Post-publication amendment of judicial rulings: Schutz v Werit revisited

In Schutz (UK) Ltd v Werit (UK) Ltd [2013] UKSC 16,, decided by the UK Supreme Court on 13 March 2013 (and noted here on PatLit) laid out some important guidance on when the provision of spare or replacement parts for a patented product might or might not infringe the patent. However, almost as much attention is now being paid to the fact that, after the ruling was published, it has been amended. The original version of the decision, at paragraphs 38 and 39, reads as follows:

"38 The House of Lords and this court have emphasised on a number of occasions the desirability of national courts following the established approach to infringement of the Technical Board of Appeal of the European Patent Office ("the EPO"), and the German Bundesgerichtshof ("the BGH") have taken the same view - see, most recently, Human Genome Sciences Inc v Eli Lilly & Co [2011] UKSC 51, [2012] 1 All ER 1154, paras 84-87, and Case Xa ZR 130/07.

39 The parties in this case have not referred to any relevant decision of the EPO, but we have been referred to four decisions of the BGH which consider what activities constitute "making" a patented article ..."

The version of the decision that appears on BAILII now reads:

"38. The House of Lords and this court have emphasised on a number of occasions the desirability of national courts following the established approach to validity of the Technical Board of Appeal of the European Patent Office ("the EPO"), and the German Bundesgerichtshof ("the BGH") have taken the same view - see, most recently, Human Genome Sciences Inc v Eli Lilly & Co [2011] UKSC 51, [2012] 1 All ER 1154, paras 84-87, and Case Xa ZR 130/07.

39 The parties in this case have not referred to any relevant decision of the EPO, as we are here concerned with infringement. However, it is worth addressing four decisions of the BGH which consider what activities constitute "making" a patented article.

Naturally there was no relevant decision of the EPO which the parties could have referred to the Supreme Court, since the EPO does not deal with patent infringement ..."

The issue that has troubled several patent practitioners is that there is no clear sign that the current version of the decision is not the same as the original.  The entry for the case on BAILII lists it as Schutz (UK) Ltd v Werit (UK) Ltd (Rev 1) [2013] UKSC 16, so presumably "(Rev 1)" indicates that the version online is the first revision of the text.  However, there is nothing at the top of the judgment to state that it has been amended, which means that anyone who reaches it via a direct hyperlink will not even see the "(Rev 1)".  A separate version of the ruling can be found on the Supreme Court's website, here, and that doesn't even have a "(Rev 1)".

In this particular instance it doesn't much matter, since the correction relates to an error that has no effect on the law itself, but it would be good to know when a ruling that has been delivered to the parties and subsequently published has been changed -- if only to ensure that lawyers don't make fools of themselves and disadvantage their clients by citing passages that have been amended or even removed.

Thanks go to Gary Moss (EIP) for forwarding the two versions of the ruling, though he modestly says that his colleague Darren Smyth spotted it first.

EU Commission seeking comments on Samsung's proposed commitments concerning injunctions for standard-essential patents

In a press release issued yesterday, the European Commission invited interested third parties to submit comments on the formal commitments offered by Samsung to address competition concerns raised by its use of injunctions for the enforcement of standard-essential patents in the field of mobile communications. The proposed commitments follow a Statement of Objections notified to Samsung in December 2012, where the Commission took the preliminary view that, by seeking injunctions against Apple in various member states, for the alleged infringement of some mobile phone standard-essential patents, Samsung committed an abuse of a dominant position prohibited by EU antitrust rules (Art. 102 TFEU). According to the press release,

To address these concerns, Samsung has proposed to commit for a period of five years not to seek any injunctions on the basis of any of its SEPs, present and future, that relate to technologies implemented in smartphones and tablets ("Mobile SEPs") against any company that agrees to a particular licensing framework.
The licensing framework consists of: (i) a negotiation period of up to 12 months and (ii) if no agreement is reached, a third party determination of FRAND terms by either a court or an arbitrator, as agreed by the parties. If the parties cannot agree on either submitting to court or arbitration, the parties will have to submit to arbitration.
The proposed commitments would cover the EEA. An independent trustee would advise the Commission in overseeing the proper implementation of the commitments.

There must be something wrong in this picture...

Essentially, Samsung offers a 5-year commitment (clause 14) not to seek injunctive relief, for any of its mobile SEPs, against a 'willing' potential licensee that agrees to comply with a specific framework for determining F/RAND terms (by signing and returning, within 30 days, Samsung’s Invitation to Negotiate). The first part of the proposal (clauses 1-4) sets out the negotiating procedure, which lasts for a maximum of 12 months (although the licensee may reduce the term to a minimum of six months, in case of unilateral licenses). Clause 2 lists several terminating events, while clause 3 circumscribes the perimeter of the commitments. Both clauses, in particular, contain provisions aimed at protecting Samsung from being required to comply with the proposed commitments when a potential licensee, which holds other mobile SEPs, has brought a claim for injunctive relief against Samsung or one of its customers, for infringement of those standard-essential patents. The proposal submits Samsung's obligations to a requisite of reciprocity, to the effect that, when a potential (cross-)licensee is seeking an injunction, and Samsung offers to be bound by the same process of F/RAND determination set out in the proposal, it is relieved from its obligation not to seek injunctive relief (clause 2.c), and may also terminate an on-going license (clause 3.f). The latter provision, for instance, clarifies that:

3. Nothing herein shall:

f.  preclude Samsung Electronics from terminating a Unilateral or a Cross-License concluded in the context of the Licensing Framework in the event the Potential Licensee files a claim for Injunctive Relief before any court or tribunal in the EEA against Samsung Electronics based on alleged infringement of any of the Potential Licensee's Mobile SEPs, where Samsung Electronics has offered or offers to be bound by the same process as set out in the Licensing Framework applied to it as licensee of such Mobile SEPs by signing and delivering the Annex B Invitation to Negotiate.

This mechanism should presumably kick into action when the potential (cross-)licensee, within the same 30-day period mentioned in clause 1, does not withdraw the action for injunctive relief, entering into negotiations under the licensing framework detailed in the proposed commitments. However, in light of the Commission's recent adversity towards strategic termination clauses, as highlighted by the draft proposal for a revised Technology Transfer Block Exemption Regulation (which proposes to exclude, from the safe harbour of the TTBER, any clauses that permit the licensor to terminate an agreement if the licensee challenges the validity of the licensed IPRs), there is reason to doubt that the potential licensee's recourse to injunctions, in the same situation in which Samsung agreed not to seek injunctive relief, may be a sufficient reason to relieve the latter from its obligations. Although Samsung's concern is understandable from a strategic and commercial perspective, such considerations should have no impact on the application of Article 102 TFEU.

Tired of SEPs? Try a good movie!

The second part of the proposal (clauses 5-11) describes the process for the third-party determination of F/RAND terms. If the parties cannot reach an agreement during the 12-month long negotiations, clause 5 establishes that they have an additional 60-day period to submit the matter to arbitration or court adjudication. Surprisingly, clause 6 states that, if the parties disagree on whether to demand the determination of F/RAND terms to a judge or a panel of arbitrators, they must commence an arbitration procedure. Samsung's proposed solution is certainly quite counter-intuitive, as one would expect court adjudication to be the appropriate choice, in case of disagreement. There are, of course, reasons that justify the recourse to arbitration, such as the inclusion, in the panel, of particularly experienced arbitrators (each with at least 10 years’ relevant experience in the telecommunications sector and/or in IP licensing - clause 9.b), the possibility that the arbitration procedure be faster than court adjudication, or the confidentiality assured by the process, and expressly prescribed by clause 9.e ('The arbitration will be conducted in strict confidence and the arbitral proceedings and decision shall be confidential'). At the same time, however, the final and binding decision that concludes the two-stage arbitration procedure (the decision of the first panel may be subject to a de novo appeal before a second arbitral tribunal, according to clause 9.f) would effectively preclude a party (barring exceptional circumstances) from obtaining court adjudication of the controversy, even if it did not agree to arbitration. The absurd consequence would be that a potential licensee wishing to retain its right to a court determination of F/RAND terms would be forced to reject Samsung's Invitation to Negotiate under the proposed commitments, incurring the risk that the SEP owner lawfully pursued injunctive relief against it. It is readily apparent that such consequence still represents an epiphany of the same competition concerns that the proposed commitments seek to address.

Florian Mueller, in his timely review of Samsung's proposal, highlighted similar issues concerning the arbitration/court adjudication mechanism, while also noting that 'a fundamental drawback of arbitration is that it's usually private -- under Samsung's proposal, it would be "conducted in strict confidence" --, so it does not result in the creation and refinement of a body of case law that gradually increases clarity'. This observation is particularly persuasive in light of the recent judgments of two US courts (Judge Robart here, Judge Holderman here), which provided long sought-after guidance on the determination of F/RAND royalty rates. The confidentiality surrounding arbitration would plausibly prevent the arbitral decisions from contributing directly to the debate on F/RAND licensing, although the licensing agreements incorporating F/RAND terms established by the arbitrators would still be examined, and their disclosure required, in judicial proceedings related to the same or comparable standard-essential patents (e.g. in the US, under Georgia Pacific factors n. 1, 2 and 12).

Other provisions of the proposed commitments concern the procedure for court adjudication (before 'the Patents Court, High Court of England and Wales (or any successor court), or the UPC, as is agreed between the Parties' - clause 10), further obligations with regard to non-circumvention (clauses 15-16), and the institution of a monitoring trustee (clauses 17-28). Clause 13 expressly states that the Commission may, on its own initiative or on the request of Samsung, reopen the proceedings to take into account the guidance given by the Court of Justice in case C-170/13, where a German court referred several questions concerning the issuance of injunctions against willing potential licensees (IPKat post here).

Joaquin Almunia, Commission Vice President

The Commission is eagerly awaiting your comments on Samsung's proposed commitments. There appear to be some critical points (the duration of the commitments, limited to 5 years, the termination clauses related to the licensee's conduct, the arbitration/court adjudication mechanism) which would deserve a more in-depth discussion. Further, the proposal indirectly suggests that the ex ante implementation of a policy on the enforcement of SEPs and on the determination of F/RAND commitments, binding on all SEP owners and potential licensees within the context of a specific standard-setting organization, would probably be more efficient in discouraging abusive behaviors, than requiring individual commitments. Whatever your opinion, however, PatLit invites you to share it with other readers, while Commission Vice President Almunia would not mind if you could also address your comments to him:

I am looking forward to receiving the feedback of other market players on Samsung’s proposals. Enforcing patents through injunctions can be perfectly legitimate. However, when patents are standard-essential, abuses must be prevented so that standard-setting works properly and consumers do not have to suffer negative consequences from the so-called patent wars. If we reach a good solution in this case, it will bring clarity to the industry.

Judicial determination of F/RAND royalties: direction set, still no easy task

On September 27, only a few months after Judge Robart's (W.D. Wash.) landmark judgment in Microsoft v Motorola, Judge Holderman (N.D. Ill.) provided the second judicial determination of F/RAND royalty rates, in a case concerning several patents owned by Innovation IP Ventures LLC and essential to the 802.11 standard (Wi-Fi). The patent owner had originally filed lawsuit against numerous commercial activities (coffee shops, hotels, restaurants,...), which offered wireless internet access to their customers or used it internally. Several manufacturers of electronic devices used for managing Wi-Fi networks, including Cisco, Motorola, NetGear and Hewlett-Packard, filed declaratory judgment actions against the patent owner, seeking a declaration of non-infringement and invalidity of Innovatio's patents, which, in turn, claimed that the devices manufactured by the plaintiffs infringed its SEPs. The court and the parties, which waived their right to a jury determination of damages, agreed to assess potential damages before determining the issues of validity and infringement.

The ruling first reviewed the method employed by Judge Robart to calculate F/RAND royalties, which revolved around the simulation of a hypothetical negotiation between the SEP owner and a potential licensee, at the time the infringement began. The negotiation was re-constructed under the framework of a modified version of the Georgia-Pacific factors, which took into account the peculiarities of the F/RAND context. The court described the methodology used in Microsoft v Motorola as a three-step process, as the judge is expected to evaluate (i) the importance of the patent portfolio to the standard (both in terms of numeric proportion, and technical contribution), (ii) the importance of the patent portfolio as a whole to the alleged infringer's products, and (iii) other licensing agreements concluded for comparable patents, to determine an appropriate F/RAND rate.

Judge Holderman endorsed this approach, but introduced minor modifications in light of the distinct circumstances of the two cases. First, the court decided to determine a single F/RAND rate for calculating damages, whereas, in Microsoft v Motorola, Judge Robart had identified a reasonable F/RAND range, to serve as a basis for the jury's evaluation of Motorola's conduct during negotiations. Second, the court chose not to adjust the F/RAND rate in light of pre-litigation uncertainty about the essentiality of a given patent, since it had already determined, in a separate proceeding, that all asserted patents were standard-essential. The ruling explained this choice in detail:

At the time of the hypothetical negotiation, the parties in actuality would not have known whether a given patent is valid or infringed, and the alleged infringer would have had the option of contesting these issues in court. Nonetheless, by the time the damages phase of an infringement suit arrives, the court has determined infringement and validity, thus foreclosing the hypothetical negotiator from benefiting from any uncertainty as to future court rulings. [...] Stated another way, the hypothetical negotiator could no longer leave the negotiating table to contest liability in court, and could no longer demand the benefit of uncertainty about a court's rulings. Accordingly, "[t]he hypothetical negotiation also assumes that the asserted patent claims are valid and infringed," [Lucent Techs Inc. v Gateway Inc.], because no hypothetical negotiation would have taken place if it were otherwise. The patent infringer gets no discount on its licensing fee because of uncertainty about its liability that has since been cleared up by litigation. Analogously, it would be inappropriate to adjust the RAND rate based upon pre-litigation uncertainty about the essentiality of a given patent. 

Before proceeding with the royalty calculation, Judge Holderman examined some of the issues that commonly surround the determination of F/RAND royalties in the standard-setting context:

• hold-up - the court recognized that this 'is a substantial problem that RAND is designed to prevent', to the effect that F/RAND royalties should 'reflect only the value of the underlying technology and not the hold-up value of standardization'. The judge noted that the ease with which a patent can be adopted into a standard is part of its intrinsic value, and should be taken into account when determining the appropriate royalty rate;
• royalty stacking - Judge Holderman concluded that courts should make sure that 'the asserted patents are not overvalued compared to the technological contribution they make to the standard', and that the overall royalty rates for all the SEPs included in the standard do not prevent its widespread adoption. En passant, the judge rejected the use of numeric proportionality as an appropriate methodology to set F/RAND rates; 
• reverse hold-up - the court observed that this issue does not merely concern the F/RAND context, and refused to give it any special consideration 'beyond what it receives in a typical patent case', adding, however, that it would evaluate whether the F/RAND royalty determined through hypothetical negotiations provided sufficient incentive for companies to invest in new technologies and participate in standard-setting processes.

The court took the date of adoption of the 802.11 standard (1997) as the date of the negotiation for all the patents (including those issued after that date). It also identified the Wi-fi chip as the appropriate royalty base, following the Federal Circuit's teachings in LaserDynamics Inc. v Quanta Computer Inc. ('it is generally required that royalties be based not on the entire product, but instead on the smallest salable patent-practicing unit'), and clarified that, in this case, the evaluation of the importance of the patent portfolio to the standard, and to the alleged infringers' products, effectively coincided.

The ruling held that Innovatio had not provided sufficient proof to support its alternative thesis, which suggested the use, as base for royalty determination, of the final selling price of the end-products, discounted by a 'feature factor' (the value of the end products attributable to the functionalities brought by the implemented standard - accordingly, Innovatio argued that Wi-Fi accounts for 10% of the value of a laptop, but 95% of that of an access point). Similarly, the court rejected Innovatio's arguments pointing to the use of a 6% licensing rate, to be applied on the final selling price of the end-products, adjusted to take into account the 'feature factor'. The patent owner asserted that the licensing rate was determined in light of allegedly comparable licensing agreements for other SEP portfolios, but the court found that none of the proposed licenses was appropriate for a comparative analysis in the F/RAND context (and also questioned the validity of this approach, highlighting the conflation of two steps - royalty base and royalty rate - of the royalty analysis).

Judge Holderman examined in detail the importance of Innovatio's patents to the 802.11 standard, as required by Georgia Pacific Factor 9 (advantages of the patented property over alternatives that could have been written into the standard before its finalization), addressing two issues highlighted by the parties. In this perspective, he clarified that the court (i) would consider patented alternatives, but 'recognize that they will not drive down the royalty in the hypothetical negotiation by as much as technology in the public domain', and (ii) would only take into account alternative technologies that were considered by the standard-setting body during the standardization process.

The court then proceeded with the analysis of comparable licensing agreements, under Georgia Pacific Factors 1 and 2, but found that none of the licenses cited by the parties could be used to determine an appropriate F/RAND royalty. In particular, it rejected the use of the VIA pool licensing agreement, employed by Judge Robart to set a reasonable royalty in Microsoft v Motorola, noting that such license did not include high-value patents, and thus could not provide an appropriate reference point to calculate royalties for Innovatio's SEPs, which were of moderate to moderate-high importance to the 802.11 standard. The court '[did] not take a position on the question of whether non-RAND licenses can ever be useful in determining a RAND rate'.

In light of the lack of comparable licenses, Judge Holderman assessed other methods for calculating royalties. He rejected the 'bottom up' approach, which focuses on the cost of implementing reasonable alternatives to the SEPs at issue, due to the lack of technologies alternatives to Innovatio's patents, and to the difficulty of conducting such analysis (as previously noted by Judge Robart in Microsoft v Motorola). Instead, he accepted the 'top down' approach:

In summary, the Top Down approach starts with the average price of a Wi-Fi chip. Based on that average price, Dr. Leonard [the manufacturers' expert] then calculated the average profit that a chipmaker earns on the sale of each chip, thereby isolating the portion of the income from the sale of the chip available to the chipmaker to pay royalties on intellectual property. Next, Dr. Leonard multiplied the available profit on a chip by a fraction calculated as the number of Innovatio' s 802.11 standard-essential patents, divided by the total number of 802.11 standard-essential patents. Dr. Leonard also provided several alternative calculations for this step by varying the denominator of the fraction to account for varying conclusions about the value of Innovatio's patents to the 802.11 standard.

The judge noted that this approach does not rely on other licenses, and takes into account both the principle of non-discrimination and the royalty stacking concerns, by setting the chipmaker's profit margin as the maximum potential royalty. Although the profit margin 'is not always dispositive for determining a RAND rate', especially when widespread infringement is present, Judge Holderman clarified that there was no reason, in light of the circumstances of the case, to question the appropriateness of this method. Thus, he applied the 'top down' approach, by:

1. identifying the average price of a Wi-Fi chip in the period 1997-2013, and the average profit margin, which respectively amounted to $14.85 and 12.1%. The court also determined the total number of patents essential to the 802.11 standard (3000);
2. assessing the value of Innovatio's portfolio to the standard, in relation to the other standard-essential patents. The judge concluded that the patents at issue, which are of moderate to moderate-high importance to the standard, 'are likely among the top 10% of all patents essential to the 802.11 standard', as '84% of the value in electronics patents is found in the top 10% of electronics patents';
3. multiplying the average chip price ($14.85) by the profit margin (12.1%), to identify the average profit ($1.80); and subsequently multiplying the latter by the value attributable to the top 10% of the 802.11 SEPs (84%), dividing it by the number of essential patents included in the top 10% (300), and multiplying the resulting pro-patent share by the number of patents included in Innovation's portfolio (19). 

The resulting F/RAND rate was 9.56 cents per Wi-Fi chip. The court concluded that this rate was 'comfortably within Judge Robart's reasonable range for a RAND rate', and that the difference with the F/RAND rate set for Motorola's patents was justified, due to the different contribution of Motorola's and Innovatio's patents to the standard: the first only provided minimal value to the standard, whereas the latter were of moderate to moderate-high importance.

International Patent Litigation 2013 event: discount available to PatLit readers

Conferencing in comfort?

"International Patent Litigation 2013" is the title of the fifth successive annual conference on the topic which is being organised by IBC Legal Conferences.  The conference takes place on 10 and 11 December 2013 in the somewhat clumsily-named Crowne Plaza London St James hotel ("modern spa and sumptuous dining" ...), in Central London.

It goes without saying that there's an outstanding cast of speakers, including both well-known and familiar faces and some very distinguished personalities from far afield.  Importantly for readers of this weblog, there's a welcome 10% discount for all PatLit readers who register for the event and quote the VIP code FKW82435PLBL. Just click here for programme details and registration.

U.S. Government Shutdown Will Not Immediately Affect USPTO, Federal Courts

Due to the failure of the U.S. House of Representatives and U.S. Senate to pass either a budget or a continuing spending resolution before the start of the 2014 fiscal year, President Obama has initiated a partial shutdown of the U.S. government on October 1. (Never thought I would be saying that). Because the USPTO and the federal courts have some non-appropriated funds available, however, the shutdown will not affect those offices for at least 10 days.

The U.S. Department of Commerce announced that:

The USPTO has sufficient funds from other than FY14 appropriations to continue full operations for approximately 4 weeks.  Therefore, all 11,789 employees of the USPTO will be excepted [from furloughs] for approximately up to 4 weeks following a lapse in appropriations.  After this time period, the USPTO will execute [a shutdown plan].

The U.S. Court System also has reserves to keep the doors open, but for a shorter period:

In the event of a government shutdown on October 1, 2013, the federal Judiciary will remain open for business for approximately 10 business days. On or around October 15, 2013, the Judiciary will reassess its situation and provide further guidance. All proceedings and deadlines remain in effect as scheduled, unless otherwise advised. Case Management/Electronic Case Files (CM/ECF) will remain in operation for the electronic filing of documents with courts.

So, the national parks and Panda Cam are closed, but the USPTO and  federal courts are open (for now).

Geographical distribution of patent applications in Italy - where do inventors hide?

Last week, several newspapers and websites reported news of a study on the number of patent applications filed in Italy, in the period January - August 2013 (see Adnkronos here - data can also be directly sourced from UIBM). Filings in the first eight months of this year amounted to 5976, in line with the 2012's trend in the same period (5590). As expected, companies from northern Italy (Lombardia, Emilia Romagna, Veneto, Piemonte, Friuli Venezia Giulia, Trentino Alto Adige and Liguria) submitted the vast majority of the patent applications, totalling 3676 filings, about 61.5% of all the applications. Applicants from southern Italy (Campania, Puglia, Sicilia, Calabria, Basilicata and Molise) filed only 436 applications, or 7.3% of the total. Another 1212 applications (20.3%) came from other regions, while more than 600 filings were submitted by foreign entities (10.9%). Here is the list of patent filings per region:

Region Lombardia Emilia Romagna Veneto Piemonte Toscana Lazio Marche Friuli Venezia Giulia Campania Puglia Trentino Alto Adige Liguria Sicilia Umbria Abruzzo Calabria Sardegna Basilicata Molise Valle d'Aosta

Filings 1176 836 820 461 408 354 247 158 139 127 119 106 92 85 76 60 37 10 8 5

Wikipedia - Regions of Italy

The staggering contrast between the number of applications filed by companies in northern and southern Italy highlights a phenomenon known as 'dual market', as per the definition coined by The Economist, back in 1997 (you can read more here). The disparities found in the distribution of patent filings mirror those seen, for example, in growth rate, labour cost, gross wages and employment rates (discussed on The Economist and The Guardian). Comparing the number of applications with the gross domestic product (GDP) of each region shows that, although the richest, most economically advanced regions are generally favourable environments for inventors, there are exceptions to this rule. For example, a few regions (most notably, Lazio and Sicilia) score high on the GDP list, but fare worse in the list of patent filings. A reverse trend can be noted, for example, in Friuli Venezia Giulia, the 12th region for GDP, but the 8th for number of patent applications. The following table provides a comparison of GDP (data from 2011 - source: Wikipedia - ISTAT) and patent filings, and the ratio of the first over the latter:

Region Lombardia Lazio Veneto Emilia Romagna Piemonte Toscana Campania Sicilia Puglia Liguria Marche Friuli Venezia Giulia Trentino Alto Adige Calabria Sardegna Abruzzo Umbria Basilicata Molise Valle d'Aosta

GDP (bln. EUR) 302.1 154.5 133.6 128.3 114.4 96.4 86.6 76.5 64.5 40.2 37.2 33.0 31.3 29.8 29.8 26.4 19.3 9.6 5.6 4.2

Patent filings 1176 354 820 836 461 408 139 92 127 106 247 158 119 60 37 76 85 10 8 5

GDP/Filings (mln. EUR) 256.9 436.4 162.9 153.5 248.2 236.3 623.0 831.5 507.9 379.2 150.6 208.9 263.0 496.7 805.4 347.4 227.1 960.0 700.0 840.0

The ratio of GDP over patent filings cannot provide a satisfactory measure of the relationship between inventions and economic strength, as the overall income generated by a region (or country) consists of more than R&D achievements (although some patent enthusiasts would strongly disagree!). However, it may constitute a useful indicator of the potential for R&D growth in any given region. Regions with low ratios represent ideal models for other regions which struggle to achieve the same economic efficiency and to provide an equally favourable environment for inventors. 

The idea behind the use of the ratio of GDP over patent filings as an indicator of potential R&D growth is that, given the same economic and infrastructural conditions, the geographical distribution of companies investing in R&D should be relatively balanced within the whole territory of a given country. Thus, regions such as Sicilia (ratio of 831.5), Campania (623.0), Puglia (507.9), Calabria (496.7) and Lazio (436.4) could potentially enjoy a significant increase in R&D growth, and consequently in patent filings, if their economic and infrastructural environment improved towards the models of Marche (150.6), Emilia Romagna (153.5), Veneto (162.9) or Lombardia (256.9). This colourful map of Italy shows which regions enjoy the best and worst GDP/patent filings ratios, providing a more accurate overview of how the geographical distribution of patent filings correlates with the actual economies of Italian regions.

Correlation and causation are, of course, distinct matters. Researchers have frequently tried to read patent statistics in light of economic factors, and vice-versa - for example, studying their relationship with economic growth (Hu and Png here, IPKat's post on 2012 WIPO's statistics), sustainable development (Saini and Jain here), public debt (see the IPKat's Schweizer's Law). The multitude of variables involved in the analysis of the real economic impact of patent filings frequently prevents researchers from reaching definite conclusions, although it is apparent that some form of correlation, and possibly a reciprocal cause-and-effect relationship, indeed exists between certain economical indicators and patent statistics. Any reader who wishes to share his/her view on the relationship between GDP, economic growth and patent filings, including their geographical distribution in his/her country, is welcome to leave a comment, or to contact me, as I'm currently working on a more in-depth analysis of these issues (and I would be happy to get in touch with other researchers interested in joining forces to study correlations between real-world economies and patent filings). 

Patent Litigation in Europe: a portrait of the recent past

ZEW Discussion Paper No. 13-072, Patent Litigation in Europe, is now available online -- you can click here to access the 67-page pdf. The authors of this paper, which is packed with solid data, are the formidable team of Katrin Cremers, Max Ernicke, Fabian Gaessler, Dietmar Harhoff, Christian Helmers, Luke McDonagh, Paula Schliessler and Nicolas van Zeebroeck.

In the abstract, the authors write:

"We compare patent litigation cases across four European jurisdictions – Germany, France, the Netherlands, and the UK – covering cases filed during the period 2000- 2008. For our analysis, we assemble a new dataset that contains detailed information at the case, litigant, and patent level for patent cases filed at the major courts in the four jurisdictions. We find substantial differences across jurisdictions in terms of case loads. Courts in Germany hear by far the largest number of cases in absolute terms, but also when taking country size into account. We also find important between country differences in terms of outcomes, the share of cases that is appealed, as well as the characteristics of litigants and litigated patents. A considerable number of patents are litigated in multiple jurisdictions, but the majority of patents are subject to litigation only in one of the four jurisdictions".

Two of the authors -- Christian Helmers and Luke McDonagh -- are also the authors of "Patent litigation in the UK: an empirical survey 2000–2008", which is now available online to subscribers to the Journal of Intellectual Property Law & Practice (JIPLP): click here for the abstract.

This blogger is always excited to see the results of research conducted on real data rather than mere speculation.  His only regret is that we have had to wait until the tail-end of 2013 for this helpful analysis of the world of European patent litigation up to five years ago.  The major and highly successful reforms of the Patents County Court for England and Wales in October 2010 all happened far too late for inclusion. Let's hope that the authors of Patent Litigation in Europe are given the funds and the support to produce a sequel.

Proposed Troll-Fighting Reforms Would Pick Up Where AIA Left Off

This week, U.S. Representative Bob Goodlatte (R-Va) floated a discussion draft of a bill that would amend the U.S. Patent Act to make it more difficult for some NPEs (aka “patent trolls”) to use infringement litigation to terrorize companies. 

In 2011, Leahy-Smith American Invents Act (“AIA”) introduced some reforms, including tightened joinder rules and post-grant administrative patent challenges. Goodlatte’s proposed bill would make other, more far-reaching changes. Highlights include:

• A party asserting a claim for patent infringement would be required to plead the claim in exacting detail, including identifying each patent infringed, each claim infringed, the exact product or activity alleged to infringe each claim, the factual and legal basis for the allegation that each limitation of each claim is infringed by each product or process, the basis for any allegation of indirect infringement, a list of all lawsuits asserting each patent, and other information. In essence, the bill would require each pleading to contain a detailed claim chart for each claim and accused product or process. This would be an enormous change from current practice, which requires only notice pleading. See K-Tech Telecoms., Inc. v. DirecTV, 714 F.3d 1277, 1283-84 (Fed. Cir. 2013). The plaintiff also would be required to disclose in a filing with the USPTO all assignees, licensees, or entities with a financial interest in each patent.
• A defendant could request the court to add any “interested party” to the action by showing that the named claimant “has no substantial interest in the patent or patents at issue other than asserting” the patent in the lawsuit. An interested party could include any entity with a “direct financial interest” in an asserted patent, including a right to share in a damage recovery, but would not include law firms operating under a reasonable contingency fee arrangement.
• A fee-shifting provision would require the court to award a victorious party its costs and attorneys’ fees unless the court ruled that “the position of the nonprevailing party or parties was substantially justified or that special circumstances make an award unjust.” If a losing plaintiff could not pay such an award, the court could order an “interested party” to pay.
• Generally, discovery would be bifurcated, with discovery limited to claim construction issues until the district court issued a claim construction order.
• In some circumstances, an action alleging infringement against a customer using an accused product or process would be stayed to allow claims against the supplier of the accused products to proceed first.
• The bill would aim to implement practices developed by the Judicial Conference of the U.S. to control discovery costs, including procedures for controlling costs of e-discovery.
• Finally, the bill would make other changes to the Patent Act, including eliminating civil actions to obtain patents under 35 U.S.C. § 145, expanding the estoppel arising from post-grant review proceedings, and expanding the Covered Business Method Patent Review procedures.

A copy of the discussion draft, posted by the Electronic Frontier Foundation (which supports patent reform legislation) is HERE.

Standard setting organizations and F/RAND: 'if it ain't broke, don't fix it'. Or should you?

As of late, the role of standard setting organizations (SSOs) in preventing hold-up has been the focus of a lively debate. The IPR policies of SSOs commonly require members to disclose any standard essential patents they hold, and to commit to licensing them on fair, reasonable and non-discriminatory terms. The F/RAND commitment, however, is frequently described as vague and uncertain, and may be weakened by the SEP holder's recourse to injunctive relief against a willing licensee, during negotiations. The resolution of the uncertainty surrounding F/RAND usually requires a judicial determination, and a long and complex trial, while a preliminary injunction against a third party that is willing to enter into a licensing agreement may yield anti-competitive effects, or be incompatible with the F/RAND commitment.

Joshua Wright (left) at the FTC's swearing-in ceremony

To address both issues, three leading US and EU economists recently suggested that SSOs should introduce new provisions in their IPR policies, (i) implementing a fast and low-cost process to adjudicate F/RAND disputes (arbitration or another ADR mechanism), (ii) requiring SEP holders to specify an acceptable cash price for their essential technologies, and (iii) restricting the use of injunctions and exclusion orders. The use of IPR policies to prevent hold-up had already been advocated in previous studies (here and here), both to attain a better definition of F/RAND commitments (including their transferability in case of sale of a SEP), and to ensure a comprehensive and timely disclosure of essential technologies.

In a speech delivered on September 12, at the Center for the Protection of IP (George Mason University), FTC's Commissioner Joshua Wright discussed the opportunity of modifying the current IPR policies of standard setting organizations, but observed that there is no economical theory or empirical evidence that suggests that introducing stricter terms, or excluding the availability of injunctive relief, effectively prevents hold-up. To the contrary, these modifications could deter participation in SSOs, and possibly result in reverse hold-up. The Commissioner explained that:

Much of the call for SSO contract reform - whether under the guise of possible antitrust enforcement or friendly advice on contract drafting - is based upon the notion that SSOs bear a special responsibility for constraining the market power of SEP holders. Indeed, the possibility of SSOs constraining the exercise of SEP holders’ market power is purported to be the primary benefit of filling gaps in SSO contracts. However, it is unlikely SSO contract reform can bear the burden its proponents place upon it. [...] It is important to recognize that SSOs are not necessarily in a position to constrain license terms for SEPs at will. SSOs compete to attract key players to join and contribute their technology to the standard and can be at the mercy of certain members with essential technologies. However, even assuming arguendo SSO contract terms can constrain market power newly created by adoption of the standard, that situation is clearly not always the case. For some SEPs, the relevant market power will be inherent in the underlying technology and the patents themselves, rather than conferred upon the SEP holder by the SSO as the result of the standard-setting process.

Evaluating the potential consequences of the use of the IPR policies of SSOs to restrict the use of injunctive relief or provide a more accurate delimitation of F/RAND commitments, Wright added that:

Requiring stricter SSO terms might make it less attractive for IPR holders to join the SSO process. The social costs associated with deterring participation in SSOs can outweigh any potential benefits associated with decreasing the probability of hold-up. This would lead to, in the short-term, SSOs more frequently selecting an inferior technology; it could also lead to a dichotomy between competing technologies, which would defeat the purpose of SSOs and deprive consumers of the well-understood benefits of standardization. Over the long-run, these reforms could undermine the very desirable purpose of SSOs, which among other things, facilitate compatibility and interoperability, reduce consumer costs, and advance innovation.

Interestingly, the Commissioner argued that the use of 'less precise contract terms' is fundamental to guarantee the flexibility needed to adapt to quickly changing market conditions, and that the availability and threat of injunctions prevents reverse hold-up and is 'a very important part of the bargaining process and [...] likely part of the benefit of the bargain conceived of by a contributing member of the SSO at the time it decided to participate in the standard'. The Commissioner observed that (i) although rates negotiated under the threat of injunctions are likely to be higher than rates negotiated without the threat of injunction, it does not follow that the former is above F/RAND', (ii) property rights allow the owner to exclude all others, and (iii) no maxim of contract interpretation justifies the idea that, by accepting the F/RAND commitment, SEP holders acknowledged that damages are adequate compensation for infringement. These conclusions unexpectedly conflict with those of several courts and authorities around the world, including the FTC itself. To name just a few:

• the US Department of Justice and US Patent and Trademark Office's Policy Statement of 8 January 2013 ('[a] patent owner’s voluntary F/RAND commitments may also affect the appropriate choice of remedy for infringement of a valid and enforceable standards-essential patent. In some circumstances, the remedy of an injunction or exclusion order may be inconsistent with the public interest');
• the FTC's Statement on the Public Interest of 6 June 2012 ('a royalty negotiation that occurs under the threat of an exclusion order may be weighted heavily in favor of the patentee in a way that is in tension with the RAND commitment');
• the EU Commission's perspective, as expressed in Google/Motorola, and in the recent Statements of Objections notified to Samsung and Motorola (according to Commission Vice President Almunia, '[w]hen companies have contributed their patents to an industry standard and have made a commitment to license the patents in return for fair remuneration, then the use of injunctions against willing licensees can be anti-competitive');
• several US cases, including Apple v Motorola, Microsoft v Motorola, and Realtek Semiconductor v LSI (a F/RAND commitment 'implies a promise not to seek injunctive relief either domestically [...] or abroad').

In particular, the Commissioner's view rejects Judge Posner's persuasive statement in Apple v Motorola:

I don’t see how, given FRAND, I would be justified in enjoining Apple from infringing the ‘898 unless Apple refuses to pay a royalty that meets the FRAND requirement. By committing to license its patents on FRAND terms, Motorola committed to license the ‘898 to anyone willing to pay a FRAND royalty and thus implicitly acknowledged that a royalty is adequate compensation for a license to use that patent. How could it do otherwise? How could it be permitted to enjoin Apple from using an invention that it contends Apple must use if it wants to make a cell phone with UMTS telecommunications capability - without which it would not be a cell phone. 

Although Wright rightfully highlighted that there is no guarantee that improving IPR policies could provide beneficial effects, his reasoning on imprecise, but flexible F/RAND commitments, and on the importance of injunctions in the bargaining process, is likely to prove controversial (see Professor Cotter here). It is reasonable to think, however, that even Commissioner Wright would welcome the introduction of a fast and low-cost process to adjudicate F/RAND disputes, as suggested by US and EU economists, a solution that could protect the interests of both SEP holders and licensees. What do readers think? What is the best way to strengthen F/RAND commitments, while preserving the parties' freedom to negotiate?

New Documents in Nullity Appeal Instance - BGH Mischerbefestigung X ZR 36/12

After receipt of a negative preliminary opinion (§ 83 par. 1 PatG) of the senate, he plaintiff in the nullity suit 4 Ni 13/10 had extended the subject-matter under dispute and filed new documents D1  - D5 to support the alleged lack of patentability.

At trial, the senate disagreed with the interpretation of one of the documents (D1) and maintained the patent in the amended form as defended by the plaintiff.

A further  document D7 was submitted by the plaintiff in the appeal instance in order to provide further evidece for what was originally intended to be proven by the document D1 .

The new document was not admitted to the procedure by the BGH. The question arises whether the Bundespatengericht should have issued a further preliminary opinion under § 83 par. 1 PatG in order to give the plaintiff the possibility to suitably react on the adverse interpretation of the Bundespatentgericht and to eventually file the document in the 1st instance.

The BGH found that - under these circumstances - no procedural violation (§ 531 (2) Nr. 2 ZPO) justifying the submission of new evidence was comitted by not issuing a new communication with a written preliminary opinion on the (already late filed) documents D1 - D5 and that the mere adverse finding of the senate in the 1st instance does not as such justify the admission of new means of attack in the appeal instance. 

The decision emphasizes once more the importance to file the complete case at the onset in order to avoid the rejection of evidence as being late filed.

The full text decision (in German) can be accessed here. The 1st instance decision here.

Study Shows US Patent Cases Increasingly Concentrated In Just Two Courts

For some time, attorneys filing patent cases have opted to file their actions in a relatively limited subset of U.S. district courts. These filing decisions reflect a number of practical and tactical issues, including jurisdiction and venue requirements, convenience, anticipated success rate, and time to trial. For a discussion of some of these factors, see Mark Lemley’s excellent article, “Where to File Your Patent Case.”

It now appears, however, that the trend is becoming more acute. A new analysis of filing trends for 2013 shows that case filings are being concentrated in just two courts with alarming frequency. A report by James Pistorino at Perkins Coie compiling case filing statistics through September 10 shows that 45 percent of cases filed this year have been launched in the District of Delaware and the Eastern District of Texas. This appears to be a marked increase in the concentration of cases in those two courts, since from 2007 through 2010 those courts accounted for no more than 20 percent of all cases filed. The full Perkins Coie report is available here.

This trend will undoubtedly trigger concerns that because they will be deciding almost half of all U.S. patent cases at the trial court level, the ED Texas and Delaware may be able to exert a disproportional influence on the development of patent law in coming years. At least one commentator has expressed concern that this trend will benefit patentees, since it is also “subtly tilting the patent system against defendants, by giving some of the nation's most plaintiff-friendly judges a disproportionate role in deciding patent disputes.” See WaPo Comment HERE.

Patent litigation and stock market reactions: evidence from a recent study

© Rob Tannenbaum/Nasdaq

'Certain patents' is the title of an interesting article, published in the Yale Journal of Law & Technology and now available on SSRN, in which Alan C. Marco and Saurabh Vishnubhakat estimated and compared the market reactions to patent litigation decisions and to patent grants, analysing litigation data for the period 1977-1997. According to the abstract:

These estimates reveal that the resolution of legal uncertainty over patent validity and patent infringement is, on average, worth as much to a firm as is the initial grant of the patent right. Each is worth about 1.0-1.5% excess returns on investment. There are significant differences between such market reactions before and after the establishment in 1982 of the United States Court of Appeals for the Federal Circuit. There are also significant differences among the reactions of patent holders to resolved uncertainty depending on their litigation posture as plaintiffs or defendants. Interestingly, there is no similar effect for appellate decisions relative to trial decisions. The normative implications of these findings proceed, not from the magnitude of the quantitative results — which are statistically meaningful but modest — but rather from our illustration that uncertainty in the value of patent rights is quantifiable and so can be correlated with patentee and litigant behavior in developing patent policy.

The article provides one of the first comprehensive reviews of the effects of patent litigation on stock market valuations in the US. The data collected by the researchers corroborate the idea that the evaluation of plausible market reactions may play a significant role in determining the strategic choices made by firms involved in patent litigation. In this perspective, the authors noted that '[i]f valuable patents are subject to uncertainty about validity and infringement, then resolving that uncertainty is important to patent holders, and leaving such uncertainty unresolved reduces patent value as well as rewards to innovation'. These findings appear to lend weight to the hypothesis that agreements which seek to avoid or delay the resolution of legal uncertainty normally concern weak or less valuable patents. Although this correlation should be tested on a case by case basis, as taught by the US Supreme Court in the recent case of Federal Trade Commission v Actavis Inc. et Al., estimated stock market reactions could provide another useful factor to understand the objective, and assess the lawfulness, of such agreements.

The study still leaves many questions unanswered, in particular concerning the market reactions to settlements and non-final decisions, and the proportionality between market reactions and actual gains or losses determined by the outcome of litigation. Further, although other researches analysed some of these issues, there appears to be no comprehensive study of how market reactions evolved in the past few years. Recent evidence suggests that the sensitivity of the stock market to patent litigation may have significantly increased; correspondingly, the effects of market reactions on the firms' strategic choices may be higher than in the past. A recent example of this phenomenon is the market reaction to the presidential disapproval, on 3 August 2013, of the exclusion order issued by the ITC against several products manufactured by Apple, for infringement of a patent held by Samsung (see here and here): according to The Wall Street Journal, '[m]ore than $1 billion was wiped off Samsung's market value on Monday after the surprise veto' (approximately 0.6% of its current market cap). Similarly extreme market reactions may indeed play an increasingly important role in shaping the firms' behavior in patent litigation.

More on this topic? See the following studies:

- T.S. Raghu and others, 'Market reaction to patent infringement litigations in the information technology industry'

- M. Henry, 'The Market Effects of Patent Litigation'

- P. Schliessler, 'The Effect of Patent Litigation on Firm Performance – Evidence for Germany'

Provisional protection for patent applications: is it time to revisit this topic?

This morning's IPKat post, "New improved Dyson sucks up German infringements from London" (here), reflects on the fickle nature of litigants' attitudes towards bringing patent infringement proceedings in on jurisdiction in preference to another. In the case in point, Sir James Dyson appears to have opted to sue in England and Wales, whose courts he has previously subjected to scathing criticism. In this case it is may be that Sir James was motivated more by necessity than by a change of opinion -- but his decision has in any event generated some thought-provoking comments.

Two of the anonymous commentators raised the issue of provisional protection of rights in as-yet ungranted patents. This is an area in which there is no apparent harmonisation, yet it is also a topic concerning which it may be difficult to justify anything other than a single, blanket rule to cover the entire territory of the European Union.

What do readers think?

Accenture v Guidewire : another chapter in the saga of eligible subject matter

Following in the footsteps of Bilski, CLS Bank, and Ultramercial, another case on subject matter eligibility was decided by the US Court of Appeals for the Federal Circuit last Thursday. The court's opinion, delivered by Judge Lourie, and the dissenting opinion, filed by Chief Judge Rader, show that there is still significant disagreement on the rules to be applied when evaluating abstractness in light of the substantial limitations embedded in claims.

In 2007, Accenture sued Guidewire alleging infringement of US Patent 7,013,284, which describes a computer program for handling insurance related tasks, comprising several software components for storing and manipulating data, enabling their transmission and receipt, and managing program events. In particular, claim 1 discloses a system for generating and assigning the tasks to be performed in an insurance organisation when a specific event happens, and claim 8 describes a method that has the same objective and employs many of the same software components.

The defendant argued that Accenture's patent embodied abstract ideas which failed the machine-or-transformation test. The District Court for the District of Delaware agreed, finding that the patent was 'directed to concepts for organizing data rather than to specific devices or systems, and [that] limiting the claims to the insurance industry does not specify the claims sufficiently to allow for their survival'. The court found that method claim 8 was patent-ineligible, as the limitations contained therein did not restrict it to a concrete application of the abstract idea. Consequently, it held that system claim 1, which closely resembled claim 8, was equally patent-ineligible.

On appeal, Accenture challenged the District Court's conclusions on system claims 1-7, but did not appeal the findings concerning claim 8 and the related method claims. The Federal Circuit affirmed the District Court's decision. 

The majority first noted that, in order to evaluate abstractness, it is necessary to determine whether a claim preempts an abstract idea. To this aim, under Ultramercial's two-step process, the court should identify the fundamental concept wrapped up in the claim, and assess whether there are substantive limitations which restrict it to an application, in such a way that it does not cover the full abstract idea. 

The court recalled CLS Bank, explaining that '[a]lthough CLS Bank issued as a plurality opinion, in that case a majority of the court held that system claims that closely track method claims and are grounded by the same meaningful limitations will generally rise and fall together'. The judges analysed the limitations contained in system claim 1 and method claim 8, finding that they required performance of the same basic process, and contained only minor differences in terminology, to the effect that both claims 'should rise or fall together'. Accordingly, in light of the District Court's unchallenged findings of invalidity on method claim 8, the court affirmed the patent-ineligibility of all system claims. 

The decision also found that the system claims were ineligible for patenting irrespective of the status of the method claims. The majority argued that system claim 1 referred to an abstract concept ('generating tasks [based on] rules...to be completed upon the occurrence of an event'), providing only two limitations: its application in a computer environment and within the insurance industry. These limitations, according to the court, were insufficient to avoid preempting the abstract idea of system claim 1. Citing Bancorp, the judgment clarified that 'the complexity of the implementing software or the level of detail in the specification does not transform a claim reciting only an abstract concept into a patent-eligible system or method'.

In his dissenting opinion, Judge Rader questioned the majority's reliance on CLS Bank ('no part of CLS Bank, including the plurality opinion, carries the weight of precedent'), and contested its application, noting that both CLS Bank and Ultramercial actually endorsed the evaluation of eligible subject matter on a claim-by-claim basis. Further, Judge Rader argued that the system described in the patent 'does not preempt anything beyond the specific claims, let alone a broad and undefined concept', observing that it would be possible to rely on various non-infringing methods to generate tasks based on rules to be completed upon the occurrence of an event. Concluding his dissenting opinion, the judge touched the heart of the issue that the Federal Circuit hasn't still settled:

In conclusion, I note that prior to granting en banc review in CLS Bank, this court commented: “no one understands what makes an idea abstract.” [CLS Bank Int’l v. Alice Corp.] After CLS Bank, nothing has changed. “Our opinions spend page after page revisiting our cases and those of the Supreme Court, and still we continue to disagree vigorously over what is or is not patentable subject matter.” [MySpace, Inc. v. GraphOn Corp.] Indeed, deciding what makes an idea “abstract” is “reminiscent of the oenologists trying to describe a new wine.” [MySpace, Inc. v. GraphOn Corp.] 

Draft Rules of Procedure for UPC: a helpful publication

Unified Patent Court - Draft Rules of Procedure is a 306-page handbook, which includes the Agreement in the three official languages of English, French and German.

The Rules in question are those found in the (original English language) 15th Draft of the Rules of Procedure, an unofficial French version of which has been prepared by Véron & Associés and is available at www.upc.documents.eu.com

The recent Commission’s proposal for a Regulation amending Regulation 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I) 26.7.2013, COM(2013) 554 final 2013/0268 (COD) is also available on this website.

For a direct link to the handbook, click here.

A German version of the Draft Rules is being prepared by the law firm Reimann Osterrieth Köhler Haft and should be available in October. A third firm, the UK's Powell Gilbert, is also named in this venture. Pierre Véron adds that the firms are still working to facilitate simpler navigation in the document through the use of bookmarks, hyperlinks, etc., and that improved versions will be posted from time to time on www.upc.documents.eu.com.

When a party is unrepresented at a hearing and witnesses don't appear

Coupling Technology Ltd v Coupling Solutions LLC BL O/342/13, a 23 August 2013 decision of Mr A. C. Howard in the UK Intellectual Property Office, takes a look at the problem of dealing with evidence in a dispute relating to entitlement to two patent applications for couplings for the use in connecting pipes, where the defendant stated that it would not be represented at the oral hearing, nor would it be bringing its witnesses for cross-examination.

There was no obligation on the part of the hearing officer to strike out the defendant's evidence, but what should he do?  He reasoned as follows.  Since the defendant had chosen not to avail himself of the opportunity to cross-examine the claimant's witnesses, the evidence of those witnesses would be treated as uncontested.  In contrast, while the evidence of the defendant's witnesses would not be disregarded, it would be given little weight. Where there existed any conflict between the defendant's and the claimant’s evidence, the latter would be allowed to prevail unless this course led to the hearing officer reaching an absurd or totally implausible conclusion.

Patent litigation and implications of EU federalisation: more study needed

"The European Unified Patent Court: Assessment and Implications of the Federalisation of the Patent System in Europe" is the title of an article by Dimitris Xenos (Lecturer in Public Law and Intellectual Property Law, School of Law and Social Sciences, University of East London), which has just been published in the latest issue of the excellent online peer-reviewed IP/IT journal SCRIPTed.

The subject of the article is easily guessed from its descriptive title, which indicates that it will be of great interest to readers of this weblog -- but its content is not, with the author calling for far more rigorous and methodologically sound studies on the likely impact of the new system, given that the issues involved are so complex and cannot easily be understood by non-experts, nor even by the patent profession itself. It's worth taking a look at the author' conclusions, quoted in relevant part here:

"... Unlike the federal model of the US which the UPC tries to imitate, the European states do not form a federation. As a result, there cannot be a uniform economic policy that will influence the setting of the legal standards of patents, because the economic and technological needs and capacities of the European countries vary considerably. Another important difference is that the UPC will create a centralised institution that escapes the democratic control of the people on whom the legal standards will be imposed. Indeed, a new form of monopolistic source of legal power will be established that has no precedent in the world’s democratic political history.

... To the extent that the UPC replaces the national courts in the legal disputes relating to patents with unitary effect, the determination of patents as objects of property and the distribution of justice will mainly be made by this new source of legal power. ...[C]rucial issues of property rights and the underlying economic sustainability policies on which the future and well-being of a country depends will be decided by a body of foreign judges.

... For the large body of SMEs which do not have patents, or patents of strong market relevance, the situation can be illustrated as follows: Under the current regime when a foreign company sues a SME that is based in the UK, the case will be tried in the UK courts and in the English language. Under the UPC, the UK SME might stand as a defendant in a litigation that takes place abroad, in another language and in various judicial forums. The same applies to the majority of SMEs in other EU countries. More seriously, the legal principles against which the case will be examined will no longer by influenced by the adjusting ability of national courts.

In short, the issue of surrendering an important element of national sovereignty that concerns vital economic policies and property rights requires a comprehensive economic study about the effect that the UPC will have on local business and economy. Irrespective of whether or not the UPC is challenged in national courts (e.g. the state’s sovereign ability to determine property rights; the right to fair trial regarding the language issue in patent litigation, etc), or there is a constitutional obligation for a referendum (e.g. Ireland, Denmark), non-expert politicians and lay people cannot rely solely on an outdated study which was of limited scope that the EU Commission has presented to the states nor can they rely solely on the advice of the patent profession which benefits most from the considerable expansion of its business activities. Since the very important issue of national sovereignty in the context of patents is at stake, comprehensive and thorough national economic studies must be prepared in order for the decision-makers to make an informed choice, and the people, who will ultimately come to evaluate this choice, to be able to understand the various parameters involved".

It's okay for the US -- but how do you calculate lost profit in the Lost Continent?

Calculating Lost Profit in IP and Patent Infringement Cases by Nancy J. Fannon and published by Business Valuation Resources, LLC, reflects the advantages offered to prospective US litigants when the likelihood of infringement litigation and the assessment of the relative advantages of suit or settlement are concerned.  As the book's web-blurb explains:

"In this one-stop resource you’ll find a comprehensive overview of strategies, analysis, case studies, and legal insight to help you calculate and recover the maximum lost profits incurred due to patent infringement. Nowhere else will you find such a complete and thorough analysis of current case law and the valuation methods that form the basis of damage awards in IP and patent infringement cases.

... you’ll learn the accepted methods and procedures from financial experts and insight into legal issues from top IP attorneys. This includes a summary of applicable rules of civil procedures and evidence, and continually expanding case law that interprets what prior courts have deemed as acceptable evidence for lost profit claims. You’ll also learn what the courts have rejected and details explaining the reason for the rejection".

The European Union, with a market of not far short of twice as many consumers and with a history of patents that is certainly more than twice as long as that of the United States, has no comparable publication. The EU's Intellectual Property Enforcement Directive, Directive 2004/48, has been in force in EU Member States for only around seven and a half years and has virtually no patent-specific case law or interpretation to flesh it out. There are simply no insights to be had.  An EU version of this work should be started immediately, while there is so little data to analyse and material to work on; that way, it can grow as decisions proliferatedand methodologies relating to lost profits mature.

Further details of Calculating Lost Profit in IP and Patent Infringement Cases can be accessed here.