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.

---

[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.

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.

USPTO Finds No One Country or Firm "Winning" 5G Tech Race

The United States Patent and Trademark Office has released a report titled, “Patenting Activity Among 5G Developers.”  Notably, the USPTO Report states:

In recent years, many studies have attempted to identify a single global leader in 5G technologies. Because it is difficult to directly determine which company owns the most patent-protected technologies used in 5G networks, existing studies have examined company activity in 5G standardization work and patents and patent applications declared potentially essential to 5G standards.

This report provides a broader perspective by examining more than one data set and by recognizing the variances in significance that patents have to a sophisticated technical standard, such as 5G.

Specifically, the report examines which companies have fled for more patents at the USPTO in four technologies that have seen the most patenting activity among declared patent flings: Management of Local Wireless Resources, Multiple Use of Transmission Path, Radio Transmission Systems, and Information Error Detection or Error Correction in Transmission Systems. This approach narrows the focus to patent flings on technologies central to 5G innovation. In addition to measuring patenting activity in these four technologies, the report also examines certain patent fling attributes associated with greater value. By analyzing the question of the 5G patenting activity from a variety of perspectives, the USPTO has generated a rich set of results that are arguably more informative of 5G competitiveness than prior studies.

The USPTO’s examination shows that six 5G companies consistently competed in patenting activity: Ericsson, Huawei, LG, Nokia, Qualcomm, and Samsung. According to the data generated for the report, no single firm dominates 5G innovation at present.

In summary, the results suggest that there remains ongoing competition among these six 5G companies in patenting activity notwithstanding media claims that a single firm may lead. Given the complexity of the results, caution is recommended when reviewing media claims of 5G dominance.

The Report also notes some key takeaways:

• Unique among studies on 5G patenting activity, this report examines both (1) overall global 5G patenting trends, and (2) patent flings and value indicators in the four most patented 5G-related technologies. • Based on the report’s analysis of patenting activity, the six most active 5G companies are Ericsson, Huawei, LG, Nokia, Qualcomm, and Samsung. • The findings of the report call into question claims that any single firm or country is “winning.”

The report is available, here. 

Damage Calculations in Patent Infringement Cases in the United States of America. OxFirst Free Webinar . February 24 2022 15.00 -16.00 GMT = 16.00-17.

 

Damage Calculations in Patent Infringement Cases in the United States of America
OxFirst Free Webinar February 24 2022 15.00 -16.00 GMT = 16.00-17.00 CET
 
What this Event is About:
This webinar offers insights into damage calculations in patent infringement cases in the U.S.A., with an emphasis on important recent developments relating to the law of reasonable royalties; extraterritorial damages; awards of profits for design patent infringement; and enhanced damages.
Judge Randall Rader:
For over 25 years, Judge Rader has been a thought leader in the field of intellectual property law and jurisprudence. His work as Chief Judge, his publications and his work teaching patent law globally to students, judges and government officials has left an indelible mark on the field of IP law and the protection of IP rights throughout the world. Judge Rader was appointed to the United States Court of Appeals for the Federal Circuit by President George H. W. Bush in 1990 and assumed the duties of Chief Judge on June 1, 2010. Before that he was appointed to the United States Claims Court (now the U. S. Court of Federal Claims) by President Ronald W. Reagan in 1988. 
Before appointment to the Court of Federal Claims, former Chief Judge Rader served as Minority and Majority Chief Counsel to Subcommittees of the U.S. Senate Committee on the Judiciary. From 1975 to 1980, he served as Counsel in the House of Representatives for representatives serving on the Interior, Appropriations, and Ways and Means Committees. Since leaving the bench in 2014, Judge Rader has founded the Rader Group, initially focusing on arbitration, mediation, and legal consulting and legal education services. Judge Rader has presided over a major arbitration under ICC rules in Paris; conducted mediations to settle ongoing litigation.  
Professor Thomas Cotter:
Professor Cotter is Associate Dean for Research and the Taft Stettinius & Hollister Professor of Law with the University of Minnesota Law School. He is author of over 70 publications in law and runs the blog on ComparativePatentRemedies.com, on the law (both foreign and domestic) and economics of patent remedies. Professor Cotter's principal research and teaching interests are in the fields of domestic and international intellectual property law, antitrust, and law and economics. He is the author of seven books—Remedies in U.S. Patent Law: An Open-Source Casebook (Tributary Publishing, Inc. 2019); Patent Wars: How Patents Impact Our Daily Lives (Oxford Univ. Press, 2018); Trademarks, Unfair Competition, and Business Torts (with Barton Beebe, Mark A. Lemley, Peter S. Menell, and Robert P. Merges) (Wolters Kluwer 2d ed., 2016; 1st ed., 2011);
Register here:
Webinar Registration - Zoom
https://us06web.zoom.us/webinar/register/WN_AasJtbWeQGu4mCiGwj35ow

University of Arkansas Professor Misleads FBI Concerning Role in Chinese Patents

A University of Arkansas professor has pled guilty to misrepresenting the existence of patents in China to FBI.  The U.S. Department of Justice Press Release states:

An Arkansas man and University of Arkansas Professor pleaded guilty today to one count of making a false statement to the FBI about the existence of patents for his inventions in the People’s Republic of China (PRC).

Simon Saw-Teong Ang, 64, of Fayetteville, entered a guilty plea to count 58 on a superseding indictment charging him with making a materially false and fictitious statement and representation to an FBI Special Agent. According to court documents, 24 patents filed in the People’s Republic of China bear Ang’s name or Chinese birth name. The University of Arkansas, where Ang worked as a professor, required individuals such as Ang to promptly furnish to the University “full and complete” disclosures of inventions, and University policy provided that it, not individual inventors, would own all inventions created by those subject to the policy. This policy was established “in furtherance of the commitment of the University to the widest possible distribution of the benefits of University Research, the protection of Inventions resulting from such research, and the development of Inventions for the public good.”

Despite this requirement, Ang did not disclose his Chinese patents to the university and, when interviewed by an FBI agent, lied about his involvement in the inventions. Specifically, when asked whether his name would be listed as “the inventor” of numerous patents in China, Ang denied being the inventor, despite knowing he was. In addition, Ang also received numerous talent awards from the PRC government, which he did not list on the university’s annual conflict of interest disclosure forms.

Ang’s sentencing is expected to take place in approximately four months. Ang faces a maximum penalty of 5 years in prison for the crime for which he pleaded guilty, however, the plea agreement also states that if the court wishes to sentence Ang to a sentence that is not a year and a day in federal prison, Ang will have the right to withdraw from the plea agreement. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division and U.S. Attorney David Clay Fowlkes of the Western District of Arkansas made the announcement.

The FBI, the U.S. Department of State’s Diplomatic Security Service (DSS), NASA Office of Inspector General and Air Force Office of Special Investigations investigated the case.

New Patent Search Tool Released by USPTO

The United States Patent Office has released a new patent search tool and website.  The press release states:

The United States Patent and Trademark Office (USPTO) today announced a new Patent Public Search tool that provides more convenient, remote, and robust full-text searching of all U.S. patents and published patent applications.

Based on the advanced Patents End-to-End (PE2E) search tool USPTO examiners use to identify prior art, this free, cloud-based platform combines the capabilities of four existing search tools scheduled to be retired in September 2022: Public-Examiner’s Automated Search Tool (PubEAST), Public-Web-based Examiner’s Search Tool (PubWEST), Patent Full-Text and Image Database (PatFT), and Patent Application Full-Text and Image Database (AppFT).

 “This new platform represents a significant step forward in our broader efforts to meet stakeholders where they are, especially in the pandemic,” said Drew Hirshfeld, Performing the Functions and Duties of the Under Secretary of Commerce for Intellectual Property and Director of the USPTO. “Knowing that our previous tools did not provide users with the convenience or similar functionality as those used by our examiners, it is incredibly gratifying to know that now more stakeholders can search for patents using the resources of four powerful search platforms in one expansive tool.”

In the past, users could only access legacy search tools PubEAST and PubWEST at a USPTO facility like the headquarters in Alexandria, a regional office, or a Patent and Trademark Resource Center. With the launch of the new tool, remote searching is now available to all users with internet access. Additional benefits include:

• Layouts: Multiple layouts with multiple tools to provide more data at once
• Highlighting: Multi-color highlighting that can be viewed across multiple gadgets and turned on or off
• Tagging: Ability to tag documents into multiple groups that can be renamed and color coordinated
• Notes: Ability to add notes to an image with options to include tags, relevant claims, and highlights
• Quality: Robust full-text searching of U.S. patents and published applications
• Familiar usability: Same searching syntax as PubEAST and PubWEST

In conjunction with the launch of Patent Public Search tool, the USPTO unveiled a new Patent Public Search webpage that includes FAQs, training resources, and other information to help users transition to the new tool. Upcoming public training sessions will be posted on the webpage as soon as they are scheduled.

For questions regarding Patent Public Search, please contact the Public Search Facility at psf@uspto.gov or visit the Public Search Facility and/or Patent and Trademark Resource Centers websites.

Sharp - not weak or late enforcement is required against recalcitrant SEP implementers

Public comments on SEPs and FRAND licensing sought for the US Department of Justice’s Draft Policy Statement and the UK Intellectual Property Office’s Call for Views.

It is vital that the fundamental sanction in patent law—of the temporary right to exclude—along with other remedies, including enhanced damages, are readily available against infringers when Fair, Reasonable and Non-Discriminatory (F/RAND) licensing has been offered, but is rejected, evaded or unreasonably delayed.

Technical standards confer enormous value to implementers and consumers. For example, cellular standard-essential technologies enable annual revenues exceeding a trillion dollars in operator services, several hundred billion dollars in smartphone sales and hundreds of billions more in over-the-top applications and services on those devices. Undermining the fundamental patent rights of organizations that commit large R&D resources to develop those technologies and contribute them to the standards would unfairly short-change those innovators and jeopardize ongoing investments in 5G and the Internet of Things (IoT). In addition to facilitating revenue growth and cost savings in those downstream markets, standard-essential technologies, for example, help save the planet by enabling us to fly and drive less—thus reducing our carbon footprints—and reduce deaths on the road with autonomous driving capabilities.

Innovative standard-essential technology developments result from high-value professional employment: for example, in US organizations including InterDigital, Nokia Bell Labs and Qualcomm. In contrast, most handset implementer jobs, such as those in manufacturing, are offshore.

Technology transfer from independent developers to implementers of cellular and other standards is flourishing and extensive. Intellectual Property Rights (IPR) policies—most notably including ETSI’s IPR Policy as applied to FRAND licensing of cellular Standard-Essential (SEPs)—have facilitated exceptional innovation, industry growth and vigorous competition including numerous new market entries with low barriers to entry in mobile phones (e.g. Apple in 2007, Xiaomi, Oppo and Vivo since 2011) and some notable major market participant exits (e.g. Nokia in 2013 and LG in 2021).

Aggregate royalty payments are small percentages of product costs and have declined while many implementers seek to significantly diminish, greatly delay or entirely avoid paying these altogether. This undermines competition and deprives the innovative companies—that develop the new technologies for all to share through their contributions to openly-available standards—from obtaining an adequate, fair, and timely return on their substantial R&D investments.

Increasing yet illegitimate attempts to weaken patent rights encourage free riding and unfairly advantage unscrupulously opportunistic implementers. Harm is mainly suffered in advanced nations, such as the US and in Europe, where most standard-essential technology developments occur and recompense for these patented contributions have been available, while implementers have largely taken unfair advantage elsewhere.

Patent piracy (i.e., theft) provides offenders with an unfair cost advantage over those implementers who comply by paying their dues in FRAND royalties. This disparity impairs a compliant implementer’s competitive position and has far more impact on the sales and profits it can make than any other input cost (e.g., manufacturing labor) that is paid uniformly by all implementers. It also deprives patent owners of fair and timely compensation from those free riders.

In absence of reasonable resort to injunctions and enhanced damages, it is also implementers wielding considerable market power from downstream product sales such as of smartphones that can misuse their negotiating strength, with delay tactics and brinkmanship to force down royalty charges paid on licensing renewals to below the FRAND rates they have already used to lower payments paid to various other licensors.

 
More consultations

While copious evidence shows the success in technology transfer from developers to implementers in cellular standards, there is ongoing conflict between some SEP owners and implementers in FRAND licensing. This is in markets where cellular standards already prevail, and in markets being developed based on new cellular-based technologies (e.g., IoT in smart cities, agriculture, manufacturing, healthcare and in the metaverse). Despite various consultations and the publication of policy documents over many years, authorities in the US, European Union, UK and elsewhere have repeatedly asked for comments and views on the same issues as policies are adjusted.

The Department of Justice (DoJ), Patent & Trademark Office (USPTO) and the National Institute of Standards and Technology (NIST) in the US seek public input on various questions with publication of the DoJ’s ‘Draft Policy Statement on Licensing Negotiations and Remedies for Standard-Essential Patents Subject to Voluntary F/RAND Licensing Commitments’ (“DoJ Draft Revised Statement”). It states that this seeks to promote good-faith licensing negotiations and addresses the scope of remedies available to patent owners that have agreed to license their essential technologies on F/RAND terms. However, it threatens to weaken fundamental patent rights emphasized in the DoJ’s 2019 statement on the very same issue.

The UK Government’s Intellectual Property Office (IPO) has also launched a “Call for Views” to better understand whether the current SEP framework encourages innovation and effectively promotes competition in markets, or whether there are any barriers to innovation and competition. The IPO states that this will establish whether government intervention is required and to understand what intervention could look like.

Evidence-based analysis

Alleged opportunistic behaviors described in the DoJ Draft Revised Statement—that are commonly referred to as patent holdup and holdout—are examined in-depth in my full report on this topic. In this, I consider key issues including industrial and IPR policy, market power, and why sanctions such as injunctions and enhanced damages must be available for licensing to be widely and timely completed under FRAND terms and royalty rates.

This article was first published in RCR Wireless on 24th January 2022.

Over $100 million Patent Damages Decision

Back in October 21, 2021, the Court of Federal Claims decided to award over $100 million dollars concerning patent infringement against the United States Transportation Security Adminsitration (TSA) in SecurityPoint Holdings v. United States.  Independent claim 1 of the patent

discloses a method comprising: a. positioning a first tray cart containing trays at the proximate end of a scanning device through which objects may be passed, wherein said scanning device comprises a proximate end and a distal end, b. removing a tray from said first tray cart, c. passing said tray through said scanning device from said proximate end through to said distal end, d. providing a second tray cart at said distal end of said scanning device, e. receiving said tray passed through said scanning device in said second tray cart, and f. moving said second tray cart to said proximate end of said scanning device so that said trays in said second cart be passed through said scanning device at said proximate end. JX 1 col. 11 ls. 58-59, col. 12 ls. 1-14.

The court summarized its damages calculation as follows:

If we were to assess the royalty as of the date of this opinion, it would come to $103,685,510, derived as follows: 1) a royalty base of 7,660,935,659 passengers at Cat X and I airports from January 1, 2008 to April 30, 2020; 2) less 2,374,890,054 (31%) to account for TSA’s implied license; 3) less 101,770,092 (ASL passenger throughput); and 4) applying the per passenger royalty of two cents per passenger:

1)      Category X and I Passenger Throughput

Passenger Throughput 7,660,935,659

2) Implied License Deduction

31% Implied License Deduction

31% Passenger Throughput covered by Implied License 2,374,890,054

Remaining Passenger Throughput After Deduction for Implied License Remaining PAX (after 31% deduct) 5,286,045,605

3) ASL Passengers Passenger throughput related to ASL screening lanes that do not practice the patented methods and excludes overlapping passengers already deducted from the implied license

101,770,092 Royalty Base Calculated as Passenger Throughput Reduced by: 1) Implied License; and 2) ASL Throughput 5,184,275,513

4) Royalty Rate

Royalty Rate $0.02

Royalty Rate multiplied by the Royalty Base

Total Damages $103,685,510

This calculation, however, is based on a passenger throughput figure as of April 30, 2020. Plaintiff is correct that this number should be updated through the date of judgment, including appropriate reductions for implied licenses and ASL lanes. The same is true with respect to the application of interest, set out below. Accordingly, we leave to the parties the correct total judgment.

A Transfer of Global Wealth to Happen Soon? Funding for Semiconductor Manufacture in the United States

Back in May of 2021, I noted that the Endless Frontier Act, which is designed to improve the United States’ competitiveness, had been proposed in the U.S. Senate.  Since that time, the Act has been renamed the U.S. Innovation and Competition Act and passed the U.S. Senate.  The U.S. House of Representatives has also passed two laws covering parts of the U.S. Innovation and Competition Act.  A very nice article by Shelly Castle and Emily Jenkins titled “USICA and its House equivalents go to conference: what will be the likely outcome?” published in JD Supra has a very nice summary of the process of attempting to come to agreement about the contents of the ultimate law and a chart concerning where the proposed laws match up and differ.  Notably, according to the article, the House bills do not include appropriations for the CHIPs Act, which is designed to incentivize semiconductor manufacture in the United States.  There is an interesting question as to why this is happening, and I am not going to speculate.  Interestingly, in perhaps a bid to put pressure on Congress to fund the CHIPs Act, there are reports of a potential $50 billion chip manufacturing plant that may be built in North Carolina (the location of the Research Triangle).  Hopefully, Congress can get moving on this.  It is a midterm election year.