European Court of Justice Ruling Adds to Challenges that U.S. Standard-Essential Patent Holders Face on Enforcement

BartkowskiGuest Commentary

by Paul M. Bartkowski, a partner with Adduci, Mastriani & Schaumberg, LLP, with Mike Doman, an associate with the firm.

On July 16, 2015, the European Court of Justice (“ECJ”), in Huawei v. ZTE, clarified the circumstances under which an owner of a standard essential patent (SEP) that is required to license the SEP on fair, reasonable, and non-discriminatory terms (FRAND) can bring a claim for injunctive relief against an alleged infringer. The ruling was highly anticipated because the nature of a SEP holder’s right to enjoin alleged infringers has been a recent topic of debate in both the U.S. and in Europe. A review of the decision reveals that European and American courts analyze FRAND-related issues quite differently. Continue reading

Federal Circuit Reaffirms International Trade Commission’s Authority Over Induced Patent Infringement

Kaminski_Jeffri_LRFeatured Expert Contributor – Intellectual Property (Patents)

Jeffri A. Kaminski, Venable LLP

The U.S. Court of Appeals for the Federal Circuit sitting en banc has reaffirmed the International Trade Commission’s (ITC) longstanding authority for remedying inducement infringement. The ITC authority was called into question, and in fact overruled, by an earlier panel decision in the same case. The court sitting en banc in Suprema v. ITC voted 6-4 to overturn the panel’s decision limiting the circumstances under which the ITC could issue an exclusion order for induced infringement. The en banc decision closes a loophole for induced infringement and provides certainty on the issue.

By way of background, Suprema is company that manufactures fingerprint scanners in Korea. The fingerprint scanners are imported and sold to Mentalix in the U.S. Mentalix writes custom software for controlling the scanners. It then bundles its software with the scanners and resells the bundled product within the U.S. Continue reading

A Case with Teeth?: Federal Circuit to Review International Trade Commission’s Jurisdiction over Digital “Articles”

ITCNext Tuesday, August 11, the U.S. Court of Appeals for the Federal Circuit will hear oral argument in ClearCorrect Operating, LLC v. International Trade Commission, a case that nominally involves a cease-and-desist order the International Trade Commission (ITC) imposed on a data file that contained a digital model of crooked teeth. As numerous amici in the case assert, however, the court’s ultimate decision could have significance well beyond digital teeth images; it could establish standards for the Commission’s jurisdiction over international trade in digitalized goods.

The case followed a routine path from ITC to the Federal Circuit. Align Technology complained to ITC that ClearCorrect was importing goods into the United States that infringed Align’s patents. Both companies create patient-specific “aligners” to correct crooked teeth. ClearCorrect’s facility in Texas would download data of a model created in Pakistan from a foreign-based server, and then use that data to create the aligner. Align alleged that the data “imported” from the foreign server constituted an “article,” under 19 U.S.C. § 1337, over which ITC had jurisdiction. Continue reading

Supreme Court Observations: Kimble v. Marvel Entertainment, LLC

Kaminski_Jeffri_LRFeatured Expert Contributor – Intellectual Property (Patents)

Jeffri A. Kaminski, Venable LLP

The U.S. Supreme Court recently decided a closely watched case concerning contract rights and patent royalties. In Kimble v. Marvel Entertainment, LLC the Court upheld its long standing precedent and determined that parties cannot agree to patent royalty payments that extend beyond the expiration of the patent.

The case originated when Kimble and Marvel agreed to a patent license for a toy glove that Kimble had patented. The licensing agreement called for a lump sum payment and running royalties for a license to the patent as part of a settlement of ongoing litigation. The agreement did not set an end date for the royalty payments. In making its decision the Court upheld its ruling in Brulotte v. Thys Co., 379 U.S. 29 (1964), holding that licenses requiring payment of patent royalties after patent expiration are “unlawful per se.” Brulotte has been the subject of criticism in the 50 years since it was decided, but the Court determined that was not enough of a reason to overturn its longstanding precedent. Continue reading

Supreme Court Holds that Belief Patent Is Invalid Is No Defense to Induced Infringement

Kaminski_Jeffri_LRFeatured Expert Contributor – Intellectual Property (Patents)

Jeffri A. Kaminski, Venable LLP

The Supreme Court declined to create a new defense this week for defendants in patent infringement cases, holding that a defendant’s belief regarding patent validity is not a defense to a claim of induced infringement under 35 U.S.C. § 271(b), as a matter of first impression in Commil USA, LLC v. Cisco Systems, Inc. This is welcome news to some patent owners who have felt the legal tide has been turning against them. However, the Court also recognized that so-called “patent trolls” exist and that frivolous patent infringement lawsuits are being brought in federal courts. The Court stressed that district courts have authority under Rule 11 and 35 U.S.C § 285 to levy sanctions and award fees to dissuade frivolous cases from being filed. With its ruling, the Court continued its trend of trying to maintain a balance between patent owners and accused infringers.

The Court began its analysis by clarifying the current state of the law. Direct infringement is a strict liability offense. The state of mind of the infringer is not relevant in determining liability for direct infringement. In contrast to direct infringement, liability for inducing infringement attaches only if the defendant knew of the patent and that “the induced acts constitute patent in­fringement.” Global-Tech Appliances, Inc. v. SEB S.A. It is not enough if the party charged with induced infringement did not know that the acts it induced would infringe. Continue reading

California’s New Scrutiny of Patent Litigation Settlements Will Not Stand Under Federal Law

cali sealThe California Supreme Court earlier this month issued an opinion that subjects litigants who settle their patent disputes to scrutiny under state antitrust law. The court reasoned that such settlements may create unreasonable restraints on trade. While the decision in In re Cipro Cases I & II to reinstate antitrust claims was not overly surprising—after all, the U.S. Supreme Court had previously held in FTC v. Actavis, Inc. that some patent litigation settlements might violate federal antitrust law—the breadth of the California Supreme Court’s decision could have a particularly negative impact on the free-enterprise system. Indeed, the decision suggests that parties to a patent litigation settlement will have great difficulty ever avoiding California antitrust liability if the settlement entails transferring anything of value from the patent holder to the alleged infringer. Because Cipro’s new state-law antitrust standard is so much more exacting than the standard announced by the U.S. Supreme Court in Actavis, federal antitrust law may well trump California’s standard. Indeed, were Cipro to reach the U.S. Supreme Court, the Court likely would reverse on federal preemption grounds.

“Reverse-Payment” Patent Settlements

When parties to litigation enter into a settlement, one would normally expect that any cash payments would flow from the defendant to the plaintiff. The normal expectations have been reversed in the context of litigation involving prescription-drug patents, however, as a result of financial incentives created by the Hatch-Waxman Act, a federal statute designed to ensure that generic versions of prescription drugs enter the market more quickly. The Act includes a provision that permits generic companies, by declaring to the Food and Drug Administration a belief that the patent held by a brand-name drug company is invalid, to essentially force the patentee to immediately file a patent infringement suit. It also grants huge financial awards to generic companies that successfully challenge drug patents. Continue reading

Playing Field May Continue to Shift for Patent Litigants on Willful Infringement

Kaminski_Jeffri_LRFeatured Expert Contributor–Intellectual Property (Patents)

Jeffri A. Kaminski, Venable LLP

While various patent reform proposals percolate on Capitol Hill, the courts continue to decide cases that impact the issues. A recent U.S. Court of Appeals for the Federal Circuit decision in Halo Electronics, Inc. v. Pulse Electronics, Inc. maintains the current standard for enhanced damages for willful infringement (a victory for accused infringers), but signals that a change may be coming (a victory for patent owners). Currently, a patent owner must prove that an infringer willfully infringes by clear and convincing evidence in order to recover enhanced damages. Under 35 U.S.C. § 284, enhanced damages may be up to three times the damages found.

In Halo Electronics, the Federal Circuit passed on an opportunity to change, and perhaps lower, the standard required for proving willful infringement, similar to how the Supreme Court lowered the standard for fee-shifting in Octane Fitness (see our previous post on fee-shifting). Although the court passed on the opportunity this time, four of the seven Federal Circuit judges are now on record as favoring reconsideration of the standard for enhanced damages for willful infringement. Continue reading