Today, the U.S. Supreme Court issued its decision in TC Heartland v. Kraft Foods that limits the venue — i.e., geographical location–of where patent cases may be brought.  For decades prior to this decision, venue was construed broadly to be essentially anywhere a defendant has minimum contacts.  By today’s decision, venue is  construed narrowly as limited to where the defendant either (i) is incorporated or (ii) has a regular and established place of business in which the defendant committed acts of infringement.

This ruling may substantially limit the number of patent cases that may be brought in the perceived patent-friendly Eastern District of Texas.  This also may increase the number of patent cases brought in patent-savvy Delaware, because that is where most companies are incorporated.  The decision also may make it harder to sue multiple defendants in a single action, because it may be difficulty to establish proper venue over all defendants.

This decision also takes more wind out of the sales of those seeking legislative changes to U.S. patent law.  Whether rightly or wrongly (we express no view here), the E.D. Texas has been used as an example of patent litigation abuse, venue shopping and the need for patent reform.  This decision may end that concern and follows other court decisions addressing patent litigation issues as well as the FTC’s patent assertion entity study that did not find the widespread patent litigation abuse that had fueled legislative efforts. (see, e.g., our Apr. 29, 2014 post on Supreme Court making it easier to get attorneys fees in patent cases and our Oct. 7, 2016 post on the FTC’s PAE study). Continue Reading Supreme Court limits patent venue statute (TC Heartland v. Kraft)

USTR SealThe U.S. Trade Representative (USTR) issued its annual 2017 Special 301
Report FINAL
 that “reviews the state of IP protection and enforcement in U.S. trading partners around the world.”  (Report at 1).  The report aims to “call out foreign countries and expose the laws, policies, and practices that failed to provide adequate and effective IP protection and enforcement for U.S. inventors, creators, brands, manufacturers, and service providers.”  (Report at 1).  Among the issues raised in this report are concerns that a foreign government may force U.S. standard essential patent (SEP) holders to enter license terms that devalue the patent and subject them to improper competition law enforcement. Continue Reading U.S. Trade Representative’s Report raises concerns about unfair foreign treatment of U.S. companies with standard essential patents

Today the Supreme Court ruled that the laches defense could not be used to limit 35 U.S.C. § 284 patent damages given the 35 U.S.C. § 286 statute of limitations that permits recovery of patent damages up to six years prior to filing an infringement suit.  Specifically, the Court ruled that “Laches cannot be interposed as a defense against damages where the infringement occurred within the period prescribed by §286.”  The result of the ruling is that the laches defense may limit equitable relief, such as an injunction, but will no longer preclude past damages in patent cases.

From a practical standpoint, the ruling may not be as significant as it otherwise might appear.  Laches is a frequently raised, but seldom successful, equitable defense in patent litigation.   Laches basically arises from a patent owner unreasonably delaying its assertion of a patent right during a period of time when the accused infringer made investments and the infringer would be prejudiced by the delayed assertion of the patent.  If successful, the defense traditionally would bar all past damages, limit injunctive relief and preclude future royalties on products purchased during the laches period.  The Federal Circuit’s en banc decision below in the instant case limited the defense so that it would no longer preclude any future royalties (see our Sep. 18, 2015 post explaining the en banc decision).  In sum, prior to today’s decision, the laches defense could limit damages prior to the filing of the lawsuit and limit injunctive relief.  This might have little impact in most patent cases where the period of past infringement may be relatively short and the patent has many years of life remaining for which future royalties would be paid even if an injunction were not granted.

Laches was a more promising defense when a litigation patent assertion entity purchased and asserted a near-end-of-life dormant patent (i.e., a never asserted patent) against defendants who have long-used the alleged infringing technology (see our Oct. 7, 2016 post on the FTC’s PAE Study and distinction between non-problematic “portfolio PAEs” and some problematic “litigation PAEs”).  In such circumstances, a laches defense could have a substantial impact because it would bar the bulk of the damages period (six years prior to the lawsuit) and would bar injunctive relief.  This would leave a remedy of only a future royalty for the short period of time remaining in the patent’s life.  For example, consider a patent with only a year remaining before it terminates.  The litigation PAE could seek seven years of damages: six years of damages prior to the lawsuit and one year of royalties before the patent terminates.  A successful laches defense would limit the damages exposure by over 85% — i.e., remove all six years of pre-suit damages, leaving only one year of future royalties before the patent expires.

The Supreme Court’s decision today will now permit six years of pre-suit damages notwithstanding a successful laches defense.  The related doctrine of equitable estoppel still remains as a defense.  Equitable estoppel is a somewhat harder defense to establish, because it requires proof that the infringer relied on some action by the patent owner indicating it would not assert the patent.  But equitable estoppel is a more effective defense, because it is a complete defense — i.e., it precludes all past and future damages and injunctive relief.

Below is a short summary of the case and the Supreme Court’s decision. Continue Reading Supreme Court rules laches cannot preclude statutory damages within the 6 year period before a patent suit is filed (SCA v. First Quality)

Judge Gilstrap recently ruled that  certain challenges to a damages expert’s testimony  went toward the weight a jury could give that testimony, rather than whether the testimony should be admitted.  Specific FRAND-related portions of the testimony that he would admit at trial include the following:

  • Expert could testify that the hypothetical FRAND royalty rate to be awarded for infringement damages (which presumes the patents are valid and infringed) would be higher than the royalty rate of a comparable FRAND license, which comparable license’s royalty rate may have been skewed low based on discounts made for litigation risks and costs.
  • Expert could testify about FRAND royalties that the accused infringer charges for its own SEPs.
  • Expert could testify about licenses negotiated in the context of German litigation and threat of injunction.

Judge Gilstrap indicated that the expert had sufficiently identified what he relied on and explained adjustments that he made to those proposed comparable licenses to account for differences from the hypothetical negotiated license.  The defendant’s challenges to that testimony goes to the weight the jury should give the testimony, not its admissibility.

Judge Gilstrap’s ruling is an interesting example of how FRAND litigation has matured since taking the main stage in Judge Robart’s first-of-its-kind FRAND royalty decision in Microsoft v. Motorola (see our May 1, 2013 post) and Judge Holderman’s following decision in In re Innovatio (see our Oct. 3, 2013 post).  Both of those 2013 decisions were based on, inter alia, a general failure of litigants to present sufficiently comparable licenses.  Since then, Federal Circuit decisions have leaned toward admitting comparable licenses where expert testimony sufficiently accounts for differences from the hypothetical negotiated license.

For example, the Federal Circuit’s 2014 Virnetx decision (a non-SEP case) counseled that, although “alleging loose or vague comparability … does not suffice,” a jury may consider comparable licenses where differences from the hypothetically negotiated license are explained to them (see our Sep. 17, 2014 post).  And the Federal Circuit’s 2015 Ericsson decision (an SEP FRAND case) stressed that, although real world licenses “are almost never perfectly analogous to the infringement action,” the jury may consider them if expert testimony accounts for “distinguishing facts when invoking them to value the patented invention.” (see our Dec. 5, 2015 post).  Litigants following the Federal Circuit’s guidance may find courts more willing to allow expert testimony on proposed comparable licenses despite their differences from the hypothetical negotiated license.

Continue Reading Judge Gilstrap permits damages expert testimony that litigated FRAND royalty should be higher than comparable license’s FRAND royalty that was skewed low by litigation risk discount (St Lawrence v. ZTE)

Magistrate Judge Payne recently ruled against prospective licensee T-Mobile’s motion to dismiss patent owner Huawei’s Declaratory Judgment Complaint that seeks a declaration that Huawei  complied with its FRAND commitments to ETSI regarding LTE standard-essential patents during Huawei’s license negotiations with T-Mobile.  Judge Payne did not rule whether or not Huawei had complied with its licensing negotiations; rather, he simply indicated that there was sufficient controversy between the parties and concern that T-Mobile might bring a breach of contract action against Huawei that the court could exercise declaratory judgment subject-matter jurisdiction to resolve the FRAND-compliance dispute.  This is a procedural ruling that is subject to review by the presiding district court judge, Judge Gilstrap.

This decision is interesting because it supports a way for patent owners with large SEP portfolios to resolve FRAND or other licensing disputes in a single action and, thereby, avoid complex and expensive patent infringement litigations on a patent-by-patent basis.  But the devil is in the details and we will await further developments as the case proceeds. Continue Reading Judge Payne rules patent owner may bring case seeking a declaration that it has not breached FRAND commitments (Huawei v. T-Mobile)

Today the Supreme Court in Life Technologies v. Promega ruled that 35 U.S.C. § 271(f)(1) liability for supplying from the U.S. “all or a substantial portion of the components of a patented invention” is a quantitative, not qualitative, analysis of the number of  components supplied such that supplying only a single component of a multicomponent invention does not give rise to liability under that section (though it might give rise to liability under § 271(f)(2) if that single component “is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use”). (see also our June 27, 2016 post on the Supreme Court’s grant of review of this case).  As Justice Alito’s concurrence states, the opinion “establishes that more than one component is necessary, but does not address how much more.”   So the art of litigating Section 271(f)(1)  will focus on the litigants’ ability to delineate how many separate “components” are in a claimed invention and whether the resulting number of such components supplied from the U.S. is “substantial.” Continue Reading Supreme Court rules that number of components supplied from U.S., not their importance to invention, is relevant to Section 271(f)(1) infringement (Life Tech. v. Promega)

The Korea Fair Trade Commission (“KFTC”) recently issued a press release stating its intent to issue a written decision that will impose an $865 Million sanctions and a corrective order against Qualcomm for abuse in licensing standard essential patents (“SEPs”) in the mobile communications industry.  Specifically, on December 28, 2016, the KFTC released a three-page English-translated summary of a 27-page Korean-language  press release.  Qualcomm issued its own press release, which includes an unofficial English translation of the 27-page KFTC press release.

This was only a press release by the KFTC and an actual written decision  has yet to issue from which any action will be taken.  Accordingly, at this point we provide a summary of the KFTC Press Release and conclude with important questions or issues to look for when the actual written decision of the KFTC issues.  For example, Korean-based Samsung had some of the same or similar licensing practices as U.S.-based Qualcomm and prevailed in U.S. litigation on whether such practices breached the same ETSI FRAND obligations at issue here.  The KFTC written decision may show why Samsung’s activities were okay, but Qualcomm’s were not.

To be clear:  This is a summary based on a review of an unofficial translation of the KFTC Press Release and may not reflect actual facts or the facts and theories upon which the KFTC ultimately bases its written decision.  In other words, assume that the qualification “The KFTC Press Release may indicate that …” applies to everything below since there could be error in the KFTC’s factual findings, the unofficial translation of it, or our summary thereof. Continue Reading Korea FTC proposes sanctions against Qualcomm’s SEP licensing practices

Magistrate Judge Nathanael M. Cousins recently denied Apple’s equitable defense that sought to hold a Core Wireless standard essential patent unenforceable because the prior patent owner Nokia allegedly failed to timely disclose to the ETSI standards body a pending patent application.  Judge Cousins also entered Final Judgment based on the jury’s recent verdict that awarded a $7.3 million lump sum reasonable royalty for Apple’s infringement of two SEPs (see our Dec. 15, 2016 post on the verdict).  This case provides incremental insight into litigating issues concerning a patentee’s alleged failure to disclose intellectual property rights to a standards body, at least with respect to the equitable theories of implied waiver and equitable estoppel.

In this case, the alleged failure to disclose related to a pending U.S. patent application that claimed priority to a Finnish patent application that was filed by the patent owner and pending while the standard was being developed.  The U.S. patent application did not issue as the patent-in-suit until several years after the standard was adopted.  Within a month or so of the patent’s issue, the patent owner disclosed the patent to the standards body, which was deemed to be “shortly after [the patentee] could point to the contours of its IPR with specificity because the claims were allowed.”

This did not give rise to an inference that the patent owner was relinquishing its patent rights as required to establish implied waiver.  And Apple, who did not create or sell its adjudged infringing products until many years later, did not show that it had relied on Nokia’s failure to disclose or was prejudiced by it, as required to establish equitable estoppel. Continue Reading Court denies Apple’s equitable defense that was premised on failure to disclose patent applications to a standards body (Core Wireless v. Apple)

Today, a Northern District of California jury in a trial before Magistrate Judge Nathanael M. Cousins entered a Verdict finding that Apple infringed two patents alleged essential to ETSI and 3GPP cellular standards, that the patents were not invalid and awarding a reasonable royalty in the amount of $3.4 Million and $3.9 Million for each patent, respectively, as single lump sum payments for past and future infringement.  It is not clear from the public record how the jury reached this damages verdict or whether it favors more the patent owner Core Wireless or the adjudged infringer Apple.  We may follow-up this post if more insight is provided by post-trial briefings or the trial transcripts become public.

Below is a discussion of some of the pre-trial rulings and jury instructions that would have shaped the jury’s reasonable royalty determination here.  These rulings touch-on the issues of royalty stacking, the smallest salable patent practicing unit, the form of a reasonable royalty, relevant Georgia-Pacific factors and apportionment to the value of the patented technology. Continue Reading Jury awards Core Wireless $7.3 Million lump sum for Apple’s infringement of two SEPs (Core Wireless v. Apple)

Today the U.S. Supreme Court issued its decision in the Apple v. Samsung design patent case on the limited of question of what constitutes an “article of manufacture” under the design patent statute, ruling that “The term ‘article of manufacture,’ as used in [35 U.S.C.] §289, encompasses both a product sold to a consumer and a component of that product.”  The decision is not surprising given the circumstances of this case and the unique statutory provisions for design patents, which are distinct from–and should not be confused with–the more commonly known and discussed utility patents (such as standard essential patents).  Below is a top-level summary of the decision, followed by a more detailed discussion.

Summary

Generally speaking, design patents cover how something looks–i.e., an “ornamental design.”  Importantly, design patents cannot include a shape or design that has some functional benefit, such as some novel shape that also has a functional benefit that makes something easier to carry, use, faster or the such.  Only utility patents can cover such functional innovations; thus, utility patents by and large have been the focus of patent law, including standard essential patents.  In contrast, design patents generally have been a niche’–almost obscure and somewhat confusing–area of law.  So much so that when practitioners, the courts and the general public talk about “patents” they usually mean “utility patents”; patent practitioner’s will specifically say “design patents” if they happen to be referring to that specialty.

Unlike the reasonable royalty remedy for infringing utility patents under 35 U.S.C. §284, the §289 design patent remedy requires that the infringer “shall be liable to the owner to the extent of his total profits” for selling an “article of manufacture” that infringes a design patent.  Samsung’s mobile phones were found to infringe Apple design patents generally directed to the look of the housing and screen icons of the mobile phone.  Apple argued that the “article of manufacture” was the entire Samsung mobile phone and it was entitled to the “total profits” made from selling the phone; Samsung argued that the “article of manufacture” would just be the patented design components of the phone– e.g. housing–and the damages should be limited to the “total profits” made from selling such components within the phone.  The Federal Circuit ruled below that “articles of manufacture” always must be the entire end product because only the end product–not an individual component–is sold to consumers.

Thus, the specific issue presented in this case was whether, under the design patent statute, an “article of manufacture” for which “total profits” are awarded always must be the entire end product or could such article of manufacture be individual components of the end product.  The Supreme Court today disagreed with the Federal Circuit and decided that an “article of manufacture” under the design patent statute may be either the end product or a component–i.e., in some circumstances it may be the end product and in other circumstances it may be the component.  The decision stopped there without deciding whether in this case the relevant “article of manufacture” is the mobile phone or only some of its component.  Rather, the Supreme Court has sent the case back down to the Federal Circuit for further consideration based on its limited ruling here.

This is an important case for design patent law in determining remedies for infringing a design patent.  The many open questions will require much more future development of design patent law.

Understanding what the Court did and did not decide here also is important:

  • The decision concerns the unique design patent statute’s mandatory “total profits” remedy and not the utility patent statute’s reasonable royalty remedy.
  • The decision does not address whether the design patent statute remedy is (a) an award of all total profits without further analysis or (b) an award limited to only total profits made because of the infringement–e.g., show that the infringing ornamental design caused any of Samsung’s sales and resultant profits where there are a host of other factors that contribute to sales.
  • The decision does not address how to determine whether the relevant “article of manufacture” is the end product or component.

In sum, the Supreme Court decided that, in determining statutory damages for infringement of a design patent, an “article of manufacture” is not always required to be the end product, but also could be components of that end product.  We await future developments in this interesting and often overlooked area of design patent law. Continue Reading Supreme Court rules that design patent statute term “article of manufacture” can be an end product or component thereof (Samsung v. Apple)