• Some New Papers, Posts on FRAND Issues (Part 2)

    1.  Dr. Spiros Makris and Dr. Claudia Tapia have posted a paper titled Confidentiality in FRAND Licensing After Huawei v ZTE: National Courts in Europe Searching for Balance, 53 les Nouvelles 210 (2018).  Here is a link to the paper, and here is the abstract:
    In a landmark decision in the matter Huawei v ZTE, the Court of Justice of the European Union (CJEU) established a well-balanced framework for the licensing of Standard Essential Patents (SEPs) on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions. Following this judgement, national courts in Europe have been providing further guidance on several key questions related to the ruling, as illustrated in summary infographic starting on page 215. A significant portion of this case law has been developed in Germany. In their effort to interpret the Huawei v ZTE FRAND framework, German courts have repeatedly addressed an issue with significant practical relevance for the licensing of SEPs, which the CJEU did not expressly raise in its decision: The protection of confidentiality in the context of FRAND licensing negotiations and FRAND related litigation. The present paper examines whether the efforts of the German jurisprudence have produced viable solutions in this respect so far.

    2.  J. Gregory Sidak and Urška Petrovčič have published a paper titled Will the CJEU’s Decision in MEO Change FRAND Disputes Globally?, 3 Criterion J. Innov. 301 (2018).  Here is a link to the paper, and here is the abstract:
    In April 2018, the Court of Justice of the European Union (CJEU) issued a decision in MEO v. Autoridade da Concorrência that clarified the circumstances in which price discrimination would trigger liability under Article 102(c) TFEU. The decision in MEO has so far received sparse attention from lawyers, academics, and competition law commentators. Yet, it represents an important addition to the analysis of price discrimination under EU competition law. The CJEU emphasized that Article 102(c) TFEU does not categorically prohibit a dominant firm from engaging in price discrimination, but instead prohibits only price discrimination that “tends to distort competition on the downstream market.�? The CJEU also said that one cannot assume that price discrimination will have that prohibited effect, but rather one must examine the circumstances of each case to determine whether the challenged practice has a prohibited effect on the downstream market and thus violates Article 102(c) TFEU.

    Although MEO concerned the licensing of copyrights, for two reasons it has important implications for disputes concerning standard-essential patents (SEPs) that are subject to the owner’s commitment to offer to license them on fair, reasonable, and nondiscriminatory (FRAND) terms. First, MEO clarifies that an SEP holder’s differential offers to its licensees are discriminatory within the meaning of Article 102(c) TFEU only when that differential treatment is so substantial as to be capable of distorting competition in the market in which the licensees compete. Thus, after MEO, scrutiny of an SEP holder’s licensing practices under Article 102(c) TFEU turns on the potential effects of the differential treatment. Second, to the extent that the prohibition against discrimination in the FRAND contract is equivalent to the prohibition against discrimination contained in Article 102(c) TFEU, MEO will require an effects-based analysis in cases alleging a breach of the FRAND contract. In those cases, MEO provides guidance for scrutinizing an SEP holder’s discharge of its duties under the FRAND contract, not only in the European Union, but also in foreign jurisdictions where a court must construe and enforce the nondiscrimination requirement of an SEP holder’s FRAND contract.

    3.  J. Gregory Sidak and Jeremy O. Skoh have published a paper titled Citation Weighting, Patent Ranking, and Apportionment of Value for Standard-Essential Patents, 3 Criterion J. Innov. 201 (2018).  Here is a link to the paper, and here is the abstract:
    In patent-infringement litigation involving standard-essential patents, one must apportion the value of the patents in suit by deriving an appropriate measure of each patent’s value relative to the value of other patents that are also declared essential to the standard. Using data on patents declared essential to the LRDIMM standard, we have analyzed multiple methodologies that purport to measure the relative value of patents. We conclude that the choice of a particular patent-valuation methodology is secondary to the apportionment inquiry. In other words, we find that the particular weighting method that a researcher chooses to use is of secondary importance to the researcher’s decision to use some weighting method, rather than none. A simplistic patent-counting methodology that assigns each patent equal value relies on assumptions that are rarely satisfied in the real world. It produces a result that meaningfully differ from the results of any of the methods that rely on forward citations to measure a patent’s value.
    We propose a half-life citation-weighting method that researchers might decide to use, in addition to adjustments for technology fields or unweighted citation counts. By placing greater weight on more recent citations, our proposed method attempts to account for the increasing number of citations and patents over time and the importance of speed during the standard setting process. Our proposed method might be particularly appropriate for standards in which the declared-essential patents cover similar technologies or in cases where innovation (and, consequently, the standards-development process) occurs rapidly.

    4.  D. Daniel Sokol recently noted on the Antitrust & Competition Policy Blog that Professor Peter Picht will be presenting a webinar on industry challenges after recent case-law on confidentiality of FRAND agreements, and other relevant aspects of FRAND case law, on November 22 from 4-5 p.m. CET.  Details here.  

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  • China’s Actions on Copyrights Suggest Increasing Support of IP Rights

    These headlines are further proof that China, long known as and still considered to be a major international contributor to IP theft and piracy issues, has taken steps to rectify these issues in the months since President Xi Jinping publicly stated that “IP infringers will pay a heavy price” last July. A look at China’s economy profile in the U.S. Chamber of Commerce’s 2018 IP Index shows that some of these recent copyright actions directly address certain weaknesses in China’s IP regime. The…

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    集約

    (INTENSIVE)
    $$ Unless the number of valid pixels is very small for all sample times, this computationally intensive task is infeasible given the co…

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  • Federal Circuit Issues Another Rule 36 Patent Eligibility Loss to a Patent Owner

    This particular Rule 36 patent eligibility loss for the patent owner came in Digital Media Technologies, Inc. v. Netflix, Inc., et al., affirmed the district court’s finding that patent claims asserted by Digital Media against Netflix, Amazon and Hulu were invalid under 35 U.S.C. § 101 because they were directed to an abstract idea… Using Rule 36 in an area of the law as unstable, chaotic and unpredictable as patent eligibility is irresponsible. Whether the decision would be the same or not,…

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  • Federal Circuit Issues Another Rule 36 Patent Eligibility Loss to a Patent Owner

    This particular Rule 36 patent eligibility loss for the patent owner came in Digital Media Technologies, Inc. v. Netflix, Inc., et al., affirmed the district court’s finding that patent claims asserted by Digital Media against Netflix, Amazon and Hulu were invalid under 35 U.S.C. § 101 because they were directed to an abstract idea… Using Rule 36 in an area of the law as unstable, chaotic and unpredictable as patent eligibility is irresponsible. Whether the decision would be the same or not,…

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  • The Role of IP in Industry Structure

    I’ve long been a fan of Peter Lee’s (UC Davis) work at the intersection of IP and organizational theory. His latest article is another in a long line of interesting takes on how IP affects and is affected by the structure and culture of its creators. The latest draft, forthcoming in Vanderbilt Law Review, is titled Retheorizing the Impact of Intellectual Property Rights on Industry Structure. The draft is on SSRN, and the abstract is here:

    Technological and creative industries are critical to economic and social welfare, and the forces that shape such industries are important subjects of legal and policy examination. These industries depend on patents and copyrights, and scholars have long debated whether exclusive rights promote industry consolidation (through shoring up barriers to entry) or fragmentation (by promoting entry of new firms). Much hangs in the balance, for the structure of these IP-intensive industries can determine the amount, variety, and quality of drugs, food, software, movies, music, and books available to society. This Article retheorizes the role of patents and copyrights in shaping industry structure by examining empirical profiles of six IP-intensive industries: biopharmaceuticals; agricultural biotechnology, seeds, and agrochemicals; software; film production and distribution; music recording; and book publishing. It makes two novel arguments that illuminate the impacts of patents and copyrights on industry structure. First, it distinguishes along time, arguing that patents and copyrights promote the initial entry of new firms and early-stage viability, but that over time industry incumbents wielding substantial IP portfolios often absorb such entrants, thus reconsolidating those industries. It also distinguishes along the value chain, arguing that exclusive rights most prominently promote entry in “upstream” creative functions—from creating biologic compounds to coordinating movie production—while tending to promote concentration in downstream functions related to commercialization, such as marketing and distribution of drugs and movies. This Article provides legal and policy decision makers with a more robust understanding of how patents and copyrights promote both fragmentation and concentration, depending on context. Drawing on these insights, it proposes calibrating the acquisition of exclusive rights based on the size and market position of a rights holder.

    Professor Lee surveys six industries, looking for commonalities in how they are structured, and how IP fits in with entry and consolidation. This is not an empirical paper in the sense of, say Cockburn & MacGarvie, who found that patents reduced entry into the software industry unless the entrant had patent applications. Instead, it looks at the history of entry and consolidation in the different industries as a whole, using studies like Cockburn & MacGarvie (which is discussed in some detail) as the foundational base for the theoretical view that puts all the empirical findings together.

    The result is a sort of two dimensional axis (though Prof. Lee provides no chart, which wouldn’t have added much). He finds that, in general, IP leads to entry early in time, but as the industry (or product area) matures, then IP leads instead to consolidation, as companies find it easier to acquire IP than create it on its own in crowded areas. He also finds, however (and I think this is a key insight in the paper), that IP leads to more entry upstream (early creation stage) and more consolidation downstream (commercialization and marketing).

    This second axis is the more interesting one (there are lots of articles about development of thickets over time), but it is also the harder one to prove, and it depends a lot on your definition. For example, Professor Lee discusses video streaming services such as Netflix and Hulu but doesn’t discuss whether he views them as horizontally consolidated because there are so few of them. I’ve always thought of IP as fragmenting video streaming, because rights holders want to monetize their IP by holding on to it. Hence, we have to pay separately to get Star Trek: Discovery on CBS streaming, Hulu has many TV shows that Netflix doesn’t, and soon Disney will pull out of its exclusive deal with Netflix to create its own service. That’s 5 or more services I have to sign up with if I want to get all the shows (contrast this with the story he tells about music streaming, in which the music distributors all distribute all the music, and the distributor record labels consolidate to enhance market power against the distributor streamers). Indeed, this issue is so important that the services have (as Prof. Lee points out) vertically integrated by consolidating production with distribution (Netflix and Amazon making its own shows, Comcast and NBC/Universal, and AT&T buying Warner). Professor Lee discusses this as a penchant for consolidation, but it is not clear why IP drives it. I think it is consolidation caused by upstream entry (as he would predict) by the likes of Netflix and Amazon in the creation space, because they also happen to be distributors. But then why don’t the record labels become streamers? Why does this fragmentation work for video and not music? I’d be interested in hearing how Professor Lee breaks this down.

    As you can probably tell, this is a thoughtful and thought-provoking paper, and I recommend it, especially to those unfamiliar with the literature on the role of IP in industry organization and entry.

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  • FWP IP ApS v. Biogen MA, Inc. (Fed. Cir. 2018)

    By Donald Zuhn –- Last month, in FWP IP ApS v. Biogen MA, Inc., the Federal Circuit affirmed a decision by the U.S. Patent and Trademark Office’s Patent Trial and Appeal Board granting Biogen’s motion that FWP’s U.S. Application No. 11/576,871 did not provide an adequate written description under 35 U.S.C. § 112 for claims directed to a method for treating multiple sclerosis. The MS treatment at dispute involves administering a specific daily dosage (480 mg) of fumarates, specifically dimethyl fumarate (DMF) and/or monomethyl fumarate (MMF), to a subject. The appeal arose from an interference proceeding involving the above method…

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  • Federal Circuit Vacates Damages Award for Lack of Substantial Evidence

    This morning the court handed down its opinion in Enplas Display Device Corp. v. Seoul Semiconductor Co. (majority opinion by Judge Stoll, with Judge Newman concurring in part and dissenting in part).  As described by the court, the patents in suit are “directed to methods of backlighting display panels, particularly LED displays used in televisions, laptop computers, and other electronics” (p.2).  Enplas filed an action for a declaratory judgment of noninfringement and invalidity, and Seoul Semiconductor counterclaimed for induced infringement.  The court affirms the district court’s determination that the patents were not anticipated by the prior art, and that Enplas induced third parties to infringe; but it vacates and remands the damages award for lack of substantial evidence.  From the opinion:
    Enplas argues that the district court erred when it denied JMOL that the damages award was not supported by substantial evidence. Specifically, it contends that the only evidence supporting the $4 million award was testimony from SSC’s damages expert that explicitly and improperly included non-infringing devices in the royalty calculation. Before trial, Enplas filed a Daubert motion to exclude this testimony. The district court deferred full consideration of that motion, stating that it was more appropriate for a motion in limine. Enplas filed a motion in limine, seeking to exclude SSC’s damages expert’s testimony regarding “other lenses” not at issue in this case. The district court denied that motion, holding:
    Consistent with this Court’s prior rulings, [SSC’s expert] cannot assume that infringement can be proven for the lenses not in this case. However, [SSC’s expert] may present evidence that under a lump-sum royalty negotiation, [Enplas] would seek to cover all of its potentially infringing products. As long as [the] ultimate damages determination is adequately adjusted to only recover for those lenses in the case, [the] testimony is permitted.
    J.A. 13144 (emphasis added). Thus, the district court’s order limited SSC’s expert to a damages theory based on infringing and “potentially infringing products.” Id. It did not allow a damages theory based on sales of nonaccused products.
    At trial, SSC’s expert opined that Enplas would have agreed to a lump sum royalty in a hypothetical negotiation for the ’554 and ’209 patents. She testified that “[i]f the license [were] limited only to the accused lenses . . . the reasonable royalty for the ’554 Patent [would be] $500,000, and for the ’209 Patent $70,000.” J.A. 15539 at 722:3–5. She explained that “the $570,000 covers the[] five products” accused of infringement in this case. J.A. 15534 at 717:1–3. SSC’s expert did not stop there, however. She went on to testify that Enplas and SSC would not have limited the license to just the accused products “if there [were] a risk of infringing the patent by manufacturing other products that are similar in nature.”J.A. 15534 at 717:11–13 (emphasis added). The “more pragmatic approach,” explained SSC’s expert, would have been for the parties to agree to a premium “freedom to operate” license to avoid the need to test and negotiate licenses for additional or future potentially infringing lenses that Enplas might sell. J.A. 15534–35 at 717:22–718:3.

    To determine the premium that Enplas would pay, SSC’s expert assessed the volume of sales of all nonaccused lenses made by Enplas. Because none of this information had been produced during discovery, SSC’s expert found “some publicly-available information from the Enplas website” and used that to “determine what that volume of sales would be.” J.A. 15535 at 718:17–25. SSC’s expert testified that “the volume of sales” for Enplas’s unit that sells lenses “is eight to ten times the sales of the specific products that we’re here to talk about today”—i.e., the accused infringing products. J.A. 15537 at 720:3–7.

    Based on this information and theory, SSC’s expert testified that Enplas and SSC would have agreed to pay $2 to 4 million depending on the ultimate “volume of sales of potentially infringing products beyond the ones in this case.” J.A. 15538 at 721:2–5 (emphases added). SSC’s expert did not present any explanation or evidence whatsoever to show how the past revenue from Enplas’s noninfringing lenses could reasonably estimate the future revenue from Enplas’s infringing or potentially infringing lenses. . . .

    Here, SSC’s expert opined that Enplas and SSC would have agreed to a $2 to 4 million royalty based on a royalty base comprising sales of non-accused lenses. J.A. 15538 at 721:2–5. This testimony cannot support the jury’s damages award, for § 284 and our precedent proscribe awarding damages for non-infringing activity. Thus, the jury’s $4 million award for infringement of the ’554 patent cannot stand (pp. 16-23).

    Judge Newman dissents, arguing inter alia that the court should defer to the expert’s testimony that a hypothetical ex ante license would have been in the amount of “$2 to 4 million for a freedom to operate license . . . to alleviate business uncertainty” (dissent p.9).  The dissent also makes more of the fact that the plaintiff did not challenge this testimony at trial or offer a rebuttal case on damages (p.12), and views the majority as permitting Enplas to “challenge admissibility under the guise of substantial evidence,” rather than “under the framework of the Federal Rules of Evidence . . . through a Daubert challenge” (p.7).
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  • Judge Awards Enhancement of Damages to $268 Million in Cochlear Implant Patent Case

    “While the jury’s $130 million verdict is significant and may sound large in the abstract, it may not be enough without enhancement to deter infringing conduct given the context of this case,” Judge Olguin wrote. Evidence presented at trial shows that the infringing products sold by Cochlear generated $1.8 billion in revenues. Cochlear had publicly stated in a 2016 annual report that the jury’s verdict won’t disrupt Cochlear’s business or U.S. customers.

    The post Judge Awards Enhancement of…

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  • Inside Views: The Bumpy Road To Selection Patents In India

    Namrata Chadha, of K&S Partners, a Tier 1 Indian law firm, discusses various crucial aspects relating to patenting of selection inventions in India, especially in pharmaceuticals and chemicals. Summary: The patenting of selection inventions is not plain sailing in India. The patentability of such inventions must be determined in accordance with the general provisions of the Indian Patents Act, as there is no separate provision for the same in the Act. Of the said general provisions, the assessment of inventive step and testing under section 3(d) of the Indian Patents Act can be perceived as the most critical to patentability of selected novel species. Additionally, the concepts of ‘implicit disclosure’ and the contrasting views on ‘coverage vs disclosure’ frequently makes it challenging for applicants to defend their novel selection under the Indian scenario. Given the lack of enough precedents in India on this aspect, to date the fate of selection patents depends mostly on the judgement of the patent controllers. Not all hope is lost, however, since not only the Indian Patent Office, but also the IPAB and higher Courts have time-and-again acknowledged the existence of selection patents in India.

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    周方向

    (CIRCUMFERENTIAL)
    $$ The electrode elements for one or more of the first electrode arrays may be arranged with a common circumferential dimensio…

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