from 8:15 a.m. to 4:00 p.m. (webpage here).  They have quite an impressive list of speakers lined up, as described below, so if you happen to be near the Twin Cities area you might want to check this out.  I assume that at least some of the presentations will be appearing in a future volume of the Minnesota Law Review.  (Update (10/26/17):  Here is a link to a video about the conference, which states (among other things) that a video recording of the conference will be available on the Minnesota Law Review's website.)  Anyway, here is the agenda:

Key Note Address by Dr. Jonathan Jarow, Senior Medical Advisor to the Director of the Center for Drug Evaluation and Research, U.S. Food and Drug Administration
  • “FDA Regulation of Drugs and Biologics: Finding the Right Balance”
Introduction by Michelle M. Mello, Ph.D., J.D., Professor of Law, Stanford Law School, and Professor of Health Research and Policy, Stanford University School of Medicine
  • “Why Ensuring Access to Affordable Drugs Is the Hardest Problem in Health Policy”
Address by Joanne Chan, J.D., Assistant General Counsel, Pharmaceutical Research and Manufacturers of America

Panel 1: Investigating the Pricing Equation: A Law and Economics Analysis
Pricing pharmaceutical drugs is a complex endeavor bogged down by disparate market forces and motivations. On one side of the equation, pharmaceutical companies gauge competitor prices by consulting insurers, consulting providers to assess prices with treatment plans, assessing input costs (such as research, development, marketing, FDA approval and other compliance measures, etc.), and determining desired profits for shareholders and the company, to name a few factors. On the other side of the equation, consumers want prescriptions and insurance premiums to be affordable and effective. The pricing process remains largely hidden, because partly Medicare cannot negotiate prices directly with drug companies. This panel confronts which underlying issues need to be addressed in the pricing equation and which issues should change or remain the same. Moderated by Thomas F. Cotter, M.S., J.D., Briggs and Morgan Professor of Law, University of Minnesota Law School.

  • Arti K. Rai, J.D., Elvin R. Latty Professor of Law, Duke University Law School
    • “Regulatory Gaming and Antitrust: Drugs vs. Biologics”
  • Christopher Robertson, Ph.D., J.D., Professor of Law and Associate Dean for Research and Innovation, University of Arizona College of Law
    • “The Economics and Experience of Patient Cost Exposure”
  • Rachel E. Sachs, M.P.H., J.D., Associate Professor of Law, Washington University School of Law
    • “The Role of Reimbursement”
  • Stephen W. Schondelmeyer, PharmD, Ph.D., Professor and Head of the Department of Pharmaceutical Care and Health Systems, Director of the PRIME Institute, University of Minnesota

Panel 2: “Safe & Effective” or “Now & Cheap”?: Finding the Right Role for the FDA
The FDA, its mission, and its powers are partially the result of Congressional response to a series of national incidents sparked by bad drugs and public outcries. Such a history lends itself to a potentially incoherent or incomplete mission. In fact, critiques of the FDA have suggested that its mission is in one sense too broad because it must investigate drugs for effectiveness and not merely safety. Others have suggested that the FDA’s commitment to be only scientific in its approval process is too narrow and does not allow for the consideration of other relevant factors, such as immediate need of the product. State right to try laws, in which a terminally ill patient may try drugs before FDA approval, exemplify one way that lawmakers challenge the approval process. As with any administrative agency, there are also issues of “mission creep” and exceeding statutory bounds, often to consider factors in drug approval that are not statutorily permitted. This panel will explore potential changes to the statutory mission and authority of the FDA. What should be its fundamental mission? What factors should it be allowed to consider? Have we already struck the proper balance? Moderated by Ralph Hall, J.D., Professor of Practice, University of Minnesota Law School.
  • Amy Kapczynski, M.A., J.D., Professor of Law and Faculty Director of the Global Health Justice Partnership, Yale Law School
    • “Why Do We Have Pre-Market Review of Medicines? The“Precautionary” Fallacy and the FDA’s Role in Information Production”
  • Jordan Paradise, J.D., Professor of Law, Loyola Chicago School of Law
    • “Regulatory Silence at the FDA: Impact on Drug and Biologic Competition”
  • Nicholson Price II, J.D., Ph.D., Assistant Professor of Law, University of Michigan Law School
    • “Drug Approval in a Learning Health System”

Panel 3: Pharmaceuticals Around the Globe: Access and Delivery Issues for Consumers

A final vital aspect of pharmaceutical drug development concerns bringing these drugs to consumers. Due to the expense of drug research and development, pharmaceutical companies need to make careful decisions on what products to pursue. However, consumers, particularly those consumers in poor areas, can suffer from the unavailability of particular pharmaceuticals or underdeveloped pharmaceuticals. Moreover, the pharmaceutical drugs that even are available might not be delivered competently. How does the intellectual property regime influence this phenomenon? Is pharmaceutical research and development compatible with social justice, and how so? What kinds of reforms are needed, and what is feasible for businesses? This panel will tackle both the international community’s need to respond as well as the United States’ role in response efforts. Moderated by Fred Morrison, Ph.D., J.D., Popham, Haik, Schnobrich/Lindquist & Vennum Professor of Law, University of Minnesota Law School.

  • Margo A. Bagley, J.D., Asa Griggs Candler Professor of Law, Emory University School of Law
    • “Making Room at the (Drug Access) Table: Is There a Place for Traditional Medicine?”
  • James Love, Director, Knowledge Ecology International
    • “Delinking R&D Costs, including Incentives from Prices for Drugs and Vaccines”
  • Jerome H. Reichman, J.D., Bunyan S. Womble Professor of Law, Duke University Law School
    • “Compulsory Licensing of Patented Pharmaceuticals under Article 31bis of TRIPS: The Way Forward”

Monday, October 23, 2017

Some Recent Papers on Huawei v. ZTE

1.  Giuseppe Colangelo and Valerio Torti have posted on ssrn the following abstract of their paper Filling Huawei's Gaps:  The Recent German Case Law on Standard essential Patents, Eur. Comp. L. Rev. (forthcoming):
The Huawei ruling identified the steps that owners and users of SEPs will have to follow in negotiating a FRAND royalty. Compliance with the code of conduct will shield patent holders from the gaze of competition law and, at the same time, will protect implementers from the threat of an injunction.
The licensing framework provided by the CJEU is aimed at increasing legal certainty and predictability for the whole standardisation environment. Nevertheless, the judgment has been criticised because a relevant number of issues are left unresolved. In this scenario the activities of national courts in filling the gaps left by the CJEU deserve the utmost consideration. This paper will seek to explore the approach developed at national level post Huawei, focusing on the German judicial experience. 
2. Urska Petrovcic has posted on ssrn the following abstract of her paper Injunctions for Standard-Essential Patents in the European Union:
Injunctions for standard essential patents (SEPs) — that is, patents that are essential to practice an industry standard — have been at the center of the antitrust debate for more than a decade. In July 2015, the Court of Justice of the European Union (CJEU) issued its long awaited decision in Huawei Technologies. Co. v. ZTE Corp., in which it addressed, for the first time, the question of whether an SEP holder’s request for an injunction could violate Article 102 of the Treaty on the Functioning of the European Union (TFEU) — the provision of EU competition law that prohibits a dominant company from abusing its market position. In this article, I analyze the implications of the CJEU’s judgment for SEP holders that seek to enforce their SEPs in the European Union. Huawei confirmed that an SEP holder faces a stricter level of antitrust scrutiny in the European Union than in some other jurisdictions, such as the United States. In practical terms, however, the developments that followed Huawei showed that the judgment limited Article 102 TFEU’s scope in addressing an SEP holder’s behavior, when compared with the approach that the European Commission had adopted in its previous investigations. After Huawei, an SEP holder’s request for an injunction is less likely to trigger antitrust liability under Article 102 TFEU. In addition, Huawei raised the barrier that an SEP holder must overcome to obtain an injunction. Yet, the requirements established in Huawei are not so strict as to preclude obtaining that remedy. Unlike in the United States, where, as of August 2017, no SEP holder has obtained an injunction, several SEP holders have requested and obtained injunctions against infringers in the European Union. 
3.  Nicolo Zingales has posted on ssrn a paper titled The Legal Framework for SEP Disputes in EU Post-Huawei:  Whither Harmonization?Here is a link to the paper, and here is the abstract:
This article revisits the antitrust treatment of unilateral conduct in Standard Essential Patent (SEP) disputes in EU, with particular focus on the landmark CJEU judgment in Huawei v ZTE and the way it has affected subsequent developments before national courts. It illustrates that while the Court in Huawei significantly improved legal certainty both for SEP holders and their potential licensees, it also left open a number of crucial questions affecting everyday’s licensing practice. First, it is not entirely clear whether the liability of an SEP holder presupposes leveraging by a vertically integrated firm or can also arise in purely vertical or horizontal relationships. Secondly, the safe harbor procedure formulated in the judgment begs important questions concerning burden of proof and portfolio licensing, which have given rise to divergent interpretations. It follows that the space remains wide open for competing national and even regional approaches to the rights and obligations of SEP holders, calling for further European harmonization - be it judicially, legislatively, or administratively through the European Commission. In support for the latter measures, the article illustrates the limited remit of EU private international law rules in preventing the forum shopping which is likely to unfold as a result of a fragmented landscape for the resolution of SEP disputes.

Friday, October 20, 2017

Two More Conferences on SEPs

1.  The Jindal Institute on Research in IP and Competition (JIRICO) will be holding its Third International Conference on Innovation for Shared Prosperity:   Deliberations on Standard Setting and Patent Licensing on November 4-5 at the Taj Mahal Hotel in New Delhi.  I will be participating remotely on day two, during a session titled "Patent Damages in SEP Cases and Court Adjudications."  The conference website is available here.

2.  The IPKat Blog earlier this week called attention to a conference taking place in London on December 6-7 titled "The 11th Annual Standards, Patents & Competition: Law & Litigation," which will include a session titled "The Latest on FRAND from the EU Courts."  The conference website is available here.

Wednesday, October 18, 2017

Seaman on the VirnetX v. Apple Enhanced Damages Opinion

This past Tuesday I wrote that "reports are coming in that Judge Schroeder (Eastern District of Texas) on September 29 entered a memorandum opinion and order awarding VirnetX $41.3 million in enhanced damages and another $96 million in costs, attorneys' fees, and interest, on top of a damages award $302 million, in a suit against Apple.  For coverage, see, e.g., this story on Ars Technica.  Apparently the opinion and order have now been unsealed, but as of this morning it isn't showing up on Lex Machina."  Professor Christopher Seaman (Washington & Lee University) has now posted the opinion on Scribd and has authorized me to publish the following guest post summarizing it: 

The district court found that Apple willfully infringed VirnetX’s patents by selling products that contained the accused features for a number of months (10 months for VPN on Demand, 5 months for FaceTime) after the initial jury verdict in 2012 found that Apple infringed and that the patents in suit were not invalid.  The court’s reasoning (see pp. 29-38) is focused on Apple’s post-verdict conduct, finding that “Apple’s continued sales after the verdict of products with the [infringing] features [was] unreasonably risky or reckless.”  (p. 35)  It rejected Apple’s claim that the PTO’s grant of a inter partes reexamination into the patents after the verdict made its conduct not willful/egregious (appeals of the reexam proceedings are still pending, but at least some claims of two of the patents-in-suit were cancelled by the PTAB in July).  Applying the Read factors (pp. 38-50), it awarded a 50% enhancement of the royalty rate during the relevant time frame, resulting an enhancement of approx. $41 million, even though the court concludes that “VirnetX has not presented any evidence of copying,” nor did it find any attempt to conceal the alleged misconduct.  The court also awarded attorney’s fees under 285 in part for VirnetX for the September 2016 trial.

Tuesday, October 17, 2017

News on Enhanced Damages

1. The Stanford Program in Law, Science & Technology and Samsung Electronics are sponsoring an event this coming Friday, October 20 titled "Patent Law in Global Perspective," which will include a session titled "The law of enhanced damages and how companies should respond to willfulness risk."  Speakers for this session will include Professors Colleen Chien, David McGowan, and Peter Menell, as well as Chris Lubeck (Tesla) and Isaac Peterson (Netflix). Information is available here.

2.  The aforementioned speakers should have a lot to talk about.  Just a couple of days ago Dr. Sanjeev Mahanta published a post on IP Watchdog titled "Idenix v. Gilead: District Court Exercises Discretion to Deny Enhanced Damages," discussing the September 22 decision of Judge  Stark (D. Delaware) denying Idenix a damages enhancement (and an award of attorneys' fees) on top of the $2.54 billion reasonable royalty award for the infringement of Idenix's patent on a method of treating hepatitis C (which I earlier reported on here.)  A redacted version of Judge Stark's opinion is available here.  Dr. Mahanta's post seems pretty thorough, though I may wish to write up some of my own thoughts on the opinion later this week or next week.  (My initial reaction, for what it's worth, is favorable.)  The court also awards prejudgment interest at the prime rate.

3.  Meanwhile, reports are coming in that Judge Schroeder (Eastern District of Texas) on September 29 entered a memorandum opinion and order awarding VirnetX $41.3 million in enhanced damages and another $96 million in costs, attorneys' fees, and interest, on top of a damages award $302 million, in a suit against Apple.  For coverage, see, e.g., this story on Ars Technica.  Apparently the opinion and order have now been unsealed, but as of this morning it isn't showing up on Lex Machina. 

Monday, October 16, 2017

Bray on Remedies and Economics

According to the old saying (attributed to the Greek poet Artilochus and later popularized by Sir Isaiah Berlin) the fox knows many things, but the hedgehog one big thing.  That could, perhaps, be the message of Professor Samuel Bray's recent paper Remedies, Meet Economics; Economics, Meet Remedies, which is forthcoming in the Oxford Journal of Legal Studies.  Bray argues that, while one might "expect to find a high degree of affinity between law and economics and the field of remedies," in fact this often isn't the case--one possible reason being "disciplinary fragmentation . . . .  As specializations narrow and literatures grow, keeping up becomes difficult."  Too many of us are hedgehogs, in other words, and not enough of us as foxes.  (This may even include me, as much as I try to be a fox.  I admit that I wasn't aware of Landes & Posner's 1994 paper in the Journal of Legal Studies on the economics of anticipatory adjudication, which Professor Bray cites (and critiques) in this article.)  I suspect there's a good deal of truth in Professor Bray's observation, and overall this is a very interesting, though-provoking paper (though I'm not sure I would agree that Calabresi and Melamed intended some of their statements about property and liability rules, as presented in their famous 1972 paper, as anything more than a stylized model, as Professor Bray himself at times seems to acknowledge).  I hope the paper spurs greater interest among both remedies scholars and law-and-economics scholars to work together and learn from one another.  Anyway, here's a link to the paper, and here's the abstract:
One would expect the fields of ‘law and economics’ and ‘remedies’ to have substantial interaction. But scholars in each field largely ignore those in the other. Thus law and economics scholars blunder in their description of the law of remedies, and remedies scholars are cut off from economic insights. For scholars who are in these fields, this article offers a critique, as well as suggestions for cooperation. For all legal scholars interested in melding conceptual and economic analysis, it offers a cautionary tale of disciplinary fragmentation.

Friday, October 13, 2017

Patent Remedies Sessions at Some Upcoming Conferences

1.  AIPLA is holding its annual meeting next week (October 19-21) in Washington, D.C. (webpage here).  On Friday, October 20, there will be a panel titled "Best Practices for Managing Parallel Patent Trial and Appeal Board (PTAB) and District Court Proceedings, which will include R. Eric Hutz speaking on stays pending PTAB proceedings.  Later that same morning a session titled "Around the World in 75 Minutes:  Key IP Updates," which will include Alice Young-Ran Choi speaking on "South Korea:  How IP Law Changes Are Affecting Damages, Evidence, and Invalidation."  

2.  On October 30, there will be a conference in Turin, Italy titled "Tutela giudiziale di Standard Essential Patents," which will feature a mock trial and much discussion of Huawei v. ZTE.  Webpage here.  For further information, see posts on IPKat and EPLaw.

3.  Georgetown Law and the Berkeley Center for Law & Technology are putting on their Ninth Annual Patent Law and Policy Conference in Washington, D.C. on November 5 (webpage here).  There will be a session patent remedies in the afternoon, featuring Morgan Chu, Professor Bernard Chao, Ken Korea, and Matt Powers.

Wednesday, October 11, 2017

Some New Papers, Posts on SEPs, FRAND in Asia

1.  Jorge Contreras has posted a paper on ssrn titled National Disparities and Standards-Essential Patents:  Considerations for India, which is a draft of a chapter in a forthcoming edited volume titled Complications and Quandaries in the ICT Sector:  Standard Essential Patents and Competition Issues (Ashish Bharadwaj, Vishwas Deviah & Indraneth Gupta eds., Spinger, forthcoming 2017).  Here is a link to the paper, and here is the abstract:
Patents on standardized technologies are being issued with increasing frequency, and the majority of these patents are held by large multinational firms based in developed economies. As a result, firms from less-developed economies with sparse patent holdings are disadvantaged in both domestic and foreign markets. While protectionist governmental policies can address these disparities, such measures are potentially contrary to international treaty obligations and generally unsuccessful in the long term. An alternative approach involves greater participation in international SSOs by firms from less-developed economies. This increased participation is likely to benefit such firms both in terms of technology development, strengthening of patent positions, and influence over SSO policies. To facilitate increased participation, both financial and institutional support will be required from local governments, NGOs, multinational organizations and SSOs themselves. To the extent that participation in international SSOs by firms in developing economies such as India can be increased, it could have a meaningful impact on domestic innovation, job creation, technical capability and manufacturing output.
2.  Ankita Tyago and Sheetal Chopra have posted a paper on ssrn titled Standard Essential Patents (SEP's)--Issues & Challenges in Developing Economies, 22 J. Intell. Prop. Rts. 121 (2017).  Here is a link, and here is the abstract:
Intellectual property rights (IPRs) in standards have proven to be an intensively debated issue nowadays. Although standards are meant to offer ‘access’ to technology and patents grant the possibility to ‘exclude’ others (exclusivity rights), both aim to promote innovation. The “return on investment” (ROI) from the patented technology selected to become part of a standard is the motor that fuels the development and implementation of standards. When aiming to solve highly complex technology problems the effort of many companies in sharing the technology resulting from large R&D investments is necessary. It is not surprising that, before sharing with others, such technical solutions are protected by patents. Thus, in the information communication technology (ICT) area the phenomenon of patents in standards is the general rule. Indeed, connecting millions of devices with each other (interoperability) and making them work properly (high performance) can only be achieved when the best technologies out of thousands of contributed technical solutions are selected. Considering some of the most celebrated Government of India’s initiatives such as Internet of Things, Start Up India, Make in India, Digital India etc. calls for an effective IPR regime that incentivizes development of standardized technologies and encourages indigenous local manufacturing of innovative standardized devices. This will go a long way in reducing India’s net import reliance, enhancing value addition, creating IP, generating employment, increasing domestic patent footprint, reducing cash outflow due to Bill of Materials (BOM), etc.
With this view, the present paper analyses the concept of Standard Essential Patents (SEPs) and related issues to mobile technology that are deliberated at various forums. It summarizes some important aspects that arise when dealing with SEPs. The linkage of standards and patents has also been studied. The paper examines the patent landscape and offers analysis of existing and anticipated patent holdings. It also outlines the evolution of key technologies and provides comparative analysis of key patents. The paper brings light to some notable circumstances likely to influence the mobile patent landscape for the next several years and gives some recommendations for facilitating India’s growth story in creation, protection, and wider adoption of technology.
3.  Hao Yuan has posted a paper titled SEP Holder's Right to Injunction Shall Not Be Lightly DeprivedHere is a link to the paper, and here is the abstract:
The 2017 Beijing High Court Patent Infringement Guidelines’ rule of “no injunction as a principle for SEP holders” has been premised on two “it” theories, i.e. the patent hold-up and royalty stacking conjectures, which still need to be judged by their predictive power in the real world. For the past two decades these conjectures did an unsatisfying job in this respect – despite grand appearance at first sight, empirical support of a stagnant market for SEP-intensive industries is still in serious lacking. As direct variants of classical transaction cost economics hold-up theory and the Cournot Complement problem, the conjectures also seem to be inconsistent with the established theories. From a historical and comparative law’s perspective, occasional patent hold-up is by no means a new phenomenon limited to the standard setting. It is entirely possible that the patent system is imperfect, with frictions or loopholes happening from time to time. But there is a significant distinction between acknowledging occasional overcharging behavior (frictions or loopholes), and concluding that a systematic market failure has been resulted, or will be resulted absent taking aggressive “reforms” departed from the classical rule. For the former, comparative law teaches us that patent law has been functioning pretty well in the past hundreds of years, and absent the latter, aggressive departures from a fundamental notion of a well - working patent system, for example in the form of “no injunction by principle” rule, is simply wrong. Market mechanism with carefully and finely tuned rules has largely proved itself to be capable in dealing with occasional hold-ups, and without substantial empirical evidence to the contrary, policy makers in China should not be frightened into making overzealous changes. 

4.  On September 29, the Japan Patent Office published its "Invitation to Contribute to Guidelines for Licensing Negotiations Involving Standard-Essential Patents," available here.  Some recent blog posts discuss a proposal, floated this summer but not mentioned in the above document, that would have submitted disputes over FRAND-committed SEPs to mandatory ADR.  See Hirotaka Nonaka, Japan Considers Introducing a New ADR System with Compulsory License for SEPs, Trust in IP Blog, Aug. 12, 2017; Jacob Schindler, Patent Owners Sound Alarm over Proposed "Compulsory Licensing for SEPs" in Japan, IAM Blog, July 27, 2017; and (most recently) Jacob Schindler, Japanese Government Will Issue SEP Negotiation Guidelines, but Controversial ADR Proposal on Hold for Now, IAM Blog, Oct. 3, 2017.     

Monday, October 9, 2017

AIPPI: Quantification of Monetary Relief

The AIPPI World Congress will be meeting October 13-17 in Sydney.  (Webpage here.)  One session on Monday, October 16 will be on injunctions in pharmaceutical patent cases, and another on Tuesday, October 17 is titled "How Much for Your FRAND?"  Perhaps of most interest to readers of this blog, however, there will be a Study Committee Meeting on Saturday, October 14 titled "Quantification of Monetary Relief" and on Sunday, October 15 a "Plenary Session for proposed Resolution (4) - Quantification of monetary relief."  The description of the October 14 session is as follows:
In litigation concerning infringement of IP rights, monetary relief in the form of damages is commonly requested by the IP rights holder. It is generally accepted that this relief should at a minimum be adequate to compensate for the loss suffered by the rights holder and deter further infringement. In practice, few cases proceed beyond a determination of liability and courts are asked to determine the quantum of damages relatively infrequently.  However, if a case does proceed to that stage, it may in practice be difficult to obtain economic evidence regarding infringement, and to estimate the appropriate quantum of damages to be awarded within the factual matrix of the dispute before the court.  For example, where permanent price erosion has occurred, or other irreparable harm has occurred, the relevant quantum of damages can be very difficult to determine.  Predictable and logical rules for quantification are desirable as this allows the parties to have a reasonably clear idea of the likely quantum of damage, which may in turn encourage early settlement.  Otherwise, the amount of any damages award may vary significantly from one country to another, irrespective of the size of the market. Reports have been received from a number of National and Regional Groups on the issue of quantification, and the objective is to synthesise a number of common rules on the quantification of monetary relief that could be applied in a uniform way, promoting legal certainty. 
It will be interesting to see what resolution comes out of the meeting.  The individual country reports prepared in advance of the meeting--forty of them, ranging alphabetically from Argentina to Vietnam--are available here.  (I haven't read many of them yet myself.)  The Japan report is also available in the July 2017 issue of AIPPI-Journal of the Japanese Group of AIPPI (pp. 217-28), and the Germany report in the August-September 2017 issue of GRUR-Int. (pp. 736-43).

Thursday, October 5, 2017

Federal Circuit Reiterates that a Claimant Must Prove All Four eBay Factors to Get an Injunction

The case, decided this morning, is Amgen Inc. v. Sanofi, opinion by Chief Judge Prost, joined by Judges Taranto and Hughes.  The patents in suit relate to monoclonal antibodies used to reduce LDL cholesterol, and most of the opinion is devoted to a discussion of the written description and enablement doctrines, on which grounds the court reverses and remands for a new trial.  (I'll be teaching enablement and written description in my patent law class next week, so maybe I'll use this case as an example for class discussion.)  Of more interest to readers of this blog, however, is the court's discussion of injunctive relief.  The district court had entered judgment for the plaintiffs, Amgen, and entered a permanent injunction against Sanofi's "Praluent" product, even though (according to the district court) one of the four eBay factors--the public interest--weighed against entry of the injunction.  The Federal Circuit, echoing its May 1 decision in Nichia v. Everlight (see discussion here), concludes that this was error--though at the same time, it cautions that the public interest doesn't require that courts never enter injunctions in cases involving pharmaceuticals (pp. 21-23):
Finally, we address the district court’s permanent injunction removing Appellants’ Praluent from the market. As noted earlier, we stayed this injunction pending resolution of this appeal. Because we vacate the district court’s judgment as to written description and enablement and remand for a new trial, we also vacate the permanent injunction.
We write to note, however, that the district court’s permanent injunction analysis in this case was improper for two distinct reasons. First, the district court misapplied eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006). In that case, the Supreme Court explained that: 
[A] plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief. A plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. 
Id. at 391 (emphases added). Here, the district court concluded that issuing a permanent injunction would disserve the public interest. Despite that finding, the court issued a permanent injunction. J.A. 33–34. That was in clear violation of eBay. If a plaintiff fails to show “that the public interest would not be disserved by a permanent injunction,” then the district court may not issue an injunction. eBay, 547 U.S. at 391.
Second, the district court also erred in its analysis of the “public interest” factor. In reaching its conclusion that the injunction would disserve the public, the district court weighed “being a patent holder and a verdict winner” on the one hand and “taking an independently developed, helpful drug off the market” on the other. J.A. 33. It then “conclude[d] that the public interest of having a choice of drugs should prevail.” J.A. 33–34.
But eliminating a choice of drugs is not, by itself, sufficient to disserve the public interest. Under such an approach, courts could never enjoin a drug because doing so would always reduce a choice of drugs. That, of course, is not the law. See 35 U.S.C. § 271(e)(4)(B) (“[I]njunctive relief may be granted against an infringer to prevent the commercial manufacture, use, offer to sell, or sale within the United States or importation into the United States of an approved drug, veterinary biological product, or biological product.”). We previously rejected such reasoning in WBIP, LLC v. Kohler Co. and explained that: 
The district court’s decision is based on its reasoning that having more manufacturers of a lifesaving good in the market is better for the public interest. But this reasoning is true in nearly every situation involving such goods, such that, if it alone is sufficient, it would create a categorical rule denying permanent injunctions for life-saving goods, such as many patented pharmaceutical products. As the Supreme Court has warned, categorical rules regarding permanent injunctions are disfavored.
829 F.3d 1317, 1343 (Fed. Cir. 2016). Just as a patent owner does not automatically receive an injunction merely by proving infringement, see eBay, 547 U.S. at 394, an accused infringer cannot escape an injunction merely by producing infringing drugs. Accordingly, a reduction in choice of drugs cannot be the sole reason for a district court to deny an injunction.
I've argued before that, although I don't think it is appropriate to award injunctions to the prevailing plaintiff in virtually every patent case, as was the understanding of U.S. law prior to eBay (and is still the practice in many countries, at least outside of the FRAND context), I also wouldn't read eBay quite so literally as to require the plaintiff to prevail on all four eBay factors--a result that seems to me rather contrary to traditional notions of equitable balancing, among other problems.  For discussion, see here.  But it appears that the two panels of the Federal Circuit have now taken the literal approach--though arguably the statements above in Amgen are dicta, since the court reversed and remanded the judgment in favor of the plaintiffs anyway. 

Wednesday, October 4, 2017

Patently-O Reporting First Post-Samsung Design Patent Damages Verdict

Dennis Crouch's comprehensive write-up on the case, Columbia Sportsware v. Seirus Innovative Accessories, is available here.  According to the post, the jury awarded the plaintiff $3,018,174, and while the jury instructions asked the jury to "identify the 'article of manufacture’ to which the infringed design has been applied," based on consideration of several factors, "the jury was not asked to actually define the article of manufacture," and "the $3 million figure appears to be Seirus’s profits on all of its infringing sales" (emphasis mine).  

As readers of this blog are probably aware, I'm not a big fan of disgorgement generally, especially when (as apparently was the case here) it results in an award of all of the profit earned on a multi-feature product.  Beyond that, in my view it would make sense if judges more frequently used special verdicts or general verdicts with special interrogatories, as permitted under Federal Rule of Civil Procedure 49, to better test whether a jury's determination is supported by the evidence.  Here, the judge might have required the jury to define the relevant article of manufacture.  

Or maybe we could figure out a way to avoid having juries determine these questions altogether . . . could the recovery of the infringer's profits be viewed as an equitable remedy for which there is no constitutional right to a jury trial?

Monday, October 2, 2017

Taiwan Appeals Court Awards Philips NT$1.1 Billion

Professor Chung-lun Shen of Taiwan's National Chengchi University has published a short article titled Taiwan Supreme Court to Clarify Distinction between Patent Damages and Unjust Enrichment:  Koninklijke Philips N.V. v. Gigastorage Corporation, in NAIP IP Observer #108, Sept. 28, 2017.  The article discusses a recent patent infringement case brought by Philips against Taiwanese manufacturer Gigastorage.  (Disclosure:  In 2007, I served as a proposed expert witness for the defense in a U.S. case brought by Philips against Gigastorage.)  According to the article, the trial court concluded that (1) there was no proof of infringement from January 1, 2000 to April 1, 2003; (2) there was proof of infringement from January 1, 2014 to February 14, 2015, but under the patent statute Philips could not recover (as it requested) an award of the defendant's profit for that period, because Gigastorage earned no profit from the sale of infringing products during that time; and (3) for the in-between period, Philips was barred from recovering patent damages due to the two-year statute of limitations, but under an unjust enrichment theory (for which the applicable statute of limitations is 15 years) it could recover the benefit Gigastorage incurred during that time.  The court calculated this benefit by (1) estimating Gigastorage's revenue from the sale of infringing products (NT$644 million), and then (2) based on the relative contributions of the patent in suit and other technology awarding NT$10.5 million (about US$347,000) altogether.  On appeal, the Court of Appeals awarded $NT1.1 billion (about US$33 million) for unjust enrichment, based on its view that the defendant derived a benefit equal to the royalty it would have paid had it not infringed.  The court calculated the royalty based on a price of $NT0.06 per infringing disk, concluding that apportionment is not relevant to the unjust enrichment remedy here, and that Philips offered Gigastorage an efficient package licensing deal.  The court also held that Philips's delay in filing suit did not bar the award, and the matter is now headed to Taiwan's Supreme Court.

The case is interesting for a number of reasons.  First, in some other countries including the U.K. and I believe Germany, a court will deny an award of infringer's profits under the patent statute if the infringer earned no profits, even though it may have incurred some benefit (for example, in the form of lower costs).  See my book p.203 for discussion of a relevant English case.  Apparently Taiwan follows the same rule.  Second, the Taiwanese court's practice of awarding monetary relief for an unjust enrichment claim, for which the applicable statute of limitations is longer than for a patent infringement claim, is consistent with practice in some other countries, including as I recall Germany and Japan.  Third, however, I'm not at all sure that it is sensible to award the entire benefit the infringer earned, where some of that benefit surely must depend on the use of other technologies; the trial court's "contribution" approach sounds more defensible than the Court of Appeals' rule.  (In the U.S., of course, the infringer of a design patent can be forced to disgorge the entire benefit derived from the relevant "article of manufacture," but as I've argued many times before that result makes little economic sense.  See, e.g., here.)  Fourth, the question of whether laches or equitable estoppel should be a defense to a claim that is brought within the relevant statute of limitations (here, for unjust enrichment) is reminiscent of the two recent cases in which U.S. Supreme Court has held that under U.S. law laches is not a defense to a claim for damages for patent or copyright infringement (see, e.g., here).

It will be interesting to see what happens before the Taiwan Supreme Court.   

Friday, September 29, 2017

From Around the Blogs: Willful Infringement, Design Patent Damages, FRAND in India

1.  JD Wooten has an interesting post this morning on the IP Watchdog Blog titled Willful Infringment, Opinion Letters, and Post-Halo Trends.  The post includes not only discussion of some recent district court opinions addressing the relevance of opinion letters, but also some statistics on the number and success of motions for enhanced damages from 2009 to the present.  According to the post, as expected there has been an uptick in such motions since Halo, but the numbers over time actually seem fairly modest to me.

2.  On FOSS Patents, Florian Mueller has a post on the latest developments in the Apple v. Samsung briefing on design patent damages, with links to (1) a September 28 post on IP Watchdog by Matt Levy on the same topic, (2) a post by  Professor Rebecca Tushnet on her 43(B)log recapping a recent event in D.C. titled "Next Up In Apple/Samsung Smartphone Wars: Design Patent Remedies Following The SCOTUS Decision,” which I mentioned on this blog earlier this month; and (3) a recording of the latter event. 

3.  On the SpicyIP Blog, Rajiv Kr.  Choudhry published a post earlier this week titled TRAI Invites Comments on Patents Act, FRAND | Views on Inter Agency Co-Operation.  TRAI is the Telecom Regulatory Authority of India.

Update (Oct. 9, 2017) For a follow-up on this last matter, see Jacob Schindler, India Telecoms Regulator Will Enter the FRAND Fray amid Concerns over "Grim State" of Domestic Innovation, IAM Blog, Oct. 9, 2017.

Wednesday, September 27, 2017

Some New Articles, Posts on Exemplary Damages

1.  Joshua Marshall has published a paper titled Aggravated or Exemplary Damages for Copyright Infringement?, 39 EIPR 565 (2017).  Here is the abstract:
This article will critically evaluate the damages provisions relating to copyright infringement, specifically the award of additional damages under s.97(2) of the Copyright, Designs and Patents Act 1988. The UK courts have held that such awards are a measure of aggravated damages. This article will examine to what extent these additional awards are aggravated damages and, therefore, compensatory. It will be argued that such awards have a closer affinity to orthodox exemplary damages. The practical application by the UK courts reinforces this view.
Mr. Marshall argues that "aggravated damages" are intended to compensate for, e.g., harm to pride and dignity, but that awards under the above-cited provision of the copyright statute are more in the nature of exemplary damages intended to punish. For previous discussion on this blog of the availability of punitive damages for patent infringement in the U.K., see here.  For previous discussion of damages for what is often referred to in Europe as "moral prejudice," see, e.g., here.

2.   In August, Luca Giove and Andrea Comelli published a post on the EPLaw Blog titled Italy:  Supreme Court Ruling on Punitive Damages.  The post discusses a decision of the Grand Chamber of the Italian Court of Cassation (Cass. Civ. SS. UU. 05.07.2017, no. 16601) in which, according to the authors, the court "ruled that it could be possible to obtain recognition--where necessary--and enforce in Italy foreign judgements which may have awarded to the winning party a restoration in the form of punitive damages."  Although the case did not involve IP rights (it appears that the underlying action was a personal injury case litigated in the U.S.), the authors argue that "the ruling has many implications also for patent and more in general IP disputes, as it can be easily guessed: openings to 'punitive damages' emerged already in this year’s CJEU decision OTK v SFP (C-367/15), and are extensively detailed by the reasoning of the decision of the Court of Cassation, where specific references are made to Italian statutory provisions on the infringement of patent and other IP rights."  They also note that awards in excess of purely compensatory awards--such as royalties that exceed those that a willing licensee would have paid, or awards of the infringer's profits--aren't necessarily foreign to Italian IP law.  An interesting read.

For previous discussion on this blog of the CJEU decision referenced above, see, e.g., here.

3.  Also in August, Prashant Reddy published a post on the Spicy IP Blog titled Delhi High Court Has Liberally Applied Time Incorporated to Award Punitive Damages Even After Justice Bhat Over-ruled ItHere is a link.  To my knowledge, Indian courts have yet to award punitive damages in a patent case, but they have done so in some trademark and copyright matters.  For previous discussion on this blog, see, e.g., here.

Monday, September 25, 2017

Perotti on Torpedo Actions in Italy

As I have written before, a "torpedo action" is an action for a declaratory judgment filed by a potential patent infringement defendant in a European state that is believed to have a slow-moving docket, with the goal of preemptively staying proceedings in a faster forum in which the patent owner is likely to file an infringement action.  (For previous discussion, see my book pages 253-55 and, on this blog, posts here, here, here, here, and here.)  In my September 18, 2017 post, however, titled Some Recent Commentary on Unjustified Threats, Cross-Border Injunctions, Arrow Declarations, I forgot to include a recent blog post by Riccardo Perotti titled A requiem for torpedo actions? A catalogue of the most recent decisions on the issue, published on the IP Lens Blog (which until recently I was not aware of, but have now added to the list of "Other Blogs of Interest" in the left-hand column of this page).  Dr. Perrotti discusses, inter alia, recent Italian cases dismissing torpedo actions in Italy where the plaintiff seeks a declaration of noninfringement of the non-Italian portion of a European patent.  He concludes by stating that "all the torpedoes launched in Italy after the [2013] Asclepion ruling have been dismissed on the grounds of lack of jurisdiction. Does this mean that the torpedo saga has finally come to an end?"

Friday, September 22, 2017

Some New Articles on Patent Damages, Part 2

1.  Bernard Chao has posted a paper on ssrn titled Lost Profits in a Multicomponent WorldHere is a link to the article, and here is the abstract:
Given our adversarial system, it is not surprising that plaintiffs advance creative damages theories that would help them maximize their recoveries. In patent law, one recurring tactic is for patentees to seek remedies based on the entire infringing product instead of just the specific feature covered by the patent. This distinction can significantly inflate remedies because modern multicomponent products contain thousands, sometimes hundreds of thousands of different features. Thus, entire products are orders of magnitude larger, more complex and more valuable than individual features.
In recent years, the Supreme Court has sensibly rejected attempts to base patent remedies on entire products in the context of permanent injunctions and design patents. Nonetheless, the Federal Circuit continues to allow patentees to recover all the lost profits associated with an entire infringing product even when the patent at issue only covers one aspect of a multicomponent product. Just this past spring, in Mentor Graphics v. Eve-USA, the Federal Circuit affirmed a $36,417,661 award giving the patentee all the lost profits caused by the sales of the defendant’s infringing semiconductor emulator systems even though the patent covered only one feature of the defendant’s whole product. The decision explicitly rejected attempts to apportion profits between those attributable to the patented feature and other significant factors.
This Essay argues that the failure to consider apportionment is wrong on both the law and policy. From a doctrinal perspective, the Federal Circuit has misinterpreted deeply rooted Supreme Court precedent to arrive at an overly simplistic “but for” test to assess damages. From a policy perspective awarding lost profits based on the entire infringing product – rather than just the feature – compensates the patentee for value she did not create and deters innovation in technologies that operate with or build upon other technology (“complementary technology”). Accordingly, this Essay argues that it is time to realign lost profits doctrine to make it consistent with other types of patent remedies. Patentees should only be compensated based on the value of the patent they hold. That means focusing the remedy on the infringing feature and not the infringing product.
I mentioned this paper here a couple of weeks in connection with the Federal Circuit's denial of a rehearing en banc in Mentor Graphics Corp. v. EVE-USA, Inc., but I didn't quote Professor Chao's abstract.

2.  Erik Hovenkamp and Herbert Hovenkamp have posted a paper on ssrn titled Buying Monopoly:  Antitrust Limits on Damages for Externally Acquired Patents, 25 Tex. Intell. Prop. L.J. __ (forthcoming).  Here is  alink to the paper, and here is the abstract:
The “monopoly” authorized by the Patent Act refers to the exclusionary power of individual patents. That is not the same thing as the acquisition of individual patent rights into portfolios that dominate a market, something that the Patent Act never justifies and that the antitrust laws rightfully prohibit.
Most patent assignments are procompetitive and serve to promote the efficient commercialization of patented inventions. However, patent acquisitions may also be used to combine substitute patents from external patentees, giving the acquirer an unearned monopoly position in the relevant technology market. A producer requires only one of the substitutes, but by acquiring the combination it can impede product market rivals by limiting their access to important technological inputs. Similarly, a patent assertion entity may acquire substitute patents to eliminate inter-licensor competition, enabling it to charge supra-competitive license fees, much like a merger or cartel. For example, by acquiring two or more substitute patents that collectively dominate a market a PAE can effectively monopolize the technology for that market. Such anticompetitive practices are regularly condemned in conventional product contexts, but the courts have not yet applied the same antitrust logic to patent markets. And they passively encourage anticompetitive patent acquisitions by awarding large damages when such patents are infringed.
We propose that infringement damages for an externally acquired patent be denied if the acquisition served materially to expand or perpetuate the plaintiff’s dominant position in the relevant technology market. By weakening enforcement, this limits the patent holder’s ability to use such acquisitions to anticompetitive ends. We do not suggest that a dominant patent holder should be prohibited from securing external patent rights in the relevant technology market, but simply that it should obtain them through nonexclusive licensing, not transactions that restrict third party access. This is as valuable to patent policy as it is to antitrust, for it will tend to increase innovation by discouraging systematic monopoly in technology markets.  
I previously mentioned an earlier draft of the paper here.

3.  Peter Lee has posted a paper on ssrn titled Distinguishing Damages Paid from Compensation Received:  A Thought ExperimentHere is a link the article, and here is the abstract:
This symposium contribution argues that the shortcomings of patent damages doctrine arise in part from the conflicting normative aims of this body of law. On the one hand, patent damages should provide just enough compensation to induce invention and commercialization of a technology but nothing more, thus mitigating deadweight loss. On the other hand, damages should deter infringement and shunt would-be infringers into licensing negotiations with patentees. The current regime of “make-whole” damages largely effectuates the second aim by providing patentees with the full market value of their infringed technologies, even when such damages exceed inducement costs. To help resolve this divergence, this Article proposes distinguishing the amount of compensation that patentees receive from the amount of damages that infringers pay. Within this framework, infringers would pay damages based on the current regime of make-whole damages, thus deterring infringement and encouraging licensing. However, courts would compensate a patentee up to this amount based on the patentee’s inducement costs of invention and commercialization, including a reasonable profit. If make-whole damages paid by an infringer exceed inducement costs, courts would allocate any surplus to government agencies to fund research and development, thus advancing the goals of the patent system. This Article assesses the pros and cons of this proposal, observing that such a “decoupling” regime encourages patentees and infringers to settle, thus eliminating any patent surplus. This is a feature rather than a bug, however, as such settlement would promote more competitive market entry relative to the current status quo while guarding against overly diminishing incentives to invent. 

Wednesday, September 20, 2017

Some New Articles on Patent Damages, Part 1

1.  Colleen Chien and Eric Schulman have posted a paper titled The Responsible Use of Comparative Licenses, forthcoming in the Texas Intellectual Property Law Journal.  Here is a link to the paper, and here is the abstract:
Over the last decade, courts have applied increasingly stringent standards to the evidence used to determine patent damages. While this has reduced the risk of awards untethered to the facts, the current focus on strictly comparable licenses that conform most closely to the naked patent, one-way, royalty-bearing "hypothetical license" specified by law has created its own problems, particularly in the valuation of individual patents incorporated into products with numerous inventions. The rejection of "semi-comparables"—transactions that deviate in some significant way from the terms of the hypothetical license—has led to distorted incentives, unpredictability, and the exclusion of the very transactions that best reflect the incremental value of the invention; those that are formed ex ante, but do not make the cut. We suggest that many of these problems could be avoided by a more inclusive but disciplined approach to reasonable royalty determinations that prioritizes objective evidence of a patent‘s incremental value even when reflected in traditionally excluded "semi-comparable" transactions like technology licenses and sales. Though courts have been reluctant to use semi-comparables because of a lack of objective information about their formation, we begin to address this void, drawing upon the collective wisdom of licensing lawyers we interviewed, the nearly two-decade-long career of one of us as a licensing lawyer, and studies of thousands of actual licenses. When a reasonable, evidence-based estimate or upper bound cannot be derived, we consider the limited use of tailored injunctions, assuming the other eBay elements are met.
2.  R. Scott Hiller, Scott J. Savage, and Donald M. Waldman have posted a paper on ssrn titled Using Aggregate Market Data to Estimate Patent ValueHere is a link to the paper, and here is the abstract:
Intellectual property and its protection is one of the most valuable assets for entrepreneurs and firms in the information economy. This article describes a relatively straightforward method for measuring patent value with aggregate market data and the BLP model. We apply the method to United States smartphones. The demand estimates and recovered marginal costs produce sensible simulations of equilibria prices and shares from several hypothetical patent infringements. In one simulation, the presence of near field communication on the dominant firm’s flagship smartphone results in a 26 percent increase in profits per phone. This estimate provides a starting point for establishing a reasonable royalty between the patent holder and the dominant firm in a hypothetical negotiation. 
3.  Lisa Larrimore Ouellette has posted a paper on ssrn titled Adjusting Patent Damages for Nonpatent Incentives, also forthcoming int he Texas Intellectual Property Law Journal.  Here is a link to the paper, and here is the abstract:
Nonpatent innovation policies—including direct spending on grants and procurement, innovation prizes, and R&D tax incentives—are a significant part of innovation policy in practice and are attracting growing attention from legal scholars. In some cases, innovation is most efficiently incentivized by using these policies as complements, but in others, allowing researchers to claim nonpatent incentives in addition to patent rewards results in overcompensation. There are a few potential solutions to this reward-stacking problem, including limiting the patentability of inventions that have received significant alternative rewards, or conditioning nonpatent transfers on some relinquishment of patent rights. This symposium contribution presents and evaluates an additional solution: reducing patent damages to account for the nonpatent rewards (including ex ante risk reduction) an invention has already received. Such an approach could improve not only the incentive side of innovation policy, but also the allocation side, by reducing deadweight loss while maintaining incentives to innovate. The ability of patent damages doctrine to help mediate between different bodies of innovation law is a benefit of recent proposals for patent damages reform that has thus far been overlooked.

Monday, September 18, 2017

Some Recent Commentary on Unjustified Threats, Cross-Border Injunctions, Arrow Declarations

1.  Perhaps next year will be the year in which I begin work on a projected book on the comparative law and economics of wrongful patent enforcement--a topic that raises all manner of interesting policy and legal questions (potentially involving IP, antitrust, unfair competition, and even freedom of speech and related constitutional rights).  Meanwhile I continue to fortify my research file on the subject, which now includes the newly amended U.K. statute on the subject (available here), which is usefully summarized in a recent IPKat post here.  (See also this IPKat post from last December, on a 2016 case involving the U.K.'s then-existing "groundless threats" law, Nvidia v. Hardware Labs.)  In addition, Norman Siebrasse published a couple of interesting posts on the Canadian law of unjustified threats last November (here and here), raising the questions of whether (as under common law, but not current Canadian statutory law) there should be a "malice" requirement (as there usually is, in a sense, in U.S. law) and whether it makes any sense to distinguish threatening letter from informative letters.  Finally, a more recent IPKat post and an EPLaw Patent Blog post both discuss a recent English case on the question of whether making allegedly deceitful representations to the EPO could give rise to a claim for "unlawful means" under English law (and holding that it could not).  The (unsuccessful) claim calls to mind various possible parallels under U.S. law, including the defense of inequitable conduct, Walker Process antitrust claims, and the common law tort of interference with prospective business advantage.  I really think this would be a fascinating area for comparative law and economics research, so I'm hoping that once a few other pending projects are finally put to bed I might be able to resume work on this topic.

2.  Occasionally I've also touched on cross-border injunctions and torpedo actions under E.U. law (see, e.g., here).  According to the EPLaw Blog, a Dutch court recently granted a provisional cross- border injunction in Carl Zeiss Meditec AG v. VSY Biotechnology B.V.  (I haven't read the decision itself, which is in Dutch.)  However, I did recently come across a very thorough article on the topic of cross-border injunctions by Paul England, titled Cross-border actions in the CJEU and English Patents Court--ten years on from GAT v. LuK, GRUR Int., March 2017 (pp. 293-300).  The article concludes with a handy table titled "The application of the Brussels Regulation and key cases to cross-border scenarios in the CJEU and English courts," and briefly discusses, among other matters, whether a court in the U.K. would grant an "Arrow" declaration in the U.K. under foreign national laws (see pp. 299, 300).  (For other recent discussions of Arrow declarations in the U.K., see, e.g., this post and this post from IPKat; Ralph Cox & Kate Donald's article in the June 2017 issue of Mitteilungen der deutschen Patentanwälten (pp. 260-61), titled Dealing with Divisionals:  "Arrow" type declarations and the "Humira" decisions; and Dr. Manuel Kunst and Dr. Janet Streth's article in the August issue of EIPR, titled Humira Patent Rights Shot by "Fujifilm" Declaration.)  

Friday, September 15, 2017

Some New Papers on Competition Law, FRAND, SEPs

In addition to the paper by FTC Commissioner Maureen Ohlhausen that I mentioned on Monday, the following articles also might be of interest to readers of this blog:
1.  Yee Wah Chin has posted a paper on ssrn titled Basic Antitrust Principles for Standard Essential Patents and Patent Assertion EntitiesHere is a link to the paper, and here is the abstract:
There have been significant calls recently for findings that infringement suits and licensing conduct by patent assertion entities (PAEs) labeled “patent trolls” and by holders of standard essential patents (SEPs) generally are monopolization or attempts to monopolize that violate Sherman Act §2, 15 U.S.C. §2. This paper argues that the basic principles of keeping in mind history and context, and general antitrust principles, apply equally to SEPs and PAEs as to other economic phenomena.  
2.  Erik Hovenkamp has posted a very interesting paper on ssrn titled Tying, Exclusivity, and Standard-Essential PatentsHere is a link to the paper, and here is the abstract:
When a technological standard is adopted, implementers must pay to license all “standard-essential” patents (SEPs)—those covering core features of the standard—although the particular price terms usually cannot negotiated beforehand. To allay implementers’ fear of being “held up,” SEP owners usually make commitments to offer licenses on “fair, reasonable, and nondiscriminatory” (FRAND) terms. Among other things, this acts as a contractual price control for SEP licenses—albeit an imprecise one that is subject to judicial interpretation.
Aside from licenses, an SEP holder may further supply an important “collateral input”—one that is not subject to the FRAND pledge, but which implementers nevertheless require in order to market a viable product. For example, this might be a physical component of the final product. The SEP holder might tie its SEP rights to the collateral input. It might also engage exclusive dealing or related practices, such as a “loyalty discounting” arrangement that imposes larger royalties on implementers who buy the input from competing providers. Importantly, FRAND’s operation as a price control significantly alters the economic analysis: here the primary impetus for tying may be to circumvent the price control by shifting the desired overcharge to the tied good—a concern that does not arise when a seller has complete autonomy over its pricing (as is usually the case). The natural result may be to foreclose competitors’ input sales.
Such restraints have received little attention in the FRAND literature, but they are an emerging concern for innovation and competition policy. They have recently been attacked in two high-profile complaints filed against Qualcomm—one by the Federal Trade Commission, and the other by Apple. Against this backdrop, this article provides a legal and economic evaluation of tying and exclusive dealing arrangements in FRAND licensing. Such practices may act to undermine the FRAND price control, potentially violating the SEP holder’s commitment. The case for antitrust intervention is harder to make, but in principle the arrangement could act to exclude actual or potential competition in the collateral input market, bringing it within antitrust’s reach. I conclude by offering several policy recommendations for how courts and standard setting organizations might address these tying and exclusivity arrangements. 
3.  Hannibal Travis has published a paper titled Counter-IP Conspiracies:  Patent Alienability and the Sherman Antitrust Act, 71 Univ. Miami L. Rev. 758 (2017).  This is a long paper and I haven't read very much of it yet myself, so I might have more to say about it at another time.  For now, here is a link, and here is the abstract: 
Anticompetitive collusion by intellectual property owners frequently triggered antitrust enforcement during the twentieth century. An emerging area of litigation and scholarship, however, involves conspiracies by potential licensees of intellectual property to reduce or eliminate opportunities by a property’s holders to profit from it, or even to recoup their investments in creating and protecting it. The danger is that potential licensees will collude with one another to suppress royalties or sale prices. This Article traces the history of such litigation, provides an overview of the scholarly and theoretical arguments against monopsonistic or oligopsonistic collusion against licensors of intellectual property, and summarizes empirical evidence that the prime economic and business-related justification for such collusion, namely the need to reduce patent holdup, is relatively weak. It argues that some decisions not to license intellectual-property rights, or to license them at suppressed rates, may be anticompetitive, particularly if they are the result of a collusive process or serve to maintain or expand market power. Finally, it urges greater attention from a macroeconomic perspective to the plight of inventors and workers in the high-technology and patent-intensive industries. As a preliminary attempt to heighten awareness of the issue, it describes recent allegations that market power on the part of consumers of high-technology patent licenses, and reduced bargaining clout on the part of individual employees and inventors, may be contributing to unemployment and inequality.