Think Patent Arbitration Can’t Work? Think Again.

When amicable efforts fail to resolve a dispute concerning patent rights and the aggrieved party wishes to pursue the matter further, it usually initiates litigation or perhaps a U.S. International Trade Commission (“ITC”) investigation, despite the huge costs of such options, because it may assume no other plausible alternatives exist to achieve the desired objectives.

Articles, such as this one, tout arbitration as an alternative: faster, cheaper and more confidential than litigation, with other benefits as well. Apparently the U.S. Supreme Court agrees, having described the Federal Arbitration Act (9 U.S.C. §1, et seq.) as evidencing a “national policy favoring arbitration” (Nitro-Lift v. Howard); and recognized “an emphatic federal policy in favor of arbitral dispute resolution” (Marmet Health Care v. Brown). Likewise, the Patent Act provides at 35 U.S.C. §294(a) that any arbitration clause contained in a patent agreement shall be presumed valid, irrevocable and enforceable.

However, in actual practice, relatively few patent disputes are submitted to arbitration. Worldwide, only a few hundred requests to arbitrate patent disputes are filed each year. By comparison, in 2012 more than 5,000 patent lawsuits were filed in U.S. District Courts, not to mention courts of other nations. So what’s the problem? If arbitration is so great, why are so few patent disputes resolved in arbitration? More important, are patent litigants missing something? Should they rely on arbitration more often? Continue reading

10 Tips for Managing Litigation for Superior Results and Cost Savings

Earlier this year, a U.S. District Court approved the payment of $308 million in attorney fees to 116 law firms in a single case (In re TFT-LCD Antitrust Litigation, N.D. Cal.), with one firm receiving $75 million in fees and another receiving $49 million. While that case may be an extreme example, the median hourly rate for partners in U.S. law firms is $625 per hour and the average patent lawsuit requires $2.5 million in attorney fees. Is it any wonder people complain about attorney fees?

Fortunately, by managing litigation effectively, those costs can be greatly reduced. For several years I served as Director of Legal at a multi-billion dollar tech company based in Taiwan and was responsible for resolving all disputes and litigation. Cost-down was our corporate mantra, with every invoice closely scrutinized by management. Below are a few of the lessons I learned. Continue reading

Design Patents in China: Applications, Infringement and Enforcement

Design patents have been making the news. Last summer, Apple’s $1.05 billion verdict against Samsung was famously based, in part, on the finding that Samsung infringed Apple’s rounded-rectangle and edge-to-edge glass designs. Since then, Yamaha, Thule, Oakley, Nike and Spanx, to name just a few, have litigated in the U.S. over the design of headphones, ski racks, sunglasses, footwear and women’s undergarments. And just last month, former head of the USPTO, David Kappos, published an OpEd piece describing design as “the new frontier of intellectual property.”

Nothing has fundamentally changed about the nature of design patents. The first US design patent was granted in 1842. The Statue of Liberty, Coke bottle, Volkswagen Beatle, Stealth Bomber and Star Wars’ Yoda are all protected by design patents. Design patents have long played an important role in consumer electronics, automotive, apparel, jewelry, packaging and other industries.

But industrial design is becoming increasingly important, Mr. Kappos explains, because the increasing functionality of man-made devices brings with it increasing complexity, so innovative companies are constantly seeking superior designs, a convergence of form and function that helps make the complex simple and sets their companies apart; and protecting such designs is critical.

While that explanation sounds reasonable, in China there are additional factors and – as always – the picture is complex and uncertain, but it is perfectly clear that companies doing business in China, from manufacturing to sales, should seriously consider the roles design patents can play with respect to brand protection, counterfeiting and unscrupulous business practices. Continue reading

China’s Great Leap Forward in Patents

On March 28, Apple Inc. appeared in court in Shanghai to defend charges that Siri, its voice-recognition, personal-assistant software, allegedly infringes a Chinese patent. The plaintiff and owner of the patent, Zhizhen Internet Technology Co., claims its version of the software has over 100 million users in China and is requesting the court to ban all manufacturing or sales of Apple’s product in China.

This was not the first time Apple faced patent infringement claims in China. Last summer a Taiwanese man sued the company in China for alleged infringement relating to its Facetime technology; in 2010 a Shenzhen company threatened to sue concerning iPad design; in 2008 Apple was sued for the iPod; and in 2012, a Hong Kong company launched GooPhone I5, an android-based replica of the iPhone 5, reportedly based on leaked photos of the iPhone. GooPhone claimed to have patented the design and threatened to sue Apple if it dared to sell the genuine article in China.

Nor is Apple alone. French company, Schneider Electric lost a $48 million patent infringement verdict in China and Samsung lost one for $7.4 million. Sony, Phillips, Canon and Dell have all had their battles and GooPhone sells knockoffs of other smartphones in China with apparent impunity. Of course it’s possible in some cases the Chinese technology may be first and the Chinese patent legitimate. However, foreign companies face a growing risk that Chinese entities may unscrupulously patent foreign technology in China and demand a toll to do business there. Not only that, but in coming years companies will increasingly face challenges worldwide from the growing landslide of patents coming out of China. Continue reading

US Court Approves International Service of Process by Facebook

As technologies develop, courts worldwide are increasingly open to allowing service of legal documents by new means, including by FedEx, e-mail, Facebook and Twitter. In line with that general trend, last week a District Court in New York authorized service upon certain defendants located in India by means of e-mail and Facebook.

The case, FTC v. PCCare247 Inc. (S.D.N.Y. 2013), involves allegations that several individuals located in India operated a scheme that tricked American consumers into spending money to fix non-existent problems with their computers. The FTC applied to the court and obtained a temporary restraining order enjoining defendants’ business practices and freezing some of their assets.

Because India is a signatory to the Hague Convention on Service Abroad, the FTC submitted the Summons and Complaint to the Indian Central Authority, requesting service of process pursuant to Federal Rule of Civil Procedure (FRCP) Rule 4(f)(1) and Article 3 of the Hague Convention. The FTC also attempted to serve process on the defendants by e-mail, FedEx and personal service. FedEx confirmed delivery for most of the defendants and a process server personally served all of the defendants. Continue reading

Should Ongoing Royalties be Enhanced for Bad Attitude?

In January 2013, Taiwan’s InnoLux Corp. filed an appeal with the Federal Circuit, requesting the Court to overturn an award of enhanced post-judgment (“ongoing”) royalties that appeared to be enhanced, at least in part, because the trial judge took offense at an out-of-court remark made by the defendant’s CEO, after losing at trial.

Specifically, in the case of Mondis Technology v. ChiMei InnoLux Corp., et al., No. 2:11-CV-378 (E.D. Tex. Sept. 30, 2011), a jury found InnoLux liable for infringing certain computer monitor patents and ordered it to pay $15,000,000 in damages, plus royalties of 0.5% per monitor sold in the final months prior to judgment, for which sales figures had not yet been available.

Following the verdict, the defendant’s CEO was quoted in a Taiwan newspaper as having said, “The issue of patent infringement is being taken too seriously sometimes.” Continue reading

Managing Costs of Patent Litigation

For several years I was the lead attorney at a Taiwan company that manufactures technology and consumer electronic products, from light-emitting diodes to liquid-crystal displays. Every month we received a new demand for patent licensing or indemnification and it was my job to dispose of them at no cost, without licensing, litigation, or outside counsel. Usually it was possible, but occasionally we found ourselves mired in full-blown litigation.

It’s no secret patent litigation costs are immense. According to the American Intellectual Property Law Association, the cost of an average patent lawsuit, where $1 million to $25 million is at risk, is $1.6 million through the end of discovery and $2.8 million through final disposition. Adding insult to injury, more than 60% of all patent suits are filed by non-practicing entities (NPEs) that manufacture no products and rely on litigation as a key part of their business model.

However, whether one represents a plaintiff or defendant, manufacturer or NPE, there are actions one can take to help manage the costs.

Below are some general guidelines. Continue reading

Ten Tips for Successful Outbound Technology Licensing

In this age of endless corporate cost-cutting, it might seem the only way to compel a company to license ones technology is through litigation or threats of litigation. After all, why would a company agree to pay large sums of hard-earned dollars for the use of intangible property unless it absolutely has to?

Well, they do. While patent lawsuits grab the big headlines, plenty of licensing takes place without threats or coercion. Often it results from business discussions between willing participants. The licensor may be unwilling or unable to fully develop and commercialize its technology, while the licensee may believe use of the technology will generate increased revenue or other benefits that should outweigh the costs of licensing.

Take Microsoft, for example. They license out a variety of technologies that improve the performance of computers, monitors, keyboards and more. But, they hit a jackpot with their android patents, licensing their technology to cell phone manufacturers who paid more than $400 million in licensing revenue in 2012. Or consider IBM, Intel, Qualcomm and Texas Instruments, each generating roughly $1 billion in annual licensing revenue. Of course, those are extreme cases, but the point is licensing deals are often entered into not in response to litigation but as a strategic, mutually-beneficial business transaction.

Of course, it’s not easy locating potential licensing partners and convincing them that paying royalties makes business sense. In fact, it usually requires a great deal of work. But, technology licensing agreements are often negotiated as a business deal, with the licensor wielding a carrot not a stick, sparing both parties the stress and expense of litigation. I know, because my former employer, on several occasions, succeeded in doing the same.

Here are 10 tips intended to help your company out-license its technology through business means. Continue reading

Strategic Monetization of Patents

The value of all U.S. generated intellectual property is said to be approximately $5.5 trillion, equal to nearly 40% of the U.S. economy. From time to time that value is dramatically demonstrated, such as when Apple wins a $1 billion patent infringement verdict against Samsung, when Nortel sells a portfolio of patents for $4.5 billion, or when Google acquires Motorola Mobility for $12.5 billion, to gain control of its patents.

However, for many companies the cost of obtaining and maintaining intellectual assets – in particular patents – may be a huge waste of corporate resources, either because the company files patents indiscriminately, without sufficient consideration for which technologies, markets and regions may be most deserving of investment, or because it fails to devise and implement a sound plan for monetization of the patents.

Monetization of a patent portfolio usually begins with an IP audit. Working with the company’s business units and engineers, one should evaluate the company’s patents and divide them into three or four categories: those which are presently being used by the company; those which are not being used, but might have value to others; and those which are not being used and appear to have little value. One may also distinguish between patents that relate to the company’s core v. non-core technologies. Continue reading

Obtaining Discovery in the U.S. for use in Taiwan Legal Proceedings

Any litigant in Taiwan who seeks discovery from a U.S. adversary will face serious challenges, because Taiwan’s legal system lacks a formal discovery system. There are no procedures for interrogatories, document production requests or depositions. Moreover, even if a litigant were to apply to the Taiwan judge and obtain an order requiring discovery responses from a U.S. entity, any attempt to enforce that order would have to be made from Taiwan to the U.S. through a cumbersome letters rogatory process.

However, there may be a solution under U.S. law. 28 U.S.C. §1782 states that the U.S. district court where a person or entity is located may order that person or entity to give testimony or produce documents or things, for use in a foreign or international tribunal, upon application of an interested person. So, is that the answer? May a party to legal proceedings in Taiwan use §1782 to obtain discovery from a U.S. party? Perhaps, but subject to certain limitations.

First, there’s the question of whether the demanding party qualifies as an interested person. Fortunately, if the demanding party is a litigant there should be no problem, as the U.S. Supreme Court has explained in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 254 (2004) that, “litigants are included among, and may be the most common example of, the ‘interested person’ who may invoke §1782.” Continue reading