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Welcome to the fall edition of The SNIP, a quarterly newsletter by Urška Petrovčič, Adam Mossoff, and Devlin Hartline of Hudson Institute's Forum for Intellectual Property. The SNIP offers a brief breakdown of the latest policy issues and case developments in intellectual property.
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THE LATEST FROM HUDSON
New White Paper on the Benefits of Cellular Technology
A white paper published by Hudson Institute examines the value of cellular technologies, such as those implemented in the 4G and 5G standards. Data shows that cellular technologies have enabled the development of a mobile ecosystem that, in 2019 alone, added $4.8 trillion of economic value to the global economy. The majority of this value, about $2.7 trillion, represents consumer benefits. The growing connectivity enabled by 5G will lead to further innovation in critical industries such as health care, energy, automotive, agriculture, and retail, among many others. However, maintaining a sustainable ecosystem of cellular technology requires that companies who have invested in the development of foundational cellular technologies are fairly compensated for their contributions. Despite concerns about licensing fees, economic research has shown that licensing revenues for cellular technologies account for only 0.17–0.27% of the total $4.8 trillion in economic value created by those technologies.
THE SNIP: To maintain a robust and innovative ecosystem for the “connected world,” developers of foundational cellular technologies deserve fair compensation.
Necessary Reforms for the Digital Marketplace White Paper
In a new Hudson white paper on needed reforms in the digital marketplace, Steven Tepp, President & CEO of Sentinel Worldwide and Professorial Lecturer in Law at George Washington University Law School, explains how online privacy can be addressed by providing an incentive for platforms to cooperate with copyright owners. Three key steps should be taken: (1) amending the law to reverse harmful judicial decisions, most significantly to restore the “red flag” test; (2) requiring appropriate filtering out of infringements at the time of upload; and (3) codifying the authority of federal courts to order the blocking of foreign sites dedicated to infringing activities. Hudson Institute also hosted a panel discussion exploring the law and policy behind these issues, including recent legal developments, empirical data, and technological solutions.
THE SNIP: Hudson white paper explains three key changes to copyright law that are needed to address online piracy effectively and encourage cooperation between rights owners and platforms.
CASE DEVELOPMENTS
ITC Finds Google Infringes Sonos’ Patent
On August 13, the U.S. International Trade Commission (ITC) found that Google infringed five patents owned by Sonos and thus was violating section 337 of the Tariff Act by importing its infringing products into the United States. The patents cover Sonos’ wireless smart speakers and other technological features of its innovative speaker system. Sonos has long maintained that Google illicitly gained access and copied Sonos’ technologies through its 2013 partnership agreement. Although the ITC ruling is only preliminary and subject to a full review by the Commission, it could ultimately lead to an import ban on certain Google products, such as its smart home devices, phones, and laptops that incorporate Sonos’ wireless speaker technology. A final ruling on the matter is scheduled for December 13.
THE SNIP: Sonos wins initial determination in its patent dispute with Google.
Learn More:
READ: Initial Determination of Judge Charles E. Bullock, Inv. No. 337-TA-1191 (USITC Aug. 13, 2021).
READ: “Sonos Scores Legal Win in Patent Battle With Google,” Tripp Mickle, The Wall Street Journal (Aug. 13, 2021).
READ: “Sonos Wins First Round in Patent Case Against Google at ITC,” Susan Decker, Bloomberg (Aug. 13, 2021).
Court Rejects Again Intel's Antitrust Suit Against Fortress
On September 28, the Northern District of California dismissed the amended complaint that Intel had filed against Fortress Investment Group, bringing to an end this antitrust lawsuit. Apple and Intel sued Fortress in 2019, accusing the company of engaging in an anti-competitive patent aggregation scheme in violation of the antitrust laws. The court subsequently dismissed the first complaint, reasoning that the asserted market definition by Apple and Intel was too broad and that they had not plausibly shown Fortress charged supracompetitive royalties as a result of its patent aggregation and licensing business model. Earlier this year, Apple dropped out of the suit, and the court now rejected Intel’s amended complaint, thus closing the matter in front of the court.
THE SNIP: Court dismisses Intel’s complaint against Fortress for failing to establish legal claim that Fortress engaged in anticompetitive practices.
Learn More:
Court Verdict Requires Apple to Pay Optis $300M for Patent Infringement
In August, a jury awarded $300 million in royalties to Optis for Apple’s infringement of patents essential to the 4G standard. The ruling came after a different jury last year found that Apple willfully infringed Optis’ patented technology and awarded damages of $506 million. Judge Rodney Gilstrap subsequently ordered a new trial on damages, reasoning that in determining the damages amount the jury should have considered Optis’ duty to offer a license on fair, reasonable, and non-discriminatory terms. The Texas verdict is part of a larger patent dispute between Apple and Optis, which could cost Apple as much as $7 billion.
THE SNIP: Jury decides that Apple owes $300 million in damages to Optis for patent infringement.
Learn More:
READ: Verdict Form in Optis Wireless Technology LLC v. Apple Inc., (No. 2:19-CV-00066) (E.D. Tex. Aug. 13, 2021).
READ: “Apple Hit With $300M Verdict in Optis Patent Damages Retrial,” Dave Simpson, Law360 (Aug. 13, 2021).
READ: “Apple Hit with $300 Million Patent Verdict After New Optis trial,” Blake Brittain, Reuters (Aug. 13, 2021).
Judge Tosses a $308.5 Million Patent Infringement Verdict in PMC v. Apple
On August 5, Judge Rodney Gilstrap tossed a $308.5 million patent infringement verdict against Apple that a federal jury had handed out earlier this year. He found that the patent covering digital rights management technology belonging to Personalized Media Communications (PMC) was unenforceable under the doctrine of patent prosecution laches. Specifically, he found that PMC intentionally delayed the prosecution of its patent application until after widespread adoption of the technology had been established. He also found that PMC’s conduct prejudiced Apple, which had heavily invested in the technology during this period of deliberate delay. In rendering his opinion, Judge Gilstrap relied on the recent decision in Hyatt v. Hirshfeld in which the Federal Circuit elaborated on the doctrine of patent prosecution laches.
THE SNIP: Federal judge throws out $308.5 million jury verdict against Apple after finding PMC obtained and asserted submarine patents.
Learn More:
READ: Memorandum Opinion and Order in Personalized Media Communications LLC v. Apple Inc., No. 2:15-cv-01366 (E.D. Tex. Aug. 5, 2021).
READ: “Apple Sinks ‘Submarine Patent,’ Escapes $308.5 Million Verdict,” Susan Decker & Matthew Bultman, Bloomberg (Aug. 6, 2021).
READ: “Gilstrap Submarine Patent Ruling Puts a 40-Year Old NPE on Life Support,” Angela Morris, IAM (Aug. 12, 2021).
Court Confirms that Warhol Fair Use Analysis Comports with Google v. Oracle
In August, the Second Circuit ruled unanimously that the Supreme Court’s decision in Google v. Oracle did not undermine its prior decision in Andy Warhol Foundation v. Goldsmith. Earlier in March, the Second Circuit held that the Andy Warhol Foundation’s (AWF) use of Lynn Goldsmith’s photograph infringed her copyright and was unjustified under the doctrine of fair use. The court reasoned that the four-factor fair-use test was not satisfied primarily due to the lack of transformativeness. After the Supreme Court rendered its opinion in Google v. Oracle in April, which concluded that Google’s copying of Oracle’s computer code was fair use, AWF petitioned for reconsideration of the decision in this case. Ultimately, the Second Circuit unanimously concluded that Google v. Oracle did not conflict with its prior decisions on fair use, and it handed Goldsmith another victory.
THE SNIP: The Second Circuit holds that the Supreme Court’s decision in Google v. Oracle did not fundamentally change the law on fair use.
Learn More:
READ: Andy Warhol Foundation v. Goldsmith, 11F.4th 26 (2d Cir. Aug. 24, 2021).
READ: “Circuit to Warhol Estate: Google v. Oracle Does Not Dictate A Different Result,” Pryor Cashman (Aug. 26, 2021).
READ: Google/Oracle Doesn’t Affect Warhol’s Fair-Use Ruling, 2nd Cir. Says,” Blake Brittain, Reuters (Aug. 24, 2021).
READ: “A Bounty of Fair Use: ‘Google v. Oracle’ and ‘Warhol Foundation v. Goldsmith,” Robert J. Bernstein & Robert W. Clarida, Law.com (May 20, 2021).
LEGISLATION & POLICY DEVELOPMENTS
Restoring the America Invents Act Introduced in the Senate
On September 29, Senators Patrick Leahy (D-VT) and John Cornyn (R-TX) introduced the Restoring the America Invents Act, a bill that would bring significant changes to the structure and operations of the Patent Trial and Appeal Board (PTAB). The bill, among other things, expands the patentability requirements applied in inter partes review, abrogates the Supreme Court’s decision in Return Mail v. USPS that the America Invents Act (AIA) did not authorize the federal government to file PTAB petitions, grants standing to all petitioners to appeal adverse PTAB decisions to the Federal Circuit, eliminates estoppel for petitioners if they are unable to appeal an adverse PTAB decision in federal court, and abrogates the Fintiv-NHK rule on discretionary denials of petitions. Senator Leahy was one of the primary sponsors of the AIA of 2011, and his new bill continues the ongoing debate over the PTAB.
THE SNIP: The proposed Restoring the America Invents Act will vastly expand the scope of the PTAB in reviewing and canceling patents.
Learn More:
- READ: Restoring America Invents Act, Patrick Leahy & John Cornyn, 117th Congress 1st Session.
Copyright Office and USPTO Issue Reports on State Sovereign Immunity for IP Infringement
Two reports issued this summer by the U.S. Copyright Office and the U.S. Patent and Trademark Office (USPTO) address IP infringement by states and state sovereign immunity. In August, the Copyright Office released a report finding that copyright infringement by states is a legitimate concern. The Copyright Office report finds that such infringements can harm the value of copyrighted works and suggests that Congress address the issue through new legislation. In the same month, the USPTO issued a similar report, examining patent and trademark infringements by states and states entities. However, in contrast to the Copyright Office, the USPTO took no position on whether the infringements identified were sufficient to warrant legislative intervention.
THE SNIP: The Copyright Office and the Patent and Trademark Office issued reports on state sovereign immunity for IP infringement.
Learn More:
READ: “Infringement Disputes Between Patent and Trademark Rights Holders and States and State Entities,” U.S. Patent and Trademark Office (Aug. 31, 2021).
READ: “USPTO and Copyright Office Reports Attempt to Quantify Extent and Effect of IP Infringement by State Entities,” Logan Murr & Eileen McDermott, IPWatchdog (Sept. 1, 2021).
READ: “Copyright and State Sovereign Immunity,” U.S. Copyright Office (Aug. 31, 2021).
READ: ” “Copyright Alliance Survey Reveals Growing Threat of State Infringement,” Kevin Madigan, Copyright Alliance (Sept. 3, 2020).
