Posts Tagged: "Ebay v. Mercexchange"

In late August, the U.S. International Trade Commission published a notice of institution of a Section 337 investigation on behalf of the Regents of the University of California, which is now underway. The University filed a complaint in July alleging that a series of major retailers including Amazon.com, Bed Bath & Beyond, IKEA, Target and Walmart have infringed patents through the importation of certain filament light-emitting diodes (LEDs) and products containing the same. The ITC action is part of an enforcement campaign that is being hailed by the firm representing the university as a “first-of-its-kind university-led effort” to vindicate patent rights owned by the institution.

Last week the United States Court of Appeals for the Federal Circuit issued an important decision that might be easy to overlook. In Intellectual Ventures I LLC v. Capital One Financial Corporation, the Federal Circuit dodged the antitrust question presented by finding that a prior ruling had collateral estoppel effect. Still, the arguments raised by Capital One against Intellectual Ventures are part of a disturbing trend. Unwilling licensees who engage in a scheme of efficient infringement to avoid paying for patent licenses are increasingly looking to creative antitrust theories to escape liability for their actions. Efficient infringement is a cold-hearted business calculation whereby businesses decide it will be cheaper to use patented technology without paying than to license it and pay a fair royalty to the patent owner. This calculus is made on the part of large entities who realize there are a certain number of patent owners that are just simply not going to assert their patents for one reason or another, frequently because they don’t have the money to do so. Then there is another group of those that will assert their patents but will not win. The calculation progresses to realize that there is a small group of those who are likely to both assert patents and prevail, thanks to all the hurdles put in place (i.e., patent eligibility challenges, the Patent Trial and Appeal Board, etc.). The calculation further recognizes that even if a patent owner prevails, a permanent injunction is virtually impossible to obtain as the result of the Supreme Court’s decision in eBay v. MerchExchange, and damages are likely to be minimal thanks to a continual judicial erosion in damages available to victorious patent owners. This cold-hearted business approach to using intellectual property without paying has gone on for decades, but with the weakened state of the U.S. patent system since 2006, it has grown progressively worse.

The bipartisan STRONGER Patents Act of 2019 took an important step forward last week, as the Senate Judiciary Subcommittee on Intellectual Property held a hearing on the proposed legislation. Senators Tillis and Coons, the Subcommittee’s Chairman and Ranking Member, should be commended for holding the hearing and focusing attention on our patent system’s role in promoting American innovation and job creation. As several of the hearing witnesses made clear in their testimony, our patent system has been dangerously weakened in recent years through a series of judicial, legislative, and administrative changes. These changes have undermined patent rights and made it difficult for inventors to protect their innovations from infringement. Meanwhile, our foreign competitors, including China and Europe, have strengthened their patent rights. This has put us at a competitive disadvantage and helped contribute to a trend of both innovation and venture capital increasingly moving overseas. For example, the U.S. share of global venture capital fell from 66% in 2010 to 40% in 2018, while China’s share increased from 12% to 38% in the same time period. And despite more than a decade of economic growth following the Great Recession of 2007-2009, startup formation has failed to return to its pre-recession levels.

On August 16, the Supreme Court of New Hampshire issued an opinion in Automated Transactions, LLC v. American Bankers Association affirming a lower court’s decision to grant a motion to dismiss claims of defamation alleged by an inventor whose legitimate patent licensing business was decimated by a collection of entities and individuals deriding that inventor as a “patent troll.” The decision is certainly unwelcome news to any inventor concerned by the prospect that large entities could infringe upon their intellectual property and escape any chance of facing justice simply by hurling the “patent troll” epithet.

At a hearing of the House Judiciary Committee’s Subcommittee on Courts, Intellectual Property, and the Internet this morning, titled Counterfeits and Cluttering: Emerging Threats to the Integrity of the Trademark System and the Impact on American Consumers and Businesses, members of Congress expressed concern over the steep rise in trademark applications by Chinese filers, many of which have been found to be fraudulent. The problem has been exacerbated by poor enforcement on the part of platforms like Amazon, eBay, and Walmart; by the limited authority of the U.S. Patent and Trademark Office (USPTO) to revoke registrations once issued; and by incentives offered by the Chinese government in the form of subsidies to Chinese applicants for U.S. trademarks, said panelists.

Senator Chris Coons (D-DE) and Congressman Steve Stivers (R-OH) reintroduced the STRONGER Patents Act of 2019 today in an event on Capitol Hill. Coons first introduced the STRONG Patents Act in 2015, which then became the STRONGER Patents Act in 2017. This latest iteration, like the iterations before, seeks to take a number of steps to strengthen patent protections and…

Over the last 15 years, Congress, the courts and the USPTO have gutted the patent system. Fortunately, USPTO Director Andrei Iancu has been taking important steps to reverse some of the damage, with revised 101 guidance and changes in the Patent Trial and Appeal Board (PTAB). But the most important thing Iancu is doing is silencing the big tech “patent troll” narrative. False political narratives condense complicated issues into an object and then villainize the object. Once a villain is created, its evil can be expanded to encompass anything you don’t like. When you have pushed enough bad stuff into the moniker, you can simply state its evil name, add a few campaign contributions, and Congress will magically pass laws in your favor to kill the villain. The “patent troll” narrative has been valuable to big tech. It bought the laws they needed to perpetuate their monopolies. With Iancu silencing the “patent troll” narrative, big tech created a new one: “bad patents”.

On the morning of February 14, the New Hampshire Supreme Court will hear what could be one of this year’s most important set of arguments related to patent ownership taking place outside of the federal judiciary. At 10:30 AM that morning, the Court will listen to oral arguments in Automated Transactions, LLC and David Barcelou v. American Bankers Association et. al. to determine whether the New Hampshire Superior Court erred by dismissing a defamation case after finding that the term “patent troll” isn’t necessarily pejorative. Automated Transactions and David Barcelou alleged that the defendants in the action made defamatory statements by referring to them as a “patent troll.” This exposed them to hatred, ridicule and contempt, which caused them to be ignored by automated transaction machine (ATM) operators across the country and injured their legitimate business of licensing patents that they developed and that were issued by the U.S. Patent and Trademark Office. The appeal argues that the Superior Court did not examine the full context of the reference to the term “patent troll” when making its determination, dismissing the action before the plaintiffs were able to present any evidence or proof and depriving them of their rights to a trial on the merits.

The cost of obtaining a U.S. patent has not significantly changed for the past 10 years. This remarkable stability is confirmed by the AIPLA Economic Survey, our own fees, and our general knowledge of the market. The major costs for obtaining a U.S. patent include the drafting fee, the cost of responding to USPTO office actions and the USPTO fees. The first two fees have not increased in over 10 years for many firms and the government fees have increased but remain relatively low compared to the other fees. With respect to the price of issued patents, the 2018 IAM Benchmarking Survey points to a bear market for U.S. patents, which are “cheaper” year after year. A fall in prices is reported, with 24% of corporate respondents stating that patents are cheaper than a year ago; the previous year’s survey had 36% reporting a fall in prices. Such relatively stable cost and low price are disharmonious with the fact that a U.S. patent covers the largest market in the world—and a growing market. Despite a slight dip in 2009, the U.S. GDP has grown steadily for the past 20 years. Even if the recent volatility in the stock market is a sign of a difficult 2019, the long-term positive trend is likely to continue.

With the next Supreme Court term beginning in a few weeks we all need to come to terms with the fact that the U.S. has a compulsory licensing system, which is truly ironic. Trade missions, trade representatives, and governmental organizations travel the world preaching about the importance of a strong intellectual property system and how that starts with strong patent rights that are not subject to the whims and fancy of compulsory licensing. America should practice what it preaches. For some time, the United States hasn’t had a property rights-based patent system. That was merely confirmed in Oil States with the Supreme Court calling patents a government franchise, but the seeds were sown over 12 years ago when the Court decided eBay and removed exclusivity from the patent bargain.

Congressman Dana Rohrabacher (R-CA) has introduced H.R. 6557, the Inventor Protection Act, into the House of Representatives. This bill is the latest proposed piece of legislation to help undo some of the more damaging effects of recent federal government actions on patent law which have negatively impacted the ability of patent owners to enforce their patent rights against infringers.

Principe and Rudroff unfortunately regurgitate much of the misguided dialogue, which has done nothing to serve this country except to decimate its patent system in recent years. In the view of the authors, patent trolls, or patent assertion entities (PAEs) (which the authors note is the less pejorative term), provide no market value and often enforce software or business method patents which have questionable validity. Of course, it is worth noting that in its 2016 study on PAEs, the Obama Federal Trade Commission called the term “patent troll” both unhelpful and prejudicial, and also specifically recognized that PAEs can and do play a valuable role in the market. So the conclusions of Principe and Rudroff are not supported by even an FTC study commissioned for the purpose of condemning patent trolls. 

There are 13 sections to Massie’s bill, many of which are geared towards the abolition of various statutes of the AIA. Perhaps the most salient portion of the proposed bill are sections regarding the abolishment of the Patent Trial and Appeal Board (PTAB) as well as the elimination of both inter partes review (IPR) and post-grant review (PGR) proceedings currently conducted by the PTAB. As the bill states, both IPR and PGR proceedings “have harmed the progress of science and the useful arts by subjecting inventors to serial challenges to patents.” The bill also recognizes that those proceedings have been invalidating patents at an unreasonably high rate and that patent rights should adjudicated in a judicial proceeding and not in the unfair adjudication proceedings which occur within the U.S. Patent and Trademark Office. Ex parte reexamination proceedings would be preserved by this bill as well.

Last month, the U.S. Patent Office issued patent number 10,000,000. This historic occasion calls for rethinking our patent system and the future of American innovation… It is nothing short of misleading the public by telling inventors that in exchange for their invention disclosure they will receive a limited monopoly, a patent. Most of the time inventors get no monopoly rights whatsoever. At best, after years of litigation, millions of dollars in attorney fees and multiple challenges to their patent validity at the Patent Office, they may get some monetary compensation. But is it worth the hassle?

Antitrust agency communications, such as the EU Commission’s Horizontal Guidelines and the FTC/DOJ Licensing Guidelines underline that market power does not necessarily result from patent ownership as such. They contain, however, no specific language on standard-essential patents which are – if they are valid and truly standard-essential – different from other patents in that they must, by definition, be used in order to operate on the respective standard-based market. In Europe at least, it seems to be increasingly accepted that SEPs can convey market power but that they do not necessarily always do so. Advocate General Wathelet’s proposition (para. 57 et seq. of his opinion in the Huawei/ZTE case) to establish a rebuttable presumption that SEP ownership generates market power has not been taken up by the CJEU’s Huawei/ZTE-decision, probably because the parties already agreed that Huawei held a dominant position (para. 43). But court decisions from the UK (for instance Unwired Planet/Huawei, a summary of the case is provided here) and Germany (for instance LG Düsseldorf, 26.3.2015, 4b O 140/13) have taken a case-sensitive approach, looking not only at the leverage generated by a SEP but also at circumstances which may limit its holder’s power.