U.S. Patent Liability Based on Foreign Manufacturing or Sales

Taiwan patent attorney

Can a Taiwan company be held liable for damages under the U.S. Patent Act based on goods it manufactured in China and delivered in Hong Kong, even if it never imports anything to or sells anything in the U.S.?

Yes, despite the fundamental principle that patents are enforceable only within the countries where they are granted, there are circumstances in which U.S. law authorizes liability, either as a direct or indirect infringer, for what appears to be foreign conduct. While proper evaluation of any legal scenario requires consultation with a qualified attorney, this article will briefly summarize a few basic points concerning the extraterritorial reach of U.S. patent law. Continue reading

How to Dispose of Patent Demands without Licensing, Litigation or Outside Counsel

patents-20150817-1024x599

The Wall Street Journal generated controversy last week when it published an article titled, “The Best Way to Fight a Patent Demand May be to Do Nothing.” The author surveyed 223 tech startups and found more than one-fifth resolved patent demands not by fighting or settling, but by “doing nothing.” She explained that patent owners often lack the resources or desire to litigate and suggested “doing nothing” might be a rational, cost-saving response.

Readers pounced, accusing the author of advocating reckless strategy and immoral disregard for the rights of inventors, but apparently most missed the point. Admittedly, the author expressed her point poorly, because she didn’t mean to suggest actually doing nothing. Instead, she explained that “doing nothing” means “looking at the claim, determining a license isn’t needed – and then filing the letter away rather than responding.”

I would go a step further. As former Legal Director at a $7 billion tech manufacturer, I received over 100 licensing demands and disposed of almost all without licensing, litigation or outside counsel, so I agree with the general sentiment. Most licensing demands can be evaluated and disposed of at no cost. However, the evaluation should be far less cursory than the above article suggests and one should almost always respond to the demand. Below is a rough outline of the types of matters that should be considered. Continue reading

How I Dragged a $5.4 Million Patent Suit out of U.S. District Court and into Taiwan

Taiwan courtroom2

The first time I testified in court in Taiwan, I spoke English and the judge translated simultaneously for the attorneys and clerks. After fifteen years here, I speak enough Chinese to direct taxi drivers, but not enough to discuss complex licensing negotiations. Fortunately, our judge earned her law degree in the U.S., is fluent in English and was kind enough to help out.

The second time was different. The judge gave no indication that he spoke English, so the opposing witness and I each brought an interpreter. My interpreter regularly handles Taiwan legal proceedings and rode the subway twenty minutes to get to the hearing, as did I, while our adversary flew a lawyer, translator and witness from London, with the corresponding costs of airfare, hotel, meals and time.

Of course, that was why we sued them in Taiwan. Well, that and the fact that our adversary would be forced to try the case in Chinese, struggling with jet lag, unfamiliar procedures and potential bias, while my client would be comfortably on home turf, using native language, avoiding the hassles and costs of U.S. litigation. But I suppose I should start at the beginning. Continue reading

Maximize Royalties through Strategic Licensing Audits

audit-magnifying-glass

It’s no secret, most intellectual property licensees under-report royalties, often by a large margin. According to one study, 89% of all licensees under-report, with one-fourth short-changing licensors by more than 100%.

Fortunately, licensors can increase the odds of recovering the royalties they bargained for — rather than allowing their licensees to unilaterally name their price — by drafting key licensing provisions with care and strategically monitoring and auditing of licensees.

The below article lays out a few of those best practices to be employed by prudent licensors. Continue reading

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

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

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

shanghai-modern-view
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

supreme_court_building
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

BN-CL670_nokia0_G_20140421114916

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