Guest Post by Thomas F. Cotter, Taft, Stettinius & Hollister Professor of Law, University of Minnesota Law School
As readers of this blog are aware, organizations such as the European Telecommunications Standards Institute (ETSI), IEEE, and others promulgate standards that enable products such as smartphones and other complex technological devices to interoperate. These standard-setting organizations (SSOs) encourage their members to commit to licensing patents that may be essential to the practice of the relevant standards on fair, reasonable, and nondiscriminatory (FRAND) terms. Because SSOs do not define the meaning of FRAND, however, when the owners of these standard-essential patents (SEPs) and the companies that implement them fail to reach terms, litigation is often the result. And because patents are territorial rights, FRAND litigation often spans the globe—though because of its importance to the European market, Germany has been home to many of the most important FRAND cases over the past decade. The German FRAND case law, in turn, is based in part on the German courts’ interpretation of European Union competition (antitrust) law, and differs in important respects from the approaches taken in FRAND cases in other leading jurisdictions, including the United Kingdom, the United States, and China. (more…)
Two of the most controversial patent law changes of the past year have involved obviousness-type double patenting, which allows applicants to patent obvious variants of their earlier patents by disclaiming the extra term of the later-expiring patent. First, the Federal Circuit held in In re Cellect that patents tied by double patenting must expire on the same day even if one of the patents has received a patent term adjustment (PTA) giving it a more-than-twenty-year term. The en banc denial and pending cert petition in Cellect have attracted substantial interest from amici and commenters. Second, the USPTO proposed that terminal disclaimers include a commitment to not enforce the patent if any claims in the patent to which it is tied are found to be obvious or not novel. Early commentary on the proposal was “overwhelmingly negative.”
In our new draft article, Fixing Double Patenting, we argue that this outcry is unwarranted.
Guest post by Tim Holbrook. Robert B. Yegge Endowed Distinguished Professor of Law and Provost's Professor, University of Denver Sturm College of Law.
United States patents are generally territorial. Their exclusive rights only operate within the United States and its territories. Or so one may think reading the Patent Act. Moreover, in a global marketplace, the territorial nature of intellectual property rights can create challenges. It would be simpler for a patent holder to just use the U.S. patent to cover foreign activity. This is especially true if a domestic act of infringement has spillover effects into other countries.
So, when – if ever – can a patent owner receive damages for foreign activity that may flow from acts of domestic infringement?
In the past few weeks, more and more people outside of patent law have learned about ‘judge shopping’—quirks in procedural rules that allow plaintiffs to pick not just a court but the individual judge who will hear their case.
Republican state attorneys general and conservative activists have been exploiting those rules to challenge federal government policies on abortion, immigration, gun control, transgender rights, and more in front of sympathetic, Republican-appointed judges, primarily in Amarillo and Wichita Falls, Texas.
Last month, the Judicial Conference of the United States (a group of judges who oversee the operation of the federal courts) issued a new policy urging courts to adopt case assignment procedures that prevent judge shopping, especially in cases challenging federal law.
Predictably, the beneficiaries of judge shopping—namely, Republicans—decried the new policy as politically motivated and urged district courts to ignore it. Democrats, for their part,
The Schedule A litigation phenomenon continues apace in the Northern District of Illinois, a court that has become, in the words of Judge Seeger, “an assembly line for TROs.” But Schedule A litigation is not confined to Chicago. It has spread, perhaps most notably to the Southern District of Florida and the Southern District of New York.
One recent decision out of New York merits closer attention. In this case, as in most Schedule A cases, the plaintiff was able to obtain an ex parte TRO that included an order instructing Amazon to freeze the defendants’ seller accounts. The order also required the plaintiff to post a bond of $20,000 “for the payment of any damages any person may be entitled to recover as a result of an improper or wrongful restraint ordered.”
The plaintiff sued 163 defendants, alleging that each was liable for infringing a utility patent directed towards “a rectangular-shaped buckle-and-belt mechanism” for “an outdoor exercise product.”
At the TRO stage, the plaintiff’s “infringement evidence chart” consisted of a series of screenshots (many of them low-resolution screenshots) of the accused products. Here’s an example of all of the evidence submitted in that chart with respect to one of the defendants:
As per usual in a Schedule A case, the defendants did not find out about the case until after their accounts were frozen. When the plaintiff moved to extend the TRO, multiple defendants appeared to object. Judge Rochon refused to extend the TRO and the plaintiff voluntarily dismissed the case.
Two of the defendants, Hyponix and NinjaSafe, moved for bond damages, sanctions, and fees. They argued that the plaintiff had filed to conduct a sufficient pre-suit investigation and had committed various acts of litigation misconduct. They further argued that they each suffered damages from being wrongfully enjoined.
Judge Rochon granted the defendants’ motions for bond damages but denied their motions for sanctions and fees. She agreed that the moving defendants had been wrongfully enjoined because “Hyponix has pointed to at least four elements of claim 1 of the ’673 patent that are not present in its product” and “Ninja Safe has also shown that its products may not infringe claim 1 and has raised questions of invalidity.” Accordingly, Judge Rochon granted each moving defendant bond damages, though less than they asked for: $3,682.28 for Hyponix and $14,641.51 for NinjaSafe.
But she refused to grant sanctions or fees, despite being “troubled by Plaintiff’s conduct in this case.” In particular, Judge Rochon noted the “‘clear discrepancies’ between the protected elements of the ’673 Patent and the products of many of the parties against which Plaintiff secured a TRO.” She also noted other instances of “possible misconduct,” including:
“Plaintiff represented that most of the 163 parties were difficult to find and contact. In practice, however, contact information for many of the parties was readily available. . . . Plaintiff does not indicate that it tried with any diligence to locate these parties before seeking a TRO.”
“The pace and prevalence of Plaintiff’s dismissals suggest to the Court that Plaintiff used Rule 41 as part of a broader strategy to freeze the accounts of its competitors, then withdraw its claim against any party that happened to object.”
“Plaintiff failed to provide Hyponix with documents necessary for its defense. . . . . Plaintiff claims, falsely, that Hyponix did not request these documents.”
(Emphasis added.) Despite all of this, Judge Rochon refused to sanction the plaintiff:
Despite these concerns, the Court does not lightly award sanctions and will not do so in this case. Plaintiff holds a valid patent for its Hanging Exercise Product, its claim was colorable against at least some of the parties, and it dismissed its lawsuit voluntarily at a very early stage in the litigation (presumably in light of the issues raised by the Court at the order to show cause hearing), before any of the defendants responded to the Amended Complaint. Defendants here were made whole for their losses under the bond. Although a close question, the Court exercises its discretion to deny Defendants’ request for sanctions under its inherent powers and 28 U.S.C. § 1927. . . . To the extent that Plaintiff and its counsel engage in similar misconduct in the future, however, the Court will not hesitate to impose sanctions.
As Professor Eric Goldman noted in this blog post, “it would not be lightly awarding sanction when a plaintiff has committed so many violations.” Two additional points stand out as well.
First, the fact that some of the infringement claims might be colorable does not change the fact that the plaintiff brought numerous claims that were not—including the claims brought against the moving defendants. If the plaintiff had sued Hyponix and NinjaSafe separately, would that have changed the court’s analysis? If so, why should the fact of mass joinder insulate the plaintiff from sanctions? Especially in light of the fact that it’s far from clear that any—let alone all—of the defendants were properly joined, as they sell different products and do not seem to be actually connected in any way. See 35 U.S.C. § 299. In any case, the fact remains that this plaintiff brought many claims that were not colorable and used the machinery of the federal judiciary to wrongfully enjoin competitors. That is what should matter in the sanctions calculus, not the fact that some of the other claims (against apparently unrelated defendants) might have potentially had merit.
Second, it is true that the plaintiff dismissed the case at what would be, in a regular case, “a very early stage in the litigation.” But in a Schedule A case, the TRO seems to be the whole game. The plaintiff gets a TRO with an asset freeze, then starts making settlement demands. At that point, the defendants generally either settle or default. It appears that these cases aren’t meant to proceed any further. And as the defendants’ submissions show, significant damage can be done in these cases, even in a short period of time. (One also wonders how much money the plaintiff may have been able to extract in settlements before dismissing the case.)
In the end, the decision to sanction and to award fees is left to the discretion of the judge. And while it is encouraging to see Judge Rochon recognize the damage caused by acts that have become common in Schedule A cases (e.g., using FRCP 41 to dismiss defendants who fight back), it is discouraging to see a result that will only serve to further disincentivize Schedule A defendants from fighting back.
Once a judge grants a TRO with an asset freeze, the deck is heavily stacked against the Schedule A defendants. Defendants have strong incentives to settle, even when the cases against them lack merit. In many cases, it’s just too expensive to fight back, especially when your assets have been frozen.
If judges were willing to sanction plaintiffs—or at least shift fees—when Schedule A defendants were wrongfully restrained, that would do a lot to help level the playing field and incentivize the plaintiffs to bring better claims.
Without fee shifting or sanctions, the cost of bringing a nonmeritorious claim in a Schedule A case is virtually zero, while the harms to defendants who are wrongfully restrained—even for a short time—can be devastating. As Judge Hunt has noted, “the extraordinary remedy of freezing all [the defendants’] assets without notice” can “potentially ruin[] a legitimate business.”
Plus, as Casey Hewitt noted on Mastodon, Schedule A “defendants have no choice but to litigate, have no option to meet and confer and avoid a lawsuit . . . They did not ignore demand letters or refuse to negotiate or discuss alleged infringement.” But once they find out that their assets have been frozen, they have to “hire expensive IP litigators or they will lose their businesses.” In these circumstances, it seems like fee shifting for wrongfully enjoined Schedule A defendants should be the norm, not the exception.
Yes, it’s true that a presumption in favor of fee shifting would be a departure from normal federal court practice. But courts routinely use their discretion to grant procedural departures to Schedule A plaintiffs—e.g., email service, ex parte asset freezes, mass joinder upon conclusory (and in many cases, dubious) allegations. Perhaps it is time for judges to start using their discretion to make routine departures for Schedule A defendants, too.
Additional observations:
This case is a good example of why patent litigation is a poor fit for the Schedule A litigation model. I’ve written here before about how design patent infringement is ill-suited to ex parte adjudication; so too is utility patent adjudication. If judges are going to keep allowing the Schedule A model in patent cases (and they don’t have to do so, in these cases or in any others), they should consider making it a regular practice to special masters to help analyze the infringement evidence at the TRO stage. And they should, at a minimum, require an individualized claim chart for each and every defendant.
It is far from clear that Judge Rochon actually had the power to freeze these defendants’ assets in the first place. As Judge Kendall noted in a recent order, 35 U.S.C. § 284 “does not provide for the equitable relief of accounting and profits,” which is seems to be the standard basis for asset freezes in other types of IP cases. Furthermore, as Judge Seeger has noted, “Schedule A plaintiffs typically don’t request and receive equitable monetary relief” at the end of their cases, even when equitable relief is available. Other judges might be well-advised to start questioning whether they should use their discretion to keep granting these types of asset freezes, even in cases where a remedy of equitable disgorgement is actually available.
By: Suzanne Harrison, Chair of the Patent Public Advisory Committee (PPAC) at the USPTO. This post is part of a series by the Diversity Pilots Initiative, which advances inclusive innovation through rigorous research. The first blog in the series is here and resources from the first conference of the initiative are available here.
By: Abhay Aneja, Assistant Professor of Law, University of California, Berkeley, Diversity Pilots Initiative Researcher, Gauri Subramani, Assistant Professor in the Department of Management, College of Business, Lehigh University and Diversity Pilots Initiative Researcher, and Oren Reshef, Assistant Professor of Strategy, Washington University in St. Louis. This post is part of a series by the Diversity Pilots Initiative, which advances inclusive innovation through rigorous research. The first blog in the series is here, and resources from the first conference of the initiative are available here.
I’m getting ready to teach my Fall 2023 Patent Law class, and that means updating the granted utility patents graph that I do every few years. This year’s version shows U.S. utility patents granted per year from 1840-2022:
