Tuesday, 28 June 2011

US Patent reform: fears to changes

I was planning what to do during last warm long weekend in Madrid when I realised that the America Invents Act passed in Congress with a vote of 304-117.

Much has been said in the last days about the inconvenience of this reform. Most of the comments I have read refer to its negative impact. Some of those describe drastically the effects. How does it look if we put some of them together?

The anti-innovation patent reform act of 2011” “creates strong financial incentives for usurping patent rights by hacking and industrial espionage”, “could end up making it more difficult for inventors to defend their patents against infringement” and would be “dangerous to U.S. Security”.

Not bad, write?

Changes always cause fear. Modification of the system means that the new regime will have to be studied, bring some uncertainty and most of the times have economic effects (this Act has also been called the “job-killing Patent-Bill”).

I prefer trying to see the benefits and among those, the comment that brings the attention of this Patlit is the “attempt to keep patent battles out of the courts”. How this would happen? Damages regulation may have an important role. According to the Executive summary published in the website of the Republican Majority in Congress (here) “only a person who suffers a competitive injury as a result of false marking may bring a civil action in federal court for compensatory damages”. If this is correct, what would be the future of Patent Trolls?

If you want to read what do politicians say, you may like to read "The America Invents Act - Promoting American Innovation, Creating American Jobs, Growing America's Eeconomy" (here) (pdf alert)

In any case, experience show that changes are very rarely as bad (neither as good) as seemed.

We’ll see who is right.

What do you think?

Monday, 27 June 2011

PCC Page 32: Quickstep – are there difficulties changing course with 8 tentacles?

Valiantly verified by the Chartered Institute of Patent Attorneys (CIPA), the PCC Pages seek to explain how litigation works in the recently-revamped Patents County Court (PCC) for England and Wales, taking as its theme a dispute between Cautious Co and IPOff Ltd as to whether IPOff has infringed the IP rights of Cautious in its robotic octopus. In this episode, the 32nd, former CIPA President Alasdair Poore considers the option of amending a claim, and also provides a spot of nostalgia by mentioning the Routemaster buses which once roamed the streets of London. Now their dwindling herd is kept entirely in captivity.
"Just in time: Cautious’s patent attorney is taking quite some time preparing for the Case Management Conference in Cautious’s claim against IPOff for patent and design right infringement.  Just as he was contemplating whether an amendment to the statement of case was in order or would be hopeless in the “fast track” approach of the Court, out popped another judgment from the PCC to help him on his way.

First, however, I have to own up to some over-enthusiasm in my desire to get readers to think about security for costs.  Douglas Campbell has helpfully pointed out that security for costs against a foreign claimant is not as generous as it used to be – all in the interest of human rights.  If the claimant is in a civilized country like the USA, you may only get security for the extra burden of enforcing in the USA (and this could be a small sum, so it is more likely that an impecunious claimant will be able to pay it anyway – £5,000 was the extra sum for which security was considered (and awarded) in Nasser: see below).  In contrast, in a dodgy country (but aren’t some US States dodgy too), or where there are reasons to suppose enforcement may be made more difficult, it is reasonable to grant security for more.  Mance L.J’s words in Nasser v United Bank of Kuwait [2002] 1 WLR 1868 (para 62) illustrate some of the issues:

“In so far as impecuniosity may have a continuing relevance it is not on the ground that the claimant lacks apparent means to satisfy any judgment but on the ground (where this applies) that the effect of the impecuniosity would be either (i) to preclude or hinder or add to the burden of enforcement abroad against such assets as do exist abroad or (ii) as a practical matter, to make it more likely that the claimant would take advantage of any available opportunity to avoid or hinder such enforcement abroad” para 62

(White Book, para 25.13.6 -- which incidentally is published by the same publishers as the CIPA Black Book, so CIPA members should be encouraged to invest in it.) 

So some imagination is required here.

Turning then to amendment, there are a couple of issues which have come to light.  First, Cautious has realised that the person who created the original design, in relation to which Cautious is asserting design right infringement, was not employed by Cautious & Co at all, but was working at the time as a consultant.  Technically therefore, although Cautious owns the design right, which was created on commission for money’s worth, the route to ownership is not as set out tin the Statement of Case. Seeing as IPOff has put ownership in issue, Cautious's patent attorney wants to put this right.  Secondly, in talking to the consultant, Cautious’s patent attorney has identified that there are several other octopus-designs made by the consultant which were touted around the market at the time, and in which he sold the rights to Cautious when he joined Cautious's project.  Some of these have even greater similarity to the robot octopus than Cautious's marketed model, and it seems likely that IPOff might have copied these.

Coincidentally, in Temple Island Collection v New English Teas ([2011] EWPCC 19), Judge Birss QC was considering a very similar point.

Amendments to statements of case are addressed in the Civil Procedure Rules, in CPR17.  First, it is possible to amend generally before the statement of case has been served on any parties (CPR 17.1(1)) subject to the possibility that the Court may disallow it (CPR 17.2).  After it has been served it may only be amended with the consent of all the parties (but still possibly disallowed (CPR 17.2)) or with leave of the Court (CPR 17.1(2)).  Judge Birss held that, despite the arguments to the contrary in Temple Island (see para 24), the broad principle on amendments still applied: 
Amendments will generally be allowed so that the real dispute between the parties can be adjudicated upon but subject to the proviso that any prejudice can be compensated for in costs and subject to the public interest in the administration of justice.  Case should be dealt with expeditiously but also fairly and that consideration tends to weigh in favour of allowing amendments.” (para 25)
 In exercising this discretion, the approach is the same as that of the High Court, but will be 
“conditioned by the particular nature and circumstances of the Patents County Court” (ibid).  “When considering an application to amend … in a regime with capped costs, [the] balancing exercise [between allowing the amendment and a consideration of the prejudice the amendment may cause] will include an assessment of whether the likely benefit of the amendment appears likely to justify the cost of taking and dealing with it.” (ibid, para 33).
 In Temple Island the issue arose in the context of pictures of red Routemaster buses in front grey Houses of Parliament and Big Ben, used on tins of tea bags.  A second image cropped up at a later stage, and the amendment was to seek to add a claim for infringement of this.  The judge conducted an analysis of whether there was any real prospect of the second image contributing to the case and concluded that it was, at best, small. 

In contrast, the issues of costs might not be small: proving copying of the second image would be much more problematic.  It was not clear how the defendant would have had access to it.  The claimant might have to rely on similarity, but this would not really work.  The difference between the two images alleged to have been copied was really just the position of the bus, and this was still not the same as the position in the defendant’s image.  On that basis he rejected the amendment, although technically it might possibly have been the winning point.  Bringing it in now, even if it could always have featured in the claim from the beginning, would be disproportionate.  Cautious’s patent attorney breathes a sigh of relief – that is clearly a different case from his, where, although there is another design to base the claim on, all the arguments on infringement will be essentially the same. 

Naturally, the amendment to the case in relation to the consultant who created the designs should be more straightforward – it could be crucial to winning the case and there is no reason to suppose (yet) that the evidence will be contested and that it will add to the costs.

There are some interesting thoughts on how the costs regime works in these cases. Judge Birss pointed out that amendment is still subject to the proviso that a party can be appropriately compensated in costs.  However, the costs cap regime does not mean that a party cannot be appropriately compensated in costs – compensation is often likely to be less than a party would have received in the High Court, but the mere existence of the costs cap system itself is unlikely to be a factor which would lead an otherwise proper amendment being refused (para 27).  I understand this to be saying, that if a case is appropriate for the PCC, then, then usually the costs awarded under the PCC regime will be regarded as appropriate (because the costs each party incurs should reflect the substance of the case). It also suggests that one course, saying that a party can amend their case, subject to meeting the other parties actual costs thrown away, is not currently on the table".

Friday, 24 June 2011

Oracle v Google (2)

Here's some interesting fresh news in this case. I read Wednesday in Groklaw:
“In the reexamination of U.S. Patent 6192476 the USPTO has issued an office action in which it rejects 17 of the patent's 21 claims. The specifics of the office action are set forth below in text form along with an updated reexamination history. While Oracle has asserted seven different patents in its claims against Google, if this reexamination is exemplary of what Oracle can expect in each of the other reexaminations, Oracle will have a hard time finding claims that it can successfully assert against Google, and there lies Oracles conundrum. Oracle either has to agree with the court's directive to limit the number of claims it will assert at trial, or it is likely the court will simply stay the trial until the reexaminations are complete.”

Early this month I made reference to the amount of damages that Oracle would be claiming in the action against Google (here). It seems to me that this reexamintaion could have an impact in the amount the Court will consider to grant (if any). What should Oracle do now?. Should Oracle modify their damages claim in order to show the impact and provide new figures?

Other questions may arise. 17 from 21 means 80% of the registered claims!. How many “void patent claims” are registered at the USPTO? How many court claims are in course based in “void patent claims”? How many injunctions have been granted based in “void patent claims”? How much money have plaintiffs obtained from “void patent claims” infringement? How much are defendants spending in “void court actions”?

I don’t know why but Nortel’s 6,000 patent portfolio immediately came to my mind. Google bided $ 900 million for that Portfolio. What if 80% of claims in these patents are also void?

Other questions regarding that bid may arise, reading:
Comments fro the AmeriKat on Google’s bid (here)
Reference in Reuters to Microsoft objection to Google’s bid
Yesterday's news regarding the US antitrust regulators giving Apple the green light to make a bid on Nortel’s portfolio (cnet)

Tuesday, 21 June 2011

PCC Page 31: Tentacles flapping to keep head above the water?

Portentously promulgated by the Chartered Institute of Patent Attorneys (CIPA), the PCC Pages seek to explain how litigation works in the recently-revamped Patents County Court (PCC) for England and Wales, taking as its theme a dispute between Cautious Co and IPOff Ltd as to whether IPOff has infringed the IP rights of Cautious in its robotic octopus. In this episode, the 31st, former CIPA President Alasdair Poore reviews the question whether the defendant may be able to seek and obtain security for costs.
"Last week Cautious's patent attorney looked at the procedure up to trial and considered what needed to be covered in the order to be made at the Case Management Conference – such things as whether experiments need to be carried out with the octopus football results predictor’s legs to see if they are good enough at pointing to the right result.  One of the issues raised by IPOff’s solicitor, always looking for a way to make life more difficult, is that IPOff proposes to apply for “security for costs” at the CMC.  At the moment IPOff’s solicitor has only made a generalised assertion that his client will apply.

The criteria for applying for security for costs are set out in Civil Procedure Rules CPR 25.12 and 25.13.  The “conditions” are set out in CPR 25.13:

The most usual conditions – ones which should be at the top of Cautious’s patent attorney’s mind, as soon as a claim was contemplated, are that the claimant be resident outside the jurisdiction (of England and Wales) (CPR 25.13(2)(a)(i)) or of a Brussels Contracting State, a State bound by the Lugano Convention or a Regulation State (essentially EU States and  Iceland, Norway, or Switzerland) – see Brussels Regime – CPR 25.13(2)(a)(ii); or that the claimant be a company or other body (whether incorporated inside or outside Great Britain) and there is reason to believe that it will be unable to pay the defendant’s costs if ordered to do so (CPR25.13 (2)(b)).  The remaining provisions are more unusual and relate to a suspicion that the claimant might be seeking to make it difficult to enforce any order for costs; that the claimant has changed address to avoid the consequences of litigation, has given an incorrect address on the claim form, is a nominal claimant (ie not the one with a real interest in the litigation) and believed to be unable to pay costs, or that the claimant has taken steps to put assets outside the reach of the defendant.

Cautious & Co is not resident outside the jurisdiction, so that is not an issue.  So the key question looks as though it is whether Cautious & Co is facing financial difficulties. It is possible that it is one of the later grounds – Cautious's patent attorney hopes not, as it might suggest that Cautious is being a little financially reckless.  On the other hand, since Cautious has been using him for patent work for many years, he did not carry out any financial checks before commencing the litigation and just assumed he would be able to pay since he had written to Cautious saying what the risks were.  Now he has now carried out those checks, they do reveal a bit of gloomy picture.  He now writes:
“Dear Cautious, I know that you will find this a strange request, as you are renowned for your financial prudence.  IPOff’s solicitors have written indicating that they intend to apply for “security for costs”.  This may just be one of their games, but I need to check the position with you.  Security for costs may be required from a company which makes a claim if there is reason to believe that it is in sufficiently rocky financial straits that it will be unable to pay the defendant’s costs if it is ordered to do so.  The reason for this is to prevent a company bringing proceedings and leave the other party at risk as to costs because it is broke.  Of course in this case the liability for costs if you lose (which I am sure you are not going to) is only for £50,000, the costs cap in the first stage of proceedings in the PCC.
I have now carried out the usual checks, and these do not show Cautious & Co in perfect health. We can resist this claim in several ways: (1) by your providing some security or offer of security immediately – it would be easiest if this is for the full £50,000, but we may be able to argue for a lower amount at this stage with a top-up before trial; (2) by submitting evidence that in fact you are fine to meet a liability for £50,000 in about six to nine months time when this would likely come up for trial – for example you have some big orders which are likely to give you that cash; or (3) showing that the financial rocks are a result of IPOff’s outrageous activity.
Can you give me a call and we can discuss how to take this forward.
ps.  I will need you to put me in some funds immediately in the light of this gloomy news”
There are some interesting things to note about the position here. 

1.         It is always a wise move to check the financial position of both your own client and any defendants before starting any litigation.  It can avoid tears later.  A bust defendant may give your client victory – possibly without even going in for much of a fight, but the client quite often wants to know in advance whether costs will not be recovered.  A bust claimant may leave you out of pocket – a form of contingency fee which you were not really catering for.  For longer litigation it is important to refresh such checks on a regular basis to make sure things have not turned for the worse.

2.         Security for costs is almost always available against a non-resident company or individual (ie resident outside the EEA) – so it is important to be aware of this. 

3.         Note that security for costs is only available to a defendant (CPR 25.12).  That can also be a claimant on a counterclaim – but it is unlikely in many IP infringement actions, because often the counterclaim is no more than a restatement of the defence – eg the patent is invalid.  In that case it is unlikely that there will be a significant increase in costs in defending the counterclaim over fighting the claim.  But in this case IPOff are also making a claim of threats – there could be some costs incurred in that claim.

4.         Rocky financial times is generally only a basis for a claim for security against a corporate claimant.  An individual is entitled to bring a claim even if they are impecunious – but that is where some of the other steps come in, for example CPR 25.13(1)(g).  But there may be other ways of obtaining security, for example, if the claim is arguable but weak, the judge may make it a condition of bringing the claim that the claimant pay give some security for costs.  The route to obtaining this is through an application for summary judgment on a weak case (CPR 24 (eg 24.6), PD24 5.1(4) and 5.2 and CPR 3.1(3) and (6A)).

5.         The application for security which IPOff might be tempted to make needs to be supported by evidence (CPR 25.12(2)), so Cautious would be entitled to ask for information about how IPOff propose to support the claim.  But credit reference agency reports are usually sufficient prima facie evidence of inability to pay.

6.         If security is not given, after an order to do so, the claim may be struck out – and there will be a requirement to pay the costs thrown away in the first claim before commencing or progressing with a second.  An example of this was in Redwood Tree Services v Warren Apsley [2011] EWPCC 14, para 6, and CPR 3.4(2)(c).

An application for security for costs can be a very effective way of putting pressure on a claimant, especially where he is from, for example, the USA.  It makes the point that they may have to meet the costs if they lose more forcibly than sometimes their lawyer is able to.

The PS also raises an interesting question about retainers – for a later week.".

Thursday, 16 June 2011

Summary judgment and costs: come back and argue, says judge

Sitting in the Patents Court for England and Wales this morning, Mr Justice Floyd gave judgment in Nokia Oyj (Nokia Corporation) v IPCom GmbH & Co Kg [2011] EWHC 1470 (Pat), a fairly long decision but one which was driven mainly by factual issues and the submissions of the parties rather than the need to indulge in quantities of deep and anguishedly meaningful legal analysis. In any event -- in a judgment which will make PCC Page author Alasdair Poore happy because it contains the word "tentacles" -- Floyd J found IPCom's patents valid and infringed in respect of two of Nokia's devices but not a third in respect of which he agreed to grant a declaration of non-infringement.

What caught this blogger's eye was a little paragraph at the end of the decision:
"213 Technically I also have before me the summary judgment application. It makes no sense to grant summary judgment at the same time as judgment. The only point about the summary judgment application is who should bear the costs of the application. That will turn on whether it was ever likely to succeed. In adjourning the application to the trial, Kitchin J said that the trial judge would be in a better position to decide the costs of that application after he has decided the substantive issues. I propose to hear argument on this issue of costs, along, no doubt with other issues, after judgment has been handed down."
In a sizeabke (eight day) trial such as this, with two amply-endowed parties, it won't matter, but it does seem a little disappointing that, while the function of an application for summary judgment is to save time in court, the need for further argument on costs issue which hangs over from the application means that there will still be a bit stuff more to sort out after the main issues have been resolved.

Tuesday, 14 June 2011

Mobile Wars: end of one battle

Busy days in the Mobile Wars. Nokia has announced today that it has entered into patent license agreement with Apple.

As we read in nokia's webpage, “the agreement will result in settlement of all patent litigation between the companies, including the withdrawal by Nokia and Apple of their respective complaints to the US International Trade Commission”.

No reference is made to the amount, but it may be significant since “this agreement is expected to have a positive financial impact on Nokia's recently revised outlook for the second quarter 2011 of around break-even non-IFRS operating margin for Devices & Services”.

Stephen Elop, president and chief executive officer of Nokia shows their happiness "to have Apple join the growing number of Nokia licensees”. Mr. Elop considers that "this settlement demonstrates Nokia's industry leading patent portfolio and enables us to focus on further licensing opportunities in the mobile communications market." Who will be the first target in these further licensing opportunities? A new battle may be shortly served.

Monday, 13 June 2011

PCC Page 30: Managing your tentacles

A Red Letter Day for
limitation of damages
claims in the PCC
Suavely served up by the Chartered Institute of Patent Attorneys (CIPA), the PCC Pages seek to explain how litigation works in the recently-revamped Patents County Court (PCC) for England and Wales, taking as its theme a dispute between Cautious Co and IPOff Ltd as to whether IPOff has infringed the IP rights of Cautious in its robotic octopus. In this episode, the 30th, immediate past CIPA President Alasdair Poore does a little more updating in the light of a recent case and, unusually, tomorrow's news.
"Before catching up on the latest moves on in the slow-moving case of the robot octopus, there are a couple of news items to record:

The Order bringing the limit on damages into effect in the PCC has been signed.  The limit on damages for PCC cases in the special jurisdiction (that means patents, designs and matters ancillary to or arising out of the same subject matter as such proceedings) will be introduced with effect from 14 June 2011 [a.k.a. tomorrow ...] under the Patents County Court (Financial Limits) Order 2011 No 1402.  Note that this is only in relation to the special jurisdiction (Copyright, Designs and Patents Act 1988, s.287(1)(b)).  Damages outside the special jurisdiction (a category that includes trade marks and copyright disputes) are not at present affected.  
However, since the Order also covers matters ancillary to or arising out of the same subject matter as patents and designs proceedings, it is worth bearing in mind that previously copyright and breach of confidence issues, where there were related patents issues, were heard on the basis that they were in the special jurisdiction (see CIPA Guide to the Patents Acts 287.06 citing PSM International v Special Fastener Products [1993] FSR 113 and McDonald v Graham [1994] RPC 407).. There were also rumours that the PCC's very first judge, Judge Ford, had decided passing-off matters within the special jurisdiction in each case as ancillary to the other part of the proceedings.  Bear in mind also that the claimant can abandon the excess over the limit or the parties can consent by “written memorandum signed by them or their representatives” to the court awarding damages in excess of this amount (CDPA s 288(2) and (4)).

The second news item is that the Patents County Court Users Guide has now been released on the Courts’ website, here.  This is a slightly irritating link as it is not at all intuitive [if you want to remember or guess it, it goes something like 
http://www.justice.gov.uk/guidance/courts-and-tribunals/courts/hearing-lists/list-patents-cc.htm].  If you go to the Justice website, under “Guidance” you can pick out “Courts and Tribunals” and then “Courts” – half way down a list of what looks like courts is a reference to “Court hearing lists”, and the Guide under “Patents County Court”.  Particularly misleading as the first list also has “Patents County Court” it, and in case you are misled, it is also worth noting that the information on this page is deceptively out of date.  This can be determined by the fact that, although Judge Birss QC features in the first few lines, his name reverts to that of his predecessor Judge Fysh QC after the beginning.  You have been warned: rely for the time being on the information in the PCC User’s Guide.

Readers will know that Cautious’ patent attorney has been finding all sort of things to consider such as settlement and costs exposure, while waiting for the definitive issue of the PCC Users Guide to guide him on what to do in the case of the Case Management Conference (CMC).  The PCC Users Guide conveniently includes, at Annex A, a draft order for the CMC.  The guidance in the User Guide is also very valuable and is reproduced below – with Cautious attorney’s initial comments, and a couple of additional considerations he will think about at the end:

The basis on which the court will decide whether to permit material to be filed in a case is by applying the cost-benefit test (PD 63 para 29.2(2)) and by giving permission in relation to specific and identified issues only ((PD 63 para 29.2(1)). PD 63 para 29.1 lists the material which the court may order: disclosure of documents, a product or process description, experiments, witness statements, experts’ reports, cross-examination at trial, and written submissions or skeleton arguments. The parties need to attend the CMC in a position to assist the court in making appropriate orders on this basis. In particular, the parties should consider:

(a) The need for and scope of any evidence from factual or expert witnesses. Note the court will consider whether there is sufficient evidence in the statements of case or whether further evidence is required.  No more facts (subject to disclosure of Product Description (see below)), but might need expert on patent issues, don’t need expert on design issues (see for example Albert Packaging v Nampak Cartons & Healthcare ([2011] EWPCC 15), a recent design case where neither party had independent expert witnesses).

(b) The need for and scope of any oral testimony and cross-examination. Note that the court will confine any permitted cross-examination to particular issues and to time limits.  In relation to unregistered design right IPOff are denying copying and asserting independent design.  This will clearly call for cross examination of IPOff’s star witnesses on these issues.  In relation to patent infringement IPOff have refused to provide any information pending confidential disclosure of their Product Description, so will have to reserve position on this.

(c) The need for, and scope of, any disclosure of documents.  Documents relevant to the non-copying and independent design issue; and subject to the Product Description, relating to design of the Robot Octopus.  (IPOff will be wanting documents relating to the creation of the design since they quite unreasonably refuse to accept that it is owned by Cautious (but see Albert Packaging (para 33) for the problems of written and signed assignments/licences, where they got (slightly) tripped up – always as well to double-check these points).

(d) The need for any experiments, process or product descriptions or supply of any samples. Samples and product descriptions will be required; wait and see if IPOff are going to ask for experiments in relation to their insufficiency argument.  I think we will argue that this is purely speculative and should not be permitted on the grounds of proportionality.

(e) The need for written submissions or skeleton arguments. Skeleton arguments will be required (at least to spell out issues on infringement and validity, copying and substantial reproduction)

(f) The likely timetable up to trial. This may include dates on which disclosure of documents, product and process description and experiments is to take place as well as a schedule for witness statements and experts reports including provisions for any evidence in reply (if required). Like to keep this pretty tight, but need to see Product Description and have time to review it before deciding on whether further evidence is required, and before obtaining any expert evidence.

(f) [second (f)]The need for an oral hearing or whether a decision can be made on the papers. If an oral hearing is considered to be appropriate, the court will order that the hearing be of a fixed duration of no more than 2 days.  An oral hearing will be required.

In addition at the CMC, IPOff have indicated that they will be seeking security for costs under CPR 25.12 – really, Cautious is not a foreign company, and do they think that Cautious can’t manage £50,000!, some amendments to their case (CPR 17), and are still going on about an application to transfer the whole case to the High Court (CDPA s289, CPR 63.18, and PD 30.9), given that the order limiting damages recovery will now be in place – have to deal with this, but of course the order limiting damages recovery only applies to cases issued from commencement (14 June 2011) or transferred into the PCC from that date (The Patents County Court (Financial Limits) Order 2011, Art 3).".

Thursday, 9 June 2011

Microsoft v i4i just decided

The appeal has been decided today by US Supreme Court. The justices confirm that:
“in asserting patent invalidity as a defense to an infringement action, an alleged infringer must contend with §282 of the Patent Act of 1952 (Act), under which “[a] patent shall be presumed valid” and “[t]he burden of establishing invalidity . . . shall rest on the party asserting” it. Since 1984, the Federal Circuit has read §282 to require a defendant seeking to overcome the presumption to persuade the factfinder of its invalidity defense by clear and convincing evidence”.
Bearing in mind that “Section 282 requires an invalidity defense to be proved by clearand convincing evidence”, “the Court rejects Microsoft’s contention that a defendant need only persuade the jury of a patent invalidity defense by a preponderance of the evidence”.

The justices also reject “Microsoft’s argument that a preponderance standard must at least apply where the evidence before the factfinder was not before the PTO during the examination process”

Reference is also made to the fact that “during the nearly 30 years that the Federal Circuit has interpreted §282 as the Court does today, Congress has often amended §282 and other patent laws, but apparently has never considered any proposal to lower the standard of proof. Indeed, Congress has left the Federal Circuit’s interpretation in place despite ongoing criticism, both from within the Federal Government and without”.

Microsoft Corp. must therefore pay a $290 million to i4i.

US Supreme Court opinion here

Oracle v. Google: 50% royalty rate?

In Oracle America, Inc. v. Google Inc. (C 10-3561 WHA), the defendant has recently filed a writ requesting leave to file a Daubert or other motion directed at the damages report of Oracle’s expert Iain Cockburn.

Apparently, Oracle’s expert is not only fixing an unprecedented royalty rate, but also (i) fails to tie his royalty rate to the value of the patented technology actually at issue in the case (ii) argues that royalties would be owed even after expiration of Oracle’s patents and, believe it or not, (iii) would be including a portion of Google’s advertisement pie!

May Google be facing a sort of punitive damages in this case?

Arguments used by Google:
"First, Cockburn has no basis for including all of Google’s revenue from Android phones into the base of his royalty calculation. The accused product here is the Android software platform, which Google does not sell (and Google does not receive any payment, fee, royalty, or other remuneration for its contributions to Android). Cockburn seems to be arguing that Google’s advertising revenue from, e.g., mobile searches on Android devices should be included in the royalty base as a convoyed sale, though he never articulates or supports this justification and ignores the applicable principles under Uniloc and other cases. In fact, the value of the Android software and of Google’s ads are entirely separate: the software allows for phones to function, whether or not the user is viewing ads; and Google’s ads are viewable on any software and are not uniquely enabled by Android. Cockburn’s analysis effectively seeks disgorgement of Google’s profits even though “[t]he determination of a reasonable royalty . . . is based not on the infringer’s profit, but on the royalty to which a willing licensor and a willing licensee would have agreed at the time the infringement began.” ...

Second, Cockburn includes Oracle’s “lost profits and opportunities” in his purported royalty base. This is an obvious ploy to avoid the more demanding test for recovery of lost profits that Oracle cannot meet… Most audaciously, Cockburn tries to import into his royalty base the alleged harm Sun and Oracle would have suffered from so-called “fragmentation” of Java into myriad competing standards, opining that Oracle’s damages from the Android software includes theoretical downstream harm to a wholly different Oracle product. This is not a cognizable patent damages theory, and is unsupported by any precedent or analytical reasoning.

Third, after improperly inflating the base of his royalty calculation, Cockburn proceeds to apply an unprecedented fifty percent royalty rate to that base through use of improper short-cuts. In contravention of long-settled precedent, he fails to tie his royalty rate to the value of the patented technology actually at issue in this case. ... He treats the patents and copyrights at issue as a single, indivisible unit, casually dismissing critical differences in the patents (such as the technologies they embody and expiration dates over a decade apart) by deeming them all “essential” to Java, without pointing to any facts that could justify that conclusion. Instead of satisfying the Lucent standard, he adopts a presumption that is contrary to Lucent, stating that there is “no clear economic basis” for apportioning the total value of Android into value attributable to the patents and copyrights in suit and any additional value added by Google. Under the case law, however, damages must be tied to “the claimed invention’s footprint in the market place.” …

Cockburn similarly inflates his royalty rate by calculating Oracle’s loss based on the alleged value of Java as a whole, even though the patented features are only a small part of Java….

Fourth, Cockburn cavalierly asserts that infringement of a Single claim of a single patent would result in the same … award as infringement of all of the asserted claims. The ‘720 patent, for example, it expires nearly eight years after every other patent-in-suit. But according to Cockburn, even if Google does not infringe the ‘720 patent, the damages should still run throughout its life, which extends to 2025…”

Sunday, 5 June 2011

If you can't stand the heat, keep out of the fryer

From The Register comes news of another significant US Supreme Court ruling, Global Applicances Inc v SEB S.A., relating to patent litigation strategy.  "US Supremes add 'willful blindness' to patent law" is the title of a note by Rik Myslewski which explains that,
"In a case supported by HP, eBay, Red Hat, Yahoo!, and General Motors [even though it concerned a patent for a deep fryer -- something those companies are not generally known for getting excited about], the US Supreme Court has issued a ruling that may make it more difficult for a company to be sued for inducing another company to infringe a patent.

According to the ruling, a defendent accused of inducing patent infringement must be proven to have either known that it was infringing, or was "willfully blind" to that infringement. Actual knowledge of infringement can be proven through documentary evidence or sworn testimony. Willful blindness is a bit more murky. As Justice Samuel Alito explained in his opinion:
The doctrine of willful blindness is well established in criminal law. Many criminal statutes require proof that a defendant acted knowingly or willfully, and courts applying the doctrine of willful blindness hold that defendants cannot escape the reach of these statutes by deliberately shielding themselves from clear evidence of critical facts that are strongly suggested by the circumstances. The traditional rationale for this doctrine is that defendants who behave in this manner are just as culpable as those who have actual knowledge.
... Applying willful blindness to patent law, the Supreme Court's 8-1 decision (Justice Anthony Kennedy was the lone dissenter) essentially rules that when a party is accused of inducing another party to infringe on a patent, if it can be proven that it should have known that a patent was being infringed – by, say, copying a patent-protected product that it should have assumed was patent-protected – it's liable for claims of infringment. ...".
There's a rather longer explanation of the decision here on Techdirt, which also provides the full text of the judgment.

Thursday, 2 June 2011

Only in America ... "Permanent Injunctions as Punitive Damages"

The Supreme Court tried many remedies,
but none had so great a punitive effect
as the permanent injunction
"Permanent Injunctions as Punitive Damages in Patent Infringement Cases" is the provocative title of a piece penned by Professor Paul J. Heald (University of Georgia Law School) and posted on the SSRN website here.  According to the abstrct:
"Although much ink has been spilled over the decision of the [US] Supreme Court in eBay v. Mercexchange to modify the test for equitable relief in patent cases and to nullify the long-standing [and erroneous, if equity is supposed to involve the exercise of judicial discretion -- JJP] presumption that victims of infringement are always entitled to permanent injunctions, an obvious point is never pursued: Injunctions in patent cases can function like punitive damages at common law. In cases where the infringer’s costs of switching to an alternative non-infringing technology are sufficiently high, patent "hold up" will occur, whereby the patentee will be able to negotiate a post-injunction license that exceeds the amount that would have been determined by an ex ante arms-length bargain (i.e., a reasonable royalty). Permanent injunctions that result in the recovery of an extra-compensatory bounty function like punitive damages and can be analyzed as such. This article examines the economic literature on punitive damages and identifies the limited set of circumstances where permanent injunctions are warranted.".
This piece will subsequently emerge as a chapter in an upcoming Cambridge University Press book, Intellectual Property and the Common Law. Meanwhile, if any discerning PatLit readers would like to cast a critical eye across this ingenious and controversial hypothesis, we'd all be pleased to know what they think.

Wednesday, 1 June 2011

That non-paper on the Unified Patent Litigation System: a helpful explanation

It's not often that you find footnotes in a PatLit piece, but this neat summary by Will Corbett and Kevin Mooney (Simmons & Simmons) has that slightly scholarly air to it. Thanks, Will and Kevin, for shedding some light on the darkness that is the recent non-paper:
"In advance of the 30 and 31 May meetings of the European Union’s Competitiveness Council, the EU Presidency presented a note to the Council[1]. The note attached a non-paper of the European Commission setting out a credible strategy to revise Europe's patent litigation system, following a recent opinion[2] from the Court of Justice of the European Union (CJEU) regarding the compatibility of a draft international agreement[3] with the EU Treaties[4].

In response to the CJEU's concerns, the non-paper proposes that the Commission have the right to bring proceedings against Member States, should the new patents court fail to refer EU law issues to the CJEU, and also that private parties could claim damages from Member States for breaches of EU law. Subject to these amendments, the Commission believes that no further changes are required to the draft agreement to ensure compatibility with the EU Treaties.

The international agreement would establish a court system with jurisdiction over a new European patent having unitary effect in multiple EU Member States. The same court would also have jurisdiction over ‘classical’ European patents. The Commission has recently published two draft Regulations[5] setting out how the unitary patent will work. Such a unitary patent is anticipated in the existing European Patent Convention (EPC)[6], hence no new EU patent right is required. The Commission does not propose that the EU become a party to the new international agreement, nor accede to the EPC. The international agreement would now be restricted to EU Member States, thus placing the new courts firmly within the EU’s judicial system. Any new EU Regulations or international agreement is likely to make it clear that there is no intention to either expand or restrict the jurisdiction of the CJEU.

The 30 and 31 May discussions pave the way for further work with the Council aiming to agree a general approach at an extraordinary Competitiveness Council meeting to be devoted to unitary patent protection on 27 June. It is hoped that the text of the two parallel EU patent Regulations could be agreed during the Polish Presidency of the EU (the second half of 2011), with the international agreement agreed during the Danish Presidency (the first half of 2012). The unitary patent Regulations would not be adopted without the international agreement, and it may also be necessary to amend other EU Regulations[7]. This timeline reflects the Commission's goal of issuing the first EU-wide patents in 2013[8], however, one should not underestimate the level of technical legal detail (such as a regime for the service of documentation) that still needs to be agreed before that longstanding goal is finally achieved (discussions having begun nearly 40 years ago).


[1] Creating a Unified Patent Litigation System - Orientation debate (Council of the European Union document 10630/11)
[2] Opinion 1/09 of the Court of Justice of the European Union
[3] Draft Agreement on the European and Community Patents Court and Draft Statute (7928/09)
[4] Such as the Treaty on the Functioning of the European Union
[5] Proposal for a Regulation of the European Parliament and of the Council implementing enhanced cooperation in the area of the creation of unitary patent protection (9224/11) and Proposal for a Council Regulation implementing enhanced cooperation in the area of the creation of unitary patent protection with regard to the applicable translation arrangements (9226/11)
[6] See Article 142 EPC
[7] Such as Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters
[8] COM(2011) 206 - Key action 3".

PCC Page 29: Octopuses learn to live with each other – only getting half our cake … and costs.

If you only half win, do you deserve
to get more than half your costs?
Poignantly portrayed by the Chartered Institute of Patent Attorneys (CIPA), the PCC Pages seek to explain how litigation works in the recently-revamped Patents County Court (PCC) for England and Wales, taking as its theme a dispute between Cautious Co and IPOff Ltd as to whether IPOff has infringed the IP rights of Cautious in its robotic octopus. In this episode, the 29th, immediate past CIPA President Alasdair Poore continues last week's theme of costs, with a little embellishment.
"Octopuses, like buses, clearly come in bunches. Last week I reported on an interesting judgment given by Judge Birss QC in relation to costs, how the limits work, and how they add up at different stages. This week the same judge has given a further judgment which gives some insight into handling costs – and on what happens if you don’t completely win.

Redwood Tree Services v Warren Apsey (trading as Redwood Tree Surgeons) [2011] EWPCC 14 is worth reading in its own right. An interesting saga of small businesses trying to clobber one another for passing off, spending substantial parts of their annual revenue in doing so. The case started -- badly -- in the Basingstoke County Court where security for costs was ordered and the first attempt to sue was struck out because security was not provided. A fresh case was then started, before the change in PCC rules, in the PCC. That was stayed for quite a long time until the claimant managed to pay the defendant’s costs in the previous proceedings. It then progressed slowly.

The judge conducted a meticulous analysis of the evidence. The parties were two tree-related businesses with their metaphorical “branches” overlapping, and both using “Redwood” in their names. Some witnesses were good, some were relatively poor. The conclusion was that there was passing off, but only in a small area where the businesses had overlapped; and there was no evidence of any damage, although of course, in the nature of passing off cases, the claimant might now know of all cases of confusion.

On costs, the judge looked specifically at the Civil Procedure Rules, CPR 44.3(2), which provides a discretion. The general rule is the unsuccessful party will be ordered to pay the costs of the successful party, but the court may make a different order. CPR 44.3(4) provides that in deciding what order, if any, to make about costs the court must have regard to all the circumstances including (a) the conduct of all the parties, (b) whether a party has been successful in part of his case even if he has not been wholly successful, and (c) whether any payment into court or admissible offer for settlement has been made by a party which is drawn to the court's attention and which is not an offer to which the costs consequences under Part 36 apply.

The defendant submitted that, although the claimant had won an injunction, it was of very limited scope, and much more limited than the claim; they had really hardly won at all, and they should pay the defendant’s costs.

The claimant did not agree. Winning anything at all was winning, and costs should generally follow the winner. The claimant also pointed to the fact that the defendant had not made any offer to settle in any more limited terms (indeed neither party had made any offer to settle). Normally it might be argued that, if a defendant wishes to protect themselves from a judgement only in part, it is incumbent on them to make that as an offer.

The claimant had also relied (amongst other things) on the judgement of Mr Justice Falconer in Colgate Palmolive v Markwell Finance [1990] RPC 197 (claimant entitled to costs on liability phase in a passing off action although there had been a without prejudice offer including damages). In that case it was said that part of winning was just vindicating the intellectual property right. In the present case, Judge Birss QC decided that the claimant had won overall, but had not “vindicated” his intellectual property right. It was appropriate in the circumstances to order less than 100% costs. In fact he ordered that the defendant pay only 50% costs.

The case also illustrates the application of the rules on making an application for an interim payment of costs, pending assessment. In this case the claimant’s costs were about double the defendant’s. In the circumstances he was prepared to order an interim payment of 50% of the level of costs the defendant had incurred, as being “an irreducible minimum figure” that he could feel confident that the claimant would be likely to recover on assessment.

It is more usual for parties in intellectual property cases to receive only part of their costs, for example where items of prior art is relied up for invalidity, and that prior art does not render the patent invalid. As noted earlier, the maxima that the PCC applies are after any set-off (CPR 45.42(4)). Is it possible that the maxima will be applied after any such reduction as this? Answers please".

Non-paper on the non-patent court?

The non-paper: will it ever fly?
Last Friday the Council of the European Union published a document, Creating a Unified Patent Litigation System - Orientation debate, to which was attached Annex II, delightfully titled in capitals "SOLUTIONS FOR A UNIFIED PATENT LITIGATION SYSTEM – THE WAY FORWARD AFTER THE OPINION 1/09 OF THE CJEU: NON-PAPER OF THE COMMISSION SERVICES".

PatLit will be publishing a note on this development soon. In the meantime, rest assured that the various organs of the European Union will be straining every sinew to achieve a new Europe in which patents are protected and investment encouraged.  Reading the statements issued by the Commission, one is tempted to wonder why it was that, until now, anyone bothered to apply for anything as worthless as a patent in Europe, still less sue for infringement.