0
Patent trolls & damages
Speakers:
James Nurton, managing editor, Managing IP (moderator)
Eric E. Bensen, intellectual prop...
Back to Basics:
Using Existing Law to Constrain “Trolls”
Eric E. Bensen
Author & Consultant, www.ericbensen.com
Of Counsel...
Overview

1. Introduction
a) “Trolls”: Who are We Talking About?
b) “Trolls”: What Problem Do We Seek to Address?
2. Exist...
Introduction
Who are We Talking About?

1.
2.
3.
4.
5.

Trolls
Non-Practicing Entities
Patent Assertion Entities
Patent Mo...
Introduction
“Trolls” – What Problem Do We Seek to Address?

Question:
If every patent suit involved: (i) valuable patents...
Introduction
“Trolls” – What Problem Do We Seek to Address?

The “Troll Problem”: Excessive number of suits where:
1.
2.
3...
Introduction
“Trolls” – What Problem Do We Seek to Address?

The “Troll Problem”: Excessive number of suits where:
1.
2.
3...
Introduction
“Trolls” – What Problem Do We Seek to Address?

The “Troll Problem”: Excessive number of suits where:
1.
2.
3...
Introduction
“Trolls” – What Problem Do We Seek to Address?

Damages awards are too often out of proportion to the value o...
Existing Law & “Trolls”
Current State of the Law

Today, there are substantial inconsistencies in patent law. E.g.:
1.

Sm...
Existing Law & “Trolls”
Current State of the Law

Today, there are substantial inconsistencies in patent law. E.g.:
3.

Ar...
Existing Law & “Trolls”
Illustration

Question: Does it make economic sense to bring suit for infringement of a patent
tha...
Existing Law & “Trolls”
Supreme Court Precedent - Apportionment

Between 1854 and 1915 the Supreme Court decided more than...
Existing Law & “Trolls”
Supreme Court Precedent - Apportionment

Specific Rules:
1.

Patent Claims an Entire Marketable Ar...
Existing Law & “Trolls”
Supreme Court Precedent - Apportionment

Specific Rules – Entire Market Value Rule:
“If the improv...
Existing Law & “Trolls”
Supreme Court Precedent - Apportionment

Specific Rules – Reasonable Royalties:
A reasonable royal...
Existing Law & “Trolls”
Supreme Court Precedent - Apportionment

In sum:
1. A patentee’s recovery must be based on the val...
Existing Law & “Trolls”
Supreme Court Precedent - Apportionment

Question: Does it make economic sense to bring suit for i...
Conclusion

Consistent application of existing Supreme Court law:
1.

Would reduce the incentive to sue on trivial patent:...
Conclusion

Consistent application of existing Supreme Court law:
1.

Would reduce the incentive to sue on trivial patent:...
What are “trolls” and what is wrong with
them?
Charles R. Macedo
Partner
Amster, Rothstein & Ebenstein LLP, www.arelaw.com
What are “trolls” and what is wrong with
them?
• Non practicing entities;
• Asserting patents of dubious
quality and suspe...
Is our patent system failing and if so
how?
• Efficiency – Patent Litigation Costs Too Much
Median Cost of Defending Paten...
Is our patent system failing and if so
how?
• Predictability – No one knows what the law is, or will
be
Obviousness – Chan...
Is our patent system failing and if so
how?
• Reliable – Courts and PTABs keep coming up with
different decisions
Courts

...
Is our patent system failing and if so
how?
• Acceptable – News media and special interests

• Vermont and Nebraska Attorn...
Is our patent system failing and if so
how?
• Fair – Many perceived new AIA Post-Issuance
Proceedings as anti-patent owner...
Proposed Anti-Troll Legislation
(HR 3309, the Goodlatte Bill)
•

Heightened pleading requirement - Requiring "detailed spe...
Proposed Anti-Troll Legislation
(HR 3309, the Goodlatte Bill) (cont.)
•

Stay for Customer Suits - customer suits would be...
Proposed Anti-Troll Legislation
(Other legislation)
• Manufacturing Innovation in America Act of 2013 (H.R. 2605) Tax
dedu...
NPE Damages Vulnerability Points
Things to Know to Minimize Damages Exposure

©2013 Bryan W. Butler Esq. – Views presented...
2 – Step Approach to Damages Mitigation

 1. Gather the facts
 2. Use the facts to Eliminate or Mitigate Exposure
–
–
–
...
Use Facts to Categorize the Infringement Theory
Type of
Infringement

Statute

Liability and
Requirements

Classic Scenari...
Practice Pointer: Categorize Infringing Acts In
Claim Chart
Claim
Element

Smallest
Salable
Component
Practicing

Performe...
Practice Pointer: Assignment Timeline To Limit
Damage and Unenforceability Periods
Date Range
Assignee / Owner
Products So...
Now Use Facts to Mitigate Damages
 Limit the Damages Period
 Limit the damages Base
– Use Surveys to Limit the Indirect ...
Mitigate Exposure by Limiting the Damages Period
 Marking / Notice
– Start
• 35 USC §286 gives: 6 Year reach-back from li...
Mitigate Indirect Infringement Base With
Surveys
 Courts Take Three Approaches
– Inherent Infringement Approach
• Appropr...
Mitigate EMVR Base

Convoyed / collateral Sales
– litigation technique

“Claiming the
Environment”
- drafting
technique

I...
LaserDynamics Mitigates EMVR
 Laserdynamics makes “smallest salable unit” the starting point
– Notes that modern products...
Mitigate Exposure by Limiting the Geographic
Damages Base
 271(f)
• Induced infringement outside U.S. is infringing act
•...
Historically GP Factor Applications Lacked Rigour

“After careful
consideration of
the
aforementioned
GP/etc. factors”

I/...
“Gatekeeper” Cases Show Increased Rigour
 Expert testimony excluded under FRE 702 / Daubert for failure to connect GP fac...
Mitigate Exposure by Minimizing Injunction & ITC
 Good news on injunctions
– NPE’s Fail 4-Part Equitable Test

 Bad news...
NPE’s Flocking to ITC Since Coaxial Cable Case

http://www.rpxcorp.com/index.cfm?pageid=14&itemid=20

©2013 Bryan W. Butle...
ITC Scrutinizing NPE Jurisdiction
 Coaxial Cable case opened the door

 Pendulum swinging away from licensing as domesti...
Conclusion
 NPE’s are here to stay, but do have vulnerabilities
– Damages limitation can reduce ROI
• Damages period
• Da...
Patent trolls & damages
Speakers:
James Nurton, managing editor, Managing IP (moderator)
Eric E. Bensen, intellectual prop...
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Dec 17 Managing IP & LexisNexis Webinar: Patent trolls & damages

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These are the presentation slides used in the Dec 17, 2013 Webinar, "Patent Trolls & Damages" presented by Managing IP and sponsored by LexisNexis.
Speakers:
James Nurton, Managing Editor, Managing IP, Moderator
Eric Bensen, Author & Consultant, www.ericbensen.com
and Of Counsel, Vandenburg & Feliu LLP, NY
Bryan Butler, IP Counsel, IBM
Charles Macedo, Partner, Amster, Rothstein & Ebenstein LLP, www.arelaw.com

Recently, there has been a rise in allegations that the high costs of the patent litigation system in the US are being exploited to reach settlements even on low-value patents. This has led to concerns from technology companies as well as end-users that the patent system is impeding business development and innovation.
Key to this debate is the question of damages in litigation: How are they awarded? What is proportionate? Are any changes in the law needed? In this webinar, our panellists will look at the issues raised by the troll debate, what strategies plaintiffs and defendants can adopt and what changes, if any, are needed.

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Transcript of "Dec 17 Managing IP & LexisNexis Webinar: Patent trolls & damages "

  1. 1. Patent trolls & damages Speakers: James Nurton, managing editor, Managing IP (moderator) Eric E. Bensen, intellectual property author and independent  consultant Bryan W. Butler, IP Counsel, IBM Charles R. Macedo, Partner, Amster, Rothstein & Ebenstein
  2. 2. Back to Basics: Using Existing Law to Constrain “Trolls” Eric E. Bensen Author & Consultant, www.ericbensen.com Of Counsel, Vandenburg & Feliu LLP, NY, www.vanfeliu.com
  3. 3. Overview 1. Introduction a) “Trolls”: Who are We Talking About? b) “Trolls”: What Problem Do We Seek to Address? 2. Existing Law & “Trolls” a) Current State of the Law b) Supreme Court Precedent – Apportionment 3. Conclusion
  4. 4. Introduction Who are We Talking About? 1. 2. 3. 4. 5. Trolls Non-Practicing Entities Patent Assertion Entities Patent Monetization Entities “Trolls”
  5. 5. Introduction “Trolls” – What Problem Do We Seek to Address? Question: If every patent suit involved: (i) valuable patents (ii) being asserted with a good faith basis to believe infringement has occurred … … would we be talking about Trolls?
  6. 6. Introduction “Trolls” – What Problem Do We Seek to Address? The “Troll Problem”: Excessive number of suits where: 1. 2. 3. Trivial (or worthless) patents are asserted. Claims are brought in bad faith. Both.
  7. 7. Introduction “Trolls” – What Problem Do We Seek to Address? The “Troll Problem”: Excessive number of suits where: 1. 2. 3. Trivial (or worthless) patents are asserted. Suits are brought in bad faith. Both.
  8. 8. Introduction “Trolls” – What Problem Do We Seek to Address? The “Troll Problem”: Excessive number of suits where: 1. 2. 3. Trivial (or worthless) patents are asserted. Suits are brought in bad faith. Both. Why do trivial/worthless patents wreak such havoc on industry?
  9. 9. Introduction “Trolls” – What Problem Do We Seek to Address? Damages awards are too often out of proportion to the value of the patent: Key Facts Reasonable Royalty Some infringing units sold for as little as $97 $96/unit i4i Ltd. P’ship v. Microsoft, Corp., 598 F.3d 831, 853 (Fed. Cir. 2009) “Technology Fee” was $5/unit $50/unit Monsanto Co. v. Ralph, 383 F.3d 1374, 1384 (Fed. Cir. 2004) Anticipated profit was $8.00/unit $31.80/unit Golight, Inc. v. Wal-Mart Stores, Inc., 355 F.3d 1327, 1338 (Fed. Cir. 2004) Competitor sold infringing units for $1,295/unit Powell v. Home Depot U.S.A., Inc., 663 F.3d 1221, 1228 (Fed. Cir. 2011) $7,736/unit
  10. 10. Existing Law & “Trolls” Current State of the Law Today, there are substantial inconsistencies in patent law. E.g.: 1. Smallest Saleable Unit: Is the smallest saleable unit containing the patented feature a proper base for a royalty award (Laserdynamics) or not (Lucent)? 2. Total Revenues: Can a patentee “always” use the the total revenues from a product as royalty base as long as the rate is low enough (Lucent) or not (Uniloc)?
  11. 11. Existing Law & “Trolls” Current State of the Law Today, there are substantial inconsistencies in patent law. E.g.: 3. Arbitrary Profit Splitting: If the 25% Rule is unacceptable because it require an arbitrary division of profits (Uniloc), why is the analytical method acceptable (Lucent)? 4. Profit Requirement: Must an infringer be left with an anticipated profit (Lindemann, Innovatio*) or not (Monsanto)?
  12. 12. Existing Law & “Trolls” Illustration Question: Does it make economic sense to bring suit for infringement of a patent that claims a trivial feature of a smart phone? Before the right court or panel: • • • • The phone, i.e., “smallest saleable unit,” can be the base for a royalty award. Total revenues can be presented to the jury. Expert can advocate an arbitrary split of the profits on the phone. No infringer profit required.
  13. 13. Existing Law & “Trolls” Supreme Court Precedent - Apportionment Between 1854 and 1915 the Supreme Court decided more than 30 patent damages cases: Apportionment was required every time. Basic Rule: “The patentee . . . must in every case give evidence tending to separate or apportion the defendant’s profits and the patentee’s damages between the patented feature and the unpatented features, and such evidence must be reliable and tangible, and not conjectural or speculative ….” Garretson v. Clark, 111 U.S. 120, 121 (1884)
  14. 14. Existing Law & “Trolls” Supreme Court Precedent - Apportionment Specific Rules: 1. Patent Claims an Entire Marketable Article: No apportionment. Elizabeth v. Pavement Co., 97 U.S. 126, 141-42 (1878) 2. Patent Claims an Entire Marketable Article, defendant adds an improvement: Burden initially on defendant to show that improvement had value. Westinghouse Elec. & Mfr. Co. v. Wagner Elec. & Mfg. Co., 225 U.S. 604, 617 (1912) 3. Patent claims an improvement or component: Burden on patentee to show the value contributed by the claimed invention. Seymour v. McCormick, 57 U.S. 480, 491 (1854)
  15. 15. Existing Law & “Trolls” Supreme Court Precedent - Apportionment Specific Rules – Entire Market Value Rule: “If the improvement is required to adapt the machine to a particular use, and there is no other way open to the public of supplying the demand for that use, then it is clear the infringer has by his infringement secured the advantage of a market he would not otherwise have had, and that the fruits of this advantage are the entire profits he has made in that market.” Manufacturing Co. v. Cowing, 105 U.S. 253, 255-56 (1881)
  16. 16. Existing Law & “Trolls” Supreme Court Precedent - Apportionment Specific Rules – Reasonable Royalties: A reasonable royalty is an approximation of market price for a license to the patent. “[A]s the patent had been kept a close monopoly, there was no established royalty. In that situation it was permissible to show the value by proving what would have been a reasonable royalty, considering the nature of the invention, its utility and advantages, and the extent of the use involved ” Dowagiac Mfg. Co. v. Minn. Moline Plow Co., 235 U.S. 641, 648 (1915) See also Suffolk Co. v. Hayden, 70 U.S. 315, 320 (1866) (A proper reasonable royalty calculation necessarily satisfies the apportionment requirement.)
  17. 17. Existing Law & “Trolls” Supreme Court Precedent - Apportionment In sum: 1. A patentee’s recovery must be based on the value of the invention. a) A patentee’s recovery may be based on the value of the entire article only where the entire market value rule is satisfied. 2. Reasonable royalties: a) Real world licenses for the patent are the best evidence. b) Otherwise:   Base = Profit attributable to the invention (the apportioned value) Royalty = Portion of base that a reasonable licensee would pay for a license Rembrandt Social Media, L.P. v. Facebook, Inc., 2013 U.S. Dist. LEXIS 171127, **23-24 (E.D. Va. Dec. 3, 2013)
  18. 18. Existing Law & “Trolls” Supreme Court Precedent - Apportionment Question: Does it make economic sense to bring suit for infringement of a patent that claims a trivial feature of a smart phone? Smart Phone Federal Circuit Supreme Court Royalty Base: Phone Patented Feature Total Revenues: Admissible Not Admissible Arbitrary Profit Split: Permitted Not Permitted Infringer Expected Profit: Not Required Required
  19. 19. Conclusion Consistent application of existing Supreme Court law: 1. Would reduce the incentive to sue on trivial patent: Trivial Inventions = Trivial Recovery
  20. 20. Conclusion Consistent application of existing Supreme Court law: 1. Would reduce the incentive to sue on trivial patent: Trivial Inventions = Trivial Recovery 2. But, without reducing innovation: Substantial Invention = Substantial Recovery
  21. 21. What are “trolls” and what is wrong with them? Charles R. Macedo Partner Amster, Rothstein & Ebenstein LLP, www.arelaw.com
  22. 22. What are “trolls” and what is wrong with them? • Non practicing entities; • Asserting patents of dubious quality and suspect validity; and • Extracting nuisance payments based on high cost of litigation
  23. 23. Is our patent system failing and if so how? • Efficiency – Patent Litigation Costs Too Much Median Cost of Defending Patent Infringement Claims by NPE Less than $1 million at risk End of discovery Inclusive, all costs $1‐$10 million at risk $10‐$25 million at risk More than $25 million at risk 0 1 2 3 Median cost in millions 4 Source: AIPLA Report of the Economic Survey 2013
  24. 24. Is our patent system failing and if so how? • Predictability – No one knows what the law is, or will be Obviousness – Changed by KSR Patent Eligibility ‐‐ Bilski, Mayo, Myriad and now Alice Multi Party Actors – Akamai …..
  25. 25. Is our patent system failing and if so how? • Reliable – Courts and PTABs keep coming up with different decisions Courts PTO Fresenius: Jury awarded over $14 million Federal Circuit affirmed Fresenius: Reexam found claims invalid Versata: Jury awarded $345 million Versata: PTAB found not patent‐eligible
  26. 26. Is our patent system failing and if so how? • Acceptable – News media and special interests • Vermont and Nebraska Attorneys General called in to  action in their respective states because of public  reaction to seemingly inappropriate notice letters. • Vermont passed legislation including a requirement  that senders of “demand letters” post a bond if it is  likely that the patent assertion is being made in bad  faith • Etc.
  27. 27. Is our patent system failing and if so how? • Fair – Many perceived new AIA Post-Issuance Proceedings as anti-patent owner Source: USPTO Presentation
  28. 28. Proposed Anti-Troll Legislation (HR 3309, the Goodlatte Bill) • Heightened pleading requirement - Requiring "detailed specificity" as to "how the terms in each [asserted] claim … correspond to the functionality of [each] accused instrumentality." • Attorney-fees - will be awarded to a prevailing party. The new provision would require an award of fees "unless the court finds that the position of the nonprevailing party . . . was substantially justified or that special circumstances make an award unjust." • Discovery - limited until after a ruling on claim construction. • Transparency of Ownership - the patentee in an infringement litigation must disclose anyone with a financial interest and "ultimate parent entity" of the patentee.
  29. 29. Proposed Anti-Troll Legislation (HR 3309, the Goodlatte Bill) (cont.) • Stay for Customer Suits - customer suits would be stayed so long as the customer agrees to be bound by the results of that case. • IP in Bankruptcy - when a foreign company goes bankrupt, its trustee would no longer have the power to cancel licenses associated with US patent rights. • Shrinking Post-Grant-Review Estoppel- changes estoppel against the petitioner from "any ground that the petitioner raised or reasonably could have raised during that post-grant review" to only grounds actually raised.
  30. 30. Proposed Anti-Troll Legislation (Other legislation) • Manufacturing Innovation in America Act of 2013 (H.R. 2605) Tax deduction carryover for patent development expenditures where profit is made years later. • Patent Abuse Reduction Act of 2013 (S. 1013) (Senators Cornyn and Grassley) Smaller version of Goodlatte's Innovation Act that would focus on (1) raising pleading requirements (2) limiting discovery costs (especially preclaim-construction); and (3) awarding attorney fees for the prevailing party. • End Anonymous Patents Act (H.R. 2024) Requirement that the patent owner regularly update ownership information in the public record, including the "ultimate parent entity." • Patent Litigation and Innovation Act of 2013 (H.R. 2639) Includes many provisions in parallel to the Goodlatte Innovation Act, but also includes a "sanction for abusive litigation" with mandatory review of each case by the court to ensure that no Rule 11(b) violations occurred.
  31. 31. NPE Damages Vulnerability Points Things to Know to Minimize Damages Exposure ©2013 Bryan W. Butler Esq. – Views presented are mine and are not necessarily those of current or past employers
  32. 32. 2 – Step Approach to Damages Mitigation  1. Gather the facts  2. Use the facts to Eliminate or Mitigate Exposure – – – – – Enforceability Period Damages Base (Indirect Infringement & EMVR) Geographic Base Damages Theory Injunction/ITC ©2013 Bryan W. Butler Esq. – Views presented are mine and are not necessarily those of current or past employers
  33. 33. Use Facts to Categorize the Infringement Theory Type of Infringement Statute Liability and Requirements Classic Scenario Direct Infringement (a) . . .whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent. Strict Liability No Mens Rea Infringer performs all steps of a method or sells product with all elements Joint Direct Infringement Same 271(a) Strict Liability One party contracts another Induced Infringement (Expect PostAkamai Uptick) (b) Whoever actively induces infringement of a patent shall be liable as an infringer. Knowledge requirement Infringer sells product used to perform a method Contributory Infringement (c) Whoever . . .a component of a patented [thing or method], constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial noninfringing use, . . . Knowledge Requirement Materiality Requirement No Non-Infringing use Non-commodity Infringer sells a part which when combined directly infringes ©2013 Bryan W. Butler Esq. – Views presented are mine and are not necessarily those of current or past employers
  34. 34. Practice Pointer: Categorize Infringing Acts In Claim Chart Claim Element Smallest Salable Component Practicing Performed Performed by by Alleged Others Infringer Performed in U.S. or outside U.S. (Preamble) “A ______ comprising: Element 1 Element 2 Element 3 . . . ©2013 Bryan W. Butler Esq. – Views presented are mine and are not necessarily those of current or past employers
  35. 35. Practice Pointer: Assignment Timeline To Limit Damage and Unenforceability Periods Date Range Assignee / Owner Products Sold & Marked? Licensees? Standards Organizations Joined ©2013 Bryan W. Butler Esq. – Views presented are mine and are not necessarily those of current or past employers
  36. 36. Now Use Facts to Mitigate Damages  Limit the Damages Period  Limit the damages Base – Use Surveys to Limit the Indirect Infringement Damages Base – Use Smallest Salable Unit Logic to Limit the EMVR Damages Base – Exclude non-US Sales  Invoke “Gatekeeper” against un-supportable theories  Challenge injunction / ITC ©2013 Bryan W. Butler Esq. – Views presented are mine and are not necessarily those of current or past employers
  37. 37. Mitigate Exposure by Limiting the Damages Period  Marking / Notice – Start • 35 USC §286 gives: 6 Year reach-back from litigation start • 35 USC §287 takes away: Marking/Notice requirement for damages recovery • No duty to mark if method claim being asserted BUT see indirect infringement – Stop • Damages period ends with patent expiration (expired patent cannot be infringed) – NPE Vulnerability points – Prior owner failure to mark – Licensee failure to mark – Indirect infringement starts/stop with direct but mens rea still required  Standards Bodies / License – Look for prior owners membership in standards bodies – Licenses for “necessary patents” burden successive owners ©2013 Bryan W. Butler Esq. – Views presented are mine and are not necessarily those of current or past employers
  38. 38. Mitigate Indirect Infringement Base With Surveys  Courts Take Three Approaches – Inherent Infringement Approach • Appropriate when infringing devices have no utility other than to operate in a manner infringing method claims – Survey Approach • Use customer survey data to apportion between infringing and non-infringing applications – Hypothetical Negotiation Approach (New) – First appeared in Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1333-1334 (Fed. Cir. 2009) – Based on Georgia-Pacific “The extent to which the infringer has made use of the invention” • % infringing would be a factor in hypo negotiation ©2013 Bryan W. Butler Esq. – Views presented are mine and are not necessarily those of current or past employers
  39. 39. Mitigate EMVR Base Convoyed / collateral Sales – litigation technique “Claiming the Environment” - drafting technique Invention = Inventive (Novel/NonObvious) Element Entire Market Value Rule – litigation technique © 2009 Bryan Butler
  40. 40. LaserDynamics Mitigates EMVR  Laserdynamics makes “smallest salable unit” the starting point – Notes that modern products are composed of many components, some infringing, some not – General rule: • damages calculation for “adequate to compensate” starts with “smallest salable patent practicing unit”, – citing Cornell Univ. v. Hewlett-Packard Co., 609 F. Supp. 2d 279, 283, 287-88 (N.D.N.Y. 2009) – EMVR is narrow exception to general rule • Patentee must prove patented feature drives demand • Goes beyond mere importance of feature – rather “entire value” must be attributable to infringement – LaserDynamics, Inc. v. Quanta Computer, Inc., 2012 U.S. App. LEXIS 18441, 31-42 (Fed. Cir. Aug. 30, 2012) – Laserdynamics may be becoming the new standard test • Versata Software, Inc. v. SAP Am., Inc., 717 F.3d 1255, 1268 (Fed. Cir. 2013) • SynQor, Inc. v. Artesyn Technologies, Inc., 709 F.3d 1365, (Fed. Cir. 2013) ©2013 Bryan W. Butler Esq. – Views presented are mine and are not necessarily those of current or past employers
  41. 41. Mitigate Exposure by Limiting the Geographic Damages Base  271(f) • Induced infringement outside U.S. is infringing act • Requirements • Is accused infringer “supplying” • Is what is shipped outside the U.S. a “component” – Answer: Copying outside U.S. is not “supplying” • Microsoft v. AT&T  “Border-straddling infringement” • One or more claim element is practiced outside U.S. – NPE asserting WW damages • Result depends on if claim is method or apparatus • Method claims only infringed if each step of a process is performed in the U.S. • System claims are infringed if all elements are controlled from within the U.S. (“control point test”) – NTP v. RIM ©2013 Bryan W. Butler Esq. – Views presented are mine and are not necessarily those of current or past employers © 2009 Bryan Butler
  42. 42. Historically GP Factor Applications Lacked Rigour “After careful consideration of the aforementioned GP/etc. factors” I/We Conclude $$$$$$ ©2013 Bryan W. Butler Esq. – Views presented are mine and are not necessarily those of current or past employers
  43. 43. “Gatekeeper” Cases Show Increased Rigour  Expert testimony excluded under FRE 702 / Daubert for failure to connect GP factors to conclusion – “. . . mere reference to the Georgia-Pacific factors, cannot change the sow's ear of rank speculation into a silk purse of reliable expert opinion.” – Bowling v. Hasbro, Inc., 2008 U.S. Dist. LEXIS 30043, (D.R.I. Mar. 17, 2008)  Expert opinion testimony "must be shown to be based on more than the subjective belief or unsupported speculation of the expert." – Hartford Ins. Co. v. Gen. Elec. Co., 526 F. Supp. 2d 250, 252 (D.R.I. 2007).  Expert testimony excluded which failed to show “sound economic connection between argued royalty and value of “claimed invention” – Cornell University v. Hewlett-Packard Co., 2008 U.S. Dist. LEXIS 41848 (N.D.N.Y May 27, 2008)(Rader, J. sitting by designation) – IP Innovation L.L.C. & Tech. Licensing Corp. v. Red Hat, 2010 U.S. Dist. LEXIS 28372, 7-8 (E.D. Tex. Mar. 2, 2010)(Rader, J.)  Award vacated and remanded for trial court’s failure to document rationale for award in the record – “in this case we cannot review the court's methodology because the court did not provide an explanation of how it arrived at the damages award that it entered. As we have explained, "To enable appellate review, a district court is obligated to explain the basis for the award." • Heeling Sports, Ltd. v. US Furong Int'l, Inc., 2009 U.S. App. LEXIS 7182 (Fed. Cir. Apr. 3, 2009) citing Read Corp. v. Portec, Inc., 970 F.2d 816, 828 (Fed. Cir. 1992).  Lucent Award remanded for failure to: – Present evidence of how/why “comparable” licenses for GP#1 were comparable – Present evidence showing infringing feature was basis of customer demand for EMVR • Lucent Technologies, Inc. v. Gateway, Inc. --- F.3d ----, 2009 WL 2902044 Fed. Cir. Sept. 11, 2009  “25% Rule of Thumb” rejected in Uniloc  Watch out for mis-applications of Lost Profits theories to Hypothetical Negotiation – “Accelerated Market Entry” for expired patent ©2013 Bryan W. Butler Esq. – Views presented are mine and are not necessarily those of current or past employers
  44. 44. Mitigate Exposure by Minimizing Injunction & ITC  Good news on injunctions – NPE’s Fail 4-Part Equitable Test  Bad news on ITC, Moving Towards Good ©2013 Bryan W. Butler Esq. – Views presented are mine and are not necessarily those of current or past employers
  45. 45. NPE’s Flocking to ITC Since Coaxial Cable Case http://www.rpxcorp.com/index.cfm?pageid=14&itemid=20 ©2013 Bryan W. Butler Esq. – Views presented are mine and are not necessarily those of current or past employers
  46. 46. ITC Scrutinizing NPE Jurisdiction  Coaxial Cable case opened the door  Pendulum swinging away from licensing as domestic industry – Litigation expenses alone, absent successful licensing activity do not satisfy the requirement. • John Mezzalingua Assocs. v. ITC, 660 F.3d 1322, 1324-1325 (Fed. Cir. 2011) – For licensing to be domestic industry • First, three threshold factors – – – Investment in licensing relates to exploitation of asserted patent Investment relates to licensing Investment occurs in U.S. • Next, investment not substantial if: – – – – Attenuated nexus to asserted patents Licensing efforts directed to entire portfolio No evidence of licensing related to exploiting specific asserted patent Broad patent portfolio with no congruent fit > In re Certain Multimedia Display and Navigation Devices Inv. No. 337-TA-694 (2011) (“Pioneer”) ©2013 Bryan W. Butler Esq. – Views presented are mine and are not necessarily those of current or past employers
  47. 47. Conclusion  NPE’s are here to stay, but do have vulnerabilities – Damages limitation can reduce ROI • Damages period • Damages base – Injunctions no longer an NPE threat, pendulum swinging away from ITC ©2013 Bryan W. Butler Esq. – Views presented are mine and are not necessarily those of current or past employers
  48. 48. Patent trolls & damages Speakers: James Nurton, managing editor, Managing IP (moderator) Eric E. Bensen, intellectual property author and independent  consultant Bryan W. Butler, IP Counsel, IBM Charles R. Macedo, Partner, Amster, Rothstein & Ebenstein
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