Apple v Samsung in Japan: an English text

Patent litigation blossoming in Japan ...

In May there was a decision of the Japanese IP High Court on Apple v Samsung in which FRAND-based royalties were mentioned. The judgment, which was unsurprisingly delivered in Japanese, was released a month after it was rendered and has since become available to English speakers via this website; it took nearly five months to produce the translation, during the course of which the case settled.

Highlights of this case include the following:

Injunctions

Does a request for an injunction constitute an abuse of patent right? This issue is dealt with from page 17 onwards, one of the highlights being, on page 25, "Whether the respondent (Apple) has any intention of accepting a FRAND licence" (here and here).

FRAND licences

Apple alleged non-infringement of Samsung's patent and sought a declaratory judgment to confirm that Samsung was not entitled to damages from Apple's infringement (a summary of the claim is on page 3). From page 115 onwards the judgment focuses on FRAND (after deciding that Apple infringed Samsung's patent). From page 122 the text discusses whether the patentee should be allowed to seek damages and determination of the "patentee's claim for damages exceeding or equivalent to a FRAND-based royalty".

The court found that damages exceeding a FRAND-based royalty should not in general be allowed, though they may be appropriate in exceptional circumstances. Such circumstances would include situations in which the patentee proves that the alleged infringer is not a willing FRAND-based licensee. The court also decided that the damages equivalent to a FRAND-based royalty should be ordered unless it is significantly unfair to do so (cf the decision of the court of first instance). The court did not find any fact which demonstrated that it was unfair to disallow damages equivalent to a FRAND-based royalty, but found that Apple was a willing licensee which kept on negotiating with Samsung to obtain a licence by presenting specific royalty rates.

The amount of damages is discussed from 130 page onwards. The court analyses the percentage of contribution of the patent in suit in each product in issue, choosing to limit the aggregate royalty at 5% according to WCDMA and other patent pools. The summary of the actual calculation is on page 138 (D).

The court appreciates responses to the public consultation (Amicus Briefs) summarising the responses from page 139.

PatLit is grateful to a friendly reader for this information

EU Commission shares its views on the FRAND defence

In the decision relating to the merger between Google and Motorola Mobility, the EU commissioner for competition Jaquin ALMUNIA expresses some interesting thoughts on the role of standard relevant patents (SRP) in the context of the EU antitrust regulations (Art. 102 TFEU).

Google had committed itself to Motorola's FRAND declarations and to the German "Orange-Book" standard  as follows (see item 9 d of the decision):

Finally, Google contends that in relation to Motorola Mobility's SEPs, a potential
licensee will have the opportunity to prevent an injunction from being sought, even
after good faith negotiations have failed, provided that a potential licensee (a) makes
an offer to license Motorola Mobility's SEPs, subject to certain conditions, and (b)
provides securities with regard to the royalty payments.

 And in item 106:

In the event licensing discussions fail, the SEP holder may ultimately take its counterparty to court and seek an injunction.

Florian Müller on FOSS argues that this might bee seen as a further requirement that licensing discussions must have taken place and have failed before an injunction is granted.

Similar thoughts are expressed in item 126:

it may be legitimate for the holder of SEPs to seek an injunction against a potential licensee which is not willing to negotiate in good faith on FRAND terms.

In a footnote, the commpssion points to the Case T-111/96 ITT Promedia v Commission [1998] ECR II-2937) and argues that in that case,

 the ECJ acknowledged that the fundamental right to property, which includes the rights linked to intellectual property, is not absolutely protected but must be balanced against the protection of other fundamental rights such as the freedom to conduct business. (See Case C-70/10 Scarlet Extended, judgment of 24 November 2011, paragraphs 41 to 46).

However, the commision emphasizes that the commitment to the Orange Book-Conditions is by no means a guarantee that Art. 102 TFEU is respected and reminds that the sword of Damocles of a commission investigation is always hanging over the holder of a SEP trying to enforce his right (item 132):

Given this context, the Commission considers that Google's incentives to use the threat of injunctions to forcibly extract cross-licences from good faith licensees are most likely be constrained by the prospect of an investigation based on Article 102 TFEU.

Ricoh undercuts NPE profit potential

If other U.S. courts follow the lead of Wisconsin District Court Judge Barbara Crabb, NPEs (non-practicing entities, or "patent trolls") may soon see an end to their massive settlement winnings. Last month, office equipment manufacturer Ricoh won an infringement action against Taiwanese company Quanta Computer. But Crabb rejected Ricoh's request for an injunction to prevent Quanta from selling the patented optical drives at the heart of the suit. Pointing to eBay (547 U.S. 388 (2006)), the judge diverged from traditions of presumptive injunctive relief in cases of patent infringement cases, and instead appeared to establish certain criteria for distinguishing among types of patent holders. Such criteria seemed intended as a direct hit against NPEs.

Crabb was unpersuaded that Ricoh would suffer irreparable harm if an injunction did not issue. To justify this analysis, she relied on the eBay concurring opinion:

"When the patented invention is but a small component of the product the companies seek to produce and the threat of an injunction is employed simply for undue leverage in negotiations, legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest."

This language appears to specifically target NPEs; Judge Crabb explicitly contrasted such "entities" with researchers, independent inventors, and direct market competitors -- the latter classes apparently being more deserving of injunctive relief against infringers. Because Ricoh does not manufacture or sell the patented optical disc drive, Crabb reasoned that the plaintiff was not Quanta's direct competitor, and thus would not suffer irreparable harm in the absence of an injunction.

But she also turned an eye to the plaintiff's intent; since Ricoh had previously licensed its patent to numerous companies, Crabb decided that Ricoh's main motive was not "to narrowly limit the practice of its invention," but was rather to "simply maximize a potential licensing fee." And: "[b]ecause that is not an adequate ground for an injunction, plaintiff’s motion for a permanent injunction will be denied." The parties were ordered to negotiate a compulsory license for future use.

This policy-based decision may be one court's way of addressing the U.S. Congress's failure to heed the pleas of large companies and end the plague of the "patent trolls." It does remove one bargaining chip from the NPEs' stable of tricks. By hitting NPEs where it hurts -- in their pocketbooks -- the court may well accomplish what Congress never could.

Read the decision here.

Carving out an exception to injunctive relief

Virgin Atlantic v Premium Aircraft (t/a Contour) [2009] EWCA Civ 1513, a decision at the tail-end of last year from the Court of Appeal for England and Wales (Lords Justices Jacob and Patten, Mr Justice Kitchin), concerned an application for a stay of a damages inquiry and final injunction in light of (i) Contour's application to the Supreme Court for leave to appeal, and (ii) an appeal in European Patent Office opposition proceedings.

While dismissing the applications, the court in a judgment delivered by Jacob LJ exceptionally allowed a modification of the final injunction in order to allow Contour to complete the supply of a relatively small number of infringing seats to Delta, subject to conditions, even if leave to appeal was to be refused. Having reviewed the principles that applied to the grant of a permanent injunction both during the pendency of an appeal and after any possibility of appeal had been exhausted, Jacob LJ concluded:

"First and most important is that the infringing seats will not be used in competition with Virgin Atlantic. Second, there is only a limited number of them, 400 when already 2,800 have been supplied. Third, the period of infringement would be very short ... Fourth, there is the significant effect of the £1 million penalty clause [in the contract to supply the infringing seats] which could otherwise bite. Fifth, there is the potential effect on employment. I only give slight weight to this not because people losing their jobs is not a very significant matter for it is. The reason I give slight weight is because the ultimate decision in this case lies with the parent company Seton which is supporting Contour. If jobs are lost it will be the parent company's decision, just as it has been the parent company's decision to support Contour up until now which has prevented job losses until now ...".

Injunction granted in i4i dispute over XML patent

NOTE: the judgment in the case discussed below can now be accessed here.

According to breaking news in Times Online, software company Microsoft has been barred by the US Federal Circuit Court from selling its word processing Word software in the United States and must pay US$290 million in damges for infringing a patent held by a small Canadian software company, i4i (for earlier developments in this trial see the AmeriKat posts on the IPKat weblog here, here, here and here). Says Times Online,

"The ruling ... prevents Microsoft from selling any versions of Word 2003 or Word 2007 after January 11 2010. Copies of these products sold before this date are not affected.

Loudon Owen, Chairman of i4i, described the ruling as “a war cry for talented inventors whose patents are infringed”... Mr Owen said that the XML feature at the heart of the dispute was an important tool for users such as drugs companies who routinely handled large amounts of data.

By removing it from its Word 2007 software Microsoft would disadvantage those users. ... He did not rule out licensing the XML feature to Microsoft. "They know where to find us if they want to talk," he said.

In court documents filed during its long-running dispute with i4i, Microsoft had originally claimed that a ban on sales “will inflict irreparable harm on Microsoft by potentially keeping the centerpiece of its product line out of the market for months."

But yesterday the company brushed off the ruling, saying that it had already “put the wheels in motion” to remove the disputed feature from its products.

“We expect to have copies of Microsoft Word 2007 and Office 2007, with this feature removed, available for US sale and distribution by the injunction date,” Kevin Kutz, Microsoft’s director of public affairs, said.

He added that the beta versions of Microsoft Word 2010 and Microsoft Office 2010, which are available now for downloading, do not contain the technology covered by the injunction.

The ruling follows an earlier injunction issued by a US disctict court in Texas barring Microsoft from selling recent versions if its Word software, after the company was found to have wilfully infringed a patent held by i4i, a Toronto-based technology company, through the use of a technology used to classify documents for retrieval by computers.

That injunction was stayed while Microsoft appealed.

In the latest ruling, the three-judge panel said: "A small company was practicing its patent, only to suffer a loss of market share, brand recognition, and customer goodwill as the result of the defendant's infringing acts."

It noted that the “district court found that Microsoft captured 80 percent of the custom XML market with its infringing Word products, forcing i4i to change its business strategy." ...".

Microsoft is said to be considering applying for a rehearing or an appeal to the US Supreme Court.

What is interesting here is that, following the earlier ruling of the US Supreme Court in eBay v MercExchange (here, noted by the IPKat here), many commentators felt that the loss of what was regarded as an automatic entitlement to injunctive relief would cripple patent owners. This decision has shown that this is unlikely to be so and that, at least where the defendant has a good chance of amending its product within a reasonable time so as to avoid infringement, an injunctive order will certainly be an option for the court in the exercise of its discretion.