Welcome to the spring 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

Policy Memo: Does China Really Dominate Global Innovation?
The Impact of China’s Subsidized Patent Application System

Over the past two decades, China’s economy has grown impressively while its patented innovations have grown at an even higher rate. But this trend should not simply be accepted at face value. In a new Hudson policy memo, Jonathan Putnam, Ngoc Ngo and Hieu Luu examine the Chinese government's subsidization of patent applications and why reports of China’s innovation dominance should be viewed with skepticism.

CASE DEVELOPMENTS

In Google v. Oracle, US Supreme Court Delivers Victory for Google

On April 5, 2021, the Supreme Court issued its long-awaited decision in Google v. Oracle with a 6-2 opinion in favor of Google. The opinion, delivered by Justice Stephen Breyer, focused largely on the second question posed to the Court, which asked whether Google’s copying of 11,500 lines of Oracle’s Java code was “fair use.” The Court applied the four factors and concluded that Google’s copying was “fair use.” The Court first said that the code received minimal protection given the difficulty in disentangling the unprotected functional nature of the declaring code from its protectible expression. Next, it found that Google’s copying of the code to build the Android smartphone platform was transformative and innovative. The Court also said that Google copied a relatively small amount of declaring code compared to the total amount of computer code in Java.

In his dissent, Justice Clarence Thomas, joined by Justice Samuel Alito, said that the majority failed to address important facts, such as Google’s commercial motivation in copying the legally protected code as well as the impact of Google’s conduct on Oracle, that together demonstrate that Google’s copying was not fair use.

THE SNIP: Google wins its decade-long legal dispute with Oracle arising from its copying of 11,500 lines of computer code in Oracle’s Java.

Learn More:

• READ: Google v. Oracle (U.S. Supreme Court slip opinion, Apr. 5, 2021).
• WATCH: “Google v. Oracle: The Supreme Court and Copyright in the Digital Age,” online discussion hosted by the Committee for Justice with Stephen Tepp, Adam Mossoff, Zvi Rosen, and Curt Levey.
• READ: “Have Tech Platforms Captured the Supreme Court?” by Jonathan M. Barnet, The Hill.
• WATCH: “Google v. Oracle: Consequences of the Case,” Hudson Institute online discussion with Tim Wilson and Adam Mossoff (Feb. 14, 2020).

Samsung Appeals Anti-Interference Injunction in Ericsson Patent Dispute

Samsung Electronics has appealed an anti-interference injunction issued by a court in the Eastern District of Texas on January 11, 2021, in its patent licensing dispute with Ericsson. The district court issued its anti-interference injunction in response to an anti-suit injunction that Samsung received from a court in Wuhan, China, on December 25, 2020 that prohibited Ericsson from litigating the lawsuit it filed in the Texas district court. Samsung now argues in the appeal that the legal doctrine governing international comity requires vacating or at least narrowing the anti-interference injunction. Samsung’s appeal is supported by several law professors.

In response, thirteen professors in law, business, and political science, including Adam Mossoff of the Forum for IP, filed an amicus brief in support of Ericsson. They reasoned that the Wuhan court proceedings were without notice and held ex parte, and that the lack of due process and respect for basic norms of the rule of law violate the test for comity and create opportunities for implementers to engage in strategic litigation behavior that would result in an uneven playing field for owners of standard-essential patents (SEPs).

THE SNIP: Samsung asks the Federal Circuit to vacate or narrow an anti-interference injunction granted by the district court in January.

Learn More:

• READ: Appellants’ Opening Brief, Ericsson Inc. v. Samsung Electronics Co. (No. 2021-1565) (Fed. Cir. Feb. 22, 2021).
• READ: Brief of International Intellectual Property Law Professors as Amici Curiae in Support of Neither Party - Ericsson v. Samsung (Mar. 1, 2021).
• READ: Brief of Professors in Law, Business, and Political Science as Amici Curiae in Support of Appellee - Ericsson v. Samsung (Apr. 1, 2021).

US Supreme Court Hears Oral Argument in Arthrex

On March 1, 2021, the U.S. Supreme Court heard oral argument in United States v. Arthrex. The case presents two questions: (1) whether the administrative patent judges (APJ) in the Patent Trial & Appeal Board are “principal officers” who must be appointed by the president with the Senate’s advice and consent, or “inferior officers” who may be appointed by the director of the U.S. Patent & Trademark Office; and (2) if APJs are principal officers and their appointments are therefore unconstitutional, whether the Federal Circuit’s severing of a legislative provision protecting APJs from at-will termination was a sufficient remedy.

During the oral argument, Arthrex argued that APJs are unconstitutional principal officers and that the proper remedy is for Congress to amend the America Invents Act of 2011 to provide for proper constitutional procedures. The U.S. government and Smith & Nephew both argued that APJs are inferior officers given the various means of control the USPTO director exercises over them. This passes muster, they claimed, under the test created by the Supreme Court’s 1997 decision in Edmond v. United States.

THE SNIP: The Supreme Court heard oral argument in Arthrex on whether the appointment of administrative patent judges in the Patent Trial and Appeal Board violates the Constitution’s Appointments Clause.

Learn More:

• READ: United States v. Arthrex, Inc., SCOTUSblog.
• READ: “Argument Preview: Justices to Consider Appointments Clause Challenge to Administrative Patent Judges,” George Quillin and Jeanne Gills, SCOTUSblog.
• READ: “Argument Analysis: Justices Appear Conflicted About Status of Administrative Patent Judges,” George Quillin and Jeanne Gills, SCOTUSblog.
• READ: “The Supreme Court Hears Oral Argument in Arthrex,” David M. Tennant, John B. Scheibeler, and Natalie Ryang, White & Case.

CJEU Rules Reverse-Payment Settlements Violate EU Competition Law

On March 25, 2021, the Court of Justice of the European Union (CJEU) ruled that reverse-payment settlement agreements between Lundbeck, a Danish pharmaceutical company, and four generic drug manufacturers violate EU competition law. The Court affirmed a fine of $172 million that the European Commission levied on the companies. The reverse-payment settlement agreements were executed in 2002. That year, Lundbeck’s patent on citalopram (a flagship antidepressant drug) expired, but Lundbeck still had several patents covering the process of producing citalopram, and it sued several generic drug manufacturers for patent infringement. In the settlement agreements, the generic drug manufacturers agreed to delay their market entry of generic versions of citalopram in exchange for financial compensation from Lundbeck.

The CJEU agreed with the Commission that these agreements violated Article 101 of the Treaty on the Functioning of the European Union (TFEU), a provision that prohibits agreements that restrict competition. The CJEU emphasized that patent settlements do not automatically violate Article 101 TFEU. Nonetheless, the court said that if the value transfer can have no other explanation than as a term of a do-not-compete agreement, the settlement can be unlawful.

THE SNIP: CJEU upholds $172 million fine against Lundbeck and various generic drug manufacturers, ruling that their reverse-payment settlement agreements violate EU competition law.

Learn More:

• READ: “Judgment in Cases C-591/16 P H Lundbeck A/S v Commission,” (ECJ, Mar. 25, 2021).
• READ: “Lundbeck Loses EU Appeal Over €146M 'Pay for Delay' Fine,” Christopher Crosby, Law360.
• READ: “The ECJ’s Lundbeck Judgment Offers Little New on Patent Settlements but Gives Birth to an Interesting Principle: Sector Inquiries Give Rise to a Duty of Diligence,” Jérémie Jourdan, James Killick, Assimakis Komninos and Dr. Tilman Kuhn, White & Case (Mar. 26, 2021).

LEGISLATION & POLICY DEVELOPMENTS

WTO Petition Seeking Waiver of all IP Rights Related to Responses to COVID-19

Last fall, India and South Africa submitted a petition to the World Trade Organization (WTO) seeking a waiver of all intellectual property rights under international treaties for drugs, vaccines, or other necessary responses to the COVID-19 pandemic. The WTO is currently considering this petition. The politicians and activists supporting the waiver argue that patents are a blockade for patient access, especially in developing countries. Opponents of the waiver maintain that patents made possible the R&D investments, the creation of technical know-how, and the many commercial agreements over the past several decades that were the launching pad for the unprecedented development of several vaccines and other medical treatments in less than a year. They also point to the lack of evidence that patents have blocked or otherwise hampered any research or medical treatments of the novel COVID-19 virus.

THE SNIP: A petition to waive IP rights related to COVID-19 under international treaties is pending before the WTO, and this has prompted an intense policy debate over the key role of patents in promoting and distributing vaccines and other medical innovations.

Learn More:

• READ: “Maintaining Intellectual Property Amid Covid-19,” Michelle McMurry-Heath.
• READ: “No Evidence that Patents Slow Access to Vaccines,” Andrei Iancu, STAT.
• READ: “Waiving Vaccine Patents Would Imperil Public Health,” Adam Mossoff, The Virginian-Pilot.
• READ: “COVID Vaccine Shakedown at the WTO,” James Pooley, Wall Street Journal.
• READ: “Ambassador Katherine Tai’s Remarks at a WTO Virtual Conference on COVID-19 Vaccine Equity,” Office of the U.S. Trade Representative.

STANDARDS & PATENTS

The IEEE Reviews Several Patent Policy Provisions

In March 2021, the Institute of Electrical and Electronics Engineers (IEEE) indicated that it will review several provisions from the patent policy it adopted in 2015. The review will focus on two particularly divisive provisions: (1) the right of an owner of a standard-essential patent (SEP) to seek a “prohibitive order,” such as an injunction against infringers, and (2) the provision that recommends that reasonable licensing rates for SEPs are determined based on the smallest marketable component of a product utilizing the patent rather than the price of the entire product. This review was prompted by a September 2020 notice from the DOJ’s Antitrust Division, which updated the business review letter (BRL) issued to the IEEE in 2015. At a three-day meeting in December, the IEEE Board of Governors instructed the IEEE Standards Association to review the two provisions and determine whether “removal or revision” is necessary. It remains to be seen whether the IEEE will revise the two provisions, considering that in April 2021, the Antitrust Division restored the 2015 BRL and said it would treat the 2020 supplemental letter as “advocacy.”

THE SNIP: The IEEE is reviewing its controversial 2015 patent policy provisions that limit the availability of injunctions and recommend a methodology for determining royalties for SEPs.

Learn More:

• READ: “IEEE Opens Review of Controversial Patent Policy,” Richard Lloyd, IAM Media.
• READ: “Study Finds IEEE’s 2015 Patent Policy Sowing Uncertainty and Slowing Innovation,” Kevin Madigan & Adam Mossoff, 4iP Council.
• READ: DOJ Antitrust Division Supplemental and Update Letter to the 2015 Business Review Letter of the IEEE-SA Patent Policy (Sep. 10, 2020).
• READ: “US DOJ Restores Obama-era Business Review Letter to IEEE on Patent Licensing, Rejects Delrahim Supplement,” Khushita Vasant.