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Welcome to the fall edition of The SNIP, a quarterly newsletter by Urška Petrovčič and Adam Mossoff 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
Event: USPTO Director Andrei Iancu on the Innovation Economy
The director of the U.S. Patent and Trademark Office Andrei Iancu joined Hudson's Adam Mossoff for a discussion on current policy issues and the patent system's role in driving the U.S. innovation economy.
Event: The Ninth Circuit’s Decision in FTC v. Qualcomm
Retired Chief Judge of the United States Court of Appeals for the Federal Circuit Paul R. Michel and leading experts joined Urška Petrovčič for a discussion on the U.S. Court of Appeals for the Ninth Circuit's recent decision in FTC v. Qualcomm, described as one of the most important antitrust cases of the twenty-first century.
CASE DEVELOPMENTS
UK Supreme Court Affirms Decision in Unwired Planet v. Huawei
On August 26, the United Kingdom Supreme Court fully affirmed the decision of the lower court in a dispute between Unwired Planet and Huawei. The unanimous Court held that English courts might grant injunctions against an infringer of standard-essential patents (SEPs) that refuse to execute a global license on fair, reasonable, and nondiscriminatory (FRAND) terms. The Court also confirmed the nondiscrimination requirement of a FRAND commitment does not require an SEP holder to grant the same license terms to all licensees. Furthermore, the Court rejected the argument that Unwired Planet’s request for an injunction violated Article 102 TFEU, even though Unwired Planet failed to comply with all the requirements that the Court of Justice of the European Union (CJEU) outlined in Huawei v ZTE.
THE SNIP: The UK Supreme Court announces a landmark decision for SEP holders ruling that English courts have jurisdiction to issue injunctions against infringers that refuse to enter into a global FRAND license.
Learn More:
READ: “UK Supreme Court Rules on FRAND Approach in Unwired Planet and Conversant,” Jane Mutimear and Richard Vary, Bird & Bird.
READ: “UK Supreme Court Hands Unwired Planet and Conversant Victory in Key SEP FRAND Dispute,” Richard Lloyd, IAM.
READ: Judgement, Unwired Planet v. Huawei, UKSC 37 (2020).
READ: “Unwired Planet v. Huawei – Supreme Court Decision,” Dafydd Bevan and John de Rohan-Truba, Lexology.
The FTC Requests an En Banc Review of the Ninth Circuit’s
Ruling in FTC v. Qualcomm
On August 11, the Court of Appeals for the Ninth Circuit reversed an early-2019 decision of the District Court for the Northern District of California which found that Qualcomm engaged in a series of anticompetitive practices. In a unanimous opinion, the Ninth Circuit three judge panel rejected the district court’s conclusion that Qualcomm’s practice of licensing its patents to end-product manufacturers, rather than rival chip manufacturers, violated antitrust law. The court also rejected the finding that Qualcomm violated antitrust law by adopting a policy to sell its chips only to licensed manufacturers (the so called ”no-license, no chip” policy). Finally, the court found no evidence that Qualcomm’s exclusivity agreements with Apple foreclosed competition and were therefore unlawful. The Ninth Circuit
vacated the district court’s injunction as well as its partial grant of summary judgment. On September 25, the FTC filed a petition with the Ninth Circuit requesting a rehearing en banc of the August 11 decision, arguing that the ruling was a legal error. The FTC’s petition focuses exclusively on Qualcomm’s “no-license, no chip” policy, and does not challenge the Ninth Circuit’s conclusions regarding an antitrust duty to license or exclusive dealing.
THE SNIP: The Ninth Circuit reversed a district court’s ruling establishing that Qualcomm violated the Sherman Antitrust Act, resulting in a victory for Qualcomm that clarified a distinction between anticompetitive and hypercompetitive behaviors. The FTC is now requesting a rehearing en banc.
Learn More:
READ: The Editorial Board, Judge Ko’s Qualcomm Coup, The Wall Street Journal, (22 May 2019).
READ: “Ninth Circuit Reverses FTC Win in FTC v. Qualcomm, Finding No Antitrust Violations from Qualcomm’s Licensing of its Standard-Essential Patents,” The National Law Review (13 August 2020).
READ: United States Court of Appeals for the Ninth Circuit, FTC v. Qualcomm Incorporated, No. 19-16122 D.C. No. 5:17-cv-00220- LHK.
READ: “FTC Requests Rehearing En Banc of Qualcomm Appeals Panel Decision,” FTC Press Releases (25 September 2020).
Judge Ends Justice Department’s Paramount Consent Decrees
On August 7, a federal court in the Southern District of New York terminated the Paramount Consent Decrees, which regulated the distribution of films from movie studios to movie theatres for over seventy years. The review and subsequent termination of the Decrees was part of the Department of Justice’s review of legacy antitrust judgements dating to the 1890s. The Paramount Consent Decrees required movie studios to “separate their distribution operations from their exhibition businesses.” In addition, they altered some common distribution practices of motion pictures, including the bundling of films into one theater license (block booking), entering into one license to cover all theaters in a theater circuit (circuit dealing), setting minimum prices on movie tickets, and granting exclusive film licenses for particular
geographic locations. The Court’s termination of the Paramount Consent Decrees was ruled effective immediately, allowing for a two-year sunset period on the ban of block booking and circuit dealing at the request of the Antitrust Division.
THE SNIP: As part of the Department of Justice’s review of antitrust judgments, a court terminated the 1938 Paramount Consent Decrees that have regulated how movie studios distribute films to movie theaters for over seventy years, effective immediately.
Learn More:
Arthrex Cert Petitions to the U.S. Supreme Court
This summer, several petitions for writ of certiorari were filed with the U.S. Supreme Court addressing the structural constitutional limits imposed on Administrative Patent Judges (APJ) in the Patent Trial & Appeal Board (PTAB). In Arthrex v. Smith & Nephew, the Court of Appeals for the Federal Circuit held that APJs are principal officers who are impermissibly appointed by the Director of the U.S. Patent & Trademark Office pursuant to the Appointments Clause of the Constitution. Arthrex remedied this constitutional defect by severing the statutory protections against removal of APJs, converting them into inferior officers employed at will by the Director. The Arthrex case has brought the PTAB within an ongoing debate in constitutional law and administrative law about constitutional limits on federal agencies, as represented by the Supreme Court’s 2018 decision concerning the appointment of administrative law judges in Lucia v. SEC. Last March, the Federal Circuit denied petitions for rehearing en banc, and thus the certiorari petitions were filed with the Supreme Court.
THE SNIP: The U.S. Supreme Court has multiple petitions requesting it to address the structural constitutional limits imposed on Administrative Patent Judges in the Patent Trial & Appeal Board.
Learn More:
- READ: Petition in U.S. v. Arthrex (No. 19-1434).
- READ: Petition in Smith & Nephew v. Arthrex (No. 19-1452).
- READ: Petition in Arthrex v. Smith & Nephew (No. 19-1458).
- WATCH: The Maladministrative State: Administrative Law Judges, the Appointments Clause, and the State of Regulatory Adjudication (Phyllis Schafly Eagles Panel, June 30, 2020).
German Federal Court of Justice Issues a Decision in Sisvel v. Haier
On May 5, 2020, the German Federal Court of Justice (GFCJ) issued its first ruling in the context of standard essential patents (SEPs) in the patent dispute Sisvel v. Haier. The district court initially found that Haier infringed Sisvel’s SEPs and granted an injunction prohibiting the sale of the infringing products. The decision was reversed by the appellate court on the grounds that Sisvel failed to comply with the requirements that the Court of Justice of the European Union (CJEU) outlined in Huawei v. ZTE. In particular, the appellate court found that Sisvel’s offer to Haier was not fair, reasonable, and nondiscriminatory (FRAND) having offered another competitor a better rate. The GFCJ reversed the decision of the appellate court, finding that the court (1) erroneously ignored that Haier failed to declare that it was willing to execute a license agreement on FRAND terms and engaged in delaying practices, and (2) incorrectly concluded that Sisvel’s offer was not FRAND.
THE SNIP: On May 5, the long-awaited landmark judgment in Sisvel v. Haier was handed down in favor of Sisvel in a ruling that provides guidance on FRAND negotiation procedure and will shape the future of FRAND licensing negotiations and SEP enforcement.
Learn More:
Supreme Court Holds Oral Argument in Google v. Oracle
After a decade of litigation, multiple appeals, and a delay due to COVID-19, the Supreme Court held oral argument in Google v. Oracle on October 7. The lawsuit began in 2010 when Oracle sued Google for copyright infringement after Google copied 11,500 lines of Oracle’s computer code comprising the Java program, an Application Programming Interface (API) program that permits different computer devices to interface with each other. Google has argued that software programs representing an API like Java are inherently functional, and thus not copyrightable. Alternatively, Google asserted that its copying of the API code was “fair use.” During oral argument, many Justices including Justice Kagan and Justice Gorsuch expressed skepticism about Google’s arguments given the clear text of the Copyright Act that any “software program” is protected and given the inherent commercial nature of Google’s copying of Java to sell Android smartphones to compete with the iPhone. The Justices did seem more receptive to a procedural issue of how fair use judgments by trial courts or juries are reviewed on appeal, but this does not mean they agreed that Google’s commercial use of Oracle’s software program was in fact fair use.
THE SNIP: Last week, the Supreme Court held oral argument in Google v. Oracle, and will deliver a decision before June 2021 on highly anticipated legal questions concerning the copyrightability of software and scope of fair use in copying software, bringing an end to the decade-long legal battle between two titans of Silicon Valley.
Learn More:
LEGISLATION & POLICY DEVELOPMENTS
Justice Department Issues New Business Review Letter to the IEEE
On September 10, 2020, the Antitrust Division of the U.S. Department of Justice published an updated Business Review Letter (BRL) to the Institute of Electrical and Electronics Engineering (IEEE) that seeks to “supplement, update, and append” the original BRL issued in 2015. The revised BRL addresses concerns that the 2015 Letter has been frequently incorrectly cited, both domestically and internationally, as an endorsement of the IEEE’s Patent Policy. The revised BRL emphasizes that the 2015 Letter simply sought to clarify that, at the time, the Antitrust Division had no intention of challenging the revisions to the IEEE’s Patent Policy. Additionally, the revised BRL seeks to address outdated U.S. law and policy components of the 2015 Letter in the context of licensing of standard essential patents (SEPs) and the operations of standard development organizations (SDOs).
Among these policy developments, the BRL notes that, since the issuance of the 2015 BRL, U.S. courts have recognized the SEP holders’ right to seek injunctive relief and have supported flexibility in calculating reasonable royalties under FRAND (including flexibility in the selection of the royalty base). The revised BRL also guards against hold outs in SEP licensing which was ignored in the 2015 BRL. Finally, the revised BRL encouraged the IEEE to consider potential changes to its current Patent Policy to achieve unbiased participation by SDOs.
SNIP: The Antitrust Division of the U.S. Department of Justice issued a supplement to the 2015 Business Review Letter to the IEEE, which clarifies that the 2015 Letter is not an endorsement of IEEE Patent Policy and addresses recent policy developments.
Learn More:
Justice Department Issues Business Review Letter to Avanci
On July 28, the DOJ’s Antitrust Division released a business review letter (BRL) regarding Avanci’s Platform for licensing 5G telecommunications technology in the automotive industry. The Antitrust Division said that because, on balance, Avanci’s 5G Platform is unlikely to harm competition, it “has no present intention to challenge the Platform.” In fact, the Antitrust Division said that the 5G Platform could increase the efficiency of licensing standard essential patents pertaining to vehicle connectivity by giving manufacturers an all-inclusive, single step for licensing 5G technology. Further, the DOJ said that the 5G Platform could potentially reduce patent infringement and guarantee that patent owners are compensated for their innovation. The letter suggests that the 5G Platform may also help manufacturers license patents necessary for connected vehicles. The DOJ said that as part of its review, it interviewed a broad range of stakeholders, including automakers, automotive suppliers, potential licensors, and others, and considered letters issued to other patent pools in similar emergent technologies.
SNIP: The Department of Justice’s Antitrust Division issued a business review letter stating that it does not intend to challenge Avanci’s 5G licensing Platform as it is unlikely to harm competition and might instead reduce patent infringement, guarantee patent owner compensation, and streamline 5G technology licensing for automakers.
Learn More:
READ: “Justice Department Issues Business Review Letter to Avanci For Proposed Licensing Platform to Advance 5G Technology for Interconnected Automobiles,” Department of Justice Office of Public Affairs (July 28, 2020).
READ: “DOJ issues Business Review Letter on Avanci SEP Pool licensing,” David Long, Essential Patent Blog.
A New Bill Introduced to Restrict the Ability of Patent Licensing Companies to File Suits at the ITC
In August, Representatives Suzan DelBene (D-WA) and David Schweikert (R-AZ) introduced a bipartisan bill titled The Advancing America’s Interests Act (AAIA), which would amend Section 337 of the U.S. Tariff Act of 1930. If passed, the AAIA would make it more difficult for non-practicing entities to file complaints with the U.S. International Trade Commission (ITC) and obtain exclusion orders. The AAIA would limit the ability to rely on licensing activities to establish the existence of a domestic industry—an essential requirement for bringing a successful complaint under Section 337. The AAIA would also reframe the analysis of the public interest, by requiring the Commission to affirmatively determine that the issuance of the exclusion order would serve the public interest. Though the bill has been referred to the House Ways and Means Committee, it has not gained any other co-sponsors. A corresponding bill has not been introduced in the Senate.
SNIP: A new bipartisan bill has been introduced in the House of Representatives that would revise the standards for granting exclusion orders pursuant to Section 337.
Learn More:
- READ: H.R. 8037 – Advancing America’s Interests Act, 116th Congress.
- READ: “DelBene, Schweikert Introduce Legislation to Modernize ITC Process to Protect American Industry, Workers, and Consumers,” Press Release for Rep. Suzan DelBene.
- READ: “ITC Patent Cases Dramatically Drop, or Another Patent Litigation Myth Bites the Dust,” Adam Mossoff, Truth on the Market blog.
- READ: “Bipartisan ‘Advancing America’s Interests Act’ Seeks to Curtail Intellectual Property Enforcement at the International Trade Commission,” Ropes & Gray.
