Thursday, 24 February 2022

U.S. Department of Justice Sets Forth New Course for Addressing "The PRC Threat"

The U.S. Department of Justice [DOJ] is pivoting from its now past approach to investigating and prosecuting intellectual property-related issues concerning China.  Notably, the DOJ is attempting to balance the need for the United States to continue to attract research talent from abroad, encourage international collaboration and, at the same time, ensure that there won't be abuse.  Moreover, the DOJ is concerned regarding a perception of civil rights violations in the United States relating to the treatment of Asian-Americans and Chinese nationals arguably connected to some of the DOJ's activities.  [More, here.] Today, Assistant Attorney General Matthew Olsen delivered remarks outlining the broad strokes of the new U.S. approach.  Here are some of his comments:

The PRC Threat

As you can see from these examples, we at the Justice Department confront threats from a variety of nation-state actors. Our new strategy reflects this reality — there is no one threat that is unique to a single adversary.

At the same time, it is clear that the government of China stands apart. So, I want to address how the department’s approach to Chinese government activity fits within our overall strategy.

As the FBI Director publicly noted a few weeks ago, the threats from the PRC government are “more brazen [and] more damaging than ever before.” He is absolutely right: the PRC government threatens our security through its concerted use of espionage, theft of trade secrets, malicious cyber activity, transnational repression, and other tactics to advance its interests — all to the detriment of the United States and other democratic nations and their citizens around the world.

To be clear, we are focused on the actions of the PRC government, the Chinese Communist Party, and their agents — not the Chinese people or those of Chinese descent. As we talk about the threats that the PRC government poses to the United States, we must never lose sight of that fundamental distinction. We must always be vigilant to ensure that no one is treated differently based on race, ethnicity, familial ties, or national origin. This is a foundational commitment of the Department of Justice.

I’ll give you a few examples of what the PRC government is doing.

First, it has targeted U.S. citizens with connections to the intelligence community to obtain valuable government and military secrets. In recent years, we have prosecuted four espionage cases involving the PRC, reflecting a concerted effort to steal our most sensitive information.

Second, the government of China has also used espionage tools and tactics against U.S. companies and American workers to steal critical and emerging technologies. Agents of the PRC government have been caught stealing everything from cutting-edge semiconductor technology to actual seeds that had been developed for pharmaceutical uses after years of research and the investment of millions of dollars.

Third, the PRC government has used malicious and unlawful cyber campaigns to pursue technological advancement and profit. The PRC reaps the benefits of these criminal activities, while the victims, including governments, businesses and critical infrastructure operators, lose billions of dollars in intellectual property, proprietary information, ransom payments and mitigation efforts.

Finally, China’s government has gone to great lengths to silence dissent. It has intimidated journalists and employed a variety of means to attempt to censor and punish U.S. citizens, residents, and companies for exercising their rights to free expression. I mentioned earlier Operation Fox Hunt — the PRC’s illegal effort to coerce the return of certain Chinese dissidents to China — which is just one example.

Strategic Review

Against this backdrop, the department announced the “China Initiative” in 2018. The idea behind the initiative was to develop a coherent approach to the challenges posed by the PRC government. The initiative effectively focused attention on the multi-faceted threat from the PRC. But it has also engendered growing concerns that we must take seriously.

I want to take this opportunity today—discussing our approach to nation-state threats overall—to also address the China Initiative directly.

We have heard concerns from the civil rights community that the “China Initiative” fueled a narrative of intolerance and bias. To many, that narrative suggests that the Justice Department treats people from China or of Chinese descent differently. The rise in anti-Asian hate crime and hate incidents only heightens these concerns. The Department is keenly aware of this threat and is enhancing efforts to combat acts of hate. These efforts are reflected in the Attorney General’s memorandum issued last year following the enactment of the COVID-19 Hate Crimes Act.

There are also increasing concerns from the academic and scientific community about the department’s pursuit of certain research grant fraud cases. We have heard that these prosecutions — and the public narrative they create — can lead to a chilling atmosphere for scientists and scholars that damages the scientific enterprise in this country.

Safeguarding the integrity and transparency of research institutions is a matter of national security. But so is ensuring that we continue to attract the best and the brightest researchers and scholars to our country from all around the world — and that we all continue to honor our tradition of academic openness and collaboration.

In light of these concerns, we began a review soon after I took office. The review’s purpose was forward-looking. The key question was whether this framework still best serves the strategic needs and priorities of the department. While I remain focused on the evolving, significant threat that the government of China poses, I have concluded that this initiative is not the right approach. Instead, the current threat landscape demands a broader approach.

I want to emphasize my belief that the department’s actions have been driven by genuine national security concerns. But by grouping cases under the China Initiative rubric, we helped give rise to a harmful perception that the department applies a lower standard to investigate and prosecute criminal conduct related to that country or that we in some way view people with racial, ethnic or familial ties to China differently.

I began my career as a trial attorney in the Civil Rights Division. The department is committed to protecting the civil rights of everyone in our country. But this erosion of trust in the department can impair our national security by alienating us from the people we serve, including the very communities the PRC government targets as victims. Our reputation around the world for being a country dedicated to civil rights and the rule of law is one of our greatest strengths.

As part of this review, I have paid particular attention to cases involving academic integrity and research security. When it comes to these cases, the National Security Division will take an active supervisory role in the investigations and prosecutions. In evaluating cases moving forward, NSD will work with the FBI and other investigative agencies to assess the evidence of intent and materiality, as well as the nexus to our national or economic security. These considerations will guide our decisions — including whether criminal prosecution is warranted or whether civil or administrative remedies are more appropriate.

In addition, the White House Office of Science and Technology has released new guidance to federal funding agencies, including procedures to correct inaccurate or incomplete prior disclosures. These agencies have primary responsibility for research integrity and security. Where individuals voluntarily correct prior material omissions and resolve related administrative inquiries, this will counsel against a criminal prosecution under longstanding department principles of prosecutorial discretion.

Make no mistake, we will be relentless in defending our country from China. The Department will continue to prioritize and aggressively counter the actions of the PRC government that harm our people and our institutions. But our review convinced us that a new approach is needed to tackle the most severe threats from a range of hostile nation-states.

NSD’s Approach Moving Forward

Going forward, the National Security Division will pursue this work guided by our Strategy for Countering Nation-State Threats. Our recent experience confronting the varied threats posed by the Chinese government has shown that a multi-faceted challenge demands an integrated and multi-faceted response. We need to expand our approach to these threats by recognizing the capabilities of each hostile nation and the full spectrum of activity each country undertakes to achieve its goals. And we must align our capabilities, tools and resources with those across the federal government to meet and counter these threats.

Our work will be informed by three strategic imperatives.

First, we must continue to defend core national security interests and protect our most sensitive information and resources. We will continue to aggressively investigate and prosecute espionage, export control and sanctions violations, and interference with our critical infrastructure.

Second, we must protect our economic security and prosperity, including key technologies, private information about Americans and supply chains and industry. We will bring all tools to bear, including the regulatory authorities of the Committee on Foreign Investment in the United States and Team Telecom — as well as criminal process where appropriate — to prevent and mitigate harms from economic espionage, hostile manipulation and cyber-enabled malicious activity.

Third, we must defend our democratic institutions and values to ensure that the promise of freedom remains a reality in the face of rising authoritarianism. We remain steadfast in our commitment to preventing malign influence inside our borders and to promoting freedom of expression and democracy against corrupt and repressive forces.

As we move forward, the department remains committed to confronting any nation that threatens U.S. national security, economic security or our democratic institutions and freedoms.

We will use all the legal tools in our arsenal to combat these threats. The cornerstone of our work at the Justice Department is to investigate and prosecute crimes sponsored by hostile governments and their agents. This includes prosecuting state agents for espionage, hacking campaigns against our government and the private sector, and the repression of critics, as well as efforts to manipulate public discourse in the United States.

In addition to our criminal enforcement work, NSD will use our civil and administrative tools to mitigate threats from foreign investment activity and foreign interests that seek to secretly influence public opinion in the United States.

We also will support broader whole-of-government efforts — which include diplomatic engagement, the use of economic tools and resilience building in communities within the United States and abroad — to address these threats. We will reach out, along with our federal partners, to build trust with affected communities to understand their public safety needs, and to ensure they feel comfortable reporting crimes and incidents.

Finally, we will continue to engage with democratic allies to share information and to discuss how we can make our partner countries more secure. Together, we will develop strategies for effectively responding to these grave threats to the rule of law and to our economic integrity.


The United States is a beacon for people all over the world who seek to live in an open and democratic society. It is our duty in the National Security Division to protect the United States from the myriad threats we face, while staying true to the Constitution and the values of the Justice Department. I know that this commitment to securing equal justice while defending our national security is shared by everyone in the National Security Division and the Department of Justice.  [The full comments are available, here.]

Sunday, 20 February 2022

Confusing allegations of various “behaviors” are a red herring—not evidence of anything illegal, bad-faith or discriminatory—while SEP owners earnestly attempt to obtain FRAND licensing

As previously remarked in IP Finance, I recently submitted my individual comments, and commented along with other scholars of law, business and economics, among hundreds of consultation submissions in response to the US Department of Justice’s ‘Draft Policy Statement on Licensing Negotiations and Remedies for Standard-Essential Patents Subject to Voluntary F/RAND Licensing Commitments’ (”DoJ Draft Revised Statement).

Red herring, courtesy of Wikimedia Commons

Comments on the DoJ Draft Revised Statement by academics Christian Helmers and Brian Love misleadingly imply that many measures taken by a standard-essential patent holder in seeking to obtain a FRAND license are abusive. They state there that ’we present empirical evidence of “hold-up”—i.e., evidence of opportunistic behavior by SEP enforcers that is intended to unreasonably inflate royalties.’ However, elsewhere in a supposedly supporting research paper they co-authored and cite in their comments, they admit that their analysis of these behaviors does not constitute proof of holdup: ’while these behaviors have all been associated with holdup, we stress at the outset that many are not per se unlawful and none are, standing alone, conclusive proof of holdup.’ They ’do not claim that the presence of any of these behaviors constitutes, in itself, empirical proof of holdup.’

Helmers and Love seek to maximize scope of what is deemed opportunistic to include virtually any action an SEP holder might pursue in its legitimate attempts to obtain FRAND licensing.

While the DoJ Draft Revised Statement entirely avoids using the commonly-used terms “holdup” and “holdout,” it asserts that ‘opportunistic behavior by both parties can occur’ and that ‘opportunistic conduct by either SEP holders or implementers makes the implementation of standards more costly and deters investment in future standards development, affecting all users and producers of standardized inputs and products, including small and large firms, inventors, and consumers  (emphasis added).’

The DoJ Draft Revised Statement appears aligned with commonly asserted—but disputed—existence of holdup and interpretations of the term in the context of prospective patent licensing; but it does nothing to delineate what is legitimate and possible in the real world from purported bad behaviors by SEP owners:

‘Opportunistic conduct by SEP holders to obtain, through the threat of exclusion, higher compensation for SEPs than they would have been able to negotiate prior to standardization, can deter investment in and delay introduction of standardized products, raise prices, and ultimately harm consumers and small businesses.’[1]

For example, it is impractical for royalty rates to be negotiated ex-ante to standardization, and it rarely occurs because neither licensors nor licensees seek that in practice, and it would cause antitrust concerns if it was required in standards development.

And, the DoJ has provided no supporting evidence for those alleged harms.

Another misnomer

“Opportunistic behavior” is the new euphemism for alleged holdup or any other action by patent-owners that implementers might find unwelcome. This substitute term is so vaguely defined it only sows further confusion into the already heated debate about what is and what is not Fair, Reasonable and Non-Discriminatory (FRAND) and legal when seeking Standard-Essential Patents (SEP) licensing.

No wonder one other commenter—seemingly unaligned with either the licensor or implementer camps—was so dumfounded he wrote:

'Having encountered the SEP Policy proposal today in an ad embedded in an article by the Washington Post, I urge you to revise your regulations to be intelligible to more Americans. I cannot fathom the purpose of this mission: is it to prevent Chinese manufacturers from counterfeiting American premier brands, or is it to enrich patent holders by preserving their intellectual rights?

Having graduated from the University of California with Honors in English and having taught English in public schools for 25 years, I can merely determine that these proposed regulations address a real concern. Unfortunately, I suspect that most English speakers would disregard what they cannot possibly comprehend. The likely result is a creeping cynicism about regulation and a further contempt for regulatory compliance.

I urge you to clarify the language.'

Dictionary definitions for opportunistic and opportunism all cite bad intent, including:

·        Usually disapproving: using a situation to get power or an advantage.[3]

·       Taking advantage of opportunities as they arise: such as exploiting opportunities with little regard to principle or consequences.[4]

·       To quickly take advantage of a situation, usually in a way that’s just plain wrong.[5]

·       The policy or practice, as in politics, business, or one’s personal affairs, of adapting actions, decisions, etc., to expediency or effectiveness regardless of the sacrifice of ethical principles.[6]

Filling the void

Helmers and Love brazenly exploit this chaos. In absence of identification and explanation about which “opportunistic behaviors” are illegal or unacceptably bad-faith,[7] commenting on the DoJ Draft Revised Statement became a free-for-all, including by Christian Helmers and Brian Love, citing a paper they co-authored with Yassine Lefouili. They take an “everything but the kitchen sink” approach in circumscribing the wide variety of behaviors they deem unacceptably opportunistic conduct in patent holders’ attempts to obtain FRAND licensing.

In their consultation comments, Helmers and Love state that ’we present empirical evidence of “hold-up”—i.e., evidence of opportunistic behavior by SEP enforcers that is intended to unreasonably inflate royalties and they also assert that ‘licensees are induced to pay royalties that exceed FRAND levels.’ To the contrary, their econometric analysis is on alleged behaviors, provides no evidence of patent holdup actually occurring, and they make no assessment of what FRAND levels are or whether amounts demanded or paid are FRAND.

Buried in their cited research paper, but not in the consultation comments, the three co-authors tellingly admit that ’while these behaviors have all been associated with holdup, we stress at the outset that many are not per se unlawful and none are, standing alone, conclusive proof of holdup.’ They ’do not claim that the presence of any of these behaviors constitutes, in itself, empirical proof of holdup.’ This is because, even in combination, these behaviors say nothing about—let alone evidence of—whether patent holdup is ever occurring.

All they have done, in their empirical research, is some elaborate and lengthy econometric analysis on a variety of legal and legitimate actions by the patent holder—most of which are no more than alleged actions—that are lawful and are only to be expected in attempts to obtain FRAND licensing.

SEPs do not license themselves and they are not self-enforcing. Patent owners invariably need to take some actions if they are ever to get paid. In goods and services markets, supplies can simply be withdrawn if customers do not pay. Supply of SEP technologies cannot be withheld.

The research paper by all three authors admits they take ‘a broad view of potential holdup behavior by SEP owner (emphasis added).’ Figure 1 repeats the list and descriptions of opportunistic behaviors alleged by Hellmers, Love and Lefouili, and the table also includes my rebuttals explaining why all of these actions are legitimate and may be necessary in pursuit of FRAND licensing. Helmers, Love and Lefouili “find evidence of opportunistic behavior by the SEP enforcer in approximately 75% of patent-party level SEP assertions.”

Figure 1: Overview of measures of alleged opportunistic conduct by SEP enforcers

Opportunistic behavior (Table 1 sequence, Table 3 numbering) [8]

Description[9](emphasis added)


1. Any opportunistic behavior

Did the accused infringer (specifically) allege that the patent enforcer (or its predecessor) engaged in some kind of opportunistic behavior or something that might constitute a FRAND violation?

Mere allegations, no matter how frequent, cannot be regarded as any kind of evidence or proof of opportunism.

3. Untimely declaration

Did the accused infringer argue that the patent enforcer (or its predecessor) did not disclose the SEP to the SSO until after the standard was adopted?

Mere allegations, no matter how frequent, cannot be regarded as any kind of evidence or proof of opportunism. It is normal and expected that many SEPs are not declared until standards are set.[11] SEP owners’ declarations ensure that only FRAND royalties are paid, regardless of when disclosure is made. Most new declarations are from SEP owners that have already committed to FRAND licensing for many other patents. It is unclear which patents are SEPs until the standard is set because patent claims change in prosecution and technical specifications change until the standard is completed.

4. Overdeclaration

Did the accused infringer (specifically) allege that the patent enforcer required licensees of relevant SEPs to additionally pay royalties for rights to patents that were either not essential to the relevant standardized technology generally or not relevant to the accused infringer’s specific products?

Mere allegations, no matter how frequent, cannot be regarded as any kind of evidence or proof of opportunism. SEP licensing offers are invariably for portfolios comprising patents that are declared by their owners to be or might become standard essential. FRAND-licensing offers reflect, probabilistically, that some patents are not or will not become standard-essential. True essentiality can only be determined by a court, which is impractical for all patents.

6. Discriminatory license

Did the accused infringer make a specific allegation that the patent enforcer adopted discriminatory or exclusionary licensing terms or practices?

Mere allegations, no matter how frequent, cannot be regarded as any kind of evidence or proof of illegitimate discrimination.

2. Injunction

In the complaint (or counterclaim) did the patent enforcer expressly request an injunction?

Seeking an injunction is a fundamental patent right. Courts have acknowledged that case-specific facts might support the issuance of an injunction. Injunctions are not automatic. Only a court can decide whether and injunction is issued.

8. Parallel ITC litigation

Did the patent enforcer initiate an investigation against the accused infringer at the ITC in parallel to the district court litigation?

Seeking an ITC exclusion order is a fundamental patent right. This right is preserved if a FRAND offer has been made for licensing SEPs that the infringer will not or cannot accept.

9. Relevant litigation abroad

Did the patent enforcer seek injunctive relief against the accused infringer in related litigation filed outside the U.S. (e.g., in Germany)?

Seeking an injunction is a fundamental right in any jurisdiction in which there is patent infringement. This right is preserved if a FRAND offer has been made for licensing SEPs that the infringer will not or cannot accept.

11. EMVR vs. SSPPU (Entire Market Value Rule vs. Smallest Salable Patent-Practicing Unit)

Did the accused infringer argue that the patent enforcer improperly attempted to base the royalty owed on the price of the end product (using the EMVR), rather than the price of a component/module (the SSPPU).

Mere allegations, no matter how frequent, cannot be regarded as any kind of evidence or proof of opportunism. It is not improper to base royalty offers on EMVR. This is the way FRAND royalties are most commonly derived in commercial negotiations outside of litigation. Courts have repeatedly emphasized that `[t]here is nothing inherently wrong with using the market value of the entire product' as the royalty base for a FRAND royalty (FTC v Qualcomm, 969 F. 3d 974, 999 (9th Cir. 2020) quoting Exmark Mfg. Co. v. Briggs & Stratton Power Prods. Grp., 879 F.3d 1332, 1349 (Fed. Cir. 2018)).

5. Exhaustion

Did the accused infringer (specifically) allege that the patent was already licensed (e.g., by an upstream component supplier)?

Mere allegations, no matter how frequent, cannot be regarded as any kind of evidence or proof of opportunism. That the infringer disagrees with the licensor on matters of law and fact is no proof or evidence of opportunism.

7. Threats to sue customers

Did the patent enforcer bring the accused infringer’s customers into the licensing dispute, either by contacting them, threatening to sue them, or actually suing them?

SEP owners have a right to exclude that is tempered by its FRAND commitments. If a FRAND offer has been made, the SEP owner is entitled seek redress for manufacture, sale and use of any infringing products that are unlicensed. That reasonably includes contacting various parties that are knowingly or unwittingly dealing with or using such products.

12. Prior licenses not comparable

Did the accused infringer argue that the patent enforcer improperly attempted to base the royalty owed on prior licenses that were not reasonably comparable (due to differences in patents, duration, geographic scope, licensee type, etc).

Mere allegations, no matter how frequent, cannot be regarded as any kind of evidence or proof of opportunism. Where there is a dispute, only a court can decide whether and which licenses are comparable, including how and which characteristics in these  should be considered.

10. No disclosure

Did the accused infringer make a specific allegation that the patent enforcer simply refused to disclose the terms of prior licenses with similarly situated companies?

Mere allegations, no matter how frequent, cannot be regarded as any kind of evidence or proof of opportunism. The obligation of the SEP owner is to make a FRAND offer. Prior patent licensing terms are typically confidential and are subject to confidentiality agreements. Under these conditions and in absence of a court order, SEP owners are not allowed to disclose licensing terms. However, even without such restrictions, SEP owners  are under no obligation to disclose terms of other licenses, which would likely be used as starting points for negotiation, with the infringer only being willing to pay less.

13. Other

Did the accused infringer specifically allege that some other action might constitute a FRAND violation?

Mere allegations, no matter how frequent, cannot be regarded as any kind of evidence or proof of opportunism. Undefined “other” allegations merely adds the kitchen sink to the rest of the list of behaviors including mere allegations.

 As I indicate in Figure 1, for example, given that the EMVR is legitimate and the norm in most royalty rate determinations that occur outside of litigation, it is also quite in order for parties to use that royalty base in litigation.[12] It is irrelevant whether those licensors with larger than average patent portfolios are more or less inclined to stick to their guns with EMVR-based licensing than the average patent owner.

Also in FTC v. Qualcomm, the US Court of Appeals for the 9th Circuit noted that 'the Federal Circuit rejected the premise of the district court’s determination: that the SSPPU concept is required when calculating patent damages’ and that ‘[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.’

Similarly, it is also quite usual and a the legal entitlement of any patent owner—including one subject to FRAND commitments—to pursue parallel litigation in the ITC or a foreign jurisdiction for patents granted there. There is nothing incorrect or opportunistic about that.

Helmers and Love also misunderstand standard setting, IPR policy and how FRAND rate negotiations and agreements must be pursued. For example, ETSI IPR policy requires that standards are set purely on the basis of technical criteria, and not on the basis of expected royalty costs or ex-ante negotiated royalties. The FRAND commitment was introduced to ensure balance in these circumstances. Rather than making the licensing market fairer, ex-ante licensing is impractical and would foster monopsonic and even buyers’ cartel behavior with implementers colluding to drive down royalty rates below FRAND levels (e.g., selecting the cheapest technology in a reverse auction). It is perverse for Helmers and Love to assert that absence of ex-ante licensing rate negotiations is opportunistic, since that generally does not occur, is unwelcome be either party to licensing and is disfavored by antitrust authorities.

 Devious analysis

The analysis is a big red herring. It does nothing to establish whether there actually is any patent holdup or abuse. Rather than seeking to prove the existence of actual holdup (e.g. payment of supra-FRAND royalties or suffering from lock-in and incurring switching costs to avoid paying these) or any behavior that is in fact illegal or bad faith, Helmers, Love and Lefouili cunningly duck that question. 

While the three co-authors’ regression results including statistical significance figures from their ‘linear probability model, ’and their econometric jargon will leave most readers cold, their results also beg the question: So what?

Patent holdup is neither proven nor disproven by how various legitimate behaviors—most of which are no more than allegations—correlate with characteristics that the three co-authors also choose to identify about the parties,[13] cases[14] and patents in litigation,[15] and with case outcomes in law.[16] No court found that any patent holdup occurred in any of the cases considered by the co-authors.

 Cherry picking characteristics

In econometrics, if one gets to select and reject which among numerous possible characteristics one “considers,” one can most easily support whatever point one wishes to make.

Consultation comments by Helmers and Love on the DoJ Draft Revised Statement also cite a research paper they co-authored that purports to empirically test holdout theory with evidence from litigation of SEPs. However, in this paper dated five months later than the cited paper on patent holdup, they select a different set of characteristics to the above:

'We derive empirically testable predictions from the literature supporting hold-out theory[17]—namely that hold-out should be positively associated with the size and international breadth of licensors’ SEP portfolios, but negatively associated with the “quality” of licensors’ SEPs—and we test those predictions using measures of pre- and in-litigation hold-out constructed from information disclosed in U.S. SEP cases filed 2010-2019.'

 So, the only common characteristic between their regression results and findings on holdup versus holdout is actual or claimed portfolio size. Given that the SEP enforcer behaviors in Table 1 are based on the allegations of accused infringers, it is unremarkable that SEP enforcers were found more likely to be accused of overdeclaration in both studies.

Again, the authors’ analysis merely tests the extent to which behavior (in the case of holdout) correlates with these different characteristics. This does not test or control for other closely related characteristics—such as the size of the firm—that would likely be strongly correlated with size and international breadth of patent portfolios.

Helmers and Love speculate that if holdout theory is correct, there should be more holdout with larger SEP portfolios due to overdeclaration. That does not follow: even with overdeclaration, there will on average be more valid, essential and infringed patents in large portfolios than in small portfolios.  And, there are other characteristics that may align with large portfolios, including more established licensing, and a track record of being willing to fight costly litigation that make infringers less inclined to holdout.

Inconclusive evidence

Helmers and Love claim to provide evidence of patent holdout, but they merely regurgitate many speculative allegations about the existence of holdup, “lock-in,” royalty stacking and its effects and including harms, that have been asserted by others but have never been properly supported with applicable evidence, let alone proven in court. To the contrary, these assertions have been repeatedly debunked.

Helmers and Love conduct analysis to correlate various characteristics in SEP ownership with many different SEP owner behaviors they describe as opportunistic. But these alleged behaviors are generally legal and legitimate, and so results of their analysis provides no evidence that holdup or any resulting harm is actually occurring.

It is for the courts to decide which behaviors are legitimate and which are illegal, as they have done many times. Actions such as requests for injunctions or use of EMVR licensing are not per se illegal. Empirical assessment of these behaviors, let alone on behaviors that at are mere allegations, provides no proof or evidence of patent holdup or opportunism.

[1] While this soups-up a legal dictionary definition with the DoJ Draft Revised Statement’s references to the threat of exclusion and hypothetical ex-ante royalty rate negotiations, it omits the explicit requirement for deception or ambush that is included in economists’ traditional definitions of holdout. ‘Oliver Williamson famously described opportunism as ‘self-interest seeking with guile.’… [Standards hold-up involves] deceiving buyers or keeping them in the dark about the terms on which a technology will be available [which] subverts the competitive process.’

[2] Comment by John Dodd,  January 20, 2022.

[6] (opportunism)

[7] As set out in patent law and as determined in court precedents, not merely on the basis of politically-driven policy statements.

[8] As defined and alleged by Helmers, Lefouili and Love.

[9] As described by Helmers, Lefouili and Love.

[10] By Keith Mallinson, WiseHarbor.

[11] The legal position on “late disclosures” taken by multiple implementers in litigation is shown to be at odds with industry expectation and against industry practice. On the Timing of ETSI Disclosures, by Gustav Brismark, January 2021.

[12] Licensees as well as licensors have agreed to EMVR in litigation (e.g., Unwired Planet v. Huawei, and TCL v. Ericsson), where the dispute was about the royalty rate, not the royalty base.

[13] For example, whether plaintiff is a non-practicing entity, and plaintiff’s portfolio size.

[14] For example, declaratory action or motion to dismiss.

[15] For example, SEP in pool or patent reassigned.

[16] For example, plaintiff win or settlement.

[17] In absence of a citation, it is unclear which literature they are referring to for the three predictions.

Friday, 18 February 2022

Small Claims Patent Courts Coming to the US Soon? RFPs and Comments Wanted.

The Administrative Conference of the United States (ACUS) is working with the United States Patent and Trademark Office to essentially determine if the benefits of small claims patent courts outweigh the costs.  The ACUS website states:

The U.S. Patent and Trademark Office (USPTO) is engaging ACUS to conduct an independent study of issues associated with and options for designing a small claims patent court. The resulting report, which will ultimately be submitted to Congress, will address, among other topics, whether there is need for a small claims patent court, the feasibility and potential structure of such a court, and the relevant legal, policy, and practical considerations in establishing a small claims court.

The ACUS is accepting comments, here. 

The Request for Proposals document for consultants to work with the ACUS states:

Since at least the late 1980s, concerns have been raised that the high cost of patent litigation deters small- and medium-sized enterprises, particularly those owned by traditionally underrepresented groups, from seeking patent protection enforcement. Policymakers, scholars, and organizations have studied whether a small-claims procedure is needed for resolving patent disputes. They have reached different conclusions and proposed different actions. . . .

[The report may discuss:] Whether there is need for a small claims patent court; • The operation and structure of similar small claims intellectual property tribunals in the United States and elsewhere; • The relevant laws that would govern the establishment of a small claims patent court, including the United States Constitution and applicable statutes and regulations; • The policy and practical considerations in establishing a small claims patent court; • The institutional placement, structure, and internal organization of a potential small claims patent court, including whether it should be established within the federal courts, as or within an Article I court, or as an administrative tribunal.

March 4, 2022, is the deadline for proposals.