When is Foreign Patent Licensing Subject to U.S. Antitrust Law?

confused-lawyerPatent law and antitrust law have long had an uneasy relationship. A patent is a legal monopoly, but antitrust law favors market competition and abhors monopolies. Consequently, U.S. courts have struggled for over a century to define reasonable boundaries between the two disciplines.

In the U.S., the Sherman Antitrust Act is at the core of most antitrust litigation. In the early years of the Act, patents were seen as almost immune from its reach, with the Supreme Court stating a general rule of, “absolute freedom in the use or sale of rights under the patent laws. . . The very object of these laws is monopoly.” E. Bennett & Sons v. National Harrow Co., 186 U.S. 70 (1902). But laws evolve and today courts usually apply a “rule of reason” approach when evaluating whether conduct unreasonably restrains competition, with the Supreme Court declaring “patent and antitrust policies are both relevant.” FTC v. Actavis, 570 U.S. 756 (2013).

Globalization further complicates matters. While a patent basically confers rights only within the country in which it is granted and the doctrine of comity disfavors interfering in the affairs of other nations, global manufacturing and sourcing of components, “is increasingly common in our modern global economy, and antitrust law has long recognized that anticompetitive injuries can be transmitted through multi-layered supply chains.” Lotes Co., Ltd. v. Hon Hai Precision Industry Co., Ltd., No. 13-2280 (2d Cir. 2014).

However, the test for application of the Sherman Act to foreign parties and foreign conduct has become increasingly clear, in particular with several U.S. cases decided earlier this year, one of which involved allegations of egregious patent licensing conduct in China. Continue reading

$500 Million Price-Fixing Sentence Affirmed against AU Optronics

illegalLast week the Ninth Circuit Court of Appeals affirmed criminal convictions against AU Optronics (“AUO”), a Taiwanese maker of Thin-Film Liquid Crystal Display (“TFT-LCD”) panels, its U.S. subsidiary and two of its top executives, for illegal price-fixing that resulted in prison sentences of thirty-six months for each of the individuals and a $500 million fine for AUO. The case offers many stark lessons to global manufacturers whose employees may communicate with competitors about the pricing and supply of their products.

Initially, AUO was one of several leading TFT-LCD manufacturers indicted in the Northern District of California for conspiring to fix prices for TFT-LCDs in violation of the Sherman Antitrust Act, based on a series of meetings that took place between the alleged conspirators. In the meetings, the defendants discussed prices at which they would sell TFT-LCDs to their U.S. customers, including Dell, Compaq and HP.

AUO was the only accused company to take the case to trial, with rivals including LG Display, Chunghwa Picture Tubes, Chi Mei Optoelectronics and Sharp Corp. all pleading guilty and paying a total of more than $890 million in fines. At trial, the jury found AUO and its executives guilty and imposed the $500 million fine. The Ninth Circuit affirmed the AUO convictions and fine. While the decision addresses many points, a few are particularly noteworthy. Continue reading

PWC’s 2014 Patent Litigation Study

PWC 2014 patent reportPricewaterhouseCoopers has just released its comprehensive annual study of U.S. patent litigation, covering the period from 1991 through 2013. Examining everything from litigation success rates, time-to-trial and median damage awards to comparisons of judges, districts, jury v. bench trials and non-practicing entities (“NPEs”) v. practicing entities (“PEs”), the report is a treasure trove of fascinating statistics.

The report concludes that, “in some ways, 2013 appeared to be a moderating year in patent infringement litigation,” with fewer mega-damage awards and a continuing decline in median damages, but on the other hand, “both the number of patent cases filed and the number of patents granted continued to grow rapidly in 2013 – by 25% (to almost 6,500 cases) and 7% (to almost 300,000 patents) respectively.”

Just a few highlights of the report are set forth below: Continue reading

Seventh Circuit Vacates Motorola Mobility v. AU Optronics

The extent to which U.S. antitrust law liability may be imposed on foreign parties for foreign conduct remains somewhat uncertain, as the Seventh Circuit Court of Appeals just vacated its March 27 decision in Motorola Mobility, LLC v. AU Optronics Corp. and agreed to re-hear plaintiff’s case against several Asian companies for alleged violations of the Sherman Antitrust Act based on activities that took place in Asia.

Motorola Mobility filed the underlying lawsuit in the U.S. District Court for the Northern District of Illinois, alleging that several foreign manufacturers of liquid-crystal display (“LCD”) panels, including Samsung, Sharp and AU Optronics allegedly engaged in illegal price-fixing that caused plaintiff to pay higher prices for the panels than it should have. The district court dismissed most of plaintiff’s antitrust claims and, in March, the Seventh Circuit affirmed on the grounds that plaintiff failed to meet the criteria required by the U.S. Foreign Trade Antitrust Improvements Act (“FTAIA”). Continue reading

Jury finds Firm Negligent to Prosecute Patents for Competitors

LettersPatent7899 On Thursday, a Texas jury found the Baker Botts law firm negligent for filing patents for competing companies and set the damages at $40.5 million… but Baker Botts dodged the bullet, as the jury also found the plaintiff waited too long to file its claim.

Axcess International hired Baker Botts in 1998 to provide general IP advice and assist with drafting and filing of patent applications for RFID technology. However, shortly after filing several patents on Axcess’ behalf, the firm also agreed to represent Savi Technologies, a competitor of Axcess, and began filing patent applications for Savi.

Axcess filed the lawsuit in 2010, alleging negligence, breach of fiduciary duty and material disclosure and claiming it only learned of the violations the year before. The jury disagreed. While if found Baker Botts breached its obligations, it found Axcess had knowledge in 2007 and the statutes of limitations had expired. Continue reading

Best Practices for Licensing Patents to Companies in China

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Patent licensing generally is fraught with risks, but licensors who do business in China face special challenges. Common practices and contract provisions that may work elsewhere often prove ineffective in China. Consequently, before entering into such an arrangement, the prudent lawyer will review some of the key issues faced by licensors in China.

Notably, foreign companies are increasingly being forced to defend their licensing terms before China’s antitrust regulator, the National Development and Reform Commission (“NDRC”). US patent-assertion entity InterDigital recently settled a dispute with the NDRC, by agreeing to lower its royalty rates in China and make other changes to its terms. The NDRC raided Qualcomm’s Beijing and Shanghai offices and launched an investigation into the US chip-maker’s licensing terms. And, when Microsoft announced plans to acquire Nokia’s business (but not its patents), several competitors demanded China’s government impose restrictions on the deal, prohibiting Microsoft and Nokia from raising their licensing rates in China.

But anti-trust compliance is just one challenge faced by licensors in China; other challenges relate to restrictions on technology imports, under-reporting of royalties, difficulties with audits, dispute resolution and more. This article will summarize a few relevant laws and challenges licensors should be aware of and best practices for dealing with them. Continue reading

Supreme Court Loosens Standard for Recovering Fees in Patent Suits

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In two 9-0 decisions, the US Supreme Court just made it easier for the winning party to recover its attorney fees in US patent lawsuits. In Octane Fitness v. ICON, the Court relaxed the standard for recovering attorney fees and in Highmark v. Allcare Health Management, the Court made it harder for the Federal Circuit to second-guess district courts on a party’s bad conduct.

The US Patent Act allows a successful party in patent litigation to recover its attorney fees in “exceptional cases.” In the Octane case, the Fed Circuit ruled that such cases required both objective baselessness and subjective bad faith. The Supreme Court disagreed, finding “A case presenting either subjective bad faith or exceptionally meritless claims may sufficiently set itself apart from mine-run cases to warrant a fee award.”

In the Highmark case, a district court awarded Highmark $5.2 million in attorney fees after finding it was the subject of a frivolous patent infringement suit. The plaintiff in the underlying action appealed the decision and the Fed Circuit re-heard arguments on attorney fees and came to a different decision. The Supreme Court found the Fed Circuit should have left the judge’s decision alone unless it found the court acted unreasonably.

Read more on these two cases HERE

Microsoft to Close Nokia Deal by Friday

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Microsoft announced it will complete its US$7.5 billion acquisition of Nokia’s cellphone business by Friday, April 25, including over 30,000 staff, a wide range of devices and Nokia’s CEO, who will report directly to Microsoft’s CEO.

The transaction will allow Microsoft to compete directly against Apple, Samsung and other cell-phone makers and allow Nokia to focus on generating revenue from its extensive patent portfolio.

Chinese antitrust regulators finally gave their approval to the deal earlier this month, while South Korea’s regulators still haven’t given their approval, but the parties claim approval from Korea is not required to close the deal. Continue reading

Wage-Fixing Suit v. Tech Giants Moving Forward to Trial

wage-fixing suitDefendants Adobe, Apple, Google, Intel, Intuit, Lucasfilm and Pixar lost an attempt to dispose of by summary judgment a wage-fixing lawsuit filed against them by 64,600 engineers, designers, quality analysts, artists, editors, and system administrators employed by the seven companies.

In the fascinating class-action lawsuit, the plaintiffs contend the defendant tech companies colluded to not hire employees away from each other, thereby reducing competition and lowering wages. On Friday, US District Court Judge Lucy Koh quashed the plaintiffs’ motion for summary judgment, so the case will move forward to trial.

Read more about the case HERE

40-year US Patent Review Period?

slowjustice“Father of the microcontroller,” Gilbert Hyatt, who has been granted over 70 patents, generating more than $350 million in royalties, and won a $388 million award against California’s Franchise Tax Board for wrongful harassment, has been waiting more than 40 years for the USPTO to respond to his pending patent applications.

Sounds crazy, but it may be true. Read his amazing story here: HERE