Fair Use and the Future Explored: Chip N' Dale: Rescue Rangers Movie

Yesterday, my kids and I watched the new movie, Chip N’ Dale:Rescue Rangers.  This is probably the funniest Intellectual Property law related movie I’ve seen.  Disney takes on IP Law doctrine and policy in a very humorous way.  As an exercise in understanding U.S. IP law, the facts the movie raises are very nice.  Here’s a few examples: ET v. Batman; Ugly Sonic; Chippendales; and on and on.  They also take on: a glimpse at the future of augmented reality; artificial intelligence and creativity; culture wars; Hollywood nostalgia reboots (talk about bootlegging); and the future of counterfeiting. There are so many references my brain almost exploded from overload. As a tip, be sure to take in the background materials, e.g., advertisements. Lol. They take some pretty nice shots at competitors, but I wonder what’s going to come back.  Interestingly, the Pirates of the Caribbean ride at Disneyland has been closed for “refurbishment.”  [In full disclosure, I am a very big fan of Disney and may be extremely biased.]

White Hat Hackers Safe from CFAA Prosecution?

The U.S. Department of Justice announced yesterday that it will not prosecute white hat researchers under the Computer Fraud and Abuse Act!  However, white hat hackers beware: There are many state laws that criminalize such behavior.  The press release states:

The Department of Justice today announced the revision of its policy regarding charging violations of the Computer Fraud and Abuse Act (CFAA). 

The policy for the first time directs that good-faith security research should not be charged. Good faith security research means accessing a computer solely for purposes of good-faith testing, investigation, and/or correction of a security flaw or vulnerability, where such activity is carried out in a manner designed to avoid any harm to individuals or the public, and where the information derived from the activity is used primarily to promote the security or safety of the class of devices, machines, or online services to which the accessed computer belongs, or those who use such devices, machines, or online services. 

“Computer security research is a key driver of improved cybersecurity,” said Deputy Attorney General Lisa O. Monaco. “The department has never been interested in prosecuting good-faith computer security research as a crime, and today’s announcement promotes cybersecurity by providing clarity for good-faith security researchers who root out vulnerabilities for the common good.”

The new policy states explicitly the longstanding practice that “the department’s goals for CFAA enforcement are to promote privacy and cybersecurity by upholding the legal right of individuals, network owners, operators, and other persons to ensure the confidentiality, integrity, and availability of information stored in their information systems.” Accordingly, the policy clarifies that hypothetical CFAA violations that have concerned some courts and commentators are not to be charged. Embellishing an online dating profile contrary to the terms of service of the dating website; creating fictional accounts on hiring, housing, or rental websites; using a pseudonym on a social networking site that prohibits them; checking sports scores at work; paying bills at work; or violating an access restriction contained in a term of service are not themselves sufficient to warrant federal criminal charges. The policy focuses the department’s resources on cases where a defendant is either not authorized at all to access a computer or was authorized to access one part of a computer — such as one email account — and, despite knowing about that restriction, accessed a part of the computer to which his authorized access did not extend, such as other users’ emails.

However, the new policy acknowledges that claiming to be conducting security research is not a free pass for those acting in bad faith. For example, discovering vulnerabilities in devices in order to extort their owners, even if claimed as “research,” is not in good faith. The policy advises prosecutors to consult with the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS) about specific applications of this factor. 

All federal prosecutors who wish to charge cases under the Computer Fraud and Abuse Act are required to follow the new policy, and to consult with CCIPS before bringing any charges. Prosecutors must inform the Deputy Attorney General (DAG), and in some cases receive approval from the DAG, before charging a CFAA case if CCIPS recommends against it. 

The new policy replaces an earlier policy that was issued in 2014, and takes effect immediately.

How Europe can build on strengths in SEPs to reclaim leadership in cellular with 5G and 6G

 The EU is in grave danger of “throwing out the baby with the bathwater” in its prospective attempts to reform SEP licensing with interventions for the purported benefit of European Small and Medium-Sized Enterprises (SMEs) in IoT. 

Europe was once preeminent in cellular communications with 2G GSM—including standard-essential technology innovation, product developments and sales, network deployments, and operator services adoption by consumers. Since its heyday in the in the late 1990s, Europe has declined through a succession of falls from various leading positions in cellular.

Revenue growth captured in cellular by newcomers from outside Europe

Source: Companies’ yearend reports and average annual exchange rate figures

The European Commission’s initiatives to regulate standard essential patents (SEPs)—most significantly in cellular technologies and ostensibly for the benefit of SMEs and other technology implementers—are oblivious to this bigger picture. It is vital for all Europeans that the region’s remaining major players in the cellular ecosystem can flourish profitably and are able to continue investing in R&D for innovation, new products, network deployments and services growth. That means ensuring standard-essential technology developers including the European Union’s Ericsson and Nokia can make fair and adequate returns on their SEP investments. The SEP licensing system needs to be reinforced, not weakened with prospective interventions that are inconsistent, contradictory or that have weak factual justification and would jeopardise Europe’s competitiveness.

Re-establishing European strength in cellular also requires reregulation of operator and other services markets so that European mobile network operators can become profitable leaders in the mobile ecosystem once again. Hopefully the EU’s new Digital Markets Act (DMA) that seeks to reign-in the dominant and abusive behaviour of Big Tech companies such as Apple, Alphabet and Meta will help European mobile operators and others improve their competitive positions and abilities to become leaders rather than remain followers with new technologies and services. Anticipated measures against these Big Tech “gatekeepers” include restrictions on bundling and self-preferencing between complementary services (e.g. search versus shopping), and mandating interoperability among different messaging platforms. 

The European Commission, with its call for evidence for an Impact Assessment regarding a new framework for standard-essential patents closing May 9, 2022, follows the US Department of Justice and the UK’s Intellectual Property Office with public consultations on the topic of SEP licensing. These focus on various issues including improved “transparency” with the counting of essentiality-checked patents in setting royalty rates, prospective new collective licensing arrangements and purported problems such as opportunistic behaviour by patent owners and implementers.

While the European Commission threatens to meddle with SEP licensing, a paper I have written for 4iP Council considers the broader strategic issues on Europe’s competitiveness in cellular. This longer read shows that virtually all the $14 billion in SEP royalties to Europe’s world-leading innovators Ericsson and Nokia over the last 5 years— that were vital to fund their R&D at a total cost of around $10 billion in 2021—were export revenues generated on smartphone sales by Apple and Asian OEMs. Royalties generated from SEPs in Europe are tiny in comparison: most IoT modules are produced by a top five manufacturers that are Chinese, and there is no requirement for software application developers to take SEP licenses. 

Licensing costs pale in comparison to total revenues and profits derived as the cellular ecosystem expands to be worth many trillions of dollars in products, services and applications including IoT.

This summary article was originally Published in RCR Wireless on 4th May 2022.

Women and the Unified Patent Court - Free Webinar hosted by OxFirst April 28 3 p.m. UK time

 Date & Time:  April 28 2022 15h00 -16h00 GMT = 16.00 – 17.00 CET

 The Influence of Women in IP: Women and the Unified Patent Court.

What the Panel Discussion is About

The establishment of the Unified Patent Court is likely the biggest game changer in European patent system. But what role and influence will women play in shaping this new Court?

Should under the UPC the opportunities for women be stronger established? Should women judges, given equal qualification and competence, be given priority in the selection process? Should there be adjustments made to allow judges who are also parents to participate in the UPC?

And, is there a need to come to grips with more gender-neutral language under the UPC?

This panel addresses these and more questions relating to women in IP and asks what can be done to remove gender barriers in intellectual property.

About the Speakers

Marina Tavassi has until most recently been the President of the Milan Court of Appeal. She has been a judge in Italy for over 40 years (specialized in IP) and sat on Samsung vs Apple, Italy. Since June 2014, she has also been a member of the panel of experts responsible for drafting rules of procedure for European Unitary Patent Court. She has also been a national judge on the Enlarged Board of Appeal of the European Patent Office (based in Munich). She is of counsel with BonelliErede.

 

Julia Dias is Senior IP Policy Counsel for Huawei. Julia specialises in SEP/FRAND licensing, litigation and policy. She is also the Vice Chair of the IPR working group of Digital Europe. Prior to joining Huawei, Julia gained IP experience in the UK and in Germany, including at the EPO where she worked in various ICT projects focusing on SEPs and emerging technologies. 

                                                                                                              

Katie Colart Katie is a partner in the London IP litigation team at Kirkland & Ellis. Katie specialises predominantly in patent litigation across a range of sectors including life sciences and tech. Katie regularly deals with major cross-border disputes of significant strategic importance to her clients and is ranked as an “Up and Coming” lawyer by Chambers, and a “Next Generation Partner” by The Legal 500.

How to Join:

https://oxfirst.com/webinars/the-influence-of-women-in-ip-women-and-the-unified-patent-court/

After registering, you will receive a confirmation email containing information about joining the webinar.

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Google: Investing in Education . . .

Google recently released some interesting information concerning its economic impact in the United States.  It is very impressive.  Google released its Economic Impact Report for 2021 and announced its investment of over $9.5 billion in U.S. Offices and data centers.  Notably, Google states in a blog post:

Google’s offices and data centers provide vital anchors to our local communities and help us contribute to their economies. In the U.S., over the past five years, we’ve invested more than $37 billion in our offices and data centers in 26 states, creating over 40,000 full-time jobs. That’s in addition to the more than $40 billion in research and development we invested in the U.S. in 2020 and 2021.

Google also notes that:

Today we are also releasing our 2021 Economic Impact Report, which reflects Google’s wider contribution to the economy. The report shows we helped provide $617 billion in economic activity for millions of American businesses, nonprofits, creators, developers and publishers last year. In addition, the Android app economy helped create nearly two million jobs last year, and YouTube’s creative ecosystem supported 394,000 jobs in 2020.

We also continue to help people get the skills they need to succeed in today’s economy, from our role as a founding member of the Michigan Central innovation district in Detroit to our $100 million Google Career Certificates Fund — a new financial model for helping people access education and digital skills.

The Google Career Certificates programs and Fund is an ambitious project:

The goal is to enable Social Finance to reach more than 20,000 American workers. This investment in America’s future has the potential to drive $1 billion in wage gains.

This fund is a new kind of financing model. We’ll invest Google capital and Google.org grants and provide our Career Certificate program. Social Finance will provide funding to nonprofit partners like Merit America and Year Up, who in turn will provide services like career coaching, living stipends and job placement support. And we’ll connect students to an employer consortium of more than 150 companies who are looking to hire workers with these skills.

It’s all designed around student success. They will receive all of this at no upfront cost. And will only pay it back once they find a job earning at least $40,000 a year. Social Finance will then redistribute those repayments to future learners, making this model more sustainable.

U.S. Congressional Research Service Report on Potential COVID-19 IP Rights Waiver

The Congressional Research Service has released a report for the U.S. Congress concerning the COVID-19 Patent Waiver agreement between the U.S., India, South Africa and the EU.  The report discusses the leaked agreement and outlines specific issues for the U.S. Congress to consider:

Key issues include · Should more congressional input or approval be required before the Administration could agree to modifying TRIPS obligations (as proposed in some pending bills)? · How would the proposed agreement affect innovation incentives for COVID-19 vaccines and other treatments? What would it mean for U.S. competitiveness vìs-a-vìs China, which poses major IPR theft challenges? · How would the proposed agreement affect global COVID-19 vaccine production and access? Would any boost occur quickly enough to respond to the pandemic’s current stage, or be more relevant to respond to potential future variants? What does the proposed agreement mean for future pandemic responses? · Is the U.S. position on this waiver particular to COVID-19 or a general policy shift as it relates to historical U.S. positions in advancing IPR in trade agreements? How may these issues shape potential debate on Trade Promotion Authority renewal and U.S. IPR trade negotiating objectives? · What would a timely COVID-19 IPR outcome—or its absence—mean for debates about the WTO’s relevance in the changing global economy?

The report is available, here. 

Global Detroit Entrepreneur in Residence Program

Global Detroit is a very interesting organization which is basically focused on economic development in Michigan and the general Detroit area.  Detroit has struggled economically.  Notably, Global Detroit has an Entrepreneur in Residence program which focuses on bringing foreign born entrepreneurs and their companies to Detroit/Michigan through working at a host university as a mentor.  Here is a success story:

Ashok Seetharam was living in Milwaukee when his startup, PAXAFE, began to take off. But he wasn’t sure he’d be able to stay. PAXAFE was Ashok’s third startup. After moving to the U.S. from India and graduating from Brown University with a graduate degree in Biomedical Engineering, he co-founded Orthopedix and led the company through XlerateHealth, an early-stage healthcare accelerator program. Orthopedix ultimately licensed its patented technology to a major orthopedic implant manufacturer. Next, he oversaw product development and a team of engineers for another healthcare startup, Toggle Health. 

In late 2018, Ashok and Ilya Preston founded PAXAFE in Milwaukee. Ilya’s family immigrated from Russia when he was a child. He and Ashok met at XlerateHealth in 2017. They originally helped kickstart a Minnesota startup focused on the transport of medical specimens, but ended up parting ways to start their own company. PAXAFE develops hardware and software IoT solutions that enable cheaper, intelligent shipping insurance. 

International startup founders face major challenges to launching their companies in the U.S. To remain in the country, they typically need an H-1B visa, which is available to foreign-born “specialty workers” in specific, largely high-tech fields. Ashok was permitted to remain in the U.S. for a short time on a different visa following his graduation from Brown, but he needed an H-1B visa to stay.

Fortunately for Ashok, in late 2018 Global Detroit launched a program called Global EIR. A partnership with the national Global EIR program, the program places foreign-born startup founders at universities to teach and mentor. By working at the university, Global EIRs are able to legally work in the US. This affords them the opportunity to launch their startups here and apply for a concurrent H-1B through their company. Global Detroit currently partners with the University of Michigan’s Economic Growth Institute on the program. Ashok was accepted, and PAXAFE moved their headquarters to Ann Arbor last summer. The company has recently closed on an additional $650,000 round of pre-seed funding, bringing their total raised in 2019 to almost $1 million. Working out of Ann Arbor SPARK, they have begun piloting their product and hiring for new positions.

“I didn’t think it was possible to continue building my company in the U.S. when I didn’t make the H-1B lottery,” Ashok recalls. “That all changed when I learned about Global Detroit and Global EIR. Not only did they help with my immigration through the Global EIR program but also continued to provide unparalleled support– both personally and with the business–which maximized our chance of success.”

TRIPS Waiver Compromise on COVID-19 Vaccines and Treatments Announcement Coming Soon?

The AIPLA and other IP organizations have issued a joint statement on a tentative TRIPS waiver compromise. On March 15, 2022, Adam Hodge, USTR spokesperson stated, in part:

Since last May, USTR has worked hard to facilitate an outcome on intellectual property that can achieve consensus across the 164 Members of the World Trade Organization to help end the pandemic. USTR joined informal discussions led by the WTO Secretariat with South Africa, India, and the European Union (EU) to try to break the deadlock.

The difficult and protracted process has resulted in a compromise outcome that offers the most promising path toward achieving a concrete and meaningful outcome. While no agreement on text has been reached and we are in the process of consulting on the outcome, the U.S. will continue to engage with WTO Members as part of the Biden-Harris Administration’s comprehensive effort to get as many safe and effective vaccines to as many people as fast as possible.

I wonder how Russia's invasion of Ukraine impacted the consensus building.  The Joint Statement provides:

JOINT STATEMENT ON TENTATIVE TRIPS WAIVER COMPROMISE

Written March 28, 2022

On March 24, AIPLA, along with the Intellectual Property Owners Association (IPO), Licensing Executives Society International (LESI), Licensing Executives Society USA & Canada, and the New York Intellectual Property Law Association (NYIPLA) issued a joint statement on the tentative TRIPs Waiver Compromise.  Our organizations are concerned by reports that the European Union, India, South Africa, and the United States have reached a tentative compromise on a proposed TRIPS waiver of intellectual property (IP) rights. We strongly support equitable, widespread and successful distribution of vaccines necessary to meet the challenges of COVID-19. However, the proposal currently being reported incorrectly portrays IP as a barrier to production and supply of COVID-19 vaccines. Our organizations know of no evidence to support that IP is such a barrier. In fact, the World Health Organization has stated: “[w]ith global vaccine production now at nearly 1.5 billion doses per month, there is enough supply to achieve our targets, provided they are distributed equitably. This is not a supply problem; it’s an allocation problem.”1 Solving the allocation problem is best accomplished by focusing on improvements to supply chain and distribution issues, rather than by concentrating on the red herring of intellectual property as an alleged barrier. Intellectual property has been critical to the development of technology that has enabled a global COVID-19 response and it continues to fuel efforts to more effectively distribute vaccines and advance other needed technology. We should not undermine our ability to respond to this and future pandemics.

Footnote 1:  See https://www.who.int/campaigns/vaccine-equity (accessed on 18 March 2022).

Global Recorded Music Industry Doing Quite Well

The IFPI has released a report titled, “Global Music Report 2021.”  The Report reviews the revenues for the global recorded music industry.  The news is good with streaming paving the way for an increase in revenue even with COVID-19!  The press release states:

The global recorded music market grew by 7.4% in 2020, the sixth consecutive year of growth, according to IFPI, the organisation that represents the recorded music industry worldwide. Figures released today in IFPI’s Global Music Report show total revenues for 2020 were US$21.6 billion.

Growth was driven by streaming, especially by paid subscription streaming revenues, which increased by 18.5%. There were 443 million users of paid subscription accounts at the end of 2020. Total streaming (including both paid subscription and advertising-supported) grew 19.9% and reached $13.4 billion, or 62.1% of total global recorded music revenues. The growth in streaming revenues more than offset the decline in other formats’ revenues, including physical revenues which declined 4.7%; and revenues from performance rights which declined 10.1% – largely as a result of the COVID-19 pandemic.

I couldn’t agree more with the statement by the IFPI Chief Executive Frances Moore:

“As the world contends with the COVID-19 pandemic, we are reminded of the enduring power of music to console, heal and lift our spirits.

Some things are timeless, like the power of a great song or the connection between artists and fans. But some things have changed. With so much of the world in lockdown and live music shut down, in nearly every corner of the globe most fans enjoyed music via streaming.” 

And, the whole world was happier with music:

·       Latin America maintained its position as the fastest-growing region globally (15.9%) as streaming revenues grew by 30.2% and accounted for 84.1% of the region’s total revenues.

·       Asia grew 9.5% and digital revenues surpassed a 50% share of the region’s total revenues, for the first time. Excluding Japan (which saw a decline of 2.1% in revenue), Asia would have been the fastest-growing region, with exceptional growth of 29.9%

·       Featured as a region in the report for the first time, recorded music revenues in the Africa & Middle East region increased by 8.4%, driven primarily by the Middle East & North Africa region (37.8%). Streaming dominated, with revenues up 36.4%.

·       Revenues in Europe, the second-largest recorded music region in the world, grew by 3.5% as strong streaming growth of 20.7% offset declines in all other consumption formats.

·       The US & Canada region grew 7.4% in 2020. The USmarket grew by 7.3% and Canadian recorded music revenues grew by 8.1%.

A Compelling Read: New Yorker Article on the U.S. Department of Justice's "China Initiative"

The New Yorker has published an important, fascinating and excellent article concerning Franklin Tao, a university researcher, who was caught up in the U.S. Department of Justice's China Initiative.  The article is titled, "Have Chinese Spies Infiltrated American Campuses," and is authored by Gideon Lewis-Kraus.  The article mostly focuses on Mr. Tao's experience, but also raises numerous important questions about the Trump Administration's China Initiative and its general approach. Notably, the Biden Administration has discontinued that initiative, but see here on addressing "The PRC Threat." The article may be classified as additional proof under the Trump Administration critique: "Can Spot a Problem, But Proposes Unworkable and Likely Ultimately Unproductive Solutions." The article could focus a bit more on how in some technical fields the line between basic and applied research is blurred.  Additionally, the question of industry competitiveness (and dare I say protection) is an important one that has national security implications--especially in a global economy.  This is particularly true where private interests control a significant amount of critical (and other) infrastructure and national governments spend significant amounts of funding on research and development that leads to economic development.  It is important to remember that many universities in the United States are land grant institutions with direction to help develop local economic interests.  The Bayh-Dole Act itself points toward a preference for U.S. economic development.  Moreover, democracy relies upon the trust and the relative prosperity of many of its citizens (the protection of good paying middle class jobs). The article seems to indicate that the big difference between now and past policy concerning approaches to sharing technology with, for example, the Soviet Union, is that the United States is no longer perceived as being "on top."  There may be some truth to that, but I don't think it is the full story: a lot has happened since then besides that fear. The important recommended article is available, here. I hope it stimulates more thought and conversation. 

Intellectual Property Valuation & Technology Transfer. Current Practice and Challenges

 To join OxFirst for a Free Webinar Click on the Link Below:

 https://oxfirst.com/webinars/intellectual-property-valuation-technology-transfer-current-practises-and-challenges/

Date & Time:  March 29 2022 15h00 -16h00 GMT = 16.00 – 17.00 CET

IP Valuation and Tech Transfer

What the Talk is About

The webinar will focus on strategies for technology transfer from academic research institutions to industry, with attention to current practices and challenges across Israel. Israel has a well-developed infrastructure for the commercializing of early-stage technologies developed within research institutions. This infrastructure includes sophisticated university technology transfer offices, ambitious government funding programs, and a mature venture capital ecosystem. Ronen Kreizman will provide insights into how technology transfer offices pursue optimal and sustainable commercialization strategies for early-stage academic technology. Eli Greenbaum will describe Israeli government funding mechanisms for technology transfer, and how such mechanisms complicate the transfer and licensing of intellectual property by grant recipients. 

 

About the Speakers

Dr. Ronen Kreizman, VP Business Development Life Science, Weizmann Institute. 

Eli Greenbaum, Partner. Yigal Arnon & Co. and Adjunct Faculty, Reichman University.

 

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.

Conclusion

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.]

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.'[2]

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)	Rebuttal[10]
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 9^th 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.

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[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. https://www.regulations.gov/comment/ATR-2021-0001-004

[3] Cambridge Dictionary: https://dictionary.cambridge.org/dictionary/english/opportunistic

[4] Merriam-Webster: https://www.merriam-webster.com/dictionary/opportunistic

[5] Vocabluary.com https://www.vocabulary.com/dictionary/opportunistic

[6] Dictionary.com (opportunism) https://www.dictionary.com/browse/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. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3988411

[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.