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)

Today the U.S. Supreme Court decided to review the Federal Circuit’s decision regarding international patent exhaustion in Impression Products, Inc. v. Lexmark Int’l, Inc.   Things to look for in whatever decision the Supreme Court ultimately reaches in this case is not only the mechanical aspect of applying the patent exhaustion doctrine generally, but whether the Supreme Court agrees with, strengthens or weakens the Federal Circuit’s en banc view that there are extraterritorial limits on the ability of foreign countries to control U.S. patents and access to U.S. markets. Continue Reading Supreme Court will review international patent exhaustion doctrine (Impression Prod. v. Lexmark)

Judge Gilstrap recently entered Final Judgment that included a 20% enhancement of damages based on a Jury Verdict that LG willfully infringed two patents that patent owner Core Wireless alleged to be essential to certain cellular standards.  This appears to be the first case of a court enhancing damages based on willful infringement of a standard essential patent.  Recall that Judge Gilstrap previously denied LG’s pre-trial motion to preclude finding willful infringement of an alleged standard essential patent, but indicated that he might consider LG’s policy arguments if he were to consider enhancing damages if the jury found that LG willfully infringed the patents (see our Sep. 7, 2016 post).

Judge Gilstrap has now ruled that he will enhance damages following the jury verdict that LG willfully infringed the patent, and he did so sua sponte, meaning that he enhanced damages without the patent owner filing a post-trial motion seeking such enhancement or the parties briefing same.  Judge Gilstrap has since stayed execution of the judgment while the parties file post-trial motions, which motions most likely will address the issue of willful infringement and enhanced damages.

Judge Gilstrap’s decision to enhance damages  was due to LG’s negotiation conduct and apparently weak infringement/validity defenses, which led him to conclude that “LG’s decision to terminate negotiations and continue operations without a license was driven by its resistance to being the first in the industry to take a license, and not by the merits or strength of its non-infringement and invalidity defenses.” Continue Reading Judge Gilstrap enhances damages for willful infringement of SEPs (Core Wireless v. LG)

Today, the Federal Circuit issued a decision en banc that reversed a three-judge panel decision because it erroneously had relied on evidence outside of the record from the trial court below to change the claim construction and hold claims invalid on obviousness grounds.  This decision may lead to more deference to the district court and increase the likelihood that a district court’s decision on claim construction, infringement or validity will survive appellate review.   But the decision’s ambiguous procedural posture may lead to confusion and litigants debating what portions of the decision are cloaked with the binding deference due an en banc decision of the court. Continue Reading Federal Circuit en banc decision limits appellate review to trial court record (Apple v. Samsung)

The U.S. International Trade Commission (“ITC”) recently denied a respondents request to use the Early Disposition Pilot Program to address “whether the asserted patents are standards-essential and are encumbered by mandatory licensing obligations giving rise to public interest concerns.”

Respondent 3S-Smart Software Solutions (“3S”) had submitted a first letter requesting use of the ITC’s Early Disposition Pilot Program because, among other things, the asserted patents may be essential to a standard set by the OPC Foundation (an automation industry standards setting organization) and subject to a royalty-free license.  On request, the OPC Foundation currently was determining whether the patents are essential to its standards.  3S asserts that, if the OPC Foundation finds that the patents are essential, OPC Foundation’s IPR Policy would require that the patents be licensed on a royalty-free basis.  3S argued that early determination of this defense would be an efficient way to proceed.

Complainant Rockwell Automation, Inc. (“Rockwell”) responded that it had not declared any patents to be essential, that the OPC Foundation’s review is not complete and that the outcome of such review will be subject to a challenge by Rockwell that could take months or years to resolve.  Further, Rockwell argues it could always withdraw from the OPC Foundation and assert its patents without being required to offer a royalty-free or FRAND license.  So early disposition would be inefficient and unduly delay resolution of the investigation.

3S replied that Rockwell could not cure its SEP issues by withdrawing from the OPC Foundation, because Rockwell was under an obligation to disclose its essential patents to the OPC Foundation and Rockwell’s withdrawal does not remove that promise.  Though not clear, 3S may be alluding to a potential defense that the patents may be unenforceable because Rockwell breached an obligation under the OPC Foundation’s IPR Policy to disclose its standard essential patents to the OPC Foundation.

The Commission rejected 3S’s request and gave the following short explanation for its decision:

The Commission assesses the effect of potential remedies on the statutory public interest factors following an affirmative determination on violation — once the actual scope of the Section 337 violation is determined, including the scope of valid and enforceable IP rights that are infringed (or other unfair acts) as well as the scope of imported infringing articles involved.  As such, this issue is outside the scope of the Early Disposition Pilot Program as the issue cannot be resolved at the beginning of an investigation.

Continue Reading ITC denies request for early, separate consideration of SEP issues (Rockwell v. 3S Inv. 337-TA-1020)

At the same time that Judge Gilstrap recently entered his bench trial ruling that rejected Metaswitch’s standards-based equitable defenses (see our Oct. 2, 2016 post), he also entered an Order that rejected Metaswitch’s request to set aside a jury’s verdict that it infringed valid patent claims based on, among other things, SEP-related grounds.  The ruling is interesting mainly due to the procedural issues it raises.  Judge Gilstrap did make a substantive ruling that the CableLabs, IETF and ITU-T intellectual property rights (IPR) agreements at issue applied on a patent claim-by-claim basis and not on a patent-by-patent basis (i.e., some claims in a patent may be subject to the IPR agreement, but other claims within that same patent may not). Continue Reading Judge Gilstrap rejects SEP-based arguments to set aside jury infringement and damages verdict (Genband v. Metaswitch)

Judge Gilstrap recently entered an Order that rejected various defenses raised by Metaswitch based on the prior patent owner’s (Nortel) activities in standards organizations CableLabs, the Internet Engineering Task Force (“IETF”) and the International Telecommunication Union (“ITU”).  The decision highlights the importance of considering the specific language of the standard setting intellectual property rights (“IPR”) policy and patent owner commitment at issue as well as the importance of showing that the standard incorporates the patented technology and is implemented in the accused infringing products.

For example, under the wording of the specific CableLabs IPR Agreement at issue, Judge Gilstrap ruled that (1) an entities’ commitment only applied to intellectual property (e.g., patents or applications) it owned at the time the entity made the commitment and did not apply to intellectual property that the entity later acquired and (2) a subsidiary’s intellectual property commitment did not obligate its parent entity.  Thus, although one of Nortel’s subsidiary’s that owned no patents participated in the CableLabs standards process, Nortel could hold (and later sell) patents relevant to the CableLabs standard without those Nortel patents being subject to the royalty-free licensing obligation that CableLab’s otherwise required of participants.

Further, Judge Gilstrap ruled that the accused infringer failed to show one or more material parts of the alleged standard setting obligation, such as showing that (i) the standard setting document at issue was actually an adopted standard subject to an obligation (e.g., not an expired draft or request for comment), (ii) the patented technology was incorporated into the standard (e.g., the patent claims actually are “essential” to the standard), and (iii) the accused products actually implement the standard and patented technology.  The latter requirement — e.g., show that the accused products implement the patented technology within the standard — can be particularly problematic, because accused infringer’s generally deny infringement (usually a first line of defense) and are reluctant to undermine that defense by arguing that the claims read onto their product in order to support a lower priority defense, such as the standard essential patent defenses raised here.

The decision also provides incremental insight into common equitable defenses raised in standard essential patent cases: laches, equitable estoppel, implied waiver, and implied license.  In this case, the circumstances that lead to a failure to establish breach of an expressed standard setting commitment also doomed the equitable defenses as well.  Perhaps this is not too surprising, because equity generally does not step-in when there is an adequate remedy at law–e.g., enforcement of a contractual obligation that sets the rights, obligations and expectations of the parties.  This further bolsters the importance of the language used in the specific standard setting IPR policy and specific patent owner commitment at issue when determining rights and obligations under standard essential patents subject to a standard setting obligation. Continue Reading Judge Gilstrap rejects Metaswitch’s SEP defenses based on Nortel participation in CableLabs, IETF and ITU standards bodies (Genband v. Metaswitch)

Judge Gilstrap recently denied accused infringer LG’s motion for summary judgment that alleged standard essential patents (“SEPs”) were not willfully infringed, letting that issue go to the jury;  if the jury finds willful infringement, then the court may decide whether and to what extent to enhance damages based on such willful infringement.  An important procedural point is that Judge Gilstrap did not rule that there was willful infringement in this case; rather, under the permissive summary judgment standard, he ruled that there was sufficient evidence to let the jury decide the issue.  He did rule as a matter of law, however, that there is no special rule for SEPs that precludes finding willful infringement or enhancing damages, and  he left the door open to consider policy arguments about SEPs subject to FRAND commitments when exercising discretion whether to enhance damages. Continue Reading Judge Gilstrap rules that damages can be enhanced if SEPs subject to a FRAND commitment are willfully infringed (Core Wirless v. LG)