By Nicole Daniel
The proceedings between Apple and Qualcomm began in January 2017 in the U.S. District Court in San Diego when Apple filed suit against Qualcomm over its allegedly abusive licensing practices with its wireless patents. Qualcomm then filed unfair competition law counterclaims. This case is being overseen by U.S. District Judge Gonzalo Curiel.
Apple then sued Qualcomm for similar violations in the UK, China, Japan, and Taiwan.
In July 2017 Qualcomm filed patent claims against Apple also in the U.S. District Court in San Diego. This case is being overseen by U.S. District Judge Dana M. Sabraw. At the same time Qualcomm filed a complaint with the U.S. International Trade Commission accusing the Apple iPhone of infringing five Qualcomm patents.
District Court Case I
In November 2017, Judge Curiel issued a split decision in the first patent and antitrust case between Apple and Qualcomm.
Apple has been seeking a declarative judgment that it had not infringed the nine Qualcomm patents at issue and asked the court to decide on a fair and reasonable licensing rate. Judge Curiel denied those claims, holding instead that no detailed infringement analysis as to the Additional Patents-in-Suit had been conducted.
Judge Curiel further held that Qualcomm had not adequately pleaded claims against Apple based on California’s Unfair Competition Law. These allegations stemmed from Apple’s decision to use both Qualcomm and Intel chips in its iPhone. Before, Apple exclusively used Qualcomm’s chips in earlier versions of the iPhone.
In a hearing in October 2017 the lawyers for Qualcomm claimed that Apple executives threatened to end their business relationship if Qualcomm publicly claimed that its own chipsets were superior to Intel’s. In his order judge Curiel held that Qualcomm had not adequately pleaded the specific facts indicating its own reliance on an alleged omission or misrepresentation by Apple. Accordingly, Qualcomm lacked standing under Unfair Competition Law.
District Court Case II
In the district court patent case, Apple filed counterclaims arguing that Qualcomm infringed patents relating to enabling extended battery life in a smartphone or other mobiles devises by supplying power only when needed. This technology serves to maximize battery life.
Apple further argued that it created the smartphone as its own product category in 2007 when it introduced the iPhone. Qualcomm merely developed basic telephone technology which is now dated.
Qualcomm, on the other hand, argued that the success of the iPhone is due to its technology as Qualcomm has developed high-speed wireless connectivity over decades.
The discussion of who essentially invented the smartphone is of importance since under U.S. President Trump the term “innovator” has become very significant. On 10 November 2017 Makan Delrahim, the new chief of the Department of Justice’s antitrust division, made a policy speech and stated that the government aims to rebalance the scales in antitrust enforcement away from implementers who incorporate the inventions of others into their own products. There will be more emphasis on the innovators’ rights so as to protect their patent-holder rights in cases concerning patents essential to technology standards.
Further Cases filed and the Case at the US International Trade Commission
In November 2017, Qualcomm filed three new district court patent cases against Apple as well as one new complaint for the case pending before the U.S. International Trade Commission. In sum, Qualcomm accuses Apple of infringing 16 non-standard essential patents for technology implemented outside the wireless modern chip.
Despite this litigation, Qualcomm has so far remained a key supplier of chips to Apple.
By Giuseppe Colangelo
On November 29, 2017, the European Commission released the much-awaited Communication on standard essential patents (SEPs) licensing [“Setting out the EU approach to Standard Essential Patents”, COM(2017) 712 final].
The Communication comes in the wake of the UK judgement Unwired Planet v. Huawei, recently delivered by Mr. Justice Birss and analyzed in our previous newsletter. As highlighted by the UK decision, after the judgment in Huawei/ZTE (Case C-170/13), in which the European Court of Justice identified the steps which SEPs owners and users must follow in negotiating a FRAND royalty, there are still several unresolved questions. Notably, the different approaches adopted by Germany and the UK have spurred the Communication to set out “key principles that foster a balanced, smooth and predictable framework for SEPs”.
The key principles reflect two stated objectives: incentivizing the development and inclusion of top technologies in standards by providing fair and adequate returns, and ensuring fair access to standardized technologies to promote wide dissemination.
First, the Commission takes the view that the quality and accessibility of information recorded in standard development organizations (SDOs) database should be improved. Therefore, the Commission calls on SDOs to ensure that their databases comply with basic quality standards, and to transform the current declaration system into a tool providing more up-to-date and precise information on SEPs. Moreover, the Commission stated that declared SEPs should be scrutinized to assess their essentiality for a standard, and will launch a pilot project for SEPs in selected technologies in which an appropriate scrutiny mechanism will be introduced.
Second, the Commission sets out certain general principles for FRAND licensing terms, stating that it is necessary and beneficial to establish a first set of key signposts on the FRAND concept, so as to provide for a more stable licensing environment, guide parties in their negotiations, and reduce costly litigation. In this regard, provided that the parties are best placed to arrive at a common understanding of what are fair licensing conditions and fair rates, the Commission states that:
- there is no one-size-fit-all solution on what FRAND is: what can be considered fair and reasonable can differ from sector to sector and over time;
- determining a FRAND value should require taking into account the present value add of the patented technology: that value should be irrespective of the market success of the product which is unrelated to the value of the patented technology;
- to avoid royalty stacking, parties must take into account whether the aggregate rate for the standard is reasonable;
- the nondiscrimination element of FRAND indicates that rightholders cannot discriminate between implementers that are ‘similarly situated’ (see Unwired Planet);
- for products with a global circulation, SEP licenses granted on a worldwide basis may contribute to a more efficient approach and therefore can be compatible with FRAND (see Unwired Planet).
A third part of the Communication is devoted to providing guidance in order to achieve a balanced and predictable enforcement environment. With regards to the availability of injunctive relief, the FRAND process requires both parties to negotiate in good faith, including responding in a timely manner. The willingness of the parties to submit to binding third-party FRAND determination – should the (counter-)offer be found not to be FRAND – is an indication of a FRAND behavior. Furthermore, in terms of the timeliness of the counter-offer, no general benchmark can be established, as case-specific elements play a role. Nonetheless, there is a probable trade-off between the time considered reasonable for responding to the offer and the detail and quality of the information provided in the SEP holder’s initial offer.
Even if injunctive relief can be sought against parties acting in bad faith (i.e. parties unwilling to take up a license on FRAND terms), courts are bound by Article 3(2) of the IPR Enforcement Directive, and notably the requirement to ensure that injunctive relief is effective, proportionate, and dissuasive.
Finally, the Commission states that patent assertion entities should be subject to the same rules as any other SEP holder.
  E.W.H.C. 711 (Pat).
By Marie-Andrée Weiss
A 5-page copyright infringement complaint filed last April in the Southern District of New York (SDNY) is being closely watched by copyright practitioners, as it may lead the court to rule on whether a Twitter post incorporating a copyrighted photograph, without permission of the author, is copyright infringement. The case is Goldman v. Breitbart News Network LLC et al., 1:17-cv-03144.
In the summer of 2016, Justin Goldman took a picture of the Boston Patriots quarterback, Tom Brady, walking in the streets in the Hamptons, in New York, with members of the basketball team the Boston Celtics. The picture was of interest as it could be implied from it that Tom Brady was helping the Celtics to acquire star player Kevin Durant.
The picture was published by several Twitter users on the microblogging site, and these tweets were then embedded in the body of articles about Tom Brady’s trip to the Hamptons published by Defendants including Yahoo!, Time, the New England Sports Network, Breitbart and others.
Justin Goldman registered his work with the Copyright Office and filed a copyright infringement suit against the platforms which had reproduced his photograph. Defendants moved to dismiss, claiming that the use was not infringing because it was merely embedding, and also because it was fair use. Judge Katherine B. Forrest denied the motion to dismiss on August 17, 2017, because whether embedding a tweet is equivalent to in-line linking could not be determined at this stage of the procedure.
Defendants, minus Breitbart, then filed a motion for partial summary judgment on 5 October 2017. Plaintiff moved to oppose it on 6 November 2017.
The Exclusive Right to Display a Work
Section 106(5) of the Copyright Act gives the copyright owner the exclusive right “to display the copyrighted work publicly.” Section 101 of the Copyright Act defines displaying a work as “to show a copy of it, either directly or by means of a film, slide, television image, or any other device or process or, in the case of a motion picture or other audiovisual work, to show individual images nonsequentially.” Plaintiff argues that “embedding” is one of the processes mentioned in Section 106(5).
Is Embedding a Tweet Just Like In-Line Linking?
Defendants claimed that incorporating an image in a tweet is not different from ‘in-line linking,’ which the Ninth Circuit found to be non-infringing in Perfect 10, Inc., v. Amazon.com, Inc.. In this case, the issue was whether the thumbnail versions of copyrighted images featured by Google on its image search result pages were infringing.
The Ninth Circuit had defined “in-line linking” in Perfect 10 as the “process by which the webpage directs a user’s browser to incorporate content from different computers into a single window”. In this case, Google had provided HTML instructions directing a user’s browser to access a third-party website, but did not store the images on its servers. This was found not to be infringing, as Google did not store the images as it not have a have a copy of the protected photographs, and thus did not display then, since to “display” a work under Section 101 of the Copyright Act requires to show a copy of it. This reasoning is known as the “Server Test”.
Plaintiff distinguished the facts in our case from Perfect 10, claiming that his photograph was shown in full size, that it was not “framed” and that it was featured prominently on Defendant’s websites. He argued that the thumbnails in Perfect 10 were low-resolution pictures which users had to click in order to access the full photos, whereas an embedded tweet allows the user to see the full high-resolution image without further maneuvers.
Defendants argued instead that, similarly to the Perfect 10 facts, tweets were embedded using code which directed user’s browsers to retrieve the Tom Brady picture from Twitter’s servers, and the picture was indeed framed, with a light gray box. They had, as publishers, merely provided an in-line link to the picture already published by the Twitter users, and this was not direct copyright infringement. They argued that the embedded tweets were not stored on, hosted by or transmitted from servers owned or controlled by them.
Meanwhile, in the European Union…
Defendants argued that an embedded tweet functions as a hyperlink, since clicking on it brings the user to the Twitter site. This case is somewhat similar to the European Court of Justice (ECJ) GS Media (see here for our comment) and Swensson cases. In Swensson, the ECJ had found that posting a hyperlink to protected works which had been made freely available to the public is not a communication to the public within the meaning of article 3(1) of the InfoSoc Directive, which gives authors the exclusive right of public communication of their works. Recital 23 of the Directive specifies that this right covers “any… transmission or retransmission of a work to the public by wire or wireless means, including broadcasting.” The ECJ reasoned that providing a hyperlink is not a communication to a new public and is thus not infringing.
In GS Media, the ECJ found that posting hyperlinks to protected works, which had been made available to the public, but without the consent of the right holder, is not a communication to the public within the meaning of article 3(1) of the InfoSoc Directive either. However, if the links were posted by a person who knew or could have reasonably known that the works had been illegally published online, or if they were posted for profit, then posting these hyperlinks are a new communication to the public and thus infringing.
Could ECJ case law on hyperlinks inspire U.S. courts to revisit Perfect 10?
By Nicole Daniel
In October and November 2017 significant developments occurred in the two Apple-Samsung patent cases.
The first concerns litigation between Apple and Samsung that started in 2011 and went to trial in 2012. In October 2017, a retrial was ordered.
A second case between Apple and Samsung was filed in 2012 and went to trial in 2014. In November 2017, the Supreme Court declined to hear Samsung’s appeal—thereby effectively ending the case.
Judge Lucy Koh, a District Judge in the Northern District of California, oversaw both cases.
The first Apple and Samsung case
In an order issued on 22 October 2017, Judge Koh ordered a new trial. This will be the second retrial. A damages retrial took place in November 2013.
This order for retrial comes more than five years after a federal jury ordered Samsung to pay $1.05 billion to Apple for patent infringement regarding the design and software of the iPhone. This sum was reduced to $929.8 million in the damages retrial. In the new trial, the jury will have to reconsider approximately $399 million in damages for design patents. Accordingly, the new trial has the potential to reduce the original damages by nearly 40%.
The decision for the new trial was triggered by a December 2016 Supreme Court decision in this case which held that an “article of manufacture” need not just be the whole product, but could also refer to the specific patented elements of the final product. The damages however, were set considering the infringement of the product as a whole and not of certain parts only.
Judge Koh also set out a four-factor test for the jury to use to determine what the “article of manufacture” in the present case is:
- What is the “scope of design claimed in the plaintiff’s patent”
- What is the “relative prominence of the design within the product as a whole”
- Whether the patented design elements are “conceptually distinct” from the whole phone
- Whether the patented components could be sold separately from the whole iPhone itself
By setting out this test Judge Koh rejected the tests proposed by Apple and Samsung respectively. Judge Koh determined that Samsung’s proposed test was too restrictive whereas Apple’s proposed test was too broad. Judge Koh adopted the test as argued by the Solicitor General in Supreme Court in 2016.
This second retrial will be significant for the development of design patent law as the definition of “article of manufacture” will be central and this is only the second time a federal judge will weigh in on this definition since the 2016 Supreme Court decision.
The second retrial will start on 14 May 2018 and Judge Koh has said that she will adopt an aggressive schedule leading up to the retrial.
Judge Koh further granted Samsung’s request for time for limited new evidence discovery since the law is currently being developed and it would be more prejudicial for Samsung if it was denied discovery.
She also imposed strict time limits on Apple’s and Samsung’s demands and even though the parties proposed a six-day trial she decided that five days would have to suffice. Judge Koh further rejected Samsung’s request to vacate the partial judgment for $548 million she entered in 2015.
The second Apple and Samsung case
On 6 November 2017 the Supreme Court decided not to hear Samsung’s appeal against a $120 million decision in favor of Apple. The Court of Appeal for the Federal Circuit had preserved the original verdict by the jury.
The Supreme Court followed the US Solicitor General’s recommendation to deny the petition for certiorari.
Only some smaller items are left before the case is fully resolved; these regard ongoing royalties to be paid by Samsung and will be decided on by the trial court in San Jose, California.
The original decision for the $119.6 million verdict in favor of Apple was handed down in May 2014 by a federal jury. The Court of Appeal for the Federal Circuit in early 2016 overturned the jury’s verdict. However, then the Court of Appeal for the Federal Circuit met en banc and reversed the three-judge panel. The en banc panel affirmed the lower court decision in an 8-3 decision that denied Samsung’s request for a judgment as a matter of law. Samsung had argued that the three Apple patents that the jury found infringed by Samsung were either not infringed or invalid. This was a rather controversial decision.
Samsung then asked the Supreme Court to decide whether the Court of Appeal for the Federal Circuit had erred in interpreting the four-factor test set out by the Supreme Court in the 2006 decision in eBay v. MercExchange, which states the conditions for when a court may issue an injunction against an infringer of a patent. Samsung argued that there had to be proof that the patented features directly drove demand for the product in question. The Solicitor General argued that no such proof was necessary.
Samsung also argued that the decision Court of Appeal for the Federal Circuit harmed competition and innovation, and that it conflicted with other Supreme Court precedent on patent law. Furthermore, the obviousness of patent claims was treated by the Court of Appeal for the Federal Circuit entirely as a factual rather than a legal question.
Finally, according to Samsung, the Court of Appeal for the Federal Circuit erred in stating that it only needed to consider one out of the three elements of a patent claim.
By Gabriel M. Lentner
As reported by IAReporter, the pharmaceutical company Pfizer served a notice of dispute under the US-Ecuador Bilateral Investment Treaty involving a patent dispute between Pfizer and Argentine generics producer Acromax.
Pfizer holds a patent, obtained in 1999 from the Institute of Intellectual Property of Ecuador, for “the preparation of sildenafil”. Sildenafil is a medication treating erectile dysfunction (better known under the brand name Viagra).
The dispute arises out of several court rulings involving the Argentine-owned pharmaceutical laboratory Acromax, which produced and marketed sildenafil, against which Pfizer pursued claims in defense of its intellectual property rights. Several court rulings dealt with this issue. In the latest ruling, the Ecuadorian Constitutional Court heard an appeal and issued a ruling upholding Acromax’s rights to seek damages against Pfizer.
What Pfizer is allegedly asking is an intervention similar to an international investment tribunal’s issuing of interim measures, such as in the case of Chevron v Ecuador II, which required Ecuador to stop domestic proceedings against the company in the cases related to the dispute.
Should the dispute be brought before an arbitral tribunal, it will be another interesting case dealing with IP-related issues in international investment law.
By Martin Miernicki
On 29 November 2017, the ECJ gave its opinion in VCAST v. RTI (C-265/16). The court ruled on the compatibility of an online service (offered by VCAST) – which provides users with cloud storage space for free-to-air terrestrial programs of TV organizations – with Directive 2001/29/EC (the so-called Copyright Directive), and in particular with its article 5(2)(b) (the so-called private copying exception). Upon the selection of the user, the service autonomously picks up the television signal and records the indicated content in the “cloud”.
Background & questions referred
The case involved questions relating to the private copying exception as well as the concept of the communication to the public, contained in article 3 of the Copyright Directive. The ECJ has repeatedly given its opinion on both matters. Relevant case law includes Padawan v. SGAE (C-467/08), ACI Adam v. Stichting de Thuiskopie (C-435/12), and Copydan Båndkopi v. Nokia Danmark (C-463/12) (on the private copying exception), as well as ITV Broadcasting v. TVCatchup (C-607/11), Reha Training v. GEMA (C-117/15), and AKM v. Zürs.net (C-138/16) (on the communication to the public). In essence, the referring (Italian) court asked the ECJ whether an online cloud service as described above was compatible with the Copyright Directive.
The decision of the court
The ECJ reached the same result as proposed by Advocate General (AG) Szpunar in his opinion and held VCAST’s cloud service is incompatible with EU law. First of all, the court recalled its case law and stated that natural persons can benefit from the private copying exception also in situations where the copying services are provided by a third party (para 35). However, in the opinion of the court, the service at issue did not merely assist users in making lawful reproductions but also, by picking up the television signals, provided access to the protected content (para 38). For this reason, the services in question also qualified as a communication to the public within the meaning of article 3 of the Copyright Directive. Since this act required the consent of the rightholders, the provision of the services at issue infringed their exclusive rights and was hence not permissible under EU law.
What does the judgment mean?
The judgement gave the court the opportunity to reconfirm and clarify its opinion on two recurring issues of the more recent copyright case law: First, the lawfulness of the source of the reproduction which is made under the private copying exception; second, the concept of the communication to the public. With regard to the former, the ECJ held that the private copying exception cannot be invoked where the third party provides access to the protected content (para 37). In principle, this is in line with the prior case law of the court. With regard to the latter, the court referred to the principles established in ITV Broadcasting, holding that acts of communication to the public – different than the original transmission – carried out under specific technical conditions using different means of transmissions are subject to the right holder’s consent (para 48). In such circumstances, the new public criterion is irrelevant (para 50). Obviously, the principles established in AKM were, as indicated by the AG, not relevant for the court (para 52-56 of the AG’s opinion).
In this light, providers of online services will have to assess whether they merely enable natural persons to obtain private copies or whether they also provide access to protected content. As illustrated by the court’s decision, this requires a delineation of the different exclusive rights involved. In this context, it is noticeable that the answer given to the national court appears to be broader than might be expected from the grounds of the judgement. The ECJ stated that cloud services as described above conflict with the Copyright Directive where the provider “actively [involves] itself in the recording, without the right holder’s consent”. Apparently, one way to be “actively involved” in the recording is to communicate the work to the public, thereby providing access to the copyrighted content. However, other ways are also conceivable. For instance, it is unlikely that the private copying exception applies to cases where the service provider takes the initiative to make reproductions, or defines its object and modalities (para 25 of the AG’s opinion). It will be up to the court to shed further light on such questions in future cases.