In a May 10, 2018 ruling, discussed earlier on this blog, Magistrate Judge Payne affirmed the jury’s willfulness finding largely on the ground that TCL did not proffer any evidence that it held a subjective, good faith belief that it did not infringe the patent-in-suit or that the patent was invalid. The fact that TCL filed over a dozen petitions for inter partes review of the asserted patents did not mean, as a matter of law, that TCL held such a subjective, good faith belief. The ruling demonstrates the importance, post-Halo, of alleged infringers performing their own investigation of allegations against them – mere pleadings taking non-infringement or invalidity positions may not suffice to defeat a willfulness allegation. Continue Reading Willfulness Finding in EDTX Ruling in TCL v. Ericsson Illustrates the Risk to Accused Infringers of Failing to Investigate Allegations
On May 10, 2018, Magistrate Judge Payne reconsidered his previous March 2018 order which had vacated a jury award, and granted plaintiff Ericsson’s motion for reconsideration. The May ruling makes clear that the accused infringer bears the burden of production for royalty-stacking and other mitigatory arguments on damages. Whereas the March ruling excluded Ericsson’s damages expert for failing to account properly for the royalty stack on the accused products that his damages theory implied, the May ruling scrutinized the record and found that TCL had failed to submit any evidence into the record that would support even a jury instruction on royalty stacking. The decision underscores the importance of developing an affirmative record in support of each element of a damages theory or counter-theory.
The ruling also stands in stark relief to Judge Selna’s 2017 ruling in the Central District of California case between the parties. There, Judge Selna determined that approximately $20 million would represent a fair, reasonable, and non-discriminatory (FRAND) royalty for TCL’s infringement of Ericsson’s worldwide portfolio of patents declared essential to various telecommunications standards (SEPs) – thousands of patents that, the parties agreed, represented a significant share of the value of the technology in those standards.
As 2018 begins and IP strategies are being developed for the new year, it is a good time to reflect on what IP issues were prominent in 2017. According to the many readers of Global IP Matters, hot topics included navigating the waters of U.S. patent prosecution, evaluating obviousness, and ITC treatment of standard-essential patents (SEPs).
The public version of ALJ Shaw’s Initial Determination (ID) in U.S. International Trade Commission (ITC) investigation Certain Magnetic Data Storage Tapes and Cartridges Containing the Same, Inv. No. 337-TA-1012 (1012 Investigation), provides important guidance on enforcement of standard-essential patents (SEPs) in the ITC. Respondent and accused infringer Sony argued that several of the patents asserted by patentee Fujifilm wereessential to the LTO-7 standard (relating to “linear tape open” magnetic media) and therefore that Fujifilm had waived its right to injunctive relief and was obligated to license its patents on FRAND terms. ALJ Shaw ultimately found that Sony had not met its burden of demonstrating essentiality, but he nevertheless provided helpful instructions on the quantum of proof necessary to make out such a claim, as well as other factors relevant to ITC enforcement of SEPs, all of which affirmed that the ITC is a viable forum for enforcement of SEPs. In sum he ruled that:
- The party arguing that a patent is essential bears the burden of proof on that point;
- Unless a patent is, in fact, essential to a given standard, there can be no breach of the standard-setting organization (SSO) agreement(s) giving rise to the FRAND obligation at issue;
- Breach of an SSO agreement and of forum selection clauses are not valid defenses in ITC investigations; and
- Respondents bear the burden of proving that a complainant/patentee relinquished its rights to equitable relief by joining the SSO in question.
The decision in U.S. International Trade Commission (ITC) investigation Certain Magnetic Data Storage Tapes and Cartridges Containing the Same, Inv. No. 337-TA-1012 (“1012 Investigation”), is still confidential, but the ITC has issued a notice stating that ALJ Shaw has ruled in favor of patentee Fujifilm against Sony and recommended that an exclusion order be issued. This is important because it is the first time the ITC has issued an exclusion order on standard-essential patents (SEPs), and may be the first time any U.S. tribunal has issued exclusionary or injunctive relief on patents which were declared standard essential. In the opinion, which should become public in a few weeks, ALJ Shaw, who presided over the case, is expected to address a number of key issues relating to the assertion of SEPs in general, and at the ITC specifically. In this case many of Sony’s affirmative defenses relate to the alleged essentiality of the asserted patents and the Administrative Law Judge was asked to answer a number of questions relating to SEPs generally and the ability to enforce them at the ITC.
On February 25, 2016, Judge Richard Andrews granted the parties’ cross-motions to exclude both sides’ damages experts in M2M Solutions LLC v. Motorola Solutions, Inc., C.A. No. 12-33-RGA,
Dkt. Nos. 295 and 296 (D. Del. Feb. 25, 2016), and in doing so provided a salient reminder to all practitioners of the risks in presenting damages testimony uninformed by technical expertise. In the case, plaintiff M2M Solutions LLC’s (“M2M”) expert Herman “Whitey” Bluestein – admittedly not a technical expert – improperly supplied an otherwise-absent link between demand for technology gauged in surveys and the technology at issue. Defendant Telit Communications PLC (“Telit”) similarly proffered damages opinions lacking needed technical support. Telit’s expert Charles Donohoe opined that worldwide portfolio licenses on FRAND terms that did not include the patent-in-suit represented the upper bound of a reasonable royalty rate for the asserted patent. Concluding that Telit failed to adduce evidence that these portfolio licenses were relevant, the Court excluded Mr. Donohoe’s opinion.
Continue Reading In Daubert Ruling Excluding Both Parties’ Damages Experts, Judge Andrews Rejects FRAND Portfolio Rate as Ceiling on Reasonable Royalty, and Finds Use of Surveys Not Properly Tied to Relevant Technology
Last month, the Ninth Circuit Court of Appeals issued a pivotal decision in Microsoft v. Motorola regarding the licensing of standard essential patents (SEPs) on reasonable and non-discriminatory (RAND) terms. Mintz Levin attorneys Richard G. Gervase, Jr., Bruce D. Sokler, Sandra J. Badin, and Michael T. Renaud critically assess the Ninth Circuit’s decision in Mintz Levin’s Intellectual Property Alert titled Ninth Circuit Upholds Judge Robart’s RAND Determinations in Microsoft v. Motorola. The Court endorsed the lower court’s methodology for determining the RAND rate, including its determination of the relevance of patent pools to SEP licenses. In so doing, the Court discussed the evidence necessary to determine whether particular RAND commitments have been breached and the proper measure of damages of such breaches. Based on its review of the record evidence, the Court upheld the jury’s finding that Motorola breached its duty of good faith and fair dealing when it sought injunctive relief for Microsoft’s alleged infringement of Motorola’s SEPs, as well as the jury’s $14.5 million damages award for that breach. While the decision contributes to the evolving jurisprudence of SEP enforcement, its singular focus on concerns over patent hold-up, to the exclusion of any concern over reverse patent hold-up, will only add to the growing pressure on innovators to opt out standard setting activities. In the long run, such an outcome bodes ill for the health and vigor of the American innovation economy.
Courts in the last two years have grappled with what methodology to apply to determine a reasonable royalty rate for infringed patents subject to “Reasonable and Non-Discriminatory,” or “RAND,” encumbrances. On December 4, 2014, the Court of Appeals for the Federal Circuit weighed in on the subject. Rather than enumerating a list of criteria to consider in all instances, the Federal Circuit held that the inquiry is necessarily case-specific. The Federal Circuit also gave additional guidance on appropriate jury instructions on RAND royalties. See Ericsson, Inc. v. D-Link Systems, Inc., 2014 U.S. App. LEXIS 22778 (Fed. Cir. 2014).
A jury in the Eastern District of Texas awarded Ericsson, Inc. & Telefonaktiebolaget LM Ericsson (together, “Ericsson”) approximately $10 million, about 15 cents per accused device, in past damages from defendant D-Link Systems, Inc. (“D-Link”) for infringement of patents that were essential to the IEEE 802.11 standard and therefore RAND-encumbered. Based on this verdict, Judge Davis found that 15 cents per infringing unit was a reasonable running royalty. D-Link appealed on multiple grounds. Continue Reading Fed. Circuit: No “Bright Line Rules” For Determining RAND Royalties; Rejects District Court Method of Computing RAND Royalty Rates
Administrative Law Judge Essex of the International Trade Commission (“ITC”) recently issued the public version of his decision in ITC investigation No. 337-TA-868. In it, he holds that the respondents should be precluded from relying on the FRAND defense—the defense that the patents-in-suit are subject to being licensed on fair, reasonable, and non-discriminatory (“FRAND”) terms, and therefore that an exclusion order should not issue—because they failed to see a license to practice the patents before implementing the standard to which they now claim the patents are essential. In so holding, Judge Essex responds to a number of influential bodies, including the Justice Department, the U.S. Patent Office, and the Federal Trade Commission, who have taken the position that injunctive relief should not be available to holders of standards-essential patents.
Our attorneys present a comprehensive discussion of the decision in this client alert.