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Welcome to the winter 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
Upcoming Virtual Event:
Patent Litigation in China: Navigating a Changing Environment
China has one of the youngest patent systems in the world. Nonetheless, its laws and policies are rapidly evolving, with profound implications for companies all over the world. On February 18, join Hudson Institute Senior Fellow Urška Petrovčič and experts Mark Cohen, Vivienne Bath, and He Jing for a discussion on this timely topic.
CASE DEVELOPMENTS
Court Grants Ericsson Anti‑Interference Injunction in Samsung Litigation
On January 11, 2021, the District Court for the Eastern District of Texas issued an order prohibiting Samsung Electronics from enforcing a Chinese court’s injunction that would have terminated earlier legal proceedings filed by Ericsson in the United States and required Ericsson’s dispute with Samsung over licensing of Ericsson’s 4G and 5G patents to be adjudicated exclusively in Wuhan, China. The order was the result of a longstanding licensing dispute and series of complaints filed in the United States and China. On December 11, 2020, Ericsson filed a complaint against Samsung in the district court in Texas, alleging a breach of a commitment by Samsung to license its standard‑essential patents (SEPs) on fair, reasonable, and nondiscriminatory (FRAND) terms. Samsung had filed a lawsuit against Ericsson in the
Wuhan Intermediate People’s Court of China on December 7, 2020, although neither the Wuhan court nor Samsung gave Ericsson notice of this earlier-filed lawsuit.
In response to Ericsson’s lawsuit in Texas, Samsung requested the Wuhan Court issue an anti-suit injunction to prevent Ericsson from either pursuing its U.S. lawsuit or seeking legal relief anywhere else in the world. Following ex parte proceedings without notice to Ericsson, the Wuhan Court granted Samsung an anti-suit injunction on December 25. Ericsson then filed a request for an anti-interference injunction from the district court in the U.S. The district court granted Ericsson’s motion, ordering Samsung to refrain from any action that would interfere with the district court’s jurisdiction or Ericsson’s right to seek relief in the United States.
THE SNIP: Federal court grants preliminary injunction to Ericsson, ordering Samsung to refrain from using a Chinese court’s injunction to prevent Ericsson from asserting its U.S. patents or litigating a licensing dispute in a U.S. court.
Learn More:
READ: “Ericsson Wins Anti-Interference Injunction Against Samsung in Texas FRAND Case,” Eileen McDermott, IP Watchdog.
READ: “Court Grants Preliminary Injunction in Ericsson, Samsung FRAND Suit,” Kirsten Errick, Law Street Media.
READ: “Gilstrap Won’t Let Samsung Enforce China FRAND Injunction,” Dani Kass, Law 360.
READ: Amicus Brief of Law Professor Adam Mossoff as Amicus Curiae in Support of Ericsson (No: 2:20-cv-00380) (E.D. Tex., Jan. 5, 2021).
Ongoing Developments on USPTO’s Rules for Denying PTAB Petitions
Recent rules adopted by the Patent Trial & Appeal Board (PTAB) have prompted several legal developments in court and at the U.S. Patent & Trademark Office (USPTO). First, four tech corporations—Apple, Google, Cisco, and Intel—sued then-Director Andrei Iancu last September, challenging the PTAB’s adoption of a multi-factor test for reviewing petitions, known as the “NHK-Fintiv rule.” The rule, created by an earlier PTAB decision, provides that a petition to institute an inter partes review (IPR) should be denied when the same patent is also challenged in a parallel district court case that is close to a decision. Second, in October 2020, the USPTO issued a “Request for Information” on whether it should adopt the NHK-Fintiv rule through the formal agency rule-making process. To that end, the USPTO sought “focused public comments on appropriate considerations” for discretionary denials of IPR petitions.
THE SNIP: PTAB’s new NHK-Fintiv rule governing discretionary denials of IPR petitions prompted a lawsuit by four major tech corporations. In response, the USPTO sought comments and input on whether it should adopt the NHK-Fintiv rule through the formal rule-making process.
Learn More:
READ: Complaint for Declaratory and Injunctive Relief, Apple Inc., Cisco Systems, Inc., Google LLC, and Intel Corporation v. Andrei Iancu (No: 20-cv-06128) (N.D. Cal. Aug. 31, 2020).
READ: “Tech Companies’ Lawsuit Against USPTO—and Small Business Inventors’ Motion to Intervene—Highlight Need to Address NHK-Fintiv Factors Via Rulemaking,” Steve Brachmann, IP Watchdog.
READ: “Are There Limits on the PTAB’s Discretionary Denial of Inter Partes Review Trial?,” Eric C. Cohen, Intellectual Property Owners Association.
READ: “Request for Comments on Discretion to Institute Trials Before the Patent Trial and Appeal Board,” Federal Register.
United States Supreme Court Grants Certiorari in Arthrex
On October 13, the Supreme Court of the United States granted review of the U.S. Court of Appeals for the Federal Circuit’s decision in Arthrex, Inc. v. Smith & Nephew, Inc. (consolidating three separate petitions). The Federal Circuit held that the legislation creating Administrative Patent Judges (APJs) at the Patent Trial & Appeal Board (PTAB) created an unconstitutional appointment of principal officers under the Appointments Clause. The Federal Circuit resolved this constitutional problem by severing a legislative provision that protected APJs from at-will termination, and thereby converted APJs into inferior officers. This would allow APJs to continue to be appointed by the USPTO Director, as set forth in the America Invents Act of 2011. Arthrex, Smith & Nephew, and the U.S. government all filed separate certiorari petitions, challenging all aspects of the Federal Circuit’s decision, from its analysis to the remedy. The Supreme Court will decide whether APJs are principal officers who must be appointed by the President and confirmed by the Senate, or, if APJs are deemed to be inferior officers, whether the Federal Circuit’s remedy of severing their job-security protections was proper.
THE SNIP: The Supreme Court will decide in Arthrex whether the constitutional requirements for the appointment of principal officers apply to the PTAB’s Administrative Patent Judges.
Learn More:
European Court of Justice Asked to Opine on SEPs in Nokia v. Daimler
The Court of Justice of the European Union (CJEU) has been asked to clarify the applicability of competition law to the licensing of standard‑essential patents (SEPs). The case arose from a patent infringement dispute between Nokia, an owner of telecommunication SEPs, and Daimler, a car manufacturer. Nokia has sued Daimler for patent infringement in three German courts—the Regional Courts in Düsseldorf, Mannheim, and Munich. Whereas courts in Mannheim and Munich ruled in favor of Nokia, the Düsseldorf decided to suspend the procedure in front of the national court and refer several questions to the CJEU. The questions posed to the CJEU primarily focused on the question of licensing level. Nokia offered a license to Daimler for the use of Nokia’s SEPs in Daimler’s automobiles that use cellular
connectivity. In response, Daimler argued that Nokia should instead execute licenses with Daimler’s suppliers, but Nokia declined to do so. The CJEU is now asked to clarify whether Nokia’s decision to license car manufacturers, rather than upstream manufacturers of car components, violates EU competition law. Additionally, the CJEU is asked to clarify some of the criteria established in its seminal decision Huawei v. ZTE, where the CJEU set for guidance for determining whether an SEP holder’s request for an injunction violates EU competition law.
THE SNIP: The Nokia and Daimler dispute has been sent to the CJEU to clarify the scope of EU competition law.
Learn More:
READ: “All eyes on Luxembourg – Düsseldorf Refers Nokia v. Daimler FRAND dispute to CJEU,” Benjamin Rätz LL.M., Lexology.
READ: “Daimler, Nokia Dispute Referred to European Court of Justice,” Automotive News Europe.
READ: “Daimler’s Patent Clash with Nokia Sent to European Union Court,” Karin Matussek, Bloomberg Law.
READ: “Regional Court Düsseldorf refers Nokia v. Daimler questions to CJEU,” Mathieu Klos, Juve Patent.
Multiple Court Challenges of HHS International Reference Pricing Rules
Separate lawsuits were filed by several organizations challenging the Department of Health and Human Services’ (HHS) most-favored-nations (MFN) rule for Medicare Part B prescription drugs, following President Trump’s executive order establishing the MFN rule last August. Released officially by HHS in November 2020, the MFN rule requires that HHS pay prices for patented drugs as set by the lowest price available in 22 member countries of the Organization for Economic Co-operation and Development (OECD). The Pharmaceutical Research and Manufacturers of America (PhRMA), the Association of Community Cancer Centers, the Global Colon Cancer Association and the National Infusion Center Association filed a complaint against HHS on December 4, 2020, in federal court in the District of Maryland. On that same day, the Biotechnology Innovation Organization (BIO), joined by the California Life Sciences Association and Biocom California, filed a complaint against HHS in federal court in the Northern District of California. Lastly, on December 11, 2020, Regeneron Pharmaceuticals filed a lawsuit against HHS in federal court in the Southern District of New York. The MFN rule was to go into effect on January 1. All plaintiffs requested temporary restraining orders or preliminary injunctions, which were granted in all three lawsuits on the ground that HHS likely violated rule-making procedures in issuing the MFN rule.
THE SNIP: The Trump Administration’s MFN rule for setting drug prices paid by the HHS in the U.S. prompted several legal challenges on administrative, statutory, and constitutional grounds and courts have since blocked the implementation of the rule.
Learn More:
READ: Complaint for Declaratory and Injunctive Relief, Association of Community Cancer Centers, Global Colon Cancer Association, National Infusion Center Association and Pharmaceutical Researchers and Manufacturers of America v. Alex M. Azar (No. 1:20-cv-03531) (D. Md. Dec. 4, 2020)
READ: Complaint for Declaratory and Injunctive Relief, Biotechnology Innovation Organization, California Life Sciences Association and Biocom California v. Alex M. Azar (No. 20-cv-08603) (N.D. Cal Dec. 17, 2020).
READ: “Trump’s Final Act on Drug Prices Put Foreign IP Thieves Before American Patients,” Adam Mossoff, Hudson Institute.
READ: “International Reference Pricing and Negotiation: Yes or No?,” Debate between Adam Mossoff and Wendell Primus, The Federalist Society.
Ninth Circuit Rejects Request for En Banc Review in FTC v. Qualcomm
In October 2020, the Court of Appeals for the Ninth Circuit denied the request of the Federal Trade Commission (FTC) for an en banc review in FTC v. Qualcomm. Earlier in the year, the Ninth Circuit reversed the district court’s decision that Qualcomm’s licensing practices violated antitrust law. The Ninth Circuit also vacated the district court’s remedies, including the worldwide injunction. The FTC filed a petition with the Ninth Circuit requesting a rehearing en banc. The Ninth Circuit unanimously voted to deny the FTC’s petition. The FTC may now file a petition for a writ of certiorari with the Supreme Court, as it has 150 days to file from the date of denial of its en banc petition.
THE SNIP: The Ninth Circuit unanimously rejected the FTC’s petition for an en banc rehearing of the case against Qualcomm. The FTC may seek Supreme Court review and, if it does not do this, its lawsuit against Qualcomm ends with the Ninth Circuit’s ruling that Qualcomm did not violate antitrust laws.
Learn More:
READ: “FTC Request to Reconsider Qualcomm Antitrust Case Rejected by Appeals Court,” Brent Kendall, The Wall Street Journal.
READ: Petition of the FTC for Rehearing en banc (No. 19-16122) (9th Cir. Sept. 25, 2020).
READ: “Ninth Circuit Denies Rehearing en banc in FTC v. Qualcomm Antitrust Suit,” Kirsten Errick, Law Street Media.
LEGISLATION & POLICY DEVELOPMENTS
Experts Publish Statement of Principles on 5G Leadership
Several legal scholars and economists have joined a statement of principles on 5G leadership published by Hudson Institute. Considering that 5G is the backbone for the next technological and commercial revolution, it has enormous implications for economic growth and national security. Policymakers understandably have focused on promoting and securing 5G leadership. However, the current policy discussions on 5G leadership have become muddled by mistaken assumptions about how to measure and identify what counts as leadership in this next-generation technology, for either companies or countries. The Hudson statement addresses two issues that are essential to all fact-based policy discussions about 5G. First, it distinguishes between the physical 5G infrastructure and the larger technological ecosystem. Second, it portrays the long-held view of economists and other scholars that merely counting patents is an unreliable measure by itself in identifying which companies or countries are leading the 5G race. The 5G statement warns that undue reliance on simple patent counting risks creating improper incentives for businesses and governments.
THE SNIP: Legal and economic experts emphasize that, to properly advance the discussion of 5G leadership, it is necessary to ensure that discourse is based on proper metrics of success and an understanding of the innovations that matter most.
Learn More:
Congress Adopts IP Reforms in 2020 Omnibus Legislation
On December 21, 2020, Congress passed the Consolidated Appropriations Act—a 5,593-page, $2.3 trillion omnibus spending bill containing several important provisions implementing trademark and copyright reform. Notably, the bill contains the Trademark Modernization Act, which reestablishes the presumption of irreparable harm when a trademark is infringed. This abrogates the application of the Supreme Court’s 2006 ruling in eBay v. MercExchange to trademarks. Congress also enacted two key bills in copyright law. First, the CASE Act established a small-claims court for copyright disputes, allowing small businesses and individuals to adjudicate small-scale claims of $30,000 or less for copyright infringement. Second, Congress updated the sanctions imposed on companies engaging in large-scale, commercial streaming of pirated movies or other content. This made the sanctions imposed for copyright infringement via streaming proportional, effectively closing what has been known as the “felony streaming” loophole.
THE SNIP: The 2021 omnibus bill included several significant pieces of IP legislation. It restored the presumption of irreparable harm for trademark infringement, imposed proportional felony sanctions for large-scale, commercial copyright infringement through streamed content, and created a new small claims court for adjudicating copyright disputes.
Learn More:
READ: “Intellectual Property Measures Included in Spending and Coronavirus Relief Omnibus Bill,” Jaci L. Overmann & Emily O. Douglass, National Law Review.
READ: "What to Know About the Trademark Modernization Act of 2020,” Christopher A. Mitchell, Lexology.
READ: “Protecting Lawful Streaming Act Signed into Law,” Seth A. Davidson, Lexology.
China Adopts Anti-Monopoly Guidelines on Intellectual Property Rights
In September 2020, the Anti-Monopoly Bureau of China’s State Administration for Market Regulation (SAMR) published the new Anti-Monopoly Guidelines on Intellectual Property rights. The Guidelines provide principles that the antitrust agency will apply in assessing a company’s use of its IP rights under China’s Anti-Monopoly Law. It covers five main topics: (i) general principles for handling antitrust issues related to IP rights; (ii) assessment of IP-related agreements; (iii) abuse of dominant market position; (iv) concentrations; and (v) other special IP-related issues like patent pools, standard essential patents, and the collective administration of copyrights. Commentators have noted that the Guidelines generally soften the SAMR’s positions when compared to the position adopted in prior drafts, recognizing that certain conduct or transactions can be either pro-competitive or anti-competitive. However, many of the factors outlined in the Guidelines are merely suggestions rather than mandatory considerations. This means that the SAMR has considerable discretion in scrutinizing the use of IP rights, which leaves room for significant variance in the results dealing with these issues.
THE SNIP: China implements long-awaited IP antitrust guidelines providing clarifying factors that will be considered when scrutinizing the use of IP rights under China’s Anti‑Monopoly Law.
Learn More:
European Commission Publishes Action Plan on Intellectual Property
On November 25, 2020, the European Commission (EC) published its Intellectual Property Action Plan. The IP Action Plan emphasizes the importance of IP rights generally, as well as the key role IP rights have for both increased digitalization across industries and the European Union’s transition to a greener economy. In identifying major challenges for protecting IP rights in the European Union, the IP Action Plan proposes the following actions. First, it emphasizes the need to upgrade the current fragmented system of IP regimes in different member states by establishing a unitary patent system that will provide a one-stop-shop for patent enforcement across the European Union. Second, it highlights the need for the legal system to promote effective use and deployment of IP rights in the marketplace, especially by small and medium-sized companies. Third, it underlines the need for authorities to promote access to critical technologies while ensuring a fair return on investments. Within this topic, the IP Action Plan refers to standard-essential patents (SEPs) and underscores that the EC will facilitate industry-led initiatives to reduce friction and litigation related to SEPs among players in specific sectors. Fourth, the plan emphasizes the need for developing a functional enforcement system to respond to and sanction piracy of IP rights, including clarifying the responsibilities of online platforms when third parties use their services. Finally, the EC’s IP Action Plan highlights the need to set global standards for IP protection through free trade agreements.
THE SNIP: The European Commission has published an IP Action Plan intended to help the European Union assume leadership in the global IP community and foster economic growth as it transitions to a greener and more digitized economy.
Learn More:
