Berkeley Center for Law & Technology - Patent Damages

Today, the Berkeley Center for Law & Technology emailed a notice and a paper on patent damages:

"On March 3, 2016, the Berkeley Center for Law & Technology hosted a day-long workshop on patent damages, one of the most important and contentious topics in patent law and policy. Organized by Professors Stuart Graham (Georgia Tech, Scheller College of Business), Peter Menell (BCLT Director and Berkeley Law), Carl Shapiro (Haas Business School at UC Berkeley), and Tim Simcoe (Boston University Questrom School of Business), the workshop brought together in-house counsel, litigators (from both the assertion and defense sides), patent licensing professionals, testifying expert witnesses, and academics (both law professors and economists).

Today, Profs. Graham, Menell, Shapiro and Simcoe issued a paper summarizing the workshop discussion, key findings, and ramifications for patent case management. The paper includes a background memo summarizing patent damages law prepared by Professors Thomas Cotter (Univ. of Minnesota Law School) and John Golden (Texas Law). The organizers welcome your feedback on this report and hope to continue a conversation with all interested parties regarding patent damages."

Copyright © 2016 Robert Moll. All rights reserved.

SHIELD Act of 2013 - A Problematic Solution to Patent Trolls

I thought the effort to pass the SHIELD Act died last year, but read Joe Mullin's article tonight: Peeved politicians want "loser pays" rule for patent trolls - SHIELD Act would target patent shell companies, exempt inventors, universities. I was wrong, it's repackaged as the SHIELD Act of 2013! It's changed a bit, but still not a good idea.

Part of the problem is it's a huge departure from centuries of America law. The America rule requires each party in litigation bear its own expenses, including attorney fees. In 1946, the U.S. patent statute was amended to "discourage infringement of a patent by anyone thinking all he would be required to pay if he loses the suit would be a royalty." The Senate Committee at that time noted, "it is not contemplated that the recovery of attorney fees will become an ordinary thing in the patent suits." In 1952, the U.S. patent statute was amended to add that attorney fees would only be recoverable in "exceptional cases." Even then attorney fees are intended to compensate the "good party" for its expenses and not punish the "bad party." So despite the rhetoric U.S. patent law already has a mechanism to tackle patent trolls.

This Act's proposed fee shifting ignores that plus opens a can of worms when parties have vastly different financial resources. For example, if a small company becomes aware a large company is infringing its patent, offers a license, which is ignored, it may need to go to court to seek redress. This bill would encourage defendants to engage a large law firms (many attorneys are assigned to the case) to quickly run up a huge legal bill, which is not difficult if you bill at $600-$1,000/hour, generate a "victory," and hand the entire legal bill (which should belong to the defendant for not exercising any judgment and ignoring the relatively low cost inter partes review in the USPTO) to punish the small company for having the audacity to want to license its patent. Ultimately if passed, the SHIELD Act may just shield large companies who want to freely infringe small companies patented inventions.

The SHIELD Act definitions of a patent troll is also problematic. A company or individual risks being held a patent troll by defendant's motion if (1) it doesn't practice the invention; (2) it doesn't have at least one inventor in its employ; or (3) it is not the original patent owner. Assigning so much importance on practicing the invention has no basis in US patent law. Wouldn't the bill's definition of patent troll be met by companies none of us consider to be patent trolls? For example, is Google forced to litigate as a patent troll under this bill if it seeks to enforce the Motorola Mobility patents? Better not lay off the affected Motorola inventors then. How about Facebook's purchase of AOL and IBM patents? How much practice of the invention suffices to defeat the patent troll label? Could a company avoid the patent troll label by building and selling a prototype? Couldn't someone be exempt from the Act simply by hiring one of the inventors? Maybe plaintiff and defendant could bid for the inventor. Does exempting an original owner but not any subsequent assignee discourage transfer of patents? Congress may mean well, but these types of consequences make the bill worse than the problem.

Copyright © 2013 Robert Moll. All rights reserved.

InterDigital v. ITC and Nokia - Patent Licensing Satisfies Domestic Industry Required for ITC Relief

Yesterday, in InterDigital v. ITC and Nokia, the Federal Circuit held that non-practicing entity InterDigital's patent licensing alone met the domestic industry requirement of Section 337 of the Tarriff Act of 1930, 19 USC 1337(a)(2) and 1337(a)(3). The Federal Circuit also stated the statute does not require physical articles be made in the USA. This decision poses an obstacle to the effort to reduce the impact of non-practicing entity (NPE) lawsuits in the ITC. For more detail on the lobbying, see an earlier post: Lobbying to Block ITC from Hearing Non-practicing Entities

So I expect NPEs will continue to file lawsuits at the ITC seeking injunctive relief apart from EBay considerations until (1) the domestic industry requirement is rewritten, or (2) the SCOTUS reverses the InterDigital interpretation of the domestic industry requirement. But I don't expect many NPEs to successfully assert SEPs in the ITC given the ITC only grants exclusion orders.

Copyright © 2013 Robert Moll. All rights reserved.

DOJ & USPTO Policy Statement on Remedies for Standards-Essential Patents Subject to FRAND

The FTC and DOJ/USPTO have different opinions on what should trigger an injunction for infringement of a standard essential patent (SEP).

See the FTC press release: Google Agrees to Change Its Business Practices to Resolve FTC Competition Concerns In the Markets for Devices Like Smart Phones, Games and Tablets, and in Online Search.

See U.S. Department of Justice, Antitrust Division (DOJ) and the U.S. Patent and Trademark Office (USPTO) Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments.

Also see McDonnell Boehnen Hulbert & Berghoff LLP's article: FRAND and Injunctive Relief: Exploring a Standard-Essential Patent Owners Right to Injunctive Relief

Copyright © 2013 Robert Moll. All rights reserved.

Failure to Patent Mark - Losing Easy Money

Marking has become an important issue in cases like the Oracle v. Google patent suit. Search on "marking" in the Groklaw articles. The issue boils down to this: If a patent owner or its licensee fails to mark its products, damages cannot be recovered for infringement occurring before actual notice (i.e., a specific charge of the infringement or filing a patent infringement complaint).

35 USC 287 suggests marking is simple. Fix the word "patent" or "pat." together with the patent number on the product, or if this cannot be done on the product packaging. Analyst and blogger Florian Mueller notes how difficult it has been for patent owners in the ITC in recent times. The details are described here: The ITC is tough terrain for mobile patent plaintiffs.

The computer industry continues to lose money due to a failure to mark patented products. Compared to winning in the ITC, marking should be easy, but companies don't appear to do a good job of marking when it involves software patents. Here's some possible reasons marking is not implemented that well: 

1. Software may be viewed as incapable of being marked. Stating software is a intangible set of instructions and not patentable per se obscures that software is often contained in specific device or installed in a general purpose computer on storage media (e.g., DVD, CD, or solid state device). If the patent has device or computer-readable medium claims, it should suffice to mark "substantially consistently and consistently" on the device, media, or if necessary, the associated packaging.

Another approach is to virtual mark the device or storage media as permitted under the America Invents Act (AIA). Virtual marking is a mark (e.g., URL) that directs the public to a freely-accessible Internet address where a patented product is associated with its patent number to give notice that a product is patented. This should become the preferred way to mark in the future.

2.  The PTO is so backlogged that US patent issue and the ability to mark happens well after product is released. Apple's whopping (yes 358 pages) iPhone patent issued in 2009, which was well after the iPhone release in 2007. Apple sold tens of millions of iPhones with no related patent markings because it sold the iPhones before this patent issued.

I don't see this problem going away. Despite progress under Director Kappos, the PTO continues to have lengthy pendencies (the PTO Visualization Center says pendency is 34 months) and the PTO art units that examine software inventions are even more backlogged.  Plus current law permits a one year grace period to file a US patent application after the first offer for sale or public use of the invention so companies may choose to patent after product release today.

3.  Some have concerns of the risk of false marking. This is understandable since US law gave anyone standing to sue a patent owner  for false marking for a fine of up to $500 for every offense. Then the Federal Circuit in its wisdom held an "offense" relates to each article that has been falsely-marked. Thus, a fine for 10,000 software programs falsely marked could rise to $5,000,000. No wonder a cottage industry (opportunistic patent attorneys) arose to sue any patent owner with a large number of improperly marked products. Never mind some products simply bore expired patents, the plaintiffs were too busy working in the "public" interest. Fortunately, the risk of false marking is reduced because the AIA requires only one who has suffered a competitive injury has the right to sue.

4.   The value of the software patent may be found in method claims, and a method cannot be marked like a patented article. Decades of law say 35 USC 287 does not impose a duty to mark on the owner of a method patent or even on a patent owner who is not manufacturing a patented product. Although virtual marking doesn't expressly resolve the problem of how to mark a method, it seems it should be extended by amendment to methods since the argument that a method patent cannot be marked is no longer accurate given the ease of marking on the Web.

Caveat 1 Virtual marking appears to require free access. Presenting patent marking on a client computer to a paying user, does not appear to satisfy the freely-accessible Internet requirement of 35 USC 287. Thus, it may be best to present the information on a web site, which is freely accessible to the public as well.

Caveat 2 If a company has lots of products and lots of patents, listing all of the patents on a company web site without stating how they relate to the products may not satisfy the requirement to "mark" the product.  RIM's effort to virtually mark before the AIA probably failed in two ways: (1) listing thousands of patents on a web site provided no notice which product contains certain patented inventions, and (2) listing thousands of patent raised the concern of false marking or suggested to the layperson that all or some unspecified large subset of the patents were related to the products.

Caveat 3 Software upgrades and patches may "remove" the patented invention from the application and raise the spectre of false marking. So like most of the stuff in life you can't just set it up and walk away. You need a team who understands the software and monitors the company software products to remove a patent from the list that is no longer pertinent to a given product in a timely manner.

Caveat 4 It is unclear whether presenting patent numbers at the client computer of a distributed system will suffice for marking for an invention that resides on the server side. On the other hand, since only an administrator routinely may view server-side software, perhaps you display the patent and number at the client, but state the invention is on the server.

In the future, virtual marking should be the preferred way to mark since it provides a flexible and efficient way to notify the public of the existence of a patent. Virtual marking should also open the door for more patent owners to avoid false marking charges and obtain more than a reasonable royalty for patent infringement occurring prior to actual notice.

These are just preliminary thoughts and I expect the Federal Circuit will ultimately weigh in on these issues. In the meantime you may want to read the following pre-AIA district court decision on patent marking related to web sites:

Soverain Software LLC v. Amazon.com, Inc.

Copyright © 2011 Robert Moll. All rights reserved.