Judge Gorton of the U.S. District Court of Massachusetts recently entered an order granting a motion by Amphastar Pharmaceuticals (Amphastar) that bars Momenta Pharmaceuticals, Inc. (Momenta) from enforcing a patent against certain drug manufacturing control processes based on the equitable doctrines of waiver and estoppel that arose form Momenta’s failure to disclose a pending patent application to the standard setting organization (SSO) United States Pharmacopeia (USP) when deliberating on a USP National Formulary (USP-NF) standard.  This case found a duty to disclose a pending patent application that “reasonably might be necessary” to practice the standard based on the participants’ understanding of the SSO’s ambiguous conflict of interest policy that required participants to disclose financial or other interests “that may result in a conflict of interest or the appearance of interest.”  This case also provides insight on tailoring equitable relief when waiver or estoppel are found: the court ruled that the patent was unenforceable against two infringing processes used by the infringed that practiced the standard, but the patent was enforceable against a third process that fell outside the standard (if the patent otherwise is valid and infringed).
Continue Reading Waiver and estoppel bar enforcement of undisclosed drug manufacturing patent (Momenta v. Amphastar)

Judge Gilstrap recently issued an Order rejecting the equitable defense of patent misuse in a case involving standard essential patents (SEPs) subject to a commitment to license them on fair, reasonable and non-discriminatory (FRAND) terms.  Motorola Mobility LLC (Motorola) alleged that Saint Lawrence Communications LLC (St. Lawrence or SLC) was guilty of patent misuse by, among other things, requiring Motorola to take a worldwide license to FRAND-committed SEPs, using the threat of injunctive relief in Germany to coerce licensing of those SEPs, entering different license terms with different licensees and not disclosing effective royalties from licensing the SEPs under a patent pool when negotiating individual licenses.  This decision is another indication that competition law claims asserted against SEPs may not prevail when patent owners have followed traditional patent enforcement and licensing strategies or even if they breach of a FRAND commitment.  Rather, there must be something more egregious or deceptive with the particular patent owner’s conduct at issue to give rise to competition law claims that are required to address harm to competition beyond harm that can be addressed by more traditional patent or contract law remedies — e.g., a contract remedy for breach of a FRAND commitment or limits on patent remedies based on a FRAND commitment.
Continue Reading Judge Gilstrap rejects patent misuse defense to alleged FRAND-committed SEPs (St. Lawrence v. Motorola Mobility)

Magistrate Judge Fallon recently Recommended Dismissing competition law counterclaims brought by TCT Mobile (TCT) against Godo Kaisha IP Bridge 1 (IP Bridge) and Panasonic and Judge Bataillon has now Adopted that ruling.  Those counterclaims were based on alleged improper conduct relating to standard essential patents (SEPs)  on European Telecommunications Standards Institute (ETSI) 2G, 3G and 4G wireless standards that IP Bridge acquired from Panasonic after those standards were adopted.  While the standards were under development, Panasonic had committed to license the SEPs on fair, reasonable and non-discriminatory (FRAND) terms.  TCT’s competition law counterclaims generally concerned allegations that:

  • Panasonic made FRAND commitments it did not intend to keep in order to induce the standards body to keep Panasonic’s technology in the standards;
  • After the standards were adopted, Panasonic transferred the patents to IP Bridge which offered to license the patents on terms that were not FRAND and
  • There was some type of improper concerted action between Panasonic and IP Bridge (this aspect is fairly redacted and unclear).

This case presents an interesting nuance of competition claims against a party (IP Bridge) that acquired SEPs from an original owner (Panasonic) who made a FRAND commitment.  In this case, TCT alleged that something about the transfer of the patents to IP Bridge was meant to circumvent Panasonic’s FRAND commitment (but the details of those allegations are redacted in the public court documents).

This case also indicates that an antitrust injury-in-fact cannot arise solely from a patent owner filing an infringement lawsuit on FRAND-committed SEPs.  That’s because a successful FRAND defense by the accused infringer will lead to remedies consistent with the FRAND commitment and, in any event, any relief ultimately granted by the court would be lawful.

The decision also has a unique procedural posture.  This is a decision by a magistrate judge that recommends to the presiding district court judge how to rule on the issue.  Such magistrate judge recommendations are common in patent  cases.  The presiding district court judge usually adopts a magistrate judge’s recommendation, but is not required to do so.  So we will await the district court judge’s decision whether to adopt Judge Fallon’s recommendation here.

Further, this decision concerns a Rule 12(b)(6) motion to dismiss causes of action based on the initial pleadings.  Such motions are difficult to win because of the tremendous deference the court must give to the challenged pleading — e.g., the court considers whether TCT states a “plausible” claim if the court assumes (without deciding) that all factual allegations TCT raises are true and draws all reasonable inferences in TCT’s favor.   And courts are even more reluctant to grant a Rule 12(b)(6) motion against competition law claims, which may be factually complex and require information in the hands of the alleged wrong-doer that can be obtained only in discovery.   In this case, however, TCT apparently had almost a year of discovery and two attempts to plead its competition law claims, which may have provided the court more comfort in its dispositive ruling here.
Continue Reading Magistrate Judge Fallon recommends dismissing competition claims against SEP holder (Godo Kaisha IP Bridge v. TCL et al)

Today, Judge Selna issued on Order ruling on Ericsson’s motion to alter or amend his FRAND ruling. (See our Jan. 3, 2018 post summarizing FRAND royalty ruling).  Under the procedural posture of the Rule 52(b) motion for seeking modification of a judge’s bench trial findings of fact and law, Ericsson had to show that its proposed changes to that ruling were needed “to correct manifest errors of law or fact or to address newly discovered evidence or controlling law” or were not changes that “would not affect the outcome of the case or are immaterial to the court’s conclusions.” (Order at 2).  Given this difficult standard, Judge Selna only agreed to make minor word changes to his decision, which he will soon reissue with other clerical corrections and some corrections to be made based on TCL’s Rule 52(b) motions (which were also apparently minor changes).  To be clear: by “minor changes” we mean as far as significance in applying the decision to other cases between other parties; we could be mistaken and, moreover, have no comment on how significant the changes may be to the instant parties in this particular case.  The next substantive step in this case will be the Federal Circuit appeal that Ericsson already filed, but that has been stayed pending the outcome of the parties’ Rule 52(b) motions.
Continue Reading Judge Selna will make minor changes to FRAND ruling (TCL v. Ericsson)

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 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)

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)