Wednesday, 23 September 2020

Guest Post: Professor Denoncourt's Event Report -- Intellectual property: meeting global business and technology challenges

IP Finance is very happy to offer our readers this guest post by Nottingham Law School professor Janice Denoncourt summarizing the high points of a Montreal Council on Foreign Relations event featuring Francis Gurry, outgoing Director General of WIPO.  

On 15 September 2020 the Montreal Council on Foreign Relations (CORIM) organised a fascinating 30 minute webinar with Francis Gurry, Director General, WIPO.  The event is part of CORIM’s Business Series Online accessible for a small fee of CAD $30.  “Who will finance Innovation?”  is the strapline of WIPO’s Global Innovation Index 2020  Canada currently ranks 17th overall behind Japan and Ireland, retaining its position from last year, but well out of the top 10 where it aspires to be.

From Geneva, Gurry discussed emerging global business and technology challenges with moderator, Lally Rementilla.  Lally is well-known in the Canadian intellectual property (IP) backed finance world.  In July 2020 she was appointed Managing Partner, IP-Backed-Finance for BDC Capital (      

By way of background, the Business Development Bank for Canada (BDC, French: Banque de Développement du Canada) is Canada’s bank for entrepreneurs.  It is wholly owned by the Government of Canada.    Jérôme Nycz, executive vice president at BDC Capital stated, “Our goal…is to make Canada a leader in the IP space.”  BDC Capital, the bank’s investment arm, has created a new CAD $160 million intellectual property (IP) development financing fund to support IP-rich companies who seek to commercialize their IP, increase their competitiveness and expand globally.  This BDC’s IP finance initiative is a positive reflection on Canada’s comprehensive 2018 National IP Strategy

The pair discussed several broad topics and set out below are the highlights.  

Rementilla asked for Gurry’s perspective on the role of IP rights in the new world order.  Gurry noted that a number of tendencies have been accelerated by Covid-19 virus and pandemic, not to mention worrisome trade wars and cyberwarfare, resulting in further complexity in the IP world.  Nevertheless, despite the gloom and doom ‘IP is a vector for collaboration’ said Gurry.  Indeed, 2.1% of the world’s global gross domestic product (GDP) is tied to research and development.  Gurry hopes that despite the decline in foreign direct investment, international collaboration in innovation will continue.  He cited the example of innovation hotspot Silicon Valley, where the majority of inventors are foreign.  

A key geopolitical change of course is the rise of Asia and in particular the People’s Republic of China (PRC) as a patent powerhouse.  Gurry noted that the PRC is buoyed by its national focus on IP leading to it overtaking the United States in filing patents overseas.  Indeed, I would add that the PRC announced earlier this year that it is preparing the outline for its second National IP strategy for the 2021-2013 period.  According to Gurry, a successful national IP strategy involves a focus ‘from the top’ on science, technology and innovation and further that ‘success comes when there is an awareness at the very top of the importance of protecting a nation’s competition advantage’. 

Turning to finance for IP-rich tech start-ups, Gurry surmised that ‘With a start-up you are basically backing an intangible asset’.  Further, as author of Intellectual Property, Finance and Corporate Governance (2018) I was delighted to hear that Gurry supports re-thinking the gaps in traditional accounting to better support valuation intangible IP rights.  In December 2019, I had the pleasure of attending a meeting with the BDC’s C-suite in Montreal alongside Lally and other IP experts.  I shared my views and IP in the boardroom research to raise awareness of the potential of IP-backed financing, which has now come to fruition.  

Gurry acknowledges that there are changing perceptions about IP rights.  However, he cautioned that the alternative, a scenario where no one uses IP rights, could lead to a lack of transparency.  The publication of patent information is ‘the most systematic record of humanity’s technology’, he said.   

In response to Professor Isolde Gendreau’s (Université de Montreal, Faculté de Droit) question regarding the potential for supra-national enforcement of IP rights, Gurry recognized that counterfeiting and piracy are now global issues.  These behaviors affect both developed and developing countries alike and require a global response.  Thus, WIPO’s focus is on ‘building respect for IP rights, rather than putting teenagers in jail’.  WIPO will look to ‘build capacity to take action internationally’. 

The CORIM webinar, ‘Intellectual property: meeting global business and technology challenges’ may have flown under the radar for many outside Canada.  However, it is a timely reminder of Gurry’s wisdom and contribution to the global IP landscape as WIPO’s Director-General since 2008.  His term will end this month. Join me in wishing him every success in the future. 

Dr Janice Denoncourt

Associate Professor

Nottingham Law School

Nottingham Trent University

Wednesday, 16 September 2020

Curing contagion and harm from previous changes in IP policy and law for SEP licensing

Following IEEE’s purported “clarification” and “update” of its Patent Policy in 2015, with a non-objecting Business Review Letter from the U.S. Department of Justice at that time, the Department has now “supplement[ed], update[d] and amend[ed]” its 2015 BRL with a new BRL.

The Department complains in its new BRL that its 2015 BRL was “frequently and incorrectly” cited as “an endorsement of the IEEE Policy.” The new BRL emphatically and with mettle renounces Standard Setting Organization patent policy changes that were proposed by the former head of the Department’s Antitrust Division, Assistant Attorney General, Renate Hesse, together with those that were detailed in IEEE’s 2015 Patent Policy.

This Patent Policy change was damaging to IP owners and their incentives to contribute to the standard setting and development process. Misinterpretation of the BRL, including by foreign authorities, has resulted in harmful policy developments and legal overreach in Standard-Essential Patent disputes.

As also requested by the Department most recently, it is about time IEEE re-reconsidered its Patent Policy given adverse developments at this SSO and with changes in US law and policy with respect to SEPs since 2015.

A low watermark for developers and contributors of SEPs

The former AAG, publicly beckoned SSOs to weaken patent owners’ rights with her disregard for considerations of patent “hold out.” In a 2012 speech entitled Six “Small” Proposals for SSOs Before Lunch she suggested that SSOs include terms in patent policies that make injunctions harder to obtain, restrict cross-licensing and “explore setting guidelines for what constitutes a F/RAND rate.” She also encouraged SSOs to overcome any concerns they might have about antitrust actions against their revised patent policies by “seek[ing] ex ante review through [the Department’s] business review procedures.” This was presumably to reassure any SSOs that might adopt her proposals would not find adverse antitrust actions being formulated against them subsequently.

A couple of years later, IEEE-SA (responsible for the 802.11 WiFi standard among many others) changed its Patent Policy in 2015, touting it as “clarification” and an ”update,” but it actually set out various wholly new terms that are restrictive and harmful to patent owners. In the face of significant resistance by IEEE members who were technology contributors, and via a highly controversial and secretive process, the new patent policy significantly restricted flexibility in the Reasonable and Non-Discriminatory commitment with the following conditions:
  • SEP holders must waive their rights to seek any injunctions until they have successfully-litigated claims against unlicensed implementers to conclusion in a court of appeals;
  • Reciprocal cross-licensing cannot be required, except for patents reading on the same standard;
  • Royalty charges “should” be calculated based on the “smallest saleable” implementation of any portion of the standard and comport with a reasonable aggregate royalty burden of the relevant standard; and
  • Only licenses for which SEP holders have relinquished the right to seek, enforce, or even threaten, an injunction can qualify as “comparable licenses” for determining RAND royalties.

The Patent Policy “update” also obliged patent holders to be bound by the IEEE RAND commitment to license their patent to any “Compliant Implementation,” meaning that a patent holder making such a commitment cannot opt to license its patents for using the IEEE standards at only certain levels of production (e.g. entire end product device, as opposed to chip or module).

The cause’s harmful effects

Following my in-depth empirical analysis on the effects of this patent policy change, published in September 2017—which showed that the standardization process was being jeopardized given the widespread unwillingness of technology developers to pledge their patents to the new Patent Policy—in a review of IP policy developments in December 2017 I also wrote:

“[Assistant Attorney General Makan Delrahim], the new head of the US DoJ antitrust division is reinforcing a trend that shifts the balance between IP rights and antitrust restrictions.[1] But significant harm has already also been done internationally with contagion from prospective or actual policy positions that were previously more hostile or equivocal on IP owners’ rights. For example, some Asian antitrust agencies have welcomed, for reasons of industrial or protectionist policy, previous attempts in the ‘West’ to weaken rights of SEP owners. Actions have included seeking to reduce royalty returns, imposing chip-based licensing and reducing the availability of injunctions. Getting the Asian authorities also to reverse their positions in IP policy, for example, on antitrust enforcement, is a daunting task.”

I, among various others, unwittingly, incorrectly, yet unsurprisingly misinterpreted the extent of what the Department had stated in its 2015 BRL. This BRL purported a patent “hold up” problem that the "Update" to IEEE’s Patent Policy “may further help to mitigate.” And it was a cunning sleight of hand by the former AAG to propose more in her aforementioned speech than could be legally defended as “endorsed” by the Department’s BRL.

The new BRL clarifies and underlines the Department’s position by stating that “[b]ased on our analysis in 2015, we indicated there was no intention at that time to challenge the proposed policy—nothing more. Any representation by IEEE—or other stakeholders, government enforcers, or commentators—that the Department has endorsed the Policy is wrong, causes confusion, and must stop.” (all BRL citations omitted here and elsewhere.) So, while I argued from the outset against such a Patent Policy change—given the adverse effects it would have on patent holders, the standard development process and how it would contaminate policy making and licensing enforcement abroad—with my perceptions prejudiced by separate public statements from the former AAG and from analysis in the 2015 BRL, I also incorrectly inferred at least an implicit “endorsement” of the Patent Policy change by the Department in its issuance of the 2015 BRL:

Curing and reversing the contagion

The detrimental effect of the patent policy change and supporting BRL is possibly even more severe outside of IEEE standards in some jurisdictions. The 2015 IEEE patent policy change, endorsed by a BRL from the previous DoJ antitrust head, is dangerously serving as a template for antitrust enforcers worldwide – not only with respect to IEEE standards, but also for other standards such as 3GPP’s mobile communications standards. This is like pushing at an open door in nations where antitrust enforcement is being used as an instrument of industrial or protectionist policy to support manufacturing-oriented companies who would like to pay less for the IP they are reliant upon that is developed in other nations, significantly including the US and Europe.

Contributing technology to standardisation efforts and making a FRAND commitment is voluntary. If antitrust agencies construe IEEE’s patent policy as only a “clarification,” and therefore impose it on holders of SEPs to various [SSO’s] standards the effects could be severe. They might bind patent holders to new conditions that they were never willing and never agreed to accept— for IEEE standards and for other standards. The latter would include standards such as 3GPP’s where some technology developers’ business models, development of standards and their success are much more dependent on payment of royalties than with IEEE standards. 3GPP standards account for much more in total royalties than IEEE standards. Delrahim rightly states that “[w]e should not transform commitments to license on FRAND terms into a compulsory licensing scheme.”

Antitrust agencies including NDRC (China), KFTC (Korea) and TFTC (Taiwan), as well as many other organisations and individuals have been swayed by or receptive to policy positions of US and European government agencies that were against or ambivalent about upholding patent rights in interoperability technology standards including those of many [SSOs] including IEEE, 3GPP (including regional partners such as ETSI).’

The new BRL also notes that:

“the misinterpretation of the 2015 Letter appears to extend around the world and may have influenced foreign enforcement activity. Over the last several years, some foreign competition authorities have misapplied the 2015 Letter in support of enforcement actions against essential patent holders that have no basis under U.S law, raising the prospect that the business review process could be subject to intentional manipulation abroad. For instance, in 2017 a major economy’s competition agency claimed the Department expressed support for IEEE’s injunctive relief provisions in connection with a liability decision penalizing an essential patent owner. And, more recently, a policy report authored for another jurisdiction incorrectly characterized the 2015 Letter and other Department letters as “soft precedent” to guide SSOs in designing IPR policies. 

IEEE’s advocacy may have informed the broad misinterpretation of the 2015 Letter and led to mistaken reliance on it as guidance for foreign enforcement activity. The potential negative impact to global enforcement policy from such a misunderstanding is extensive, commensurate with the wide proliferation of antitrust agencies around the world and the scope of remedies sometimes sought by jurisdictions.”

However, I also noted in 2017 that IEEE remained alone in unfairly manipulating its patent policy to the detriment of patent owners, with other [SSOs] resisting such harmful change:

‘Except for IEEE, [SSOs] have reaffirmed longstanding IP policies that uphold the rights of patent owners. For example, major European [SSOs] CEN and CENELEC state that [SSOs] should not provide guidance on, or impose compliance with, FRAND pricing, valuation, and rate-setting methodologies, and they “firmly believe that pricing should be determined by patent holders and implementers outside of SSOs in the context of bilateral negotiations.”’


Recent developments in policy and law indicate that the undermining of fundamental patent rights and fixed, formulaic prescriptions for determining royalties outside and inside of court are out of favour

In its attempts to limit damage and effect reversal in the direction of policy change, the new BRL states that “[t]he Department urges IEEE to ensure that neither it nor its members characterize the 2015 Letter as an endorsement of IEEE’s Policy.” And it indicates “the Department’s concern about mischaracterization of the Letter is also animated in large part by recent changes to US law and policy that render aspects of the 2015 Letter inaccurate.” Therefore, “[t]he Policy limits the basket of rights available to an essential patent owner such that it may undercut current US law and policy.”

The Department highlights in its new BRL:
  • “serious harm to innovation that could arise from limiting injunctive relief.” This is because “injunctive relief is a critical enforcement mechanism and bargaining tool—subject to traditional principles of equity —that may allow a patent holder (including an essential patent holder) to obtain the appropriate value for its invention when a licensee is unwilling to negotiate reasonable terms.”
  • “key risk in relying solely on the smallest saleable unit method, to the exclusion of others, is that real-world licenses often set royalties based on end-product revenue. Parties should not be discouraged from relying on these licenses—particularly since this sort of market-based evidence is often “the most effective method of estimating [an] asserted patent’s value.”

The heart of the matter

A major policy contention over many years is the extent to which efficient FRAND licensing can be disrupted, unfairly distorted or prevented by patent “hold up” by patent owners seeking excessive royalties or by patent “hold out" by implementers seeking sub-FRAND royalties, or to delay payment or avoid it altogether. According to the new BRL, ‘The 2015 Letter focused on the risk of so-called “hold up” by patent-holders without considering the possibility of “hold out” by patent implementers or the Policy’s effect on patent holders’ innovation incentives.’ It also states that ‘The 2015 Letter has proven incorrect, however, in anticipating that “hold-up” would be a competitive problem. Rather, concerns over hold-up as a real-world competition problem have largely dissipated.’ The Department notes that “studies and analyses conducted in the intervening years about hold out have confirmed that these are serious concerns, as well.” In my analysis and opinion, while purported concerns about patent “hold up” have never been factually substantiated, patent “hold out” is a pervasive problem. Accordingly, ‘The Department since has recognized that “[c]ondemning [hold up], in isolation, as an antitrust violation, while ignoring equal incentives of implementers to ‘hold out,’ risks creating ‘false positive’ errors of over-enforcement that would discourage valuable innovation.”’

The Department now urges SSOs “to promote balanced representation in decisional bodies so that diverse interests are represented and [SSO] decisions do not shift bargaining leverage in favor of one set of economic interests, including the interests of either implementers or patent holders.”

Making amends

The new BRL seeks to limit the damage caused at home and abroad by remarks made by the previous AAG, by what was described in the 2015 BRL and by what was incorrectly inferred to be Department policy at that time. While absence of evidence in support of patent “hold up” theory would have made it indefensible for the Department to “endorse” IEEE’s 2015 patent policy with advocacy in the 2015 BRL, non-objection to that patent policy in that BRL and these other statements have had adverse effects at home and abroad. While the new BRL will help arrest and reverse harmful change beyond IEEE in the US and elsewhere, I will watch with interest to what effect this and other recent developments in law and policy might have on patent policy at IEEE.

[1] The new trend was already being set by other actions including: (i) dissenting statements of US FTC Commissioner Maureen Ohlhausen in the matters of (a) Robert Bosch, (b) Motorola Mobility and Google and (c) Qualcomm; (ii) the CJEU’s judgement in Huawei v ZTE establishing obligations applying to both sides of an SEP-licensing agreement. The European court also stated that the FRAND commitment “cannot negate the substance of the rights guaranteed to the proprietors by Art. 17(2) of the European Charter of Fundamental Rights.”

Friday, 4 September 2020

Big Win for Qualcomm in the Ninth Circuit

 In a big win for Qualcomm, the Ninth Circuit Court of Appeals (Judge Callahan writing the opinion), in FTC v. Qualcomm, __ F.3d __ (9th Cir. August 11, 2020), found that Qualcomm had not violated competition law based on licensing practices, including refusal to deal and FRAND practices.  Notably, the Ninth Circuit overturned the District Court’s “permanent, worldwide injunction prohibiting Qualcomm’s core business practices.”  The District Court made five major findings:

1) Qualcomm's “no license, no chips” policy amounts to “anticompetitive conduct against OEMs” and an “anticompetitive practice[ ] in patent license negotiations”; (2) Qualcomm's refusal to license rival chipmakers violates both its FRAND commitments and an antitrust duty to deal under § 2 of the Sherman Act; (3) Qualcomm's “exclusive deals” with Apple “foreclosed a ‘substantial share’ of the modem chip market” in violation of both Sherman Act provisions; (4) Qualcomm's royalty rates are “unreasonably high” because they are improperly based on its market share and handset price instead of the value of its patents; and (5) Qualcomm's royalties, in conjunction with its “no license, no chips” policy, “impose an artificial and anticompetitive surcharge” on its rivals’ sales, “increas[ing] the effective price of rivals’ modem chips” and resulting in anticompetitive exclusivity.

One important problem with the District Court’s analysis, according to the Ninth Circuit, was the District Court’s failure “to distinguish between Qualcomm’s licensing practices (which primarily impacted OEMs) and its practices relating to modem chip sales (the relevant antitrust market).”  The Ninth Circuit rejected the District Court’s reliance on the Aspen exception to the general concept that refusals to deal are not antitrust violations and quoted a prior case: “’Competitors are not required to engage in a lovefest.’”  The Ninth Circuit also found that Qualcomm’s conduct in breaching its SSO agreements did not arise to an antitrust violation.  Notably, the Ninth Circuit stated:

Finally, we note the persuasive policy arguments of several academics and practitioners with significant experience in SSOs, FRAND, and antitrust enforcement, who have expressed caution about using the antitrust laws to remedy what are essentially contractual disputes between private parties engaged in the pursuit of technological innovation. The Honorable Paul R. Michel, retired Chief Judge of the Court of Appeals for the Federal Circuit, argues that it would be a mistake to use “the hammer of antitrust law ... to resolve FRAND disputes when more precise scalpels of contract and patent law are effective.” Amicus Curiae Br. of The Honorable Paul R. Michel (Ret.) at 23. Judge Michel notes that “[w]hile antitrust policy has its place as a policy lever to enhance market competition, the rules of contract and patent law are better equipped to handle commercial disputes between the world's most sophisticated companies about FRAND agreements.” Id. at 24. Echoing this sentiment, a former FTC Commissioner, Joshua Wright, argues that “the antitrust laws are not well suited to govern contract disputes between private parties in light of remedies available under contract or patent law,” and that “imposing antitrust remedies in pure contract disputes can have harmful effects in terms of dampening incentives to participate in standard-setting bodies and to commercialize innovation.” Wright, supra note 1, at 808–09.

The Ninth Circuit rejected the District Court’s determination that Qualcomm engaged in anticompetitive conduct by charging “unreasonably high royalty rates” among other things.  The Ninth Circuit stated:

We hold that the district court's “anticompetitive surcharge” theory fails to state a cogent theory of anticompetitive harm. Instead, it is premised on a misunderstanding of Federal Circuit law pertaining to the calculation of patent damages, it incorrectly conflates antitrust liability and patent law liability, and it improperly considers “anticompetitive harms to OEMs” that fall outside the relevant antitrust markets. Furthermore, even if we were to accept the district court's conclusion that Qualcomm's royalty rates are unreasonable, we conclude that the district court's surcharging theory still fails as a matter of law and logic.

On the Federal Circuit’s damages law, the Ninth Circuit states:

Even if we accept that the modem chip in a cellphone is the cellphone's SSPPU, the district court's analysis is still fundamentally flawed. No court has held that the SSPPU concept is a per se rule for “reasonable royalty” calculations; instead, the concept is used as a tool in jury cases to minimize potential jury confusion when the jury is weighing complex expert testimony about patent damages. See Ericsson, 773 F.3d at 1226(explaining that the SSPPU concept is a flexible evidentiary tool, not an unyielding substantive element of patent damages law); VirnetX, Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1327–28 (Fed. Cir. 2014) (same); LaserDynamics, 694 F.3d at 68 (same). As this case involved a bench trial, the potential for jury confusion was absent.

Moreover, the Federal Circuit rejected the premise of the district court's determination: that the SSPPU concept is required when calculating patent damages. See Commonwealth Sci. & Indus. Research Org. v. Cisco Sys., Inc., 809 F.3d 1295, 1303 (Fed. Cir. 2015) (“The rule Cisco advances—which would require all damages models to begin with the [SSPPU]—is untenable [and] conflicts with our prior approvals of a methodology that values the asserted patent based on comparable licenses.”) (citations omitted). The Federal Circuit has also observed that “ ‘[s]ophisticated parties routinely enter into license agreements that base the value of the patented inventions as a percentage of the commercial products’ sales price,’ and thus ‘[t]here is nothing inherently wrong with using the market value of the entire product.’ ” Exmark Mfg. Co. Inc. v. Briggs & Stratton Power Prods. Grp., LLC, 879 F.3d 1332, 1349 (Fed. Cir. 2018) (some alterations in original) (quoting Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1339 (Fed. Cir. 2009)). These statements of law and current practice run counter to the district court's conclusion that patent royalties cannot be based on total handset price and that doing so exposes a firm to potential antitrust liability.

On Qualcomm’s “no license, no chips” policy, the Ninth Circuit stated:

This is not to say that Qualcomm's “no license, no chips” policy is not “unique in the industry” (it is), or that the policy is not designed to maximize Qualcomm's profits (Qualcomm has admitted as much). But profit-seeking behavior alone is insufficient to establish antitrust liability. As the Supreme Court stated in Trinko, the opportunity to charge monopoly prices “is an important element of the free-market system” and “is what attracts ‘business acumen’ in the first place; it induces risk taking that produces innovation and economic growth.” Trinko, 540 U.S. at 407, 124 S.Ct. 872. The record suggests that this case is more like Am. Express, where a company's novel business practice at first appeared to be anticompetitive, but in fact was disruptive in a manner that was beneficial to consumers in the long run because it forced rival credit card companies to adapt and innovate. 138 S. Ct. at 2290. Similarly here, companies like Nokia and Ericsson are now “[f]ollowing Qualcomm's lead” with respect to OEM-level licensing, and beginning in 2015 rival chipmakers began to successfully compete against Qualcomm in the modem chip markets. We decline to ascribe antitrust liability in these dynamic and rapidly changing technology markets without clearer proof of anticompetitive effect.

On the alleged anticompetitive nature of Qualcomm’s dealings with Apple, the Ninth Circuit stated:

Even if we were to agree with the district court that the Apple agreements were exclusive dealing contracts that substantially foreclosed competition in the relevant antitrust markets, it is undisputed that these agreements do not pose any current or future threat of anticompetitive harm. Despite the “clawback provisions,” Apple itself terminated the agreements in 2015—two years before the FTC filed its action. Thus, while we agree with the district court that these were structured more like exclusive dealing contracts than volume discount contracts, they do not warrant the issuance of an injunction.

Finally, the Ninth Circuit nicely sums up its reasoning and approach:

Anticompetitive behavior is illegal under federal antitrust law. Hypercompetitive behavior is not. Qualcomm has exercised market dominance in the 3G and 4G cellular modem chip markets for many years, and its business practices have played a powerful and disruptive role in those markets, as well as in the broader cellular services and technology markets. The company has asserted its economic muscle “with vigor, imagination, devotion, and ingenuity.” Topco Assocs., 405 U.S. at 610, 92 S.Ct. 1126. It has also “acted with sharp elbows—as businesses often do.” Tension Envelope Corp. v. JBM Envelope Co., 876 F.3d 1112, 1122 (8th Cir. 2017). Our job is not to condone or punish Qualcomm for its success, but rather to assess whether the FTC has met its burden under the rule of reason to show that Qualcomm's practices have crossed the line to “conduct which unfairly tends to destroy competition itself.” Spectrum Sports, 506 U.S. at 458, 113 S.Ct. 884. We conclude that the FTC has not met its burden.

First, Qualcomm's practice of licensing its SEPs exclusively at the OEM level does not amount to anticompetitive conduct in violation of § 2, as Qualcomm is under no antitrust duty to license rival chip suppliers. To the extent Qualcomm has breached any of its FRAND commitments, a conclusion we need not and do not reach, the remedy for such a breach lies in contract and patent law. Second, Qualcomm's patent-licensing royalties and “no license, no chips” policy do not impose an anticompetitive surcharge on rivals’ modem chip sales. Instead, these aspects of Qualcomm's business model are “chip-supplier neutral” and do not undermine competition in the relevant antitrust markets. Third, Qualcomm's 2011 and 2013 agreements with Apple have not had the actual or practical effect of substantially foreclosing competition in the CDMA modem chip market. Furthermore, because these agreements were terminated years ago by Apple itself, there is nothing to be enjoined.

Wednesday, 2 September 2020

LES of Silicon Valley FREE Webinar on Corporate Finance and IP Management

One of the “positives” of Covid-19 is that many organizations are offering fantastic content online and even for free.  Here’s another great opportunity with an excellent organization and chapter of the Licensing Executives Society (LES).  The Silicon Valley Chapter of the LES and the Financial Executives International are offering a FREE webinar titled, “Intellectual Capital.  Connecting the Financial and IP Communities,” on Thursday, September 24, 2020 from 12:00 pm to 1:30 pm (Pacific Standard Time).  The registration link is below.  Here are the details from their email notice:

Registration Fee is complimentary.
A webinar link will be sent after your registration.
The Silicon Valley Chapters of the Financial Executives International and the Licensing Executives Society USA/Canada invite you to participate in a groundbreaking interactive webinar on the integration of Corporate Finance and IP Management.
A panel of seasoned professionals will discuss a number of Intellectual Capital (IC) intersection areas including:
  • Identifying the relevant categories of IC for a particular company
  • Getting board-level and C-Suite support for establishing a corporate IC strategy
  • Developing IC management business processes, such as:
o    IC Valuation
o    IC Accounting
o    IC Financial Reporting
o    IC Transactional Issues
o    IC Tax Considerations
Mary Adams,
 Founder, Smarter Companies
Bill Elkington, Founder, Mind IC
Petra Loer, Managing Director, Valuation Services, Andersen
Moderator: Ron Laurie, Executive Chairman and CIPO, InventionShare
Mary Adams, Founder, Smarter Companies
Mary is a consultant, speaker and practitioner of intangible capitalism which focuses on the long-term pursuit of both profits and prosperity.  Her current work is focused in three communities that she helped create:  The Exit Planning Exchange that brings long-term thinking to the private company market.  The Integrated Reporting U.S. Community that brings long-term thinking to public companies. And Smarter-Companies, a specialty consulting community that provides methodologies and tools to support intangible capitalism. Mary is the co-author of Intangible Capital: Putting Knowledge to Work in the 21st Century Organization. Prior to starting her consulting firm in 1999, she spent 14 years as a high-risk lender in the U.S. and Latin America at Citicorp and Sanwa Business Credit.
Bill Elkington, Founder, Mind IC
Bill’s career in three Fortune 500 companies, a startup, and now in his consulting firm—Mind IC LLC—has been in the field of intellectual capital management. His focus has been on uncovering, creating, protecting, and extracting the value of companies’ intellectual capital assets. His expertise is in various areas of intellectual capital management: business cadre leadership, rights valuation, rights strategy, public policy, enterprise policy and process, transactions, patent protection, and change management and communication across the enterprise.
Ron Laurie, Chair, LES Silicon Valley Chapter
Ron has worked in Silicon Valley since before it had that name, initially as a systems engineer and then as an IP lawyer and patent strategist.  He was a founding partner of the Silicon Valley offices of Irell & Manella, Weil Gotshal and Skadden Arps and has taught IP strategy courses at Stanford and Berkeley law schools.  Ron is Executive Chairman and CIPO at InventionShare, a new kind of early-stage fund that transforms breakthrough inventions into broadly patented platform technologies which can be productized by global companies across a broad range of applications and markets.  He sits on four other boards, including the oldest and most successful publicly-traded patent licensing company.
Petra Loer, Managing Director, Valuation Services, Andersen
Petra is a member of the Valuation Services Group at Andersen, a global tax and financial advisory firm. Her experience includes the valuation of closely-held businesses, business interests, intangible assets, intellectual property, debt instruments, and derivatives. These engagements span a variety of purposes, including financial reporting, tax planning and reporting, mergers and acquisitions, litigation support, strategic planning, and restructuring. Petra’s client basis ranges from small closely held businesses to multi-billion-dollar multinational public companies, in industries as diverse as manufacturing to technology.

Tuesday, 1 September 2020

Trump to Push Pharma on Drug Pricing

President Trump is continuing his push to fulfill campaign promises.  Apparently, he is meeting with pharmaceutical companies this week to negotiate lower drug prices.  This seems to be in response to his supposed Executive Order to link the drug prices that Medicare is charged to prices paid by foreign nations.  This was not an exciting development to pharmaceutical companies and they canceled a scheduled meeting with the President to discuss it.  It will be interesting to see if pharmaceutical companies will be willing to "play ball" with President Trump given the election.  For sure, part of the calculation is whether Presidential Candidate Joe Biden's administration would be better for pharmaceutical companies.  My guess is no.  However, I think the Obama Administration did not do as much as it could have on drug pricing directly--except that President Obama signed the Leahy-Smith America Invents Act into law which included rules concerning Inter-Partes Review Proceedings.  Also, pharmaceutical companies may be worried about additional Democratic appointees to the U.S. Court of Appeals for the Federal Circuit, where the battle over the scope of patent eligible subject matter is being waged (See American Axle en banc denial), and appointees to the U.S. Supreme Court.  FTC and DOJ antitrust enforcement is another issue as well as trade agreements.  Bayh-Dole Act march in rights could be an issue.  Moreover, under President Trump, pharmaceutical companies may be seeing some light at the USPTO concerning patent eligible subject matter.  Let's see if pharmaceutical companies are going to give President Trump a big win with Seniors (aka people who reliably vote). A compromise setting Medicare pricing near the most developed European countries would be interesting and an improvement.  

Wednesday, 26 August 2020

Diversity in Startups and Inventing Patented Developments

The Creator Fund has released a report titled, “State of Student Startups,” concerning university student involvement at around 545 startups in the UK.  Notably, the report states that Covid-19 has not slowed down student engagement in startups.  Moreover, some interesting statistics are that around 57% of students involved in university startups are foreign born, and pretty close to half of students involved in university startups are BAME (Black, Asian, Minority Ethnic) and are women.  Over 60% of the startups at Oxford and Cambridge “have at least one BAME founder.”  These data are very heartening given some of the other statistics about the lack of some racial and ethnic minorities and female involvement in inventing.  Indeed, in the United States, the United States Patent and Trademark Office relatively recently released a report stating that women are still not represented similarly to their percentage of the overall population in inventing demonstrated by patents (around 20%); although, the percentage of women participating as inventors is increasing.  Here are the USPTO’s report’s major findings:

  • More women are entering and staying active in the patent system than ever before.
  • The number of patents with at least one woman inventor increased from 20.7% in 2016 to 21.9% by the end of 2019.
  • The “Women Inventor Rate” (WIR) – the share of U.S. inventors receiving patents who are women – increased from 12.1% in 2016 to 12.8% in 2019.
  • The share of women among new inventors on issued patents increased from 16.6% in 2016 to 17.3% by 2019.
  • The gender gap in the number of women inventors who remain active by patenting again within five years is decreasing. For new inventors in 2014, 46% of women patented again in the next five years versus 52% of men (by 2019). In 1980, the gap was 28% for women versus 38% for men. 
  • Among the leading patent filers, the 3M Company showed the largest improvement in the participation of women inventor-patentees: Their average WIR increased from 15.2% over 2007-2016 to 16.6% for 2007-2019. 

President Trump's Executive Orders to Address Drug Pricing

In July, President Trump issued three Executive Orders designed to decrease the cost of prescription drugs.  The executive orders are part of a fulfillment of his campaign promise to address the high cost of healthcare and specifically the high cost of pharmaceuticals.  The first is directed at importation of safe drugs from other countries.  The second is directed to reducing the price of insulin and epinephrine.  The third executive order concern rebates and middleman, such as pharmacy benefit managers.  The third order states in relevant part:

By the authority vested in me as President by the Constitution and the laws of the United States of America, it is hereby ordered as follows:
Section 1.  Purpose.  One of the reasons pharmaceutical drug prices in the United States are so high is because of the complex mix of payers and negotiators that often separates the consumer from the manufacturer in the drug-purchasing process.  The result is that the prices patients see at the point-of-sale do not reflect the prices that the patient’s insurance companies, and middlemen hired by the insurance companies, actually pay for drugs.  Instead, these middlemen — health plan sponsors and pharmacy benefit managers (PBMs) — negotiate significant discounts off of the list prices, sometimes up to 50 percent of the cost of the drug.  Medicare patients, whose cost sharing is typically based on list prices, pay more than they should for drugs while the middlemen collect large “rebate” checks.  These rebates are the functional equivalent of kickbacks, and erode savings that could otherwise go to the Medicare patients taking those drugs.  Yet currently, Federal regulations create a safe harbor for such discounts and preclude treating them as kickbacks under the law.
Fixing this problem could save Medicare patients billions of dollars.  The Office of the Inspector General at the Department of Health and Human Services has found that patients in the catastrophic phase of the Medicare Part D program saw their out-of-pocket costs for high-price drugs increase by 47 percent from 2010 to 2015, from $175 per month to $257 per month.  Narrowing the safe harbor for these discounts under the anti-kickback statute will allow tens of billions in dollars of rebates on prescription drugs in the Medicare Part D program to go directly to patients, saving many patients hundreds or thousands of dollars per year at the pharmacy counter.
Sec2.  Policy.  It is the policy of the United States that discounts offered on prescription drugs should be passed on to patients.
Sec3.  Directing Drug Rebates to Patients Instead of Middlemen.  The Secretary of Health and Human Services shall complete the rulemaking process he commenced seeking to:
(a)  exclude from safe harbor protections under the anti-kickback statute, section 1128B(b) of the Social Security Act, 42 U.S.C. 1320a–7b, certain retrospective reductions in price that are not applied at the point-of-sale or other remuneration that drug manufacturers provide to health plan sponsors, pharmacies, or PBMs in operating the Medicare Part D program; and
(b)  establish new safe harbors that would permit health plan sponsors, pharmacies, and PBMs to apply discounts at the patient’s point-of-sale in order to lower the patient’s out-of-pocket costs, and that would permit the use of certain bona fide PBM service fees.
Sec4.  Protecting Low Premiums.  Prior to taking action under section 3 of this order, the Secretary of Health and Human Services shall confirm — and make public such confirmation — that the action is not projected to increase Federal spending, Medicare beneficiary premiums, or patients’ total out-of-pocket costs.
July 24, 2020.

Friday, 7 August 2020

President Trump Moves on Ensuring Essential Medicines Produced in United States

President Trump issued an Executive Order which helps ensure that essential medicines are produced in the United States, including critical inputs, among other things.  The Executive Order provides, in part: 

“Section 1.  Policy.  The United States must protect our citizens, critical infrastructure, military forces, and economy against outbreaks of emerging infectious diseases and chemical, biological, radiological, and nuclear (CBRN) threats.  To achieve this, the United States must have a strong Public Health Industrial Base with resilient domestic supply chains for Essential Medicines, Medical Countermeasures, and Critical Inputs deemed necessary for the United States.  These domestic supply chains must be capable of meeting national security requirements for responding to threats arising from CBRN threats and public health emergencies, including emerging infectious diseases such as COVID-19.  It is critical that we reduce our dependence on foreign manufacturers for Essential Medicines, Medical Countermeasures, and Critical Inputs to ensure sufficient and reliable long-term domestic production of these products, to minimize potential shortages, and to mobilize our Nation’s Public Health Industrial Base to respond to these threats.  
It is therefore the policy of the United States to:(a)  accelerate the development of cost-effective and efficient domestic production of Essential Medicines and Medical Countermeasures and have adequate redundancy built into the domestic supply chain for Essential Medicines, Medical Countermeasures, and Critical Inputs;(b)  ensure long-term demand for Essential Medicines, Medical Countermeasures, and Critical Inputs that are produced in the United States;(c)  create, maintain, and maximize domestic production capabilities for Critical Inputs, Finished Drug Products, and Finished Devices that are essential to protect public safety and human health and to provide for the national defense; and(d)  combat the trafficking of counterfeit Essential Medicines, Medical Countermeasures, and Critical Inputs over e commerce platforms and from third-party online sellers involved in the government procurement process.
I am therefore directing each executive department and agency involved in the procurement of Essential Medicines, Medical Countermeasures, and Critical Inputs (agency) to consider a variety of actions to increase their domestic procurement of Essential Medicines, Medical Countermeasures, and Critical Inputs, and to identify vulnerabilities in our Nation’s supply chains for these products.  Under this order, agencies will have the necessary flexibility to increase their domestic procurement in appropriate and responsible ways, while protecting our Nation’s service members, veterans, and their families from increases in drug prices and without interfering with our Nation’s ability to respond to the spread of COVID-19.” 

Saturday, 1 August 2020

Will Trump Win the Presidential Election in November?

A common general inquiry I get from friends who are not Americans is “what is going on in the United States with respect to Trump—will he be reelected?”.  My answer is, “I don’t know.”  This may surprise some because they see Biden as the obvious winner.  Here are my imperfect and half-baked thoughts on the subject: 

1)      My guess is that we’ll get good news about a vaccine before the election.  It may even be distributed before the election to some in the United States.  My guess is that Trump’s biggest concern with mail in voting is that it’ll occur before the “best” news possible about a vaccine to COVID-19. 

2)     What about Trump’s handling of COVID-19?  This seems to look bad, but see above on point 1.  Also, Trump put the lock-down decisions in the hands of state and local government.  Could Trump have done more earlier?  Yes, I think he could of done more.  The Chinese apparently knew that masks were effective in slowing the spread.  Why didn’t we move faster on that?  But, see state and local government.  And, please don’t forget that many are suffering badly economically because of lock-downs. 

3)     What about Trump’s handling of race-related issues, including the George Floyd horror and BLM?  I think Trump’s botched this badly.  However, please remember that before the last election we had serious BLM protests.  I am concerned that Trump voters have become even more concerned about so-called “law and order issues.”  This means that turn-out amongst the concerned may be strong.  Hopefully, turn-out amongst BLM supporters will be strong.  Please remember one of President Obama’s relatively quick responses to the protests: Be sure to get out and vote in local elections. 

4)     What about the polls?  I haven’t looked closely at this, but my understanding is that the polls are not that far off from where Hilary Clinton was in the last election in battleground states—she had quite a nice lead.  I think Biden has a better lead now.  We’ll see if it holds up.  Also, please don’t forget one of the supposed reasons the last election defied the polls—people didn’t want to admit they were voting for Trump.  That effect may be even stronger now. 

5)     What about the debates?  I am quite worried about this.  I think Trump is going to blast Biden on any supposed mistakes concerning the Obama/Biden administration.  This time Biden is fully on the hook as VP: 1) Opioid Crisis; 2) Crappy Economy in Some Battleground States (goodness, AOC actually is attacking Opportunity Zones); 3) Bad Trade Deals; 4) Skyrocketing Health Care Costs; and 4) the China Relationship.  Finally, Trump doesn’t have to worry about how he looks debating a woman.  He is going to fully unload on Biden.  Biden also does not always present well in debates.  He sometimes looks befuddled.  If Trump is sharp, he may come out as the winner.  Biden needs to hammer Trump on his immigration disasters.  

6)      More stimulus is on the way.  More money directly into the pockets of Americans.  If the Senate Republicans were thinking, they’d continue the $600 unemployment benefit and push up the stimulus.  People are suffering economically.  When was the last time the economy was very good--when Trump was president.  Also, Trump just issued executive orders on pharmaceutical pricing and access--he's fulfilling campaign promises (see debates). 

7)      The most important issue concerning American politics is likely turnout.  If your people don’t turnout, then you’ve got a serious problem.  Will the lack of big-time rallies hurt Trump?  Maybe.  However, I fear the continuing protests in Portland and elsewhere are going to push some Trump protesters to vote.  What about young people?  Are they going to be pissed about Tik Tok?  Well, they need to register to vote.  Guess who won’t be on campus where a lot of voter registration efforts happen?  Young people.  What about Biden’s VP choice?  That may help with turnout for him, but may help the other side as well.  And, don’t forget, the possibility of a Supreme Court vacancy(ies) soon should be a good motivator to turnout.  That’s going to seriously be on the minds of members of both parties—it really should for Dems especially given the age and health of Dem Supreme Court Justices.  

What’s the answer?  I don’t know, but this election cycle is fascinating and the result is going to be devastating to one side.  What impact on IP and Innovation?  Whoever wins the impact will be huge--from USPTO appointments and policy to FTC/DOJ appointments and policy to court appointments to trade.