Some Thoughts on Remedies for Wrongful Patent Litigation or Enforcement Under U.S. Law

Developments over the past few days suggested that it might be useful to say a few words about remedies for wrongful patent litigation or enforcement under U.S. law.  I will probably follow up next week with a companion piece on this topic in Europe and other jurisdictions.

 

 

First, as reported earlier this week on FOSS Patents, on Monday United States District Judge Ronald Whyte entered a preliminary injunction against LSI Corporation and Agere Systems LLC, ordering those firms not to enforce “any exclusion order or injunctive relief by the ITC,” which obligation “shall remain in effect until this court has determined defendant’s RAND obligations and defendants have complied therewith . . . .”  The action before Judge Whyte is similar to the action pending before Judge Robart in Microsoft v. Motorola, in that the plaintiff (here, Realtek Semiconductor Corp.) alleges that the defendants have breached an enforceable contractual obligation to license certain standard-essential patents (SEPs) on RAND terms.  In his order on Monday, Judge Whyte granted “Realtek’s motion for partial summary judgment that defendants breached their RAND licensing obligations to Realtek by failing to offer a license to the declared standard essential ‘958 and ‘867 patents before filing a Section 337 action at the ITC seeking an exclusion order and injunctive relief,” and preliminary enjoined the defendants from enforcing any such an order they may obtain from the ITC.  In finding for Realtek, Judge Whyte concluded that Agere had made “a binding contract with the IEEE” to license its SEPs on RAND terms, and that Realtek was a third-party beneficiary.  He then concluded that “like in Motorola, the act of seeking injunctive relief (here, at the ITC before proposing a RAND license to Realtek) is inherently inconsistent and a breach of defendants’ promise to license the patents on RAND terms.”   The judge then applied the four-factor test for preliminary injunctive relief, and concluded that all of the factors weighed in favor of granting the injunction.   

 

 

My initial take is that the Ninth Circuit is likely to affirm, given its affirmance last year of a similar order entered by Judge Robart in Microsoft enjoining Motorola from enforcing against Microsoft any injunction it might receive from a German court relating to the patents in suit in that case.  See Microsoft Corp. v. Motorola, Inc., 696 F.3d 872 (9th Cir. 2012).  That case involved a foreign anti-suit injunction, in which comity weighed against the injunction (though the court concluded that the impact was comity was tolerable); the comity factor is lacking here.  Moreover, as Judge Whyte noted, Agere and LSI commenced the ITC litigation before offering Realtek a RAND license, a factor that wasn’t present in Microsoft (and Judge Whyte specifically limited his holding to the facts at hand, “where defendants did not even attempt to offer a license . . . until after seeking injunctive relief”).  So altogether I would tend to think that the likelihood of affirmance is good.

 

 

Assuming the opinion withstands appellate scrutiny, I think it is a welcome development.  As I have noted before, the ITC is not bound by the U.S. Supreme Court’s eBay decision and cannot award damages, so injunctive relief in the form of exclusion orders remain the norm there, even in cases in which the risk of patent holdup may be substantial.  Colleen Chien and Mark Lemley have suggested some ways around this problem; the ITC could deny an exclusion order if it believes the public interest would be disserved, for example, or it could delay entry of an order to afford the defendant time to design around (though this might not be very helpful if the patent in suit is standard-essential).  But Judge Whyte’s decision may provide yet another option for preventing ITC exclusion orders from enabling patent holdup, though it remains to be seen how broadly the opinion will be interpreted.

 

 

Second, this week the State of Vermont passed a law allowing the state Attorney General to seek injunctive relief, civil penalties, and/or restitution, and private parties to assert claims for injunctive relief and damages, against persons making bad faith assertions of patent infringement.  The text of the statute is here, and the AG’s office reports that it filed its first lawsuit under the act yesterday.  One possible hitch, as I see it, is that according to Federal Circuit case law a person asserting an unfair competition claim such as commercial disparagement or tortious interference with contract based on an allegedly false assertion of patent infringement must prove by clear and convincing evidence that the defendant acted in both objective and subjective bad faith.  See Adept, Inc. v. Murex Securities, Ltd., 539 F.3d 1354, 1370 (Fed. Cir. 2008); Dominant Semiconductors SDN BHD v. Osram GmbH, 524 F.3d 1254, 1260 n.5 (Fed. Cir. 2008).  The court’s rationale seems to rest on both patent preemption principles and Noerr-Pennington concerns.  (The Noerr-Pennington doctrine is derived from antitrust case law in which the Supreme Court has held that a person’s right to petition the government for redress means that the person is immune from antitrust liability for, inter alia, the act of commencing civil litigation, unless the person asserting the antitrust claim proves objective and subjective bad faith by clear and convincing evidence.  Not all courts believe that Noerr-Pennington  applies outside the antitrust context; the issue is whether the doctrine is based upon the First Amendment or only an interpretation of antitrust law.)  The Vermont statute doesn’t discuss the burden of proof or the requirement of both objective and subjective bad faith, and without such a limiting construction I think the statute might fail the Federal Circuit’s test–though whether the Federal Circuit’s test is the last word on the subject is of course another matter.  It will be interesting to see how the AG’s action will compare with the unsuccessful effort by Cisco to invoke the federal racketeering act (RICO) against a patent assertion entity, see In re Innovatio IP Ventures LLC Patent Litig., __ F. Supp. 2d __, 2013 WL 427167 (N.D. Ill. 2013)).

 

A third possibility that I’ve been mulling over recently is whether it can ever be a violation of U.S. antitrust law for the owner of an SEP who has made a RAND commitment to attempt to obtain injunctive relief against an allegedly unauthorized user of the SEP.  (For violations of U.S. antitrust law, the available remedies include injunctive relief and treble damages.)  The FTC’s consent order relating to Google’s acquisition of Motorola Mobility included provisions prohibiting Google and Motorola from seeking injunctive relief against the infringement of SEPs (subject to exceptions), but that case was atypical because it involved an acquisition that was potentially anticompetitive and thus subject to review under section 7 of the Clayton Act.  In a case not involving such facts, I think the likelihood that a U.S. court would impose antitrust liability are low.  See, e.g., In re Indep. Serv. Orgs. Antitrust Litig., 203 F.3d 1322, 1325-28 (Fed. Cir. 2000) (holding that unilateral refusals to license patents are actionable only under extremely narrow circumstances); Intergraph Corp. v. Intel Corp., 195 F.3d 1346, 1356-62 (Fed. Cir. 1999) (narrowly construing the essential facilities doctrine); Image Technical Servs. v. Eastman Kodak Co., 125 F.3d 1195, 1218-20 (9th Cir. 1997); Data Gen. Corp. v. Grumman Sys. Support Corp., 36 F.3d 1147, 1187 & n.64 (1st Cir. 1994).  See also  Rambus, Inc. v. FTC, 522 F.3d 456 (D.C. Cir. 2008) (casting doubt on the use of antitrust law as a vehicle for redressing a lawful monopolist’s use of deception to extract higher royalties).  It’s also possible that the Noerr-Pennington doctrine would preclude such an antitrust claim, an issue discussed in this paper by Thomas Dillickrath and David Emanuelson–though I tend to think not, since the limitation on the patentee’s right to petition would only be a limitation as to one type of remedy, injunctive relief, and not as to damages.  But I need to think about the issue some more.  I will be addressing some of these antitrust issues in a forthcoming paper and may blog about them further.    

Advertisements

Posted on May 23, 2013, in Patent. Bookmark the permalink. Comments Off on Some Thoughts on Remedies for Wrongful Patent Litigation or Enforcement Under U.S. Law.

Comments are closed.

%d bloggers like this: