Yesterday, the U.S. Department of Justice (DOJ) Assistant Attorney General (AAG) for the Antitrust Division Makan Delrahim spoke  in Brussels about maintaining a close working relationship and coordination with European Union’s Directorate General for Competition (DG Competition) in competition law enforcement.  AAG Delrahim’s remarks included suggestion that the European competition authorities shift toward the more balanced  approach to standard essential patents (SEPs) that he recently articulated for the U.S. (See our Dec. 20, 2017 post on AAG Delrahim’s remarks on shift in U.S. DOJ’s SEP enforcement approach).  Some key points in AAG Delrahim’s remarks include:

  • “I believe that strong protection of these [IP] rights drives innovation incentives, which in turn drive a successful economy.”
  • “I worry that we have strayed too far in the direction of accommodating the concerns of technology licensees who participate in standard setting bodies, very likely at the risk of undermining incentives for the creation of new and innovative technologies.”
  • The tension between innovators and implementers “is best resolved through free market competition and bargaining.  And that bargaining process works best when standard setting bodies respect intellectual property rights … including the very important right to exclude.”
  • If a patent owner violates a standard-setting commitment, “remedies under contract law, rather than antitrust remedies, are more appropriate to address licensee’s concerns.”

Below is a a complete excerpt of AAG Delrahim’s remarks in Brussels with respect to intellectual property and SEPs: Continue Reading U.S. DOJ Antitrust Head Makan Delrahim brings his message of balanced SEP competition law enforcement to Europe

You will soon see a new and improved Essential Patent Blog.  Let us know if there are features about the blog you would like to see, change or omit.  One of the blog features under review is our “Resources” section where we list scholarly papers, articles and other resources dealing with standard essential patents.  We want to update that list of resources.  So please let us know if you have a paper or other resources that would warrant posting as a “Resource”.

For example, we just added papers submitted for an AIPLA presentation a few weeks ago on litigating standard essential patents at the U.S. International Trade Commission (ITC), where we discussed the ITC as a unique agency and unique procedural issues in litigating SEPs at the ITC.

Continue Reading Help us help you …

Today, the Federal Circuit issued a ruling in Lighting Ballast v. Philips on remand from the Supreme Court after the Teva decision changed the standard of review of a district court’s claim construction.  One of the more interesting parts of the case concerns the Federal Circuit’s deference now to the district court’s decision premised on extrinsic expert and inventor testimony that the limitation “voltage source means” connotes sufficiently definite structure to avoid interpreting the limitation as a means-plus-function limitation under 35 U.S.C. § 112 ¶ 6.

This provides good insight into the importance of prevailing on claim construction at the district court level based on extrinsic evidence, to which the Federal Circuit is now more inclined to defer, particularly in light of the Federal Circuit’s recent en banc decision that broadened when functional claim language is subject to § 112 ¶ 6 (see our June 17, 2015 post).

Background

In February 2009, Lighting Ballast sued Philips Electronics for infringing U.S. Pat. No. 5,436,529 directed to electronic ballast circuitry that regulates high current flow in a fluorescent lamp where the electronic ballast can shield itself from destructive levels of current that occur when a lamp is removed or becomes defective.  Asserted Claim 1 includes a “voltage source means” limitation as follows:

voltage source means providing a constant or variable magnitude DC voltage between the DC input terminals.

The district court initially construed this as a means-plus-function limitation subject to interpretation under § 112 ¶ 6.  Because the district court found no corresponding structure in the patent specification, it ruled that the claim was invalid for being indefinite under § 112 ¶ 2.  But the district court changed its ruling in response to a motion for reconsideration, stating that its prior ruling “unduly discounted the unchallenged expert testimony” and “exalted form over substance and disregarded the knowledge of a person of ordinary skill in the art.”  The district court cited testimony from a technical expert and the named inventor that a person skilled in the art would understand the term “voltage source means” to correspond to a rectifier and, thus, the claim limitation had sufficient structure to avoid § 112 ¶ 6.

On appeal to the Federal Circuit, an initial panel decision in Jan. 2013 reversed the district court’s ruling and found the claim subject to § 112 ¶ 6 and  indefinite because the patent specification failed to disclose structure corresponding to the claimed function of that limitation.  The panel relied on the presumption that § 112 ¶ 6 applied because the claim limitation uses the term “means” and found that the expert testimony was not sufficient to overcome this presumption.  The Federal Circuit then took the case on review en banc to determine what deference is owed the district court’s claim construction, and decided to maintain its Cybor standard that affords no deference to the district court’s legal or factual determinations in construing claims. (see our Feb. 21, 2014 post).  The en banc Federal Circuit thus reinstated the original panel decision that had not deferred to the district court’s claim construction ruling.  But, afterwards, the Supreme Court in Teva ruled that the district court’s factual determinations require deference on appellate review, and remanded this case to the Federal Circuit for reconsideration (see our Jan. 23, 2015 post on Teva).

Decision

Judge Reyna wrote the decision for the panel, joined by Judges O’Malley and Lourie.  They addressed several claim construction and procedural issues (e.g., waiver of claim construction argument in district court), but this post will focus solely on the means-plus-function aspect.

The Federal Circuit found that the district court properly could consider extrinsic evidence “because the extrinsic evidence was ‘not used to contradict claim meaning that is unambiguous in light of the intrinsic evidence.”  The Federal Circuit “defer[red] to these factual findings, absent a showing that they are clearly erroneous”, the factual findings being described as follows:

For example, the district court determined that “while the ‘voltage source means’ term does not denote a specific structure, it is nevertheless understood by persons of skill in the lighting ballast design art to connote a class of structures, namely a rectifier, or structure to rectify the AC power line into a DC voltage for the DC input terminals.”  The district court went on to note that the language following “voltage source means” in the claim–“providing a constant or variable magnitude DEC voltage between the DC input terminals”–“when read by one familiar with the use and function of a lighting ballast, such as the one disclosed by the 529 Patent, [sic] would understand a rectifier is, at least in common uses, the only structure that would provide ‘a constant or variable magnitude DC voltage'”.  The district court further noted that “[i]t is clear to one skilled in the art that to provide a DC voltage when the source is a power line, which provides an AC voltage, a structure to rectify the line is required and is clear from the language of the ‘voltage source means’ term.”

The Federal Circuit also found that those “factual findings” were supported by the record based on testimony from the patent owner’s expert and the named inventor, stating:

Specifically, these factual findings are supported by the testimony of Dr. Roberts and Mr. Bobel [the named inventor].  Mr. Bobel testified in his deposition that the “voltage source means” limitation connotes a rectifier to one skilled in the art.  Mr. Bobel further explained that a battery could likewise provide the necessary DEC supply voltage described in the patent.  Similarly, Dr. Roberts explained that the “voltage source means” limitation suggests to him a sufficient structure, or class of structures, namely a rectifier if converting AC from a “power line source” to DC for a “DC supply voltage” or a battery if providing the DC supply voltage directly to the DC input terminals.  This expert testimony supports a conclusion that the limitations convey a defined structure to one of ordinary skill in the art.

The Federal Circuit, thus, affirmed the district courts ruling that the claim limitation “voltage source means” conveys sufficient structure to avoid application of § 112 ¶ 6.

A significant portion of the international patent wars between Apple and Samsung have been brought to a close, according to a joint statement issued by the parties:

Apple and Samsung have agreed to drop all litigation between the two companies outside the United States. This agreement does not involve any licensing arrangements, and the companies are continuing to pursue the existing cases in U.S. courts.

We note that the statement is similar to the one that issued following resolution of the disputes between Apple and Google this May.

Since 2011, Apple and Samsung have been involved in cross-infringement actions in Australia, France, Germany, Italy, Netherlands, South Korea, and the U.K. Many of these non-U.S. cases involved significant SEP-related rulings. You may recall that earlier this year, the Japanese High Court denied Samsung injunctive relief against Apple while allowing FRAND-based damages on the asserted SEPs (see our May 21, 2014 post). In a separate proceeding related to the European Commission’s investigation of Samsung’s SEP enforcement against Apple, Samsung committed to not pursue any injunctions in the European Economic Area for a period of five years based on any SEPs related to smartphone/tablet technologies against companies that agree to a predetermined licensing framework, as discussed in our April 30, 2014 post.

Although litigation abroad has been brought to a close, the U.S. dispute between the companies moves forward — albeit without any notable SEP issues for the time being. In March, Judge Koh granted Apple and Samsung’s request to dismiss without prejudice Samsung’s SEP infringement claims and Apple’s related FRAND defenses and counterclaims (see our March 12, 2014 post).

 

 

Yesterday the U.S. International Trade Commission (ITC) issued a Notice that it was terminating the investigation of whether certain LSI 802.11 and H.264 alleged standard essential patents were infringed by Realtek and others given various circumstances that mooted the investigation as to most patents and a finding of no liability for the remaining patent.  In terminating the investigation, the ITC “determined to take no position on the ALJ’s determination with respect to the Respondents’ RAND and equitable defenses.”

The ITC terminated the investigation as to the four patents at issue for different reasons, many not related to the merits:

  • Terminated investigation as to the ‘087 and ‘663 Patents due to settlement.
  • Terminated investigation as to ‘867 Patent because it recently expired and the ITC can only give prospective relief.
  • Terminated investigation as to remaining ‘958 Patent because asserted patent claims were not infringed, the claims were invalid and there was no domestic industry based on LSI’s licensing activities.

Our Oct. 21, 2013 post discussed the ITC’s decision to review ALJ Shaw’s determination in its entirety and had requested briefing on RAND-related issues in the event liability were found.  The ITC sought such RAND-related information given U.S. Trade Representative Froman’s prior disapproval of the Samsung-Apple exclusion order that counseled  the ITC to proactively develope a factual record on RAND issues (see our Aug. 6, 2013 post).  The ITC’s decision to terminate the investigation without addressing the RAND issues is a somewhat anti-climatic end of an investigation in which much ink was spilled (see our various posts on this Inv. No. 337-TA-837).  Whether and to what extent the RAND issue may and will be briefed in any appeal to the Federal Circuit is questionable.  But they will be front and center with any appeal from the parallel district court litigation (though there may be an issue similar to the Microsoft v. Motorola case whether the case premised on breach of RAND obligation should be appealed to the Federal Circuit or regional circuit).

Recall from our Feb. 27, 2014 post last week that the parallel district court case between Realtek and LSI before Judge Whyte led to a jury determined RAND rate for the ‘867 Patent (which the ITC dismissed because it expired) and the ‘958 Patent (which the ITC found not infringed).  The ITC’s decision is not inconsistent with the jury verdict for a few reasons.  First, procedurally, the ITC decision itself is not binding on the district court.  Second and more important substantively and practically, the jury was asked to determine a RAND rate for the two patents without deciding whether the patents were infringed and under the assumption that both patents are essential to the IEEE 802.11 WiFi standard.  The jury’s verdict thus is not inconsistent with the ITC’s determination, which did not decide whether the ‘867 Patent is infringed and found no infringement of the ‘958 Patent (an issue the jury was not asked to decide).

 

Yesterday, the jury in the Realtek v. LSI case before Judge Whyte returned a verdict finding that a RAND royalty for LSI’s two patents alleged essential to IEEE 802.11 WiFi standard would total about 0.19% of the total sales prices of Realtek’s WiFi chips (0.12% for one patent plus 0.07% for the other).  This RAND royalty is reported to be closer to the rate sought by patent owner LSI of 0.29% than the much lower rate sought by putative licensee Realtek of 0.017%.  The Realtek WiFi chip price is not clear from the available filings, but was reported to be $1 to $1.74, which would yield an effective royalty of about 0.19 to 0.33 cents per WiFi chip (the jury had the option to award a royalty per unit or percentage of sales price, and they chose the latter).  The jury also awarded Realtek about $3.8 million for costs in defending against LSI’s attempt to seek an exclusion order in the U.S. International Trade Commission, which Judge Whyte previously held breached LSI’s RAND obligations.

For further background on this jury trial, see our prior posts that outlined key evidentiary rulings by Judge Whyte that framed the issue for the jury (see our Jan. 9, 2014 post and our Nov. 14, 2013 post).

Another Litigated RAND Data Point.  The jury’s verdict in this case provides a fourth data point on a U.S. litigated RAND royalty rate.  To date, we have two judge-determined RAND royalty rates and two jury determined RAND royalty rates, as follows:

  • Judge Robart’s bench trial RAND determination of 3.471 cents per WiFi unit and 0.555 cents per H.264 unit  in Microsoft v. Motorola (W.D. Wash.) (see our Apr. 25, 2013 post and other posts).
  • Jury verdict before Judge Davis determining 15 cents per WiFi chip in Ericsson v. D-Link (E.D. Tex) (see our Aug. 7, 2013 post and other posts)
  • Judge Holderman’s bench trial RAND determination of 9.56 cents per WiFI chip in In re Innovatio Litigation (N.D. Ill.) (see our Oct. 3, 2013 post and other posts).
  • Jury verdict before Judge Whyte determining 0.19% per WiFi chip (about 0.19 to 0.33 cents per chip) in Realtek v. LSI (N.D. Cal.).

Probably too few data points at this point to predict future cases.  The two bench trials (Judge Robart and Judge Holderman) generally have resulted in RAND determinations substantially favoring the putative licensee.  The two jury verdicts (before Judge Davis and Judge Whyte) did not have as adverse results for the patentees, because the determined RAND rates were lower than–but closer to–what the patentees sought at trial.

Jury Instructions.  The jury was instructed to assess the RAND royalty rate by assuming the patents are essential to the standard and without determining whether the patents actually are infringed by Realtek’s WiFi chips: “Whether or not Realtek infringes the two LSI patents is not an issue in this case” and “The determination of a RAND royalty rate also assumes that the two LSI patents are essential to the 802.11 standard.”

The crux of the instructions for the jury to determine a RAND royalty rate is found in Instruction Nos. 12 to 15, reproduced below in their entirety given the importance to putting the jury’s decision in context:

INSTRUCTION NO. 12: RAND DETERMINATION – HYPOTHETICAL NEGOTIATION
     As I previously advised you, one of your tasks is to determine, based upon the evidence presented, the appropriate royalty rate for the ‘958 and ‘867 Patents that LSI needs to offer to Realtek to comply with LSI’s RAND obligations.  Whether or not Realtek infringes the two LSI patents is not an issue in this case.
A royalty is a payment made to a patent holder in exchange for the right to make, use, or sell the claimed invention.  This right is called a “license.”  A “RAND” royalty rate is a reasonable and nondiscriminatory royalty rate.
In determining the RAND royalty rate, you should consider a hypothetical negotiation between Realtek and LSI over a royalty rate for LSI’s two patents.  In considering the nature of this negotiation, you must assume that the patent holder and the licensee would have acted reasonably and would have entered into a license agreement.  The determination of a RAND royalty rate also assumes that the two LSI patents are essential to the 802.11 standard.
For the purposes of this hypothetical negotiation, you should consider all the facts known and available to the parties at the time Realtek first made, used, or sold products using the standard, which was November 2002.  You should not consider LSI’s advantage resulting from the standard’s adoption, if any.  However, you may consider any advantage resulting from the technology’s superiority.  Your role is to determine what the result of the hypothetical negotiation between Realtek and LSI would have been.  You must determine what royalty would have resulted from the hypothetical negotiation and not simply what either party would have preferred.

INSTRUCTION NO. 13: RAND DETERMINATION – TYPES OF ROYALTIES
     A royalty can be calculated in several different ways and it is for you to determine which way is the most appropriate based on the evidence you have heard.  One type of royalty is a percentage royalty, in which the licensee pays the patent holder a certain percentage of its revenue.  Another type of royalty is a per unit royalty, in which the licensee pays the patent holder a predetermined amount of money for each unit the licensee sells.
It is up to you, based on the evidence, to decide what type of royalty is appropriate in this case.

INSTRUCTION NO. 14: RAND DETERMINATION – DETERMINING A RAND ROYALTY RATE
     You should follow the two steps below in determining the RAND royalty rate resulting from the hypothetical negotiation:

(1) Consider the importance of the two LSI patents to the standard as a whole, comparing the technical contribution of the two LSI patents to the technical contributions of other patents essential to the standard.
(2) Consider the contribution of the standard as a whole to the market value of Realtek’s products utilizing the standard.

INSTRUCTION NO. 15: RAND DETERMINATION – CONSIDERATION OF LICENSES
     You may consider other licenses for patents comparable to the two LSI patents.  In determining the comparability of other licenses, you may consider, among others, the following factors:

(1) the patents included in the license agreement,
(2) the date of the license,
(3) any limitations on the use of the licensed technology,
(4) the inclusion of other consideration in the agreement,
(5) whether the license was part of a settlement of litigation or arbitration,
(6) whether the royalty was a lump sum or a running royalty rate, and
(7) opinion testimony of qualified experts.

 

Last week the U.S. International Trade Commission issued the public version  of its decision last December that no valid claim of Interdigital’s 3G patents was infringed by Huawei, Nokia or ZTE and reserving ruling on other issues, such as on RAND obligations (see our Dec. 23,2013 post).  The ITC also gave its Federal Register notice of its decision earlier this month to grant InterDigital’s motion to voluntarily  terminate the investigation against the remaining respondent LG to avoid simultaneously  litigating that case in the ITC while InterDigital was appealing the decision as to the other respondents (see our Jan. 13, 2014 post about InterDigital’s voluntary termination after remand from Federal Circuit).

So we may not know for a year or more–pending InterDigital’s appeal–whether the SSO-obligation issues will be considered in this litigation.  Those issues may be mooted if the Federal Circuit affirms the ITC’s ruling that no valid patent claim is infringed.

On Friday, the U.S. Department of Justice (“DOJ”) announced that it was closing its investigation into Samsung’s use of standard essential patents, which investigation had “focused on Samsung’s attempts to use its SEPs to obtain exclusion orders from the [ITC] relating to certain iPhone and iPad models.”  DOJ stated that further investigation was no longer needed given U.S. Trade Representative Michael Froman’s disapproval last year of an exclusion order in the ITC’s investigation of Apple’s infringement of Samsung’s SEPs (see our Aug. 3, 2013 post).

Samsung’s Proactive European Proposal.  DOJ states that its “Antitrust Division has worked closely and consulted frequently with its colleagues at the European Commission,” which raises the question whether DOJ took comfort in Samsung’s recent European activities.   Recall that the European Commission is considering Samsung’s proactive proposal  in response to a competition investigation that, during the next five years, Samsung would not seek injunctive relief within the European Economic Area (EEA) on SEPs in the field of mobile communications against companies that agree to a particular framework for determining fair, reasonable and non-discriminatory (FRAND) licensing terms either by agreement, by court determination or by arbitration (see our Oct. 18, 2013 post).  Samsung made this proposal on Sep. 27, 2013, several weeks after USTR Froman’s Aug. 3, 2013  disapproval of the exclusion order Samsung was awarded against Apple.  Further, Samsung’s proposal to the European Commission is similar to the consent decree entered between the U.S. Federal Trade Commission and Google/Motorola to settle an investigation about Motorola’s assertion of SEPs (see our July 24, 2013 post).

Samsung’s Cross-Licensing.  In addition to the European activity, Samsung recently entered into cross-license agreements with at least Google and Cisco.  Perhaps recent successful cross-licensing of Samsung’s patents by sophisticated companies through bilateral negotiations gave DOJ further comfort in ending its investigation.

You will soon see a fresh new look and feel to the Essential Patent Blog and some enhanced content.  For example, we will start adding specific pages for significant SEP patent litigations that we have been following to provide an easier way for you to get a summary of the litigation, including past key events, upcoming events and key filings and decisions.

We will start transitioning to the new design today and — if the technology gremlins are kind — we will have no downtime. The process includes porting-over our existing email subscriber list, so current subscribers should check to ensure they are still getting emails after the transition.  Rather than our current practice of sending an email to subscribers each time we make a new post, we intend to send only one email in the morning for all new posts from the prior day (if any).  We also will provide ways to get real-time notice of new postings, such as the blog’s new Twitter account “@essentialpatent”.

So thanks for your support so far, will appreciate your patience as we address whatever issues may arise during or after the transition, and look forward to seeing you on the other side …