Wednesday, April 25, 2018

More News on IPRs; Lost Profits in the U.S.; Punitive Damages in China

1.  Yesterday's Supreme Court decisions in Oil States and SAS have garnered, predictably, a good deal of coverage in the media and blogosphere, including articles in the Wall Street Journal and New York Times, and posts on IAM, IP Watchdog, Scotus Blog, and SpicyIP.  There also are detailed commentaries on SAS on FOSS Patents, Patently-O, and Patents Post-Grant.  For my blog post from yesterday, see here.

2.  On Monday, the U.S. Supreme Court requested the views of the Solicitor General of the United States on whether to grant certiorari in EVE-USA, Inc. v. Mentor Graphics Corp., a case I have previously blogged about (see, e.g, here and here).  The petitioner raises two questions, to wit:
(1) Whether, and under what circumstances, assignors and their privies are free to contest a patent's validity; and (2) whether the U.S. Court of Appeals for the Federal Circuit erred in holding that proof of but-for causation, without more, satisfies the requirement that damages be apportioned between patented and un-patented features.
I joined an amicus brief arguing that the Court should grant cert on the assignor estoppel issue (which in my view the Federal Circuit has unduly expanded in recent years).  As for the lost profits issue, however, as my blog posts indicate I think the Federal Circuit's decision was correct.  I also tend to think the SG would agree, given its position in WesternGeco that patent damages generally should be fully compensatory (see here), but we'll see.  Here's a link to Scotus Blog's webpage on the case, from which you can download the briefs filed thus far in the case.  For further discussion, see write-ups by Jan Wolfe on Reuters and by Dennis Crouch on Patently-O.
3.  Also on Monday Roya Ghafele published an interesting post on IPKat titled "China to adopt punitive damages for IP infringement – An economic commentary."  The author devotes much of the post to the argument that Chinese courts should (1) adopt an eBay-like standard for granting injunctions, but (2) couple that standard with a more economically-rooted approach to properly valuing inventions, given the widespread view that damages in China at present tend to be undercompensatory.

Tuesday, April 24, 2018

U.S. Supreme Court Upholds Inter Partes Review

In what must be one of its most important patent opinions in recent years, the U.S. Supreme Court this morning upheld the constitutionality of inter partes reviews (IPRs)--the opposition-like procedures that Congress established in 2011 as part of the America Invents Act--in Oil States Energy Services, LLC v. Greene's Energy Group, LLC.  Opinion here.  I'm not surprised by the ruling, but I am relieved; some of the questions posed during oral argument last November left me just a tad worried about the ultimate outcome (see post here).  The breakdown of opinions does not fall along the typical ideological lines:  Justice Thomas writes the majority opinion, joined by Justices Kennedy, Ginsburg, Breyer, Alito, Sotomayor, and Kagan.  The bottom line is that patents are "public rights," a "public franchise," and thus the federal government may entrust the adjudication of these rights to a non-article III tribunal:
Inter partes review falls squarely within the public-rights doctrine. This Court has recognized, and the parties do not dispute, that the decision to grant a patent is a matter involving public rights—specifically, the grant of a public franchise. Inter partes review is simply a reconsideration of that grant, and Congress has permissibly reserved the PTO’s authority to conduct that reconsideration. Thus, the PTO can do so without violating Article III (pp. 6-7).
The Patent Act provides that, “[s]ubject to the provisions of this title, patents shall have the attributes of personal property.” 35 U. S. C. §261. This provision qualifies any property rights that a patent owner has in an issued patent, subjecting them to the express provisions of the Patent Act. See eBay Inc. v. MercExchange, L.L.C., 547 U. S. 388, 392 (2006). Those provisions include inter partes review. See §§ 311–319 (p.11).
The Court also rejects arguments that historical practice shows that (1) "patent validity is a matter that, 'from its nature,' must be decided by a court" (p.12), and (2) "because courts have traditionally adjudicated patent validity in this country, courts must forever continue to do so" (p.14).  Finally, the Court concludes that the Seventh Amendment right to trial by jury does not post an obstacle either, stating that "This Court’s precedents establish that, when Congress properly assigns a matter to adjudication in a non-Article III tribunal, 'the Seventh Amendment poses no independent bar to the adjudication of that action by a nonjury factfinder.' Granfinanciera, S. A. v. Nordberg, 492 U. S. 33, 53–54 (1989)" (p.17).

The majority nonetheless cautions that its holding is "narrow" (pp.16-17):
We emphasize the narrowness of our holding. We address the constitutionality of inter partes review only. We do not address whether other patent matters, such as infringement actions, can be heard in a non-Article III forum. And because the Patent Act provides for judicial review by the Federal Circuit, see 35 U.S.C. § 319, we need not consider whether inter partes review would be constitutional “without any sort of intervention by a court at any stage of the proceedings,” Atlas Roofing Co. v. Occupational Safety and Health Review Comm’n, 430 U. S. 442, 455, n.13 (1977). Moreover, we address only the precise constitutional challenges that Oil States raised here. Oil States does not challenge the retroactive application of inter partes review, even though that procedure was not in place when its patent issued. Nor has Oil States raised a due process challenge. Finally, our decision should not be misconstrued as suggesting that patents are not property for purposes of the Due Process Clause or the Takings Clause. See, e.g., Florida Prepaid Postsecondary Ed. Expense Bd. v. College Savings Bank, 527 U. S. 627, 642 (1999); James v. Campbell, 104 U. S. 356, 358 (1882).
Presumably the next stop for Oil States will be to challenge the applicability of IPRs to patents that were issued prior to the establishment of IPRs.  

Justice Breyer's one-paragraph concurring opinion, joined by Justices Ginsburg and Sotomayor, states that 
the Court’s opinion should not be read to say that matters involving private rights may never be adjudicated other than by Article III courts, say, sometimes by agencies. Our precedent is to the contrary. Stern v. Marshall, 564 U. S. 462, 494 (2011); Commodity Futures Trading Comm’n v. Schor, 478 U. S. 833, 853–856 (1986); see also Stern, supra, at 513 (BREYER, J., dissenting) (“The presence of ‘private rights’ does not automatically determine the outcome of the question but requires a more ‘searching’ examination of the relevant factors”).
In dissent, Justice Gorsuch, joined by Chief Justice Roberts, argues that, consistent with "[t]he Constitution's original public meaning," patents are personal rights "that the federal government could revoke only with the concurrence of independent judges" (dissent pp. 2-3).  In a footnote, he also takes issue with Justice Breyer's concurrence, perhaps foreshadowing a bigger showdown sometime down the road on the role of the administrative state (see also below).  And while I don't agree with Justice Gorsuch's analysis, I have to concur with those observers who laud his writing style, which here includes the observation that "Just because you give a gift doesn't mean you forever enjoy the right to reclaim it" (dissent p.10).  Not exactly on point, in my view, but it is a good meme!
In another, less heralded, IPR-related case, SAS Institute, Inc. v. Iancu, the Court this morning holds that the plain meaning of the relevant statutory provisions governing IPRs require that, when a party petitions for an IPR challenging two or more claims of an issued patent, the PTAB can either institute as to all the challenged claims or none of them, but cannot institute review of just some of the challenged claims (thus reversing the Federal Circuit on this issue).  The author of this opinion is . . . Justice Gorsuch, joined by the Chief and by Justices Kennedy, Thomas, and Alito.  Justice Ginsburg dissents, joined by Justices Breyer, Sotomayor, and Kagan, and Justice Breyer files a separate dissent joined by the other three (except for one part, as noted below).  So this one is more ideologically aligned, and again the subtext appears to be administrative law, specifically the Chevron doctrine under which courts generally defer to agency rulemaking when they believe that a statute is ambiguous.  According to the majority:
whether Chevron should remain is a question we may leave for another day. Even under Chevron, we owe an agency’s interpretation of the law no deference unless,after “employing traditional tools of statutory construction,” we find ourselves unable to discern Congress’s meaning (pp.11-12).
Justice Breyer, for his part, believes that the statute "leaves a gap that Congress implicitly delegated authority to the agency to fill" (dissent p.1).  Justice Breyer's further musings on Chevron (part III.A of his dissent) are the one portion of his opinion that Justice Kagan does not join (though Justices Ginsburg and Sotomayor do):
In referring to Chevron, I do not mean that courts are to treat that case like a rigid, black-letter rule of law, instructing them always to allow agencies leeway to fill every gap in every statutory provision. See Mead Corp., supra, at 229–231. Rather, I understand Chevron as a rule of thumb, guiding courts in an effort to respect that leeway which Congress intended the agencies to have. I recognize that Congress does not always consider such matters, but if not, courts can often implement a more general, virtually omnipresent congressional purpose—namely, the creation of a well-functioning statutory scheme—by using a canon-like, judicially created construct, the hypothetical reasonable legislator, and asking what such legislators would likely have intended had Congress considered the question of delegating gap-filling authority to the agency (dissent p.9).
I'm not an administrative law scholar, but even I can see the makings here of some future struggle between the Court's liberal and conservative wings over the future of the administrative state.

Justice Ginsburg, for her part, proposes a work-around for the PTAB:
Given the Court’s wooden reading of 35 U. S. C. §318(a),and with “no mandate to institute [inter partes] review” at all, Cuozzo Speed Technologies, LLC v. Lee, 579 U. S. ___, ___ (2016) (slip op., at 9), the Patent Trial and Appeal Board could simply deny a petition containing challenges having no “reasonable likelihood” of success, §314(a). Simultaneously, the Board might note that one or more specified claims warrant reexamination, while others challenged in the petition do not. Petitioners would then be free to file new or amended petitions shorn of challenges the Board finds unworthy of inter partes review.
The majority states that it has "no occasion today to consider whether this stratagem is consistent with the statute's demands" (majority opinion p.11 n.*). 

Monday, April 23, 2018

Jung on Patent Damages in Korea

Chaho Jung has published an article titled Patent Damages Determination in Korea, 49 IIC 267-98 (2018).  Here is the abstract:
This paper provides a comprehensive introduction to the jurisprudence of patent damages calculation in Korea. It compares Korean patent damages jurisprudence with corresponding foreign systems as far as possible. Further, this paper also summarizes unique and/or important Korean patent damages jurisprudence. Firstly, Sec. 128 of the Korea Patent Act provides three different calculation methods, lost profit, infringer’s profit and reasonable royalty, from which the plaintiff may freely choose any one method. Secondly, para. 2 of Sec. 128 permits the plaintiff to prove lost profit through the number of the infringer’s assigned products, without proving his own reduced sales. Thirdly, under para. 4, the infringer’s profit is presumed to be the plaintiff’s loss. This presumption can be rebutted by the defendant by proving, for example, limited manufacturing capacity of the plaintiff. Therefore, the Korean infringer’s profit method is not effective for the plaintiff whose manufacturing capacity is limited. Fourthly, under para. 5, the plaintiff may request a reasonable royalty, which could have been agreed upon through a hypothetical agreement. The Korean reasonable royalty jurisprudence is not much different from, for example, that of the USA, but the actual average royalty rate decided by the courts is lower than that in the USA.
The article provides an English-language translation of section 128 of the Korean Patent Act (KPA), which sets out the standards for awarding patent damages in seven paragraphs, and provides extensive discussion of the Korean case law (with comparisons, from time to time, with the rules and cases in the U.S., Germany, Japan, and other countries).  The author notes, among other things, that in Korea (unlike the U.S., according to some cases) the infringer bears the burden of proving the existence of noninfringing alternatives; reports the number of cases in which Korean courts have awarded lost profits, infringer's profit, reasonable royalties, or "corresponding loss" (similar in concept to the German practice of estimating damages nach freier Überzeugung, see here, though Professor Jung is critical of the manner in which Korean courts exercise this "free discretion"); states that Korean courts, like their German counterparts, strive to award a reasonable royalty based on ex post evidence; and reports that median damages in Korea tend to be low, approximately U.S.$50,000 for the years 2009-15 according to an article by Choi.  I will certainly be referring back to this article when the time comes to publish a second edition of my book.

Friday, April 20, 2018

Further Commentary on Conversant v. Huawei

Yesterday's post noted a post by Eibhlin Vardy on IPKat discussing Mr. Justice Carr's ruling earlier this week in Conversant Wireless Licensing S.A.R.L v Huawei Technologies Co. Ltd, ZTE Corporation and Ors [2018] EWHC 808 (Pat), concluding  that the court has jurisdiction to decide a global FRAND rate, even though the U.K. sales by Huawei and ZTE account for less than 1% of global sales.  Here are a couple of more commentaries, one by Nicholas Fox on EPLaw and another by Tristan Sherliker on Bird & Bird's blog, who notes that Mr. Justice Carr
assessed the conduct of negotiations and highlighted key issues that, he said, supported Conversant’s case for an injunction. In particular he referred to the following points, which will provide further guidance from the courts about how negotiations might be handled in a FRANDly manner:
  • the length of negotiations (several years) had not led to much progress;
  • the fact that no interim royalty payments had been made;
  • Huawei’s position that they would not take a global portfolio licence; and
  • that the Defendants did not acknowledge (when requested) that they were willing to take a licence, or that their willingness was unconditional.

Thursday, April 19, 2018

From Around the Blogs: Samsung's Antisuit Injunction, Global FRAND Rates in the U.K., and More

1.  Following up on my post this Monday on Judge Orrick's decision to grant an injunction forbidding Huawei from enforcing an injunction it obtained against Samsung in Shenzhen, China, David Long has posted an extensive discussion of the case on the Essential Patents Blog, and Mark Cohen provides some interesting context on injunctions, antisuit injunctions, and anti-anti-suit injunctions, on the China IPR Blog.  Mr. Cohen also reports that "China will soon introduce punitive damages for IP infringements," in its upcoming fourth revision to the Chinese patent law.  The introduction of such damages into Chinese law is something that has been under discussion for some time, and if it is now imminent this could be a very significant, indeed.

2.  Eibhlin Vardy has published a post on the IPKat about yet another FRAND case involving Huawei, Conversant Wireless Licensing S.A.R.L v Huawei Technologies Co. Ltd, ZTE Corporation and Ors [2018] EWHC 808 (Pat), in which  Mr. Justice Carr (Patents Court of England and Wales) ruled this past Monday that the court has jurisdiction to enter a global FRAND rate, even though sales of the allegedly infringing products within the U.K. account for less than 1% of global sales.  I haven't read the opinion yet myself, but I'm inclined to think that both this case and the Huawei/Samsung litigation suggest a need for some sort of global solution to questions of jurisdiction and forum shopping for FRAND litigation.

Ms. Vardy also reports that next month the Court of Appeal will hear the appeal of Mr. Justice Birss' decision in Unwired Planet, over the course of six days.  Well, it is a huge case.

3.  Norman Siebrasse published a post on Sufficient Description on a recent Canadian case, Adir v Apotex Inc 2018 FC 346, involving the question of whether the possibility of outsourcing the production of a product intended for export should reduce the amount the defendant must disgorge for the infringement of the plaintiff's patent, where the evidence suggests that the defendant could have, but for noneconomic reasons wouldn't have, undertaken such outsourcing.  Again, I haven't read the decision yet myself, but Professor Siebrasse makes what appears to me to be a valid critique of the court's decision not to reduce the award:
. . . the reward to the patentee should be commensurate with the value of the invention to the public; a valuable invention deserves a large reward, but an invention which is less valuable merits a correspondingly lesser reward. As the FCA explained in Lovastatin Damages [56], this is the rationale for considering the NIA [noninfringing alternative] in assessing damages: it is “only by comparing the patented invention to non-infringing alternatives can a court discern the market value of the patent owner’s exclusive right, and therefore his expected profit or reward.” On the facts in this case, the objective value of the Canadian patent was the value of the one-year head start that could be obtained by manufacturing in Canada as opposed to some other country. In holding that Apotex was not entitled to offset the profits it could have made by manufacturing abroad, Apotex has been required to disgorge more than the objective value of the invention, because of Dr Sherman’s idiosyncratic non-economic motivations. This is not consistent with the instrumental rationale for the patent system: the value of an invention to society does not turn on the identity or motivations of the infringer. 
I would add only that, as Professor Siebrasse himself has pointed out elsewhere, the question of whether the potential outsourcing of production should count as a noninfringing alternative for purposes of reducing damages is something that U.S. courts may need to grapple with if, as I now expect, the Supreme Court overrules the Federal Circuit in WesternGeco (see here).

4. Finally, on Patently-O Dennis Crouch has published a post on the Federal Circuit's attorneys' fees decision in Rainere v. Microsoft, which was also the subject of my post yesterday.

Wednesday, April 18, 2018

Federal Circuit Affirms Award of Attorneys' Fees Where Action Was Dismissed for Lack of Standing

This morning the Federal Circuit issued its decision in Rainiere v. Microsoft Corp. (opinion by Judge O'Malley, joined by Judges Lourie and Wallach) affirming an award of attorneys' fees in an action against Microsoft and AT&T.  The district court dismissed the action with prejudice on the ground that the plaintiff lacked standing to assert claims for the infringement of the five patents in suit, and the Federal Circuit affirmed this decision ijn 2017.  (According to today's opinion, the plaintiff and his coinventors at some point assigned their rights to a firm named Global Technologies, Inc.  The facts are complicated, but ultimately the district court wasn't convinced that the plaintiff had reacquired those rights, and thus it dismissed the action for lack of standing.)  From the opinion:
[Plaintiff] first disputes whether Appellees are prevailing parties under § 285. [Plaintiff] contends that dismissal with prejudice for lack of standing is not an adjudication on the merits, as he contends is required to find that a defendant is a “prevailing party” under our case law.  [Plaintiff] also asserts that dismissal with prejudice, without adjudication of a patent infringement claim, should preclude finding that a defendant has prevailed in a litigation.  We disagree with these statements, particularly in light of the Supreme Court’s recent decision in CRST Van Expedited, Inc. v. EEOC, which held that a favorable judgment on the merits is not necessary for a defendant to be deemed a prevailing party for purposes of statutory fee-shifting. 136 S. Ct. 1642, 1651 (2016). Even without CRST, we conclude that the district court’s dismissal with prejudice of [plaintiff’s] case for lack of standing is tantamount to a judgment on the merits. Under either of these rationales, Appellees have in fact prevailed in this case. . . (p.9).
The court also finds no abuse of discretion based on the district court's findings that the plaintiff
employed “a pattern of obfuscation and bad faith,” and that this behavior caused Appellees to incur significant fees and costs to oppose [plaintiff’s] positions. These positions, in the district court’s view, “were made in bad faith to vexatiously multiply these proceedings and avoid early dismissal”—in effect, to stall the termination of the proceedings.  Fees Decision, 2016 WL 4626584, at *5.  “Because the district court lives with the case over a prolonged period of time, it is in a better position to determine whether a case is exceptional and it has discretion to evaluate the facts on a case-bycase basis.”  SFA Sys., LLC v. Newegg Inc., 793 F.3d 1344, 1351 (Fed. Cir. 2015) (internal quotations, alterations, and citations omitted).  The district court properly examined the totality of the circumstances in this case and found the case to be exceptional. We see no reason to disturb the district court’s well-reasoned determination (p.19).
Finally, the court finds no abuse as to the amount ("$300,295.71 to AT&T and $143,719.26 to  Microsoft in attorney fees and costs" (p.7)).

Monday, April 16, 2018

WesternGeco Oral Argument Transcript

is now available, here.  After I read it, I may return with some comments.

Update:  Having now read through the transcript, I predict a 9-0 reversal.  The rule will be that the patentee, whatever the theory of liability (271(a), 271(f)) and regardless of whether the requested award is lost profits or a reasonable royalty, is entitled to compensatory damages that are caused-in-fact and proximately caused by the domestic act of infringement--with (as suggested by Justice Breyer at p.44) comity concerns possibly factoring into the proximate cause analysis in an appropriate case.  

There were a couple of favor references to Professor Yelderman's amicus brief, which as I noted here helped me finally articulate my own view in this case.

Further Update:  For further discussion, see Ronald Mann's writeup on the Scotus Blog and Dennis Crouch's on Patently-O.  They both agree that the Court will reverse and embrace the proximate cause concept, though Professor Mann thinks there will be "a fair amount of back and forth among the justices before they come to rest on this one."