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Quantitative Analysis Of Contributions To NETMundial Meeting

A quantitative analysis of the 187 submissions to the April NETmundial conference on the future of internet governance shows broad support for improving security, ensuring respect for privacy, ensuring freedom of expression, and globalizing the IANA function, analyst Richard Hill writes.


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    US Perspectives
    US And UN Consider New Limits On Patent Wars

    Published on 20 September 2012 @ 4:37 pm

    By for Intellectual Property Watch

    The patent wars have produced many casualties around the world. Companies that make and sell smartphones and tablet computers, courts, consumers and the economy – all have suffered, according to many experts.

    “I couldn’t come up with a worse system” for handling patent disputes, said Erich Spangenberg, chairman of IP Navigation Group, a consultancy. But significant reforms may be on the way, thanks to the US government and a United Nations agency.

    Love of money is the root of all patent litigation. But many plaintiffs in the patent wars are not content to recover damages or reasonable royalties. Their main goal is to prevent rivals from selling competing (and supposedly infringing) products.

    Unfortunately, pushing popular products off the market can do far more than simply dent the bottom line of defendants. Such injunctions can produce “catastrophic” effects on competition, consumers and the economy, according to Richard Gilbert, an economics professor at the University of California at Berkeley. Courts thus need to be cautious about granting injunctions for patent infringement, many experts assert.

    Limiting the availability of such injunctions would bring another benefit. If injunctive relief were unavailable, patentees would have much less to gain from infringement suits. They would need to think harder about when it is worthwhile to prosecute infringement actions. The result would likely be fewer lawsuits that settle more quickly.

    Over the past six years, the US courts have made it significantly tougher for patentees to get injunctions against infringers. These injunctions used to be routinely granted, but that ended in May 2006, when the US Supreme Court handed down its decision in eBay Inc. v. MercExchange LLC. The high court held that in order to obtain an injunction, a patentee must prove that it would suffer “irreparable harm” from a defendant’s continued infringement and that damages would not provide adequate compensation.

    Since that ruling, the US courts have interpreted this standard more and more rigorously. Injunctions in patent suits have become far less common.

    Patentees have responded by filing a growing number of infringement complaints with the International Trade Commission (ITC). This agency of the US government cannot levy damages against infringers or halt purely domestic infringements. It is an attractive forum for patentees, however, because whenever it finds infringement, the ITC is required by statute to provide injunctive-type relief. The agency must order the seizure of infringing imports and issue exclusion orders, which forbid infringing items from being imported into the US.

    There is only one exception. The statute, 37 USC 1337(d)(1), states that the ITC can limit or deny an exclusion order if the order would be too harmful to “the public health and welfare, competitive conditions in the United States economy, the production of like or directly competitive articles in the United States, [or] United States consumers.”

    The ITC has been loath to use this public interest exception. The agency has used this exception only twice in modern times, according to Prof. Colleen Chien of Santa Clara University Law School. In 2007, the ITC found Qualcomm cellphones and PDAs violated a US patent held by Broadcom, but applied an exclusion order [pdf] only against new models of Qualcomm products. In order to avoid harm to the public, the ITC allowed Qualcomm to continue to import and sell in the US existing models of its cell phones and PDAs.

    In late 2011, the ITC found that HTC’s Android smartphones violated a US patent owned by Apple, but issued an exclusion order [pdf] that did not go into effect for four months. That delay greatly limited the harm to consumers and to competition in the smartphone market – and it provided HTC time to design around the patent.

    Such rulings may become more common, according to many experts. The 2011 HTC ruling “may signal an important shift,” said Kelly Kubasta, a partner in the law firm of Klemchuk Kubasta. “The ITC’s decision to delay implementation of the importation ban may indicate a stronger consideration of public interest factors.”

    There are certainly pressures on the ITC to make such a shift. “There’s a rising tide of opinion that the ITC should apply some discretion in their exclusion orders,” Kubasta said.

    In addition, there is a growing consensus among US policymakers that injunctive-type remedies should not be used to protect certain types of patents. Standard-essential patents (SEPs) cover technologies that are adopted by an industry standards-setting body in order to enable the interoperability of different products.

    In return for having its technology chosen as an industry standard, and thus widely licensed, the owner of an SEP voluntarily gives up its right to make exclusive use of the patented technology. The owner agrees to licence its SEP to all on a reasonable and nondiscriminatory (RAND) basis. (Sometimes the terminology is slightly different, and the SEP owner agrees to licence its patent on a fair, reasonable and nondiscriminatory, or FRAND, basis. But the US government and the vast majority of experts see no significant different between RAND and FRAND.)

    In a letter [pdf] dated 6 June, the Federal Trade Commission (FTC) urged the ITC not to grant exclusion orders for SEP patents covered by RAND agreements. The FTC warned that “the issuance of an exclusion order … in matters involving RAND-encumbered SEPs, where infringement is based on implementation of standardized technology, has the potential to cause substantial harm to U.S. competition, consumers and innovation.”

    An unimportant patent can become immensely valuable simply because it is part of an industry standard, the FTC noted:

    Because it may not be feasible to deviate from the standard unless all or most other participants in the industry agree to do so in compatible ways, and because all of these participants may face substantial switching costs in abandoning initial designs and substituting a different technology, an entire industry may become locked in to a standard, giving a SEP owner the ability to demand and obtain royalty payments based not on the true market value of its patents, but on the costs and delays of switching away from the standardized technology.

     

    This “patent holdup” can put the owner of an SEP in an unusually powerful negotiating position with potential licensees. That’s why the owner of an SEP should not be able to obtain exclusion orders against infringers, the FTC argued.

    High switching costs combined with the threat of an exclusion order could allow a patentee to obtain unreasonable licensing terms despite its RAND commitment, not because its invention is valuable, but because implementers are locked in to practicing the standard. …In these ways, the threat of an exclusion order may allow the holder of a RAND-encumbered SEP to realize royalty rates that reflect patent hold-up, rather than the value of the patent relative to alternatives, which could raise prices to consumers while undermining the standard setting process.

    The FTC encouraged the ITC to avoid exclusion orders for SEP infringements and to adopt alternative remedies. For instance, the ITC could deny any relief unless the SEP owner made a reasonable royalty offer to the alleged infringer. Or the ITC could require the parties to go into mediation and impose an exclusion order only if the alleged infringer refuses a reasonable royalty offer.

    Other parts of the US government have backed the FTC’s stance. The chairman of the Senate Judiciary Committee sent a letter to the ITC in March that expressed serious concerns about the agency’s granting exclusion orders for SEPs. The House Judiciary Committee sent a 7 June letter to the ITC expressing the same concerns. The US Department of Justice echoed this view in its 11 July testimony [psf] to the Senate Judiciary Committee.

    On 22 June, one of the USA’s most respected jurists went further. Judge Richard Posner held in Apple, Inc. v. Motorola, Inc. that courts can never issue injunctions to stop infringements of RAND-encumbered SEPs. Judge Posner noted that in order to obtain an injunction for infringement, a plaintiff must show that monetary damages would not be an adequate remedy. However, the owner of a RAND-encumbered SEP has agreed to always licence its patent in return for a reasonable royalty. If someone should use the patent without first obtaining a licence, the patentee would be made whole by receiving a reasonable royalty. Money damages would be an adequate remedy, so the owner of a RAND-encumbered SEP “is not entitled to an injunction,” Judge Posner stated.

    There is international concern, too, about using SEPs as a basis for injunctive relief. The Secretary-General of the UN’s International Telecommunication Union (ITU), Hamadoun Touré, said, “We are seeing an unwelcome trend in today’s marketplace to use standards-essential patents to block markets. There needs to be an urgent review of this situation: patents are meant to encourage innovation, not stifle it.”

    The ITU will address this issue at a high-level roundtable discussion to be held at ITU headquarters in Geneva, on 10 October. Standards organizations, key industry players and government officials will discuss whether holders of SEPs are entitled to injunctive relief and what constitutes a “reasonable” royalty.

    For now, the patent wars continue to rage. Many hope, however, that these wars will soon be made less harmful.

    Steven Seidenberg is a freelance reporter and attorney who has been covering intellectual property developments in the US for more than 15 years. He is based in the greater New York City area and may be reached at info@ip-watch.ch.

     


    Leave a Reply

    We welcome your participation in article and blog comment threads, and other discussion forums, where we encourage you to analyse and react to the content available on the Intellectual Property Watch website. By participating in discussions or reader forums, or by submitting opinion pieces or comments to articles, blogs, reviews or multimedia features, you are consenting to these rules.

    We welcome your participation in article and blog comment threads, and other discussion forums, where we encourage you to analyse and react to the content available on the Intellectual Property Watch website.

    By participating in discussions or reader forums, or by submitting opinion pieces or comments to articles, blogs, reviews or multimedia features, you are consenting to these rules.

    1. You agree that you are fully responsible for the content that you post. You will not knowingly post content that violates the copyright, trademark, patent or other intellectual property right of any third party or which you know is under a confidentiality obligation preventing its publication and that you will request removal of the same should you discover that you have violated this provision. Likewise, you may not post content that is libelous, defamatory, obscene, abusive, that violates a third party's right to privacy, that otherwise violates any applicable local, state, national or international law, that amounts to spamming or that is otherwise inappropriate. You may not post content that degrades others on the basis of gender, race, class, ethnicity, national origin, religion, sexual preference, disability or other classification. Epithets and other language intended to intimidate or to incite violence are also prohibited. Furthermore, you may not impersonate others.

    2. You understand and agree that Intellectual Property Watch is not responsible for any content posted by you or third parties. You further understand that IP Watch does not monitor the content posted. Nevertheless, IP Watch may monitor the any user-generated content as it chooses and reserves the right to remove, edit or otherwise alter content that it deems inappropriate for any reason whatever without consent nor notice. We further reserve the right, in our sole discretion, to remove a user's privilege to post content on our site. IP Watch is not in any manner endorsing the content of the discussion forums and cannot and will not vouch for its reliability or otherwise accept liability for it.

    3. By submitting any contribution to IP Watch, you warrant that your contribution is your own original work and that you have the right to make it available to IP Watch for all purposes and you agree to indemnify IP Watch, its directors, employees and agents against all damages, legal fees and others expenses that may be incurred by IP Watch as a result of your breach of warranty or of these terms.

    4. You further agree not to publish any personal information about yourself or anyone else (for example telephone number or home address). If you add a comment to a blog, be aware that your email address will be apparent.

    5. IP Watch will not be liable for any loss including but not limited to the following (whether such losses are foreseen, known or otherwise): loss of data, loss of revenue or anticipated profit, loss of business, loss of opportunity, loss of goodwill or injury to reputation, losses suffered by third parties, any indirect, consequential or exemplary damages.

    6. You understand and agree that the discussion forums are to be used only for non-commercial purposes. You may not solicit funds, promote commercial entities or otherwise engage in commercial activity in our discussion forums.

    7. You acknowledge and agree that you use and/or rely on any information obtained through the discussion forums at your own risk.

    8. For any content that you post, you hereby grant to IP Watch the royalty-free, irrevocable, perpetual, exclusive and fully sub-licensable license to use, reproduce, modify, adapt, publish, translate, create derivative works from, distribute, perform and display such content in whole or in part, world-wide and to incorporate it in other works, in any form, media or technology now known or later developed.

    9. These terms and your posts and contributions shall be governed and interpreted in accordance with the laws of Switzerland (without giving effect to conflict of laws principles thereof) and any dispute exclusively settled by the Courts of the Canton of Geneva.

     

     
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