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.
Yesterday, the U.S. Federal Trade Commission (“FTC”) released a 269-page Report following its study of patent assertion entities (“PAEs”) — i.e. what the FTC’s press release calls “firms that acquire patents from third parties and then try to make money by licensing or suing accused infringers.” (see our Sep. 27, 2013 post, May 21, 2014 post and Aug. 14, 2014 post for background on this PAE study). The report is based on a study of public information as well as non-public information that the FTC used its subpeona power to obtain resulting in data covering the 2009 to 2014 period from 22 PAEs, 327 PAE affilidate and over 2100 holding entities (entities that owned but did not assert patents).
The report indicates that not all PAEs are the same and concerns about PAEs should be focused on problematic behavior of a subset of PAEs–i.e., certain Litigation PAEs, but not Porfolio PAEs. The report also indicates that there is no widespread concern about PAEs sending demand letters or PAEs owning standard essential patents subject to a FRAND or other standard setting licensing commitment. The report provides some recommendations concerning patent reform, which are directed to patent litigation and the behavior of some Litigation PAEs. Continue Reading FTC Releases Long-Awaited Patent Assertion Entity Study
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)
Judge Payne recently denied defendant LG’s motion to exclude damages expert testimony on alleged standard essential patents (SEPs) where LG challenged the experts opinion (1) because he did not start with a royalty-rate that is then adjusted by applying Georgia-Pacific factors and (2) because he failed to apportion value to the patented feature given his reliance on the end product price. The patents-in-suit are alleged to be essential to the GSM, UMTS/HSPA and LTE cellular standards, but the parties disagreed whether the patents are SEPs and other patents-in-suit are not alleged to be SEPs.
The decision sheds some incremental insight on the entire market value rule (EMVR) that concerns when one can use the end product as the royalty base. The court considered it a rule of evidence for U.S. jury trials to avoid jury confusion and found that the expert properly considered the end product price to assess profitability of the accused device, but otherwise did not rely on the end product as a royalty base. He ruled that the expert may rely on that end product price in his analysis, but he cannot “publish” (i.e., disclose) that end product price to the jury given the EMVR’s “important evidentiary principle” that “care must be taken to avoid misleading the jury by placing undue emphasis on the value of the entire product” and concern that “diclosure of the end product’s total revenue cannot help but skew the damages horizon for the jury, regardless of the contribution of the patented component to this revenue.” Continue Reading Judge Payne applies “important evidentiary principle” to preclude telling jury about end product price (Core Wireless v. LG)
The U.S. International Trade Commission (ITC) recently released the public version of its decision in an investigation of whether Arista infringes Cisco patents, rejecting Arista’s defense and public interest arguments that the patents allegedly cover a de facto standard and are subject to a FRAND obligation. Arista’s defense was based on Cisco’s submission to IETF of a request for comments document (RFC 5517), which stated it was not a standard, along with a commitment by Cisco to license patents on FRAND terms IF (1) RFC 5517 was adopted as a standard AND (2) the patents are essential to practice such standard. The ITC rejected Arista’s de facto standard defense because, among other things, there was no evidence that RFC 5517 was adopted as an industry standard or that the patents-in-suit covered RFC 5517, both of which were preconditions under Cisco’s commitment to IETF before triggering a FRAND obligation. Continue Reading ITC rejects de facto standard defense (337-TA-944, Cisco v. Arista)