Posts in Antitrust

Senators Thom Tillis (R-NC) and Chris Coons (D-DE), Chair and Ranking Member, respectively, of the Senate Judiciary Committee’s Subcommittee on Intellectual Property, sent a letter on October 21 to U.S. Attorney General William Barr and Assistant U.S. Attorney General, Antitrust Division, Makan Delrahim, asking them to “work with the United States Patent and Trademark Office (USPTO) to provide guidance on remedies for infringement of standard-essential patents (SEPs) subject to fair, reasonable and nondiscriminatory (FRAND) licensing commitments.” Tillis and Coons applauded the Department of Justice (DOJ), Antitrust Division’s decision to withdraw from the 2013 joint DOJ-U.S. Patent and Trademark Office “Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments,” but expressed concerns over a “growing divide” among the Department of Justice, the Federal Trade Commission (FTC) and the USPTO about the role of antitrust law in policing SEPs.

This week in the nation’s capital, subcommittees in the House of Representatives will hold a series of technology-related hearings focused on online competition in data privacy, artificial intelligence (AI) and cloud computing in the financial sector, Internet consumer protections and NASA’s goal to speed up the return of a manned mission to the moon. The House Investigations Subcommittee will also hold a field hearing outside of D.C. exploring innovation in lead mitigation employed within the state of New Jersey. Elsewhere in D.C., the R Street Institute will discuss their theory on the national security implications of patents, the Brookings Institution will look at the impact of digital technologies on African entrepreneurship and the American Enterprise Institute hosts an event exploring the impact of globalization and robotic innovation on the workforce.

Here we go again! Another day, another ridiculous attack on the U.S. patent system. This time the attack comes from the R Street Institute, who claims that patents are too strong and are inhibiting American companies from achieving success in the race for leadership in the 5G marketplace and continued leadership in Artificial Intelligence (AI). R Street will hold a panel discussion on their wildly outlandish theory, for which they can’t possibly have any factual support, on Tuesday, October 15, in the Capitol Visitor Center. In the announcement they claim that patents are inhibiting American companies because Chinese telecommunications company, Huawei, asserted more than 200 patents against Verizon Communications earlier this year. Therefore—and ipso facto—patents are too strong and American companies are suffering. There may be legitimate security concerns around Huawei’s infrastructure, but to suggest that the company’s patents are at the root of these threats is in a word—Absurd!

Standards-declared patents have been challenged in ex parte and post-grant review for years as part of enforcement efforts and other strategies, though the volume of patents declared essential and their largely unlitigated status has limited the appeal of post-grant challenges against them.  One such standard, High-Efficiency Video Coding (HEVC), promises to be the successor to the current H.264 standard used by most streaming visual media.  As all parties seek to clear risk and license as they implement, developing patent pools have been utilizing new strategies for licensing standard-declared patents. Recently, Unified Patents launched an HEVC zone aimed at encouraging adoption and shedding light on the standard-essential patent (SEP) landscape, and has conducted damages studies, landscape models, and analysis of the patent landscape around the HEVC standard. As part of those efforts, Unified has been challenging patents related to the standard. To date, only a handful of litigations have been filed related to HEVC patents. 

This week in the U.S. capital, the Senate will hold committee hearings on antitrust issues in digital platforms and real-time payment systems, a sector of fintech that will also be explored by the House Task Force on Financial Technology. Elsewhere in the House of Representatives, there will be hearings on Veterans’ Affairs scheduling technology, clean industrial innovations and medical research funding at the NIH. The week kicks off at the Information Technology and Innovation Foundation with a look at small business innovation funding programs. The Brookings Institution will also host events on Army modernization efforts and issues in disaggregating health data for improved policy-making.

This week in Other Barks & Bites: the Federal Circuit issued a pair of precedential opinions affirming the USPTO’s determinations on patent term adjustment; Chuck Yeager filed a trademark lawsuit against Airbus; Facebook CEO Mark Zuckerberg met with Capitol Hill lawmakers and President Trump; the Office of Technology Assessment Improvement and Enhancement Act was introduced into both houses of Congress; the Sixth Circuit affirmed the dismissal of a copyright case lodged against musician Steve Winwood; the U.S. Department of Justice announced criminal charges over the theft of pediatric medicine trade secrets; and the NMPA doubled the damages sought against Peloton after finding more unlicensed songs used by the streaming exercise companies.

Last week the United States Court of Appeals for the Federal Circuit issued an important decision that might be easy to overlook. In Intellectual Ventures I LLC v. Capital One Financial Corporation, the Federal Circuit dodged the antitrust question presented by finding that a prior ruling had collateral estoppel effect. Still, the arguments raised by Capital One against Intellectual Ventures are part of a disturbing trend. Unwilling licensees who engage in a scheme of efficient infringement to avoid paying for patent licenses are increasingly looking to creative antitrust theories to escape liability for their actions. Efficient infringement is a cold-hearted business calculation whereby businesses decide it will be cheaper to use patented technology without paying than to license it and pay a fair royalty to the patent owner. This calculus is made on the part of large entities who realize there are a certain number of patent owners that are just simply not going to assert their patents for one reason or another, frequently because they don’t have the money to do so. Then there is another group of those that will assert their patents but will not win. The calculation progresses to realize that there is a small group of those who are likely to both assert patents and prevail, thanks to all the hurdles put in place (i.e., patent eligibility challenges, the Patent Trial and Appeal Board, etc.). The calculation further recognizes that even if a patent owner prevails, a permanent injunction is virtually impossible to obtain as the result of the Supreme Court’s decision in eBay v. MerchExchange, and damages are likely to be minimal thanks to a continual judicial erosion in damages available to victorious patent owners. This cold-hearted business approach to using intellectual property without paying has gone on for decades, but with the weakened state of the U.S. patent system since 2006, it has grown progressively worse.

On August 30, a number of amicus briefs were filed in the FTC v. Qualcomm appeal in the U.S. Court of Appeals for the Ninth Circuit. The appeal stems from a May 2019 order finding Qualcomm liable for anticompetitive behavior and issuing “sweeping” injunctive relief. Following Judge Koh’s ruling, her opinion has been called “disastrous,” an “utter failure,” and “based on scant evidence,” and further been accused of “mangling” antitrust law. The Ninth Circuit, in granting a partial stay of the injunction, noted there were “serious questions on the merits” of Judge Koh’s decision. Three of the amicus briefs in particular point out the errors in Judge Koh’s opinions that have given rise to these “serious questions.” Retired Federal Circuit Chief Judge Paul Michel filed an amicus brief focusing primarily on patent law issues, including the smallest salable patent-practicing unit (SSPPU) concept and reasonable royalty calculation. The International Center for Law & Economics (ICLE) and Scholars of Law and Economics filed an amicus brief arguing that Judge Koh’s decision “is disconnected from the underlying economics of the case” and will cause serious harm to antitrust law. Finally, a number of Antitrust and Patent Law Professors, Economists, and Scholars filed an amicus brief highlighting how antitrust overreach, as they allege is present here, will harm innovation and arguing that the district court failed to engage in the level of real-world economic analysis as is required by this case.

This week in Other Barks & Bites: the Federal Circuit issued precedential decisions regarding secondary considerations of non-obviousness, limits to design patents and collateral estoppel of antitrust claims in patent cases; the CASE Act moved out of the House Judiciary Committee towards a floor vote; AIPLA reported increasing prices for trade secret and pharmaceutical patent lawsuits; the PTAB designated a pair of precedential decisions that limit IPR institutions; the DOJ identified two foreign nationals in GE Aviation trade secret case; LeBron James and Ohio State University lost their respective trademark bids; USPTO Director Iancu talked about balancing innovation and preventing hold-up in the SEP context; Google agreed to a $1 billion fine over European tax evasion; and the UKIPO reported lower patent application filing levels for 2018.

Commissioner Christine Wilson of the U.S. Federal Trade Commission (FTC) addressed the IPWatchdog Patent Masters Symposium on Tuesday, September 10, emphasizing three main points in her keynote: that Judge Lucy Koh’s decision in FTC v. Qualcomm was flawed, that antitrust analyses should be more focused on dynamic, rather than static effects, and that, despite the latter point, antitrust authorities routinely try and fail to integrate dynamic effects into antitrust law. She was clear up front that her views did not necessarily match those of her fellow commissioners. First, Wilson reiterated the ideas expressed in her May 28 op-ed for the Wall Street Journal, which she summarized by saying that U.S. District Court for the Northern District of California Judge Lucy Koh’s opinion in the FTC v. Qualcomm case “creates bad law and bad policy.” Wilson explained that Koh in her lengthy analysis took the opportunity to “radically expand a company’s legal obligation to help its competitors” by reviving a “discredited” 1985 Supreme Court case, Aspen Skiing Co. v. Aspen Highlands Skiing Corp. “My opposition to the court’s opinion does not stem from any desire to help or protect Qualcomm,” Wilson said. “I am focused on applying and preserving sound antitrust principles and this decision scares me.”

In his luncheon keynote address to attendees of IPWatchdog’s Patent Master’s Symposium: “Standard Essential Patents: Striking a Balance Between Competition and Innovation” on Tuesday, former Federal Circuit Chief Judge Randall Rader drove home a point made by multiple speakers during the event that the concept of “patent hold-up”—in which innovator companies use SEPs to hold up implementer companies from getting products to market via anti-competitive practices—is “one of the largest misnomers in our discipline.” Earlier in the day, David Kappos, former Director of the USPTO, explained that— although he signed off on the Joint Policy Statement, that it was thoughtfully and heavily negotiated and edited, and that he felt at the time that it was a good document and a compromised agreement—he stepped back after Delrahim’s announcement last year and has now reconsidered his view. “I was defending the IP system given everything we knew at the time,” Kappos said. “I didn’t think the guidelines were anti-innovation; I thought they were balanced. But in stepping back, I realized—between 2013 and 2019 we’ve learned a lot. Multiple empirical studies have shown us that the phenomena on which we based the guidelines— hold-up and royalty stacking — aren’t occurring. There is no evidence of our predictions.”

This week marks Congress’ return from its August recess and patent owners should be encouraged to see the Senate IP Subcommittee meeting on Wednesday to explore the STRONGER Patents Act in its latest attempt to improve the U.S. patent system. In the House, various subcommittees will focus on FCC broadband map accuracy, advancements in forensic science, and security issues in the nation’s Internet architecture. Outside of Capitol Hill, the Information Technology and Innovation Foundation will hold a pair of events to look at the global race for dominance in artificial intelligence (AI) and the country’s R&D funding agenda, and the Brookings Institution will explore autonomous transportation and service delivery systems, as well as federal data privacy legislation.

Judge Douglas Ginsburg of the U.S. Court of Appeals for the D.C. Circuit, Professor Joshua Wright, and attorney Lindsey Edwards of Wilson Sonsini Goodrich & Rosati, have condemned the decision in FTC v. Qualcomm Inc. (N.D. Cal. May 21, 2019) in the George Mason University Law & Economics Research Paper Series. In their paper, “Section 2 Mangled: FTC v. Qualcomm on the Duty to Deal, Price Squeezes, and Exclusive Dealing,” the authors characterize the decision as being a part of “the misguided trend of using antitrust law to intervene in contract disputes between sophisticated parties negotiating over intellectual property rights.”

Later this year (likely in October), the United Kingdom’s highest court will hear arguments on questions arising in two disputes concerning standard essential patents (SEPs). The UK Supreme Court has agreed to hear appeals in Unwired Planet International Ltd and another v Huawei Technologies (UK) Co Ltd and another UKSC 2018/0214 and the joined cases Huawei Technologies Co Ltd and another v Conversant Wireless Licensing SARL UKSC 2019/0041 and ZTE Corporation and another v Conversant Wireless Licensing SARL UKSC 2019/0042. The arguments are likely to focus on one question: can a national court impose a global license in SEP cases? The closely watched appeal will be the culmination of years of litigation between the parties. In the Unwired Planet case, Mr. Justice Birss of the High Court heard five trials on the validity and infringement/essentiality of Unwired Planet’s patents. In April 2017, he then gave a mammoth judgment determining what a fair, reasonable and non-discriminatory (FRAND) license would be, and setting royalty rates. Critically, he found that only a worldwide license would be FRAND in the circumstances of this case. The England and Wales Court of Appeal upheld this conclusion, in a judgment in October 2018. The Supreme Court will likely sit in a five-judge panel in a hearing that will last about two days and will be live streamed on its website (the date and panel details have not been confirmed yet). It will hand down judgment later this year or early in 2020. (Ironically, patent specialist Lord Kitchin is a member of the Supreme Court but will not be sitting in this case as it is his own judgment that is under appeal.) You might have thought that—after decades of legal debate and academic writing, dozens of judgments addressing questions such as what constitutes a FRAND license and what are reasonable royalties, and extensive discussions between technology companies—the questions around SEPs would be close to being resolved. But that is far from the case. The outcome of the UK Supreme Court hearing, for instance, will have an impact on negotiations between owners of SEP portfolios and implementers worldwide, at a time when standards are set to become critical to many more industries.

This week in Other Barks & Bites: The Federal Circuit has asked USPTO Director Andrei Iancu to brief the appellate court on deference that should be paid to precedential PTAB opinions; China announced that it will create a credit rating mechanism for patent agents; Russ Slifer Op-Ed revives 101 debate; the FCC will approve the proposed T-Mobile/Sprint merger; amicus briefs filed at the Supreme Court support the abrogation of state sovereign immunity against copyright claims; Nintendo ramps up copyright campaign against YouTube accounts using video game music; Guns N’ Roses settles trademark dispute over craft beer brand; and copyright troll entity Malibu Media faces investor lawsuit.