IP Law Professors Rise-Up Against Patent Assertion Entities

By Dennis Crouch

A group of sixty US intellectual property law professors have signed a letter to Congress supporting anti-troll patent reform legislation. This effort was driven by Professor Love of Santa Clara and is also signed by Professors Bessen, Goldman, Ghosh, Lemley, Meurer, Samuelson, Sprigman, and others. [Download ProfessorsLetterOnTrolls].

A key introductory line from the letter:

Despite our differences, we all share concern that an increasing number of patent owners are taking advantage of weaknesses in the system to exploit their rights in ways that on net deter, rather than encourage, the development of new technology.

The basic argument is that patent litigation is expensive and frontloaded in such a way that "creates an opportunity for abuse" because early-state settlement is focused more on the cost of litigation rather than the value of the patent or its underlying technology. And, it is the recent "rise of patent assertion entities" that has "disrupted [the] delicate balance" of the patent system.

The professors propose the following six general reforms:

  1. To discourage weak claims of patent infringement brought at least in part for nuisance value, we recommend an increase in the frequency of attorneys' fee awards to accused patent infringers who choose to fight, rather than settle, and ultimately defeat the infringement allegations levelled against them.
  2. To reduce the size and front-loaded nature of patent litigation costs, we recommend limitations on the scope of discovery in patent cases prior to the issuance of a claim construction order, particularly with respect to the discovery of electronic materials like software source code, emails, and other electronic communications.
  3. To further protect innocent retailers and end-users that are particularly vulnerable to litigation cost hold-up, we recommend that courts begin to stay suits filed against parties that simply sell or use allegedly infringing technology until after the conclusion of parallel litigation between the patentee and the technology's manufacturer.
  4. To facilitate the early adjudication of patent infringement suits, we recommend that patentees be required to plead their infringement allegations with greater specificity.
  5. [To increase transparency and confidence in the market for patent licensing, we recommend that Congress require] patentees … to disclose and keep up-to-date the identity of parties with an ownership stake or other direct financial interest in their patent rights.
  6. [To increase transparency and confidence in the market for patent licensing, we recommend that] Congress consider additional legislation designed to deter fraudulent, misleading, or otherwise abusive patent licensing demands made outside of court.

Without a doubt, there is merit to the professors' case, although I bristle at the letter's broad-brush statements and overt stance that is pro-large-corporate-entity. I have a few thoughts regarding the specific suggestions:

(1): Anti-plaintiff fee shifting will have the obvious impact of altering the availability of contingency-fee counsel which may be the motivation of the suggestion. One problem is that almost every patent in litigation is amenable to a good-faith challenge on either invalidity or non-infringement grounds. Predicting winners and losers is a difficult prospect and this gives me little faith that the fee-shifting proposal will primarily target low-quality claims but instead will target risk-averse plaintiffs. The professors' suggestion here to reward non-settlement does not provide me with any confidence that overall litigation costs will be reduced. On the other hand, this proposal (especially if focused on invalidating patents) could serve as something like a bounty for attorneys to challenge bad patents and, as a consequence, would lessen the free-rider problem associated with a single company challenging a patent that is also being asserted against competitors.

(2) & (4): I agree that there is plenty room for reducing discovery costs and for raising pleading requirements without substantially harming patentee rights. However, one problem for both software and method patents is that some forms of infringement are difficult to truly pin-down absent discovery. Some work must be done on any particular proposals to ensure that the result is not a clear pathway unactionable infringement.

(3) Regarding customer lawsuits, we have a difficulty in line drawing because, for the most part, these are not simply customer lawsuits. Rather, the patents being asserted cover particular methods or systems that take advantage of a particular device on-the-market (such as a wireless router or flat-panel television). In this situation, the differences are such that the manufacturer and retailer typically refuse to honor their implied warrantee that the good is "free of the rightful claim … of infringement or the like." UCC 2-312(3). And so, the question is whether these use cases will fit within the definition. One reason for the downstream lawsuits is that downstreamers typically value the technology more than upstreamers with the result of greater damage award. (We know the downstreamers valued it more because they purchased it from the upstreamers). Since the exhaustion doctrine only allows a patentee to recoup at one point in the stream-of-commerce, it makes sense that they would focus on the highest valued user.

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Text of the letter:

To Members of the United States Congress:

We, the undersigned, are 60 professors from 26 states and the District of Columbia who teach and write about intellectual property law and policy. We write to you today to express our support for ongoing efforts to pass patent reform legislation that, we believe, will improve our nation's patent system and accelerate the pace of innovation in our country.

As a group we hold a diversity of views on the ideal structure and scope of our nation's intellectual property laws. Despite our differences, we all share concern that an increasing number of patent owners are taking advantage of weaknesses in the system to exploit their rights in ways that on net deter, rather than encourage, the development of new technology.

Several trends, each unmistakable and well supported by empirical evidence, fuel our concern. First, the cost of defending against patent infringement allegations is high and rising. The American Intellectual Property Law Association estimates that the median cost of litigating a moderately-sized patent suit is now $2.6 million, an amount that has increased over 70% since 2001. These and other surveys suggest that the expense of defending even a low-stakes patent suit will generally exceed $600,000. Moreover, the bulk of these expenses are incurred during the discovery phase of litigation, before the party accused of infringement has an opportunity to test the merits of the claims made against it in front of a judge or jury.

The magnitude and front-loaded nature of patent litigation expenses creates an opportunity for abuse. Patent holders can file suit and quickly impose large discovery costs on their opponents regardless of the validity of their patent rights and the merits of their infringement allegations. Companies accused of infringement, thus, have a strong incentive to fold and settle patent suits early, even when they believe the claims against them are meritless.

Historically, this problem has largely been a self-correcting one. In suits between product-producing technology companies, the party accused of infringement can file a counterclaim and impose a roughly equal amount of discovery costs on the plaintiff. The costs, though high, are symmetrical and, as a result, tend to encourage technology companies to compete in the marketplace with their products and prices, rather than in the courtroom with their patents.

In recent years, however, a second trend – the rise of "patent assertion entities" (PAEs) – has disrupted this delicate balance, making the high cost of patent litigation even more problematic. PAEs are businesses that do not make or sell products, but rather specialize in enforcing patent rights. Because PAEs do not make or sell any products of their own, they cannot be countersued for infringement. As a result, PAEs can use the high cost of patent litigation to their advantage. They can sue, threaten to impose large discovery costs that overwhelmingly fall on the accused infringer, and thereby extract settlements from their targets that primarily reflect a desire to avoid the cost of fighting, rather than the chance and consequences of actually losing the suit.

To be sure, PAEs can in theory play a beneficial role in the market for innovation and some undoubtedly do. However, empirical evidence strongly suggests that many PAEs have a net negative impact on innovation. Technology companies – which, themselves, are innovators – spend tens of billions of dollars every year litigating and settling lawsuits filed by PAEs, funds that these tech companies might otherwise spend on additional research and design. Surveys also reveal that a large percentage of these suits settle for less than the cost of fighting, and multiple empirical studies conclude that PAEs lose about nine out of every ten times when their claims are actually adjudicated on their merits before a judge or jury.

The impact of these suits is made more troubling by the fact that PAE activity appears to be on the rise. Empirical studies suggest that at least 40%, and perhaps as high as 59% or more, of all companies sued for patent infringement in recent years were sued by PAEs. PAE suits were relatively rare more than a decade ago, and they remain relatively rare today elsewhere in the world.

More worrisome than these bare statistics is the fact that PAEs are increasingly targeting not large tech firms, but rather small business well outside the tech sector. Studies suggest that the majority of companies targeted by PAEs in recent years earn less than $10 million in annual revenue.

When PAEs target the numerous small companies downstream in the supply chain, rather than large technology manufacturers upstream, they benefit in two ways. First, for every product manufacturer, there may be dozens or hundreds of retailers who sell the product, and hundreds or thousands of customers who purchase and use the technology. Patent law allows patent owners to sue makers, sellers, or users. Suing sellers or users means more individual targets; some PAEs have sued hundreds of individual companies. And, more targets means more lawyers, more case filings, more discovery, and thus more litigation costs overall to induce a larger total settlement amount.

Second, compared to large manufacturers, small companies like retailers are less familiar with patent law, are less familiar with the accused technology, have smaller litigation budgets, and thus are more likely to settle instead of fight. In fact, many small businesses fear patent litigation to such an extent that they are willing to pay to settle vague infringement allegations made in lawyers' letters sent from unknown companies. Like spammers, some patent owners have indiscriminately sent thousands of demand letters to small businesses, with little or no intent of actually filing suit but instead with hopes that at least a few will pay to avoid the risk.

This egregious practice in particular, but also all abusive patent enforcement to some extent, thrives due to a lack of reliable information about patent rights. Brazen patent owners have been known to assert patents they actually do not own or, conversely, to go to great lengths to hide the fact that they actually do own patents being used in abusive ways. Some patent owners have also sought double recovery by accusing companies selling or using products made by manufacturers that already paid to license the asserted patent. Still others have threatened or initiated litigation without first disclosing any specific information about how, if at all, their targets arguably infringe the asserted patents.

In short, high litigation costs and a widespread lack of transparency in the patent system together make abusive patent enforcement a common occurrence both in and outside the technology sector. As a result, billions of dollars that might otherwise be used to hire and retain employees, to improve existing products, and to launch new products are, instead, diverted to socially wasteful litigation.

Accordingly, we believe that the U.S. patent system would benefit from at least the following six reforms, which together will help reduce the cost of patent litigation and expose abusive practices without degrading inventors' ability to protect genuine, valuable innovations:

  1. To discourage weak claims of patent infringement brought at least in part for nuisance value, we recommend an increase in the frequency of attorneys' fee awards to accused patent infringers who choose to fight, rather than settle, and ultimately defeat the infringement allegations levelled against them.
  2. To reduce the size and front-loaded nature of patent litigation costs, we recommend limitations on the scope of discovery in patent cases prior to the issuance of a claim construction order, particularly with respect to the discovery of electronic materials like software source code, emails, and other electronic communications.
  3. To further protect innocent retailers and end-users that are particularly vulnerable to litigation cost hold-up, we recommend that courts begin to stay suits filed against parties that simply sell or use allegedly infringing technology until after the conclusion of parallel litigation between the patentee and the technology's manufacturer.
  4. To facilitate the early adjudication of patent infringement suits, we recommend that patentees be required to plead their infringement allegations with greater specificity.

And finally, to increase transparency and confidence in the market for patent licensing, we recommend:

  1. that patentees be required to disclose and keep up-to-date the identity of parties with an ownership stake or other direct financial interest in their patent rights, and
  2. that Congress consider additional legislation designed to deter fraudulent, misleading, or otherwise abusive patent licensing demands made outside of court.

In closing, we also wish to stress that as scholars and researchers we have no direct financial stake in the outcome of legislative efforts to reform our patent laws. We do not write on behalf of any specific industry or trade association. Rather, we are motivated solely by our own convictions informed by years of study and research that the above proposals will on net advance the best interests of our country as a whole. We urge you to enact them.


John R. Allison (Texas); Clark D. Asay (Penn State); Jonathan Askin (Brooklyn); Gaia Bernstein (Seton Hall); James E. Bessen (BU); Jeremy W. Bock (Memphis); Annemarie Bridy (Idaho); Irene Calboli (Marquette); Michael A. Carrier (Rutgers); Bernard Chao (Denver); Andrew Chin (UNC); Ralph D. Clifford (UMass); Jorge L. Contreras (American); Rebecca Curtin (Suffolk); Samuel F. Ernst (Chapman); Robin Feldman (Hastings); William T. Gallagher (Golden Gate); Jon M. Garon (Northern Kentucky); Shubha Ghosh (Wisconsin); Eric Goldman (Santa Clara); Leah Chan Grinvald (Suffolk); Debora J. Halbert (Hawaii); Bronwyn H. Hall (Berkeley); Yaniv Heled (Georgia State); Christian Helmers (Santa Clara School of Business); Sapna Kumar (Houston); Mary LaFrance (UNLV); Peter Lee (Davis); Mark A. Lemley (Stanford); Yvette Joy Liebesman (SLU); Lee Ann W. Lockridge (LSU); Brian J. Love (Santa Clara); Glynn S. Lunney, Jr. (Tulane); Phil Malone (Stanford); Mark P. McKenna (Notre Dame); Michael J. Meurer (BU); Joseph Scott Miller (Georgia); Fiona M. Scott Morton (Yale); Lateef Mtima (Howard); Ira Steven Nathenson (St. Thomas); Laura Lee Norris (Santa Clara); Tyler T. Ochoa (Santa Clara); Sean A. Pager (Michigan State); Cheryl B. Preston (BYU); Jorge R. Roig (Charleston); Jacob H. Rooksby (Duquesne); Brian Rowe (Seattle); Matthew Sag (Loyola Chicago); Pamela Samuelson (Berkeley); Jason Schultz (NYU); Christopher B. Seaman (W&L); Carl Shapiro (Berkeley); Lea Shaver (Indiana); Jessica Silbey (Suffolk); Christopher Jon Sprigman (NYU); Madhavi Sunder (Davis); Toshiko Takenaka (Washington); Sarah Tran (SMU); Jennifer M. Urban (Berkeley); Samson Vermont (Charlotte)

Is it Time to End the USITC’s Jurisdiction over Patent Cases?

Presidential review of USITC exclusion orders is designed to directly inject politics into the ultimate legal determination between the parties. In his recent letter of disapproval, US Trade Representative Michael Froman recognized that the review is based upon a number of policy goals, including considerations of how the decision impacts the US economy, US consumers, US competitive manufacture, and US-Foreign relations. Although Froman’s letter of disapproval focused on FRAND issues, an undercurrent of the decision is that the American company (Apple) is avoiding its penalty after being judged as an infringer of a patent held by a foreign company (Samsung). Supporting the undercurrent of US-company favoritism is the fact that the USITC is designed as to protect US industry.

In an email, Hal Wegner draws a parallel analogy:

Imagine an American movie studio, book publisher, high tech electronics manufacturer or other intellectual property rights holder going to a Shanghai Court and successfully winning an infringement suit. Then, imagine that President Xi Jinping blocks enforcement “[a]fter extensive consultations with … interested … persons … based on … review of … considerations … as they relate to … the effect on [domestic] consumers.

The question then is how can the US expect for China, India, South Korea and Brazil to strongly enforce foreign-owned intellectual property rights when the US is unwilling to do so itself.

Of course, as I wrote earlier, Samsung is still able to enforce its patent rights in Federal Court and, in that process will be able to seek both injunctive relief (to block imports of the iPhone) and monetary damages for past and ongoing infringement.

In addition to the US/Foreign divide, the USTR involvement brings politics into the dispute at a level orders-of-magnitude beyond what is seen in Federal Courts. Apple is able to get the ear of the US Administration and other influential politicians, and that influence almost certainly impacted the outcome. If adjudged infringer had been a smaller company or perhaps Koch Ind., the outcome may well have been different. The best outcome here is probably to take-away the USITC’s jurisdiction over patent cases and simply allow those cases to be heard in Federal Courts.

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A different perspective on the administrative disapproval here is that it is designed as a signal to the USITC to stop issuing injunctive relief without full consideration of the public interest at stake. If the USITC takes that message to heart then we may observe some interesting development of the law and theory of public-interest in enforcing patent rights. Public interest is also one of the four factors used by Federal Courts when determining whether to issue injunctive relief in patent cases under eBay. In the eBay line of cases, the public interest is typically the least-explored factor. However, it is the only factor available for consideration by the USITC under the Tariff-Act. As the USITC develops its law of public-interest, the next step in the law’s evolution will be for the Federal Courts to begin picking-up that analysis and applying it under eBay.

GUI Menu Structure Found Patent Eligible

by Dennis Crouch

In a split opinion, the Federal Circuit has affirmed Core Wireless win over LG Electronics [DECISION] – finding the asserted patent claimed eligible subject matter and refusing to disturb the district court’s judgment of no-anticipation and infringement. U.S. Patent Nos. 8,713,476; 8,434,020; and 6,415,164 (UK Priority Date of July 2000). The patents here are directed to user-interfaces — basically users are shown a menu of applications; Selecting on an application takes the user to an “application summary” that includes functions of the application and files (“data”) associated with each application that can be selected to launch the application and enable the file to be seen within the application.

LG Challenged Claim 8 of the ‘476 patent – arguing that was improperly directed to an abstract idea. As shown below, the claim stems from independent broad claim 1.

1. A computing device comprising a display screen, the computing device being configured to display on the screen a menu listing one or more applications, and additionally being configured to display on the screen an application summary that can be reached directly from the menu, wherein the application summary displays a limited list of data offered within the one or more applications, each of the data in the list being selectable to launch the respective application and enable the selected data to be seen within the respective application, and wherein the application summary is displayed while the one or more applications are in an un-launched state.

8. The computing device of claim 1 in which the summary further displays a limited list of functions offered in the one or more applications.

Because eligibility is deemed a question of law, it is decided by district court judges (rather than juries) and reviewed de novo on appeal. Here, the district court refused to find an abstract idea – characterizing the claim as directed to “displaying an application summary window while the application is in an unlaunched state.” In the alternative, the district court also held that key innovations of the patent would render the claims eligible under Alice Step 2. In particular, the district court noted the key innovation of “directly” accessing the application summary from the menu while the application is yet “unlaunched.”

On appeal, the Federal Circuit affirmed – finding that the invented approach here is an eligible improvement to a computer system rather than simply the use of computers as a tool.

The asserted claims in this case are directed to an improved user interface for computing devices, not to the abstract idea of an index, as argued by LG on appeal. Although the generic idea of summarizing information certainly existed prior to the invention, these claims are directed to a particular manner of summarizing and presenting information in electronic devices. . . . These limitations disclose a specific manner of displaying a limited set of information to the user, rather than using conventional user interface methods to display a generic index on a computer. Like the improved systems claimed in Enfish, Thales, Visual Memory, and Finjan, these claims recite a specific improvement over prior systems, resulting in an improved user interface for electronic devices.

Holding: Claims are not directed to an abstract idea and therefore are eligible under Alice Step 1.

All judges on the panel agreed with this holding. The disagreement between the majority (Moore & O’Malley) and Dissent-in-Part (Wallach) comes over the definition of the claim term “unlaunched state.” The majority construed the term as “not displayed” while the dissent argues that it should be construed as “not running.” The two definitions result in differing treatment of apps that are running in the background. The changed construction result would likely impact both the infringement and anticipation conclusions. For its part, the majority explained that the patent used the word “launch” in several instances to be synonymous with “displayed” – thus leading to its conclusion.

Commil v. Cisco: Despite Supreme Court Win, Patentee Still Loses

Commil USA, LLC v. Cisco Systems, Inc., __ F.3d __ (Fed. Cir. 2015)

On remand from the Supreme Court, the Federal Circuit has again concluded that the jury’s infringement verdict was wrong – but this time altering the grounds for its decision. “We now conclude that substantial evidence does not support the jury’s finding that Cisco’s devices, when used, perform the ‘running‘ step of the asserted claims. The district court’s judgment is therefore reversed.”

In its 2015 decision in the case, the Supreme Court had rejected the prior Chief Judge Prost non-infringement opinion. Under the Supreme Court analysis, the good-faith (but wrongly held) belief that a patent is invalid does not excuse a defendant’s actions to actively induce another party to infringe the patent.

Rather than re-focusing on the legal intricacies of inducement, this time the appellate panel shifted focus to the defendant’s alternative argument — that there was no underlying infringement.  Here, the patent is directed to a wireless communication system with at least two Base Stations that run a “low level” protocol for each connection, but according to the appellate panel, the patentee failed to prove that Cisco (or its customers) used their base stations in that manner. Instead, Cisco’s testimony was that its Base Stations operate a single protocol instance that is used for all connections.

The most interesting element of this decision is that it could have been written back in 2014 when the panel wrote its original decision and the Federal Circuit could have avoided the questionable legal grounds that were later rejected.


Patent Office Issues Updated “Interim Guidance” on Patent Subject Matter Eligibility

By Jason Rantanen

This morning, the USPTO issued a substantial update to its December 2014 “Interim Guidance” on patent subject matter eligibility.  The update addresses comments on the 2014 Guidance and includes several new examples of eligible and ineligible claims.  The update is available here: http://www.uspto.gov/patent/laws-and-regulations/examination-policy/2014-interim-guidance-subject-matter-eligibility-0  (The title says 2014 Interim Guidance, but the contents include the 2015 update.)

The new examples are directed to abstract ideas rather than biotechnology based inventions, although the commentary notes that the office is working on additional biotech-based examples.  According to the update,

These examples provide additional eligible claims in various technologies, as well as sample analyses applying the Supreme Court and Federal Circuit’s considerations for determining whether a claim with additional elements amounts to significantly more than the judicialexception itself. The examples, along with the case law precedent identified in the training materials as pertinent to the considerations,3 will assist examiners in evaluating claim elements that can lead to eligibility (i.e., by amounting to significantly more) in a consistent manner across the corps.

While these examples will likely be welcomed by attorneys practicing in this area, a substantial limitation is that the only recent Federal Circuit opinion finding an abstract idea-based claim eligible is DDR Holdings v. Hotels.com.  Thus, while there are several other examples of claims that the PTO would find eligible, those examples are based on either (1) PTO (as opposed to Federal Circuit) precedent; (2) hypothetical situations; or (3) pre-Mayo/Alice decisions (such as Diamond v. Diehr).

A particularly interesting part of the examples are two directed to use of the “streamlined” patent eligible subject matter analysis.  Those examples analyze claims directed to an internal combustion engine and remote storage of BIOS.  For these claims, the examiner would conduct only a “streamlined” analysis that would not become part of a written rejection.

As with the earlier Interim Guidance, the PTO is seeking public feedback on the  update.  From the website:

Any member of the public may submit written comments by electronic mail message over the Internet addressed to 2014_interim_guidance@uspto.gov (link sends e-mail). Electronic comments submitted in plain text are preferred, but also may be submitted in ADOBE® portable document format or MICROSOFT WORD® format. The comments will be available for public inspection here at this Web page. Because comments will be available for public inspection, information that is not desired to be made public, such as an address or a phone number, should not be included in the comments. Comments will be accepted until October 28, 2015.

Industry Responds to White House Calls for Prior Art, Examiner Training

Guest Post by Professor Jorge L. Contreras

As previously reported, on February 20 the White House highlighted its progress on five patent-related policy initiatives introduced in June 2013, announced three new patent-related initiatives, and renewed its call for legislation to combat “patent trolling”. In all, ten different initiatives were discussed. Below is a quick guide to making sense of the most significant ones, as well as a summary of private sector responses to date.

Patent Assertion Entities (PAEs) – In this year’s State of the Union address, President Obama came out publicly against unfair litigation tactics deployed by “patent trolls” and has called on Congress to enact legislation to “curtail abusive patent litigation.” Two of the Administration’s June 2013 initiatives relate to PAE litigation: a proposed PTO rule that would require reporting of real party in interest (re-branded as “attributable ownership”) information in patents and patent applications, and an online toolkit providing links and other information for the recipients of patent demand letters. Among the most useful features of the toolkit are links to advanced demand letter and patent litigation analytics provided by Lex Machina and Docket Navigator. Although the toolkit is available to anyone, its intended beneficiaries are small businesses that have been targeted by some of the more notorious PAEs for using off-the-shelf office equipment like scanners and wireless routers. The Administration seems to realize that both of these initiatives are relatively modest, and it has again urged Congress to enact measures that will have a meaningful impact on reducing abusive patent litigation.

PTO Fixes – The Patent and Trademark Office (PTO) has, fairly or unfairly, come under increasing fire for procedural lapses and staffing inadequacies that allow the issuance of too many “bad” patents. Last week’s announcements contain some meaningful proposals that could help to address this situation.

  • Claim Clarity – the PTO has implemented new training programs for examiners and judges relating to “functional claims“, which have been widely criticized as overly broad and unclear. The PTO also highlighted an upcoming pilot program involving the use of glossaries in patent specifications to clarify claim language. The details of this program remain to be seen, but anything that will bring greater consistency and rationality to claim interpretation can only help.
  • Examiner Technology Training – One perceived problem with the patent examination system is the inability of examiners to keep up with rapidly changing technologies. Gaps in technical knowledge can result in examiners’ failure to identify relevant prior art, to appreciate the interaction of different system elements, and to make cogent assumptions and conclusions about inventiveness, anticipation and nonobviousness. To address this issue, the Administration has called for private sector volunteers to provide state-of-the-art technical training to patent examiners through a program coordinated by the PTO. This is clearly an area in which the private sector can help to solve a known weakness in the patent system. Several private sector entities have already committed to participate in this project. For example, The Clearing House, a financial services industry association, has pledged to develop educational materials and offer seminars to examiners in the area of financial infrastructure technology, and Verizon, which has already begun to train PTO examiners in the areas of network architecture and communications, will continue these efforts.

    While commitments such as this are a welcome start, important details will likely need to be worked out as this program grows. Though examiners work in specific art units, they must still cover a wide range of products and technologies. In complex and fast-moving fields, one could easily see some examiners spending virtually all of their working hours being trained. Moreover, one can envision competition among businesses to “educate” examiners regarding their competitors’ product lines without providing a balanced or realistic survey of the field. Accordingly, the PTO will need to exercise some oversight regarding both the scope and content of this program, and to ensure that whatever training is provided is likely to enhance the patent examination system, rather than burden or bias it.

  • Crowdsourcing Non-Patent Prior Art – Perhaps the most interesting and ambitious announcement made last week was the Administration’s call for the private sector to disclose and share prior art. The problem of non-patent prior art is a real but difficult one. It goes without saying that patent examiners examining an application should seek prior art relevant to the claimed invention from whatever sources are available. Traditionally, examiners have focused primarily on prior art contained in other patents and patent applications. While patents and patent applications are admittedly easy to search, this technique is sure to miss relevant art that has not been included in patent applications. In fast-moving industries such as software, it is likely that most of the relevant art is contained in “non-patent literature” (NPL). Yet NPL is notoriously difficult to search, particularly outside of the biosciences in which scientific publications are regularly reviewed and cited by examiners. In the software arts, NPL could include old product brochures, documentation manuals, technical drawings, and obsolete code. Even finding, let alone analyzing, prior art from this diffuse and heterogeneous mass of information presents a daunting challenge.

    The problem of NPL has been understood for some time, and “crowdsourcing” of prior art searching has long been viewed as a potential solution. In 2007, the PTO announced its pilot “Peer to Patent” program, which was intended to recruit members of the public to submit prior art relevant to applications under review, initially in the areas of software and business methods. The program was funded by a number of large companies and received a reasonable amount of press coverage, both favorable and unfavorable. The initial pilot program ran from 2007-09, with a second pilot from 2010-11. Perhaps it was the enactment of the America Invents Act in 2011, with its battery of new pre-grant challenge mechanisms, or the difficulty in finding qualified volunteer peer reviewers in highly specific technology categories, but the Peer-to-Patent project has quietly faded into oblivion.

    The Administration’s current “crowdsourcing” approach is different, in that it calls directly on companies, the repositories of most NPL, to help. It is encouraging that a number of private firms have already answered the Administration’s call and pledged to make large quantities of previously non-public technical material available to the PTO. To date, pledges to this effect have been made by:

    • The Clearing House (to provide the PTO with access to documents describing the national financial infrastructure),
    • Microsoft (to provide PTO with access to more than 10 million archived Microsoft technical documents),
    • SAS (to provide 38 years of user documentation and technical papers to IP.com, working in conjunction with the PTO), and
    • Yahoo (to continue to share prior art relevant to its business).

    The amount of data contained within the private coffers of the world’s technology companies is mind-boggling; and collecting, formatting and presenting this data in a cost-effective manner that is useful to patent examiners could prove to be a monumental task. Nevertheless, the effort must be undertaken if patents will continue to be issued in fast-moving technology fields. Google, the world’s largest search engine, has started down this path with its Prior Art Finder, an outgrowth of the popular Google Patent Search launched in 2006. The Administration’s leadership in this area is to be commended, and one can only hope that many more companies will follow those who have already pledged to assist with this vital project.

  • Patent Pledges? – It is notable that both the Examiner Technology Training and the Crowdsourcing Prior Art programs announced last week rely heavily on voluntary engagement by the private sector. The Administration has called upon industry to take a leading role in addressing some of the problems that have emerged in the patent system. This approach is sensible, as the technological expertise necessary to evaluate patents in complex and rapidly evolving technical areas resides within the companies that create those technologies, not in the PTO. However, such calls to action are also risky. What if they are ignored, or too few companies heed the call? Governmental calls to action have been around since the Crusades and have recently sought to address social issues from healthy eating and blood diamonds to financial reform and climate change. Over the past few years, spurred by the increase in PAE litigation, among other things, companies have begun to make voluntary pledges relating to patents. These have included pledges not to assert patents, or not to seek injunctions, against standardized technologies and common technology platforms, to charge royalties that are fair, reasonable and non-discriminatory (FRAND), to refrain from transferring patents to PAEs, and a variety of other activities. As I have written elsewhere, these pledges are intended to assure the market that the pledgor’s patents will not be used to disrupt valuable social activity. The recent pledges made in response to the Administration’s call are of a slightly different variety. Rather than impose “negative” encumbrances on the pledgor’s patents or its ability to enforce them, they create “positive” obligations on the pledgors to contribute knowledge, technology and (presumably) trade secrets to the PTO and/or the public. These new positive patent pledges are an intriguing and potentially game-changing development, and it will be interesting to see how many additional companies elect to commit themselves in this manner. I oversee a project at American University that catalogs patent-related pledges made outside formal standards-setting organizations, and look forward to adding many new commitments from the private sector in response to the Administration’s latest call.

Patent Pro Bono/Pro Se Assistance – Another of the new initiatives announced last week relates to the allocation of “dedicated educational and practical” PTO resources to help pro se (unrepresented by counsel) patent applicants navigate their way through the patent application process. Presumably this means that better documentation, explanatory screens and improved help resources will be made available on the PTO web site, all of which would be useful additions. The Administration also called for private sector volunteers to offer increased pro bono (free) legal assistance to small inventors. While these initiatives are welcome, the vast majority of U.S. patents are filed by businesses that can comfortably afford patent counsel, and the Edisonian conception of the sole inventor has been show largely to be a myth. Thus, while politically appealing, it is not clear that these initiatives will have a meaningful impact on the market or the patent system overall.

One wonders, in fact, why the PTO’s pro bono program is limited to patent prosecution, a relatively inexpensive legal task in the grand scheme of things. Perhaps this program would be more useful, and more aligned with the Administration’s other initiatives, if the pro bono program made lawyers available to advise retailers, small businesses and non-profit organizations about how to respond to PAE patent demand letters. While the analytics and information provided through the new PTO patent litigation toolkit are a gold mine for academics and patent litigators, it is not clear that members of the lay public will be able to make effective use of them without professional legal assistance. The PTO’s pro bono program could nicely fill this gap and make the most of the electronic tools that have already been developed and deployed by the Administration.

Conclusion – There are problems with the U.S. patent system. Rather than avoiding them, the Administration has taken positive and productive steps toward addressing them. While the long-term benefits of some of these initiatives are uncertain, programs such as the PTO’s solicitation of non-patent prior art and enhanced technical training for patent examiners could yield meaningful benefits for the system. The companies that have already pledged their support of these initiatives deserve to be commended. Let’s hope that both the Administration and the private sector follow-through on these promising first steps.

Florist-Inventor Stuck With Admissions Made During Deposition and Loses on Summary Judgment

Delaware Valley Floral Group v. Shaw Rose Nets (Fed. Cir. 2010)

Shaw’s Patent No. 5,765,305 covers a process for producing larger rose heads by placing an elastic netting around the head during growth. The netting reduces the light and heat felt by the petals and therefore conditions them to continue growing for a longer time before opening. The netting has become ubiquitous. On summary judgment, the district court held the patent invalid under the on-sale bar of 35 U.S.C. § 102(b).

Changing Testimony: In a deposition, Shaw stated that he invented and began selling modified roses in 1994. However, Shaw submitted a declaration to the court indicating that he had misspoken at the deposition and the actual invention date was in 1995. This difference was important because the 1994 sales date was more than one-year before the application filing date. The district court, however, refused allow Shaw to modify his prior statement and instead awarded summary judgment of invalidity based on the admission of the 1994 date. On appeal, the Federal Circuit affirmed – holding that the district court had properly refused to allow Shaw to create a disputed material fact. (FRCP 30(e) provides a 30-day window for reviewing the deposition statements, but Shaw did not challenge his own statements until after that deadline had passed.)

Waiver: The perhaps more interesting issue on appeal involves implicit waiver of argument. During the district court proceedings, the parties never directly argued whether the invention was “ready for patenting” by the 1994 date. Shaw admitted that by then he had “ironed out all the wrinkles” but on appeal argued that even then the process was not ready for patenting. Based on the “subtle” and admittedly indirect discussion of the issue, Federal Circuit held that Shaw had waived his right to appeal on the “ready for patenting” issue.

At oral argument on appeal, when questioned about whether Shaw waived this argument, counsel’s response was that the argument was “subtly” raised at oral argument before the district court even though it was not the subject of any heading in its brief, and he did not believe the words “ready for patenting” were used. Oral Argument 6:47-7:24, http://oralarguments.cafc.uscourts.gov/mp3/2009-1357.mp3. We conclude that Shaw failed to contest whether the invention was ready for patenting below and that argument is therefore waived.

Summary Judgment of Invalidity Affirmed

Patently-O Bits and Bytes by Juvan Bonni

Recent Headlines in the IP World:

Commentary and Journal Articles:

New Job Postings on Patently-O:

Patently-O Bits and Bytes by Juvan Bonni

Recent Headlines in the IP World:

Commentary and Journal Articles:

New Job Postings on Patently-O:

Making Chips Abroad and Infringing a U.S. Patent

by Dennis Crouch

The recent Federal Circuit decision in Caltech v. Broadcom includes an important discussion of extraterritorial damages further extending Carnegie Mellon (Fed. Cir. 2015) in finding that manufacture and delivery of a product in a foreign country can infringe a US patent if sufficient sales-activity occurred within the US.

California Institute of Technology v. Broadcom Ltd. and Apple Inc., ___ F.2d ___ (Fed. Cir. 2022).

The case involves wireless communication chip logic patented by CalTech.  Broadcom makes infringing chips and they are installed in Apple devices. The Broadcom chips and Apple phones are manufactured outside of the United States, although they are largely designed in the US, and the nerve centers of marketing and sales are also in the US.  Although many of these devices made their way to the US, the jury verdict apparently included damages for 1 billion chips that Broadcom manufactured abroad, and sold to Apple’s foreign suppliers outside of the US, and that were never imported into the US.

This setup raises some concern because US patents are territorial in nature, and liability under Section 271(a) requires action “within the United States” importing “into the United States.”

(a) Except as otherwise provided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.

35 U.S.C. 271(a). Still, much of the sales activities occurred within the United States.  In Halo, the Federal Circuit addressed a similar situation regarding local sales activity leading to delivery and performance occurring entirely outside of the US.  The court explained that in that situation, “pricing and contracting negotiations in the United States alone do not constitute or transform those extraterritorial activities into a sale within the United States for purposes of §271(a).” Halo Elecs., Inc. v. Pulse Elecs., Inc.., 831 F.3d 1369 (Fed. Cir. 2016) on remand from 579 U.S. 93 (2016).

On appeal, the Federal Circuit cabined-in its prior Halo statements and concluded the sales activity can be considered “within the United States” when the US activity extends beyond “pricing and contracting negotiations . . . alone.”  A contrasting case here is Carnegie Mellon Univ. v. Marvell Tech. Grp., Ltd., 807 F.3d 1283 (Fed. Cir. 2015).  In CMU, the Federal Circuit explained that the location of a sale is often difficult to pinpoint, and might occur in multiple locations at once.

Places of seeming relevance include a place of inking the legal commitment to buy and sell and a place of delivery, and perhaps also a place where other substantial activities of the sales transactions.

CMU. The chip business is particularly crazy because they involve multi-year sales cycles and the chip-maker is looking for a “design win” where a particular chip is locked-in for mass production.  Here, apparently the patentee provided substantial evidence that the multi-year process of designs, simulations, test, reworking, sampling, pricing, etc., all occurred within the United States.  This evidence was presented to the jury, and the jury also received instructions that “sales may be found to have occurred in the United States where a substantial level of sales activity occurs here, even for products manufactured, delivered, and used entirely abroad. . . . ” (Instruction reprinted below)

On appeal, the defendants did not challenge the sufficiency of the evidence, but rather that the jury instruction was improper.  The Federal Circuit though sided with the patentee and confirmed that the instructions were proper. “This was a proper and sufficient jury instruction with respect to the applicable burdens on the territoriality of the sales at issue.”

The result here is continued flexibility on what counts as “US sales” for patent infringement purposes, and this case makes it marginally easier to capture foreign activity with a US patent.

In its appeal, Broadcom also argued that the jury should have receive instructions on the presumption against extraterritorial application of US law.  See WesternGeco LLC v. ION Geophysical Corp., 138 S.Ct. 2129 (2018).  The Federal Circuit rejected this appeal — holding that the presumption is applied when courts interpret the law or construe a statute. Once the law is defined, then it is time for the jury to weigh the evidence and draw its conclusions — and and that the presumption is inapplicable.  Here, the court told the jury that the sales must be “within the United States,” and the jury then was asked to simply weigh the evidence and determine “whether the relevant transactions … were domestic or extraterritorial in nature.”  On appeal, the Federal Circuit found that the district court’s approach was again sufficient and proper.

= = =

Note – the Federal Circuit affirmed on the extraterritorial questions, but vacated the billion dollar judgment on other grounds. Thus, there will be a new trial on damages, and the new jury might reach a different result.


Scope of IPR Estoppel Expands, but How Far?

by Dennis Crouch

On Feb 4, the Federal Circuit issued an important decision in California Institute of Technology v. Broadcom Ltd. and Apple Inc. (Fed. Cir. 2022).   Four of the big issues are listed below:

  • IPR Estoppel: The most important legal precedent in the case is a pro-patentee interpretation of the IPR estoppel provision found in 35 U.S.C. § 315(e)(2).  That prevision bars an IPR petitioner involved in patent litigation from asserting any invalidity grounds that the petitioner had “raised or reasonably could have raised during that inter partes review.” Id.  Here, the court makes clear that the scope estoppel is not tied to the grounds raised to in the IPR, but rather truly does extend to any ground “reasonably could have been included in the petition.”  Slip Op.  This decision expressly overrules Federal Circuit precedent to the contrary. Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., 817 F.3d 1293 (Fed. Cir. 2016).
  • Big money: The jury had awarded a $1 billion+ damage award; the Federal Circuit vacated that award and ordered a new new trial on damages.  The court also vacated an infringement finding with regard to one of the patent claims because the district court did not instruct the jury on the construction of a particular term (“variable number of subsets”).
  • Eligibility: The inventive feature here is use of bit repetition to better ensure wireless signal transmission.  On appeal, Broadcom argued that the claim lacked eligibility because it employs a mathematical formula.  The Federal Circuit dismissed that argument out-of-hand with a direct quote from the Supreme Court. Diamond v. Diehr, 450 U.S. 175, 187 (1981) (“[A] claim drawn to subject matter otherwise statutory does not become  nonstatutory simply because it uses a mathematical formula, computer program, or digital computer.”).
  • Extraterritoriality: The infringing chips are made abroad and installed in Apple devices abroad.  U.S. patents only cover infringement within the  territorial bounds of the United States.  The jury found infringing sales in the U.S.  On appeal, the Federal Circuit found the jury instructions appropriate.  Notably, the court refused to require any jury instructions  on the presumption against extraterritorial application of U.S. patent laws.  Rather, the instructions properly walked through factors for determining whether a particular sale occurred in the United States.

= = = =

In this post, I am just going to focus on the estoppel issues: Argument estoppel is a big deal with inter partes review.  By design, patent challengers get one-bite at the Apple; one shot at invalidating the patent claims based upon obviousness or anticipation.  Of course, the devil is in the details with this sort of rule.

Rather than relying upon traditional judge-made principles of res judicata, Congress specified within the statute how estoppel works for IPR proceedings.  The basic rule is that, once a patent claim is subject to a final-written-decision in an IPR, the IPR petitioner is estopped from asserting “that claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.” 35 U.S.C. 315(e)(2) (applies also to real-party-in-interest and privies).  Timing here is important, but favors estoppel.  Namely, once the IPR reaches Final Written Decision, the challenger is prohibited from continuing to assert invalidity, even if the litigation was already filed and had been pending prior to IPR institution.

The scope of estoppel provided by 315(e) has been subject to substantial litigation. One key decision is Shaw Industries Group, Inc. v. Automated Creel
Systems, Inc., 817 F.3d 1293 (Fed. Cir. 2016).  In Shaw, the Federal Circuit substantially limited the scope of estoppel. Shaw was a partial institution case — the PTAB had instituted IPR on only some grounds.  The court particularly held that 315(e) did not estopp the petitioner from later raising the non-instituted challenges in district court litigation.  The court reasoned that those could not  have reasonably been raised in the IPR since the petitioner’s attempt had been denied by the PTAB.   But Shaw raised further questions about where to draw the line, and district courts across the country came-up with a variety of conclusions about the scope of estoppel.  The most pro-challenger readings focused on grounds that could have been raised after institution, and thus concluded that estoppel was fairly strictly limited only to the grounds actually instituted.  See, e.g., Koninklijke Philips N.V. v. Wangs All. Corp., 2018 WL 283893, at *4 (D. Mass. Jan. 2, 2018).

Shaw was based upon a procedural posture that the Supreme Court eventually ruled improper.  Notably, Shaw presumed that partial IPR institution was proper. In SAS, the Supreme Court rejected that approach and instead held that IPR institution is an all-or-nothing decision by the USPTO. SAS Institute, Inc. v. Iancu, 138 S. Ct. 1348 (2018) (PTAB does not have partial institution authority; and that the IPR petition defines the scope of the IPR).

Ordinarily, each Federal Circuit panel is bound to follow precedent set-out by prior a Federal Circuit panel.  My colleague Tommy Bennett refers to this as the “Rule of Circuit Precedent.”  However, since Shaw‘s foundation had been undermined, the panel here in CalTech concluded that it was no longer binding precedent.

The panel here has the authority to overrule Shaw in light of SAS, without en banc action.

Although SAS did not expressly overrule Shaw, the court concluded that the Supreme Court had “undercut” Shaw‘s “theory [and] reasoning . . . in such a way that the cases are clearly irreconcilable.”  Quoting Henry J. Dickman, Conflicts of Precedent, 106 Va. L. Rev. 1345 (2020).

With this newfound freedom, the court rewrote the rule of estoppel — this time in a much broader sense:

Accordingly, we take this opportunity to overrule Shaw and clarify that estoppel applies not just to claims and grounds asserted in the petition and instituted for consideration by the Board, but to all claims and grounds not in the IPR but which reasonably could have been included in the petition.

Slip Op. In the litigation, Apple and Broadcom had hoped to rely upon several prior art references during litigation.  However, evidence showed that they were “aware” of those references by the time that they filed the IPR petition.  Even though they were not included within the IPR petition, they “reasonably could have” been used as the basis for an IPR challenge. Thus, the appellate panel affirmed the district court’s ruling barring the subsequent challenge in litigation.

The “aware of” requirement is quite broad, and the Federal Circuit did not delve further into defining the “reasonably could have” threshold. For its part, the district court in this case had gone a step further and expanded estoppel to also include any grounds relying upon prior art “a skilled searcher conducting a diligent search reasonably could have been expected to discover.” California Inst. of Tech. v. Broadcom Ltd., 2018 WL 7456042 (C.D. Cal. Dec. 28, 2018) (subsequent modifications omitted). This test is a based upon a statement made by Senator Kyl as the America Invents Act was being debated. 157 Cong. Rec. S1375 (daily ed. Mar. 8, 2011).  In his testimony, Sen. Kyl expressed that the estoppel provision had been “softened” by adding “reasonably.”  Without that term, the estoppel would have been

amenable to the interpretation that litigants are estopped from raising any issue that it would have been physically possible to raise in the inter partes reexamination, even if only a scorched-earth search around the world would have uncovered the prior art in question. Adding the modifier ‘‘reasonably’’ ensures that could-have-raised estoppel extends only to that prior art which a skilled searcher conducting a diligent search reasonably could have been expected to discover.

Statement of Sen. Kyl.

Although it is unclear how far reasonableness extends, it is clear that IPR estoppel is now based upon a use-it-or-lose-it principle.  Holding arguments back at the IPR petition stage is effectively a waiver of those arguments.

Update on Supreme Court Patent Cases: Fact Law Divide

by Dennis Crouch

Olaf Sööt Design’s pending petition for certiorari centers on the age-old division between issues-of-fact and issues-of-law.  The U.S. Constitution generally requires due process, and particularly protects litigants’ rights to a jury trial in common law cases.  One quirk–the right to a trial by jury does not cover issues-of-law, and only extends to some issues-of-fact.

This bifurcated system results in an odd dynamic in patent law — regularly seen with regard to infringement and claim construction:

  • Patent infringement is an issue-of-fact tried by a jury under the Seventh Amendment.  Typically, a jury is asked to decide whether the evidence shows that the defendant is performing the claimed invention.
  • Claim construction is treated as a question of law (or mixed question of fact and law), decided by a judge.  In contemporary patent litigation, a judge will typically be asked to decide whether the legal scope of the claims extend to cover the defendant’s actions.

With this setup, the whole case can be decided at either stage, but claim construction typically comes first and so often steals-the-show.  One problem though, is the potential of unduly undermining the Constitutionally protected jury system.

One case pending before the Supreme Court focuses-in on these issues: Olaf Sööt Design, LLC v. Daktronics, Inc., et al., No. 21-438 (Petition).  Sööt asks the following question:

In Markman v. Westview Instruments, Inc., 517 US 370 (1996), this Court held that the meaning of terms in a patent “claim” stands as a question of law and must be construed by the court. Under the Seventh Amendment, if requested by the patent owner, the jury must make the factual determination as to whether the defendant infringed the patent in light of the court’s claim construction. Consistent with the Seventh Amendment, the Markman decision leaves to the jury all factual determinations beyond the court’s construction of the claim. The question presented by this petition for writ of
certiorari is:

Whether the Seventh Amendment allows the Federal Circuit to reverse a jury verdict based on a sua sponte new claim construction of a term the district court concluded was not a term of art and construed to have its plain and ordinary meaning; where the Federal Circuit’s sua sponte claim construction essentially recasts a specific infringement factual question,  previously decided by the jury, as a claim construction issue, to be decided de novo by the appellate court.

The Supreme Court will consider the petition next week.

Patent Law at the Supreme Court December 2021

Disclaimer in Prosecution cannot be Recaptured in Litigation

by Dennis Crouch

Traxcell Technologies, LLC v. Sprint Communications Company, No. 20-1440 (Fed. Cir. 2021); Traxcell Technologies, LLC v. Nokia Solutions and Networks, No 20-1440 (Fed. Cir. 2021)

The patentee primarily these cases on claim construction on two simple terms — based largely on statements made during prosecution to skirt the prior art. 

“Location” – some of the asserted claims take various actions related to the “location of [a] mobile wireless device.”  During prosecution the patentee had argued that its location ability was not limited to “a position in a grid pattern” and did not require a grid pattern overlay.  Rather its location sense was more “adaptable” and “refined.”  The courts found this clear prosecution history disclaimer and so the location term is properly construed to require “not merely a position in a grid pattern.”  This construction excused Nokia from infringement, since the accused Nokia system is arranged in a grid of 50-meter-by-50-meter bins.

“A Computer” – the claims all required “a computer” or “first computer.” The problem was that the accused devices performed the various functions across a set of computers. The district court construed “first computer” and “computer” to mean a single computer that can perform each and every function.  That construction was affirmed on appeal after the Federal Circuit reviewed the claims and specification for supporting evidence.

[I]t would defy the concept of antecedent basis—for the claims to recite “the computer” or “said first computer” being “further” programmed to do a second set of tasks if a different computer were to do those tasks instead.

Slip Op.  This interpretation was also confirmed by the prosecution history statement including a responsive argument submitted to the PTO titled ““Single computer needed in Reed v. additional software needed in Andersson.”  Reed is the Traxcell patent; Andersson was the prior art.  One computer requirement meant no infringement. 

Means For: The case against Sprint partially turned on a means-plus-function limitation: “means for receiving said performance data and corresponding locations from said radio tower and correcting radio frequency signals of said radio tower.”  The patentee pointed to an algorithm disclosed in the specification as the corresponding structural disclosure.  Under Section 112(f), a means-plus-function claim “shall be construed to cover the corresponding structure … in the specification and equivalents thereof.”  It was clear that Sprint did not use the identical algorithm, but the question was whether the “equivalent” penumbra of the claim was broad enough.  In order to determine equivalents under Section 112, the district court applied the function-way-result test generally used in DOE cases.  See Applied Med. Res. Corp. v. U.S. Surgical Corp., 448 F.3d 1324 (Fed. Cir. 2006).  Generally, the function-way-result test ends up with a quite narrow band of equivalents.  Here, the court found that the accused activity not proven to be done “substantially the same way” as that claimed and so was not an equivalent. An aspect of this doctrine that continues to create confusion is whether this “equivalent” evidence is an element of claim construction as suggested by the statute or instead post-construction infringement analysis.

Indefiniteness: Some of the claims were also invalidated as indefinite, even after a certificate of correction. In particular, the those claims required a “means for … suggesting corrective actions . . based upon . . . location” but the specification did not disclose how that might take place. On appeal, the Federal Circuit affirmed. “Although Traxcell demonstrated that the structure makes corrections based on other performance data, it hasn’t shown that any corrections are made using location.”

The Federal Circuit uses a simple if-then shortcut for its indefiniteness analysis of claims that include means-plus-function language. If the specification lacks sufficient structure to support the claimed means; Then the claim is invalid as indefinite.  This approach is probably too rule based. Rather, each time the Federal Circuit should use its lack-of-structure analysis to ask does the claim at issue “particularly point[] out and distinctly claim[] the subject matter which the inventor or a joint inventor regards as the invention.” 35 U.S.C. 112(b).

The four asserted patents U.S. Patent Nos. 8,977,284 (“the ’284 patent”), 9,510,320 (“the ’320 patent”), 9,642,024 (“the ’024 patent”), and 9,549,388. 

Guest Post by Prof. Contreras: HTC v. Ericsson – Ladies and Gentlemen, The Fifth Circuit Doesn’t Know What FRAND Means Either

Guest Post by Prof. Jorge Contreras of the University of Utah S.J. Quinney School of Law.  Disclosure statement: in 2019, the author served as an expert for HTC in an unrelated, non-U.S. case.

In August 31, 2021, the Court of Appeals for the Fifth Circuit ruled in HTC Corp. v. Telefonaktiebolaget LM Ericsson, 2021 U.S. App. LEXIS 26250, __ F.4th __ (Fed. Cir. 2021), affirming the judgment of the District Court for the Eastern District of Texas, 2019 U.S. Dist. LEXIS 170087 (E.D. Tex. 2019).  The decision is significant as it is the first by the Fifth Circuit to address the licensing of standards-essential patents and the meaning of “fair, reasonable and nondiscriminatory” (FRAND) licensing terms, adding to the growing body of jurisprudence already issued by the Third, Ninth and Federal Circuits in this area.  It is also significant because the court addresses several issues that have become increasingly important in standards-related litigation including (1) the apportionment of value among components of a multi-component product, (2) the proper choice of law for FRAND disputes, and (3) the interpretation of the “nondiscrimination” prong of the FRAND commitment.  These issues all arose in connection with HTC’s challenge to District Judge Rodney Gilstrap’s jury instructions regarding FRAND. His vague charge appears to reflect the general uncertainty in this area, not only of the Texas district court, but of the entire judicial system. One can almost hear the weariness permeating the final sentence of Judge Gilstrap’s charge to an admittedly perplexed jury: “Ladies and gentlemen, there is no fixed or required methodology for setting or calculating the terms of a FRAND license rate.”


Though it was never a household name in the U.S., HTC — founded in Taiwan in 1997 — was an early smartphone pioneer.  In 2005 HTC released the world’s first Windows 3G smartphone (the clamshell HTC Universal) and followed in 2008 with the first smartphone running Google’s Android operating system (branded as the T-Mobile G1).  Most significantly, HTC was the developer and manufacturer of Google’s Nexus One Android phone, which was released in 2010.

The 2/3/4/5G wireless communication standards published by the European Telecommunications Standards Institute (ETSI) are incorporated into almost all smartphones (and many other devices) that have been sold over the past two decades.  These standards are covered by tens of thousands of patents around the world (standards-essential patents or SEPs), a respectable number of which are held by Swedish equipment manufacturer Ericsson.  Most standards-development organizations (SDOs) today recognize the potential leverage that the holders of SEPs may hold over manufacturers of standardized products. FRAND licensing commitments are designed to alleviate the risk that SEP holders will prevent broad adoption of a standard by asserting their patents against manufacturers of standardized products. As explained by the Fifth Circuit, “To combat the potential for anticompetitive behavior, standard setting organizations require standard-essential patent holders to commit to licensing their patents on … FRAND terms” (slip op. p. 4). Thus, under ETSI’s intellectual property policy, which dates back to 1993, Ericsson and other holders of patents that cover ETSI’s standards agree to grant manufacturers licenses on FRAND terms.

Ericsson and HTC entered into three such licensing agreements in 2003, 2008 and 2014. Under the 2014 agreement, HTC paid Ericsson a lump sum of $75 million for a 2-year license to use Ericsson’s 2/3/4G SEPs. In 2016, HTC and Ericsson began negotiations to renew the license. Ericsson proposed a rate of $2.50 per 4G device, which was based on the lump sum paid by HTC in 2014 divided by the number of phones sold by HTC over the license period. HTC did not accept this offer and instead conducted an assessment of the value of Ericsson’s SEPs. It made a counteroffer of $0.10 per device in March 2017.  Negotiations stalled, and in April, HTC brought an action in the Eastern District of Texas seeking a declaration that Ericsson had breached its obligation to offer HTC a license on FRAND terms.

The trial focused largely on the proper method for determining a FRAND royalty for Ericsson’s SEPs.  Because the actual FRAND royalty or royalty range in a given case is generally viewed as a question of fact, the case was tried a jury, and each party submitted a set of draft jury instructions to the court. As summarized by the Fifth Circuit, “HTC proposed highly detailed instructions to help the jury interpret FRAND, but Ericsson objected to most of these instructions and proposed a more general FRAND instruction. The district court considered the two proposals, but ultimately gave the following instruction to the jury: ‘Whether or not a license is FRAND will depend upon the totality of the particular facts and circumstances existing during the negotiations and leading up to the license. Ladies and gentlemen, there is no fixed or required methodology for setting or calculating the terms of a FRAND license rate.’ (slip op. at 6). The jury returned a verdict “finding that HTC had not proven that Ericsson had breached its FRAND duties and that both parties had breached their obligations to negotiate in good faith.” (slip op. at 9]. On the basis of the jury verdict, Ericsson moved for declaratory judgment that, in its dealings with HTC, it complied with its FRAND obligations.  The court granted Ericsson’s motion.

HTC appealed the district court’s ruling on three grounds:  it failed to adopt three of HTC’s proposed jury instructions, it incorrectly concluded that Ericsson’s licensing offer complied with its FRAND commitment, and it improperly excluded expert testimony as hearsay.  The Fifth Circuit, in an opinion authored by Judge Jennifer Walker Elrod, affirmed the lower court’s ruling on all three grounds.  Judge Stephen A. Higginson entered a separate concurring opinion, arguing that the district court erred by omitting HTC’s apportionment jury instruction, but this omission did not rise to the level of reversible error.


In patent infringement cases, it is well-established that a patentee’s damages should reflect only the value of the patented features of an infringing product. Thus, in assessing damages, courts routinely “apportion” the infringer’s profits between the infringing and noninfringing features of its product. See Garretson v. Clark, 111 U.S. 120, 121 (1884).  Accordingly, HTC argued that the district court erred by failing to give the jury specific instructions on apportionment.

However, this case did not sound in patent infringement, but in breach of contract.  As my co-authors and I have previously observed (see p. 162), it is a peculiar coincidence of U.S. law that both the statutory measure for patent damages under 35 USC § 284 and the FRAND commitment call for the imposition of a “reasonable” royalty.  For this reason, several U.S. courts that have calculated FRAND royalty rates (see, e.g., Ericsson v. D-Link (Fed. Cir. 2014), Microsoft v. Motorola (9th Cir. 2015); and Commonwealth Sci. & Indus. Research Org. (CSIRO) v. Cisco (Fed. Cir. 2015)) have looked to traditional methodologies for determining reasonable royalty patent damages, including the 15-factor Georgia-Pacific framework.  But while this methodology may be useful by analogy, it is not strictly required, as the damages flowing from a breach of the contractual FRAND commitment must, by their nature, be determined under applicable principles of contract law.  As the Fifth Circuit explains, “while the Federal Circuit’s patent law methodology can serve as guidance in contract cases on questions of patent valuation … it does not explicitly govern the interpretation of contractual terms, even terms that are intertwined with patent law” (slip op. at *15).  As such, the Fifth Circuit in this case held that the district court’s omission of a specific jury instruction on apportionment – a patent law doctrine – was not error.

Judge Higginson disagreed.  Citing D-Link and CSIRO, he observed the Federal Circuit’s “unmistakable command that a jury assessing patent value must be instructed on apportionment” and that “the failure to instruct a jury on proper apportionment is error when the jury is asked to assess patent value” (slip op. at *29-30, Higginson, J., concurring). And while he acknowledges that the instant case concerns breach of contract rather than patent infringement, he argues that the Federal Circuit’s precedent regarding apportionment is instructive “because a jury assessing patent infringement damages undertakes the same task of assessing whether an offered rate is FRAND” (citing Realtek Semiconductor, Corp. v. LSI Corp. (N.D. Cal., 2014) (slip op. at *30).  Moreover, Judge Higginson points out that both HTC and Ericsson, as well as the United States as amicus curiae, requested jury instructions on apportionment.  For all of these reasons, he concludes that the district court erred by omitting an instruction on apportionment.

Whether or not the district court erred, none of the Fifth Circuit judges felt that the omission of a specific apportionment instruction constituted reversible error because HTC had the opportunity to, and did, discuss apportionment during its closing argument before the jury.  This observation raises interesting questions regarding the basis on which juries are expected to make decisions in complex cases.  During trials that often last for weeks, the members of the jury hear hours upon hours of conflicting expert testimony and argumentation.  Under Rule 51 of the Federal Rules of Civil Procedure, a trial judge must instruct the jury regarding the substantive law governing the verdict. Its instructions are intended to distill the legal standards that the jury must apply during its deliberations.  Given that members of the jury are not permitted to take notes or make recordings during trial, they must rely heavily on these court-sanctioned instructions.  And contrary to the Fifth Circuit’s holding, it does seem problematic for a court to omit instructions that are germane to the jury’s deliberations concerning an area of law as complex as FRAND royalty determinations.  In such cases, irrespective of what courts and commentators believe the law to be, the results of cases on the ground depend heavily on the instructions given to the jury (we discuss the importance of jury instructions, especially model jury instructions, in FRAND cases in Jorge L. Contreras & Michael A. Eixenberger, Model Jury Instructions for Reasonable Royalty Patent Damages, 57 Jurimetrics J. 1 (2016) (“if … increasingly complex damages calculations are to remain in the hands of the jury, it is now more essential than ever that the instructions given to jurors be as clear, accurate, and understandable as possible.”)

 The French Connection

In considering HTC’s proposed jury instruction on apportionment, Judge Elrod also concluded that the proposed instruction was inaccurate because it summarized U.S. patent law with no reference to French contract law.  ETSI was formed in France in 1988 and approved its first patent policy in 1993.  That policy, and all subsequent ETSI policies, state that they are governed by the laws of France.  Judge Elrod observed that “HTC’s proposed jury instructions are based on United States patent law. HTC did not even attempt to justify its proposed instructions under French contract law or to argue that French contract law and United States patent law are equivalent” (slip op. *14).

This last point is particularly interesting.  In chastising HTC for failing to argue the equivalency of U.S. and French law, Judge Elrod refers to Apple v. Motorola, 886 F. Supp. 2d 1061, 1081 (W.D. Wis. 2012), in which a U.S. district court seemingly concluded, without any specific references, that there are no material differences between the laws of France and Wisconsin when it comes to interpreting a company’s FRAND commitment (discussed here at p.8).  In my experience that conclusion is widely ridiculed by European lawyers, and rightly so.  Yet Judge Elrod seems to imply that merely making a conclusory statement about the equivalency of French and U.S. law ought to suffice, or at least overcome one hurdle to the acceptance of a jury instruction grounded in principles of U.S. law.



HTC also argued that the district court should have instructed the jury with respect to the nondiscrimination prong of Ericsson’s FRAND commitment.  HTC’s proposed jury instruction reads as follows (Appellant’s Opening Brief, p. 40):

The non-discrimination requirement of FRAND requires an SEP holder to provide similar licensing terms to licensees that are similarly situated. The financial terms do not have to be precisely identical, because the difference might be explained by other offsetting adjustments in other terms in the license. But, at a minimum, if the difference in terms creates a competitive disadvantage for a prospective licensee, then the offered royalty terms are discriminatory. Discrimination may exist even if preferential treatment is accorded to only one or a few companies.

The non-discrimination prong of FRAND serves to level the playing field among competitors, and to foster entry and innovation from new market participants, by prohibiting preferential treatment that imposes different costs to different competitors. Thus, for purposes of the non-discrimination prong of FRAND, licensees are “similarly situated” if they compete for the purchase or sale of a product or service. It would defeat the purpose of FRAND if a licensor could draw a distinction between entrenched and emerging firms.

To my eye, this is an accurate statement of the law and the general understanding of the nondiscrimination requirement under FRAND (see Jorge L. Contreras & Anne Layne-Farrar, Non-Discrimination and FRAND Commitments in Cambridge Handbook of Technical Standardization Law: Competition, Antitrust, and Patents, Ch. 12 (Jorge L. Contreras, ed., 2017)).  This formulation is also consistent with the most extensive analysis to-date of FRAND nondiscrimination by a U.S. district court (TCL v. Ericsson, 2017 U.S. Dist. LEXIS 214003 (C.D. Cal. 2017), rev’d on other grounds, 943 F.3d 1360 (Fed. Cir. 2019)).

Yet Judge Elrod writes that “HTC’s proposed instruction would transform the non-discrimination element of FRAND into a most-favored-licensee approach, which would require Ericsson to provide identical licensing terms to all prospective licensees” (slip op. *16). This statement is plainly incorrect.  The first sentence of HTC’s proposed jury instruction, which mirrors the model instruction published by the Federal Circuit Bar Association in 2020 and cited by the court (slip op. *17 n.3), refers to “similar licensing terms [for] licensees that are similarly situated”, not identical licensing terms for all prospective licensees.  HTC further clarifies that “The financial terms do not have to be precisely identical.” In explaining the meaning of “similarly situated”, HTC follows the reasoning of the district court in TCL, stating that a distinction should not be drawn between “entrenched and emerging firms”.  None of this suggests that all licensees should pay identical royalties.

Moreover, the parties clearly disputed at trial whether various “comparable” licensees identified by Ericsson were “similarly situated” to HTC (“HTC further argued that Ericsson’s licenses with companies like Apple, Samsung, and Huawei were much more favorable, but Ericsson presented additional evidence indicating that those companies were not similarly situated to HTC due to a variety of factors” (slip op. *22)). Thus, both parties appear to acknowledge the relevance of the “similarly situated” test for nondiscrimination, making it all the more puzzling why the district court and the Fifth Circuit found HTC’s proposed jury instruction on this point to be inaccurate.


Regrettably, the Fifth Circuit’s decision in HTC v. Ericsson does little to clarify the scope or nature of FRAND commitments for standards-essential patents.  Rather, by diverging from the guidance of the Federal Circuit in terms of the apportionment of value among patented and unpatented products, and misinterpreting the scope of the nondiscrimination prong of the FRAND commitment, the Fifth Circuit has substantially muddied the already turgid waters of this increasingly important area of law.  Unfortunately, Judge Gilstrap was right when he told the jury in Texas, “Ladies and gentlemen, there is no fixed or required methodology for setting or calculating the terms of a FRAND license rate.”  It might be helpful to the industry, however, if there were.

Federal Circuit Moves Another Case Out of W.D.Tex.

In re TracFone Wireless, Inc. (Fed. Cir. 2021)

In its second go-round in the case, the Federal Circuit has ordered District Court Judge Albright to grant TracFone’s motion to transfer its case to the S.D.Fla. on convenience grounds under 28 U.S.C. § 1404(a).  “We conclude that the district court clearly abused its discretion in denying transfer under § 1404(a).”  Generally, Section 1404(a) provides substantial discretion to the district court to determine whether or not to transfer a case to a different venue.  The statutory guidelines focus on “the convenience of parties and witnesses [and] the interest of justice”

In its opinion, the appellate panel walked through the parties/witnesses:

  • Patentee Precis is a Delaware company with “no disclosed place of business.”
  • The key inventor likely to testify (Karvenon) lives in Mankato.
  • The attorney involved in patent prosecution likely to testify lives in Arizona.
  • Defendant TracFone is also a Delaware company, its principal place of business is in Miami Florida. TracFone has identified for Florida-Based witnesses likely to testify.

Effectively, there is no reason for this case to be in Waco, Texas.  Still, the district court explained that the convenience here, in his discretion, did not rise to being “clearly more convenient” so as to demand transfer.   On appeal, the Federal Circuit disagreed — finding the district court’s conclusion “clearly flawed.”

The court did not reach the issue of improper venue that was also raised.

Read it here: TracFone Decision April 2021

TracFone: Mandamus All Over Again

Timing the Venue Inquiry in W.D. Texas

Egregious Delay and Blatant Disregard for Precedent



TracFone: Mandamus All Over Again

In re TracFone (Fed. Cir. 2021)

Here is a recap of where we are with this W.D. Tex. venue case before Judge Albright:

  • Precis Group sued TracFone in W.D.Tex. (Waco) for patent infringement, alleging that venue is proper because TracFone has a San Antonio Total Wireless store.
  • TracFone moved to transfer venue on improper venue (saying that the store was not TracFone’s store, and besides, the store was closed already) and also inconvenient venue.
  • Judge Albright did not decide the venue motion for several months, but kept the case rolling forward toward trial.  After eight months, TracFone petitioned the Federal Circuit for a writ of mandamus.
  • On mandamus, the Federal Circuit ordered Judge Albright to immediately consider the venue motion. The next day following mandamus, Judge Albright denied the motion to transfer venue — holding that venue was proper and convenient.

NOW: TracFone has filed a new petition for writ of mandamus seeking an order compelling Judge Albright to transfer the case to the Southern District of Florida, TracFone’s home court.  The Federal Circuit immediately ordered Precis to respond within 7 days.  Although not clear from the docket, I suspect that this petition will be passed to the same trio judges who handled the last one – Judges Reyna, Chen, and Hughes.

In my post on the case, I noted troubles with Judge Albright’s venue decision, and the mandamus petition picks up on those — arguing that “the district court here abused its discretion by accepting as true the venue allegations in the complaint where those allegations were directly contradicted by TracFone’s declarations, declarations not rebutted by any declarations of plaintiff.” [TracFone Second Mandamus Petition].

In his opinion, the district court accepted the complaint’s allegations as true and concluded that the plaintiff “has plead sufficient venue facts to establish venue in WDTX.”  The district court did not appear consider TracFone’s evidence that it submitted via declaration — that it did not own the store and that the store was closed “well before” the action was filed.   Typically, in this situation, courts consider affidavit evidence presented by defendants, and that was not done here.

In my mind, the only question here is whether the Federal Circuit will vacate the decision or instead simply order the transfer.

Timing the Venue Inquiry in W.D. Texas

Egregious Delay and Blatant Disregard for Precedent





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