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Recent developments in the Apple-Samsung dispute over iPhone patents

By Nicole Daniel

On 22 March 2016, it emerged that the final Apple-Samsung trial is likely to be delayed for more than a year as a reaction to the Supreme Court’s decision granting Samsung’s request to review $ 399 million in design patent damages resulting from the 2012 jury verdict in the first Apple-Samsung trial.

Following the trial in August 2012 Apple was awarded damages of $ 1.05 billion as it was held that Samsung’s smartphones infringed three design patents and three software patents belonging to Apple. Due to a damages retrial in 2013 the damages were then pared to approximately $ 930 million, including $ 399 million for infringement of design patents. In May 2015 the US Court of Appeals for the Federal Circuit affirmed the verdict on design patents but tossed out other damages. This decision therefore necessitated a second damages retrial which was originally scheduled to start on 28 March 2016.

In December 2015, Samsung asked the Supreme Court to review the case arguing that it was inappropriate to award to a patent-holder the infringer’s entire profits from the sale of an item that is highly complex. That way design patents are rewarded far beyond the value of the inventive contribution.

The Supreme Court granted Samsung’s request but limited its inquiry to a single issue, namely whether the award of the infringer’s profits should be limited to the infringed components only in a case where the design patent applied only to a component of a product and not to the whole product.

It remains to be seen how the Supreme Court will decide on this important issue.

Microsoft and Google make up

By Nicole Daniel

On 22 April 2016, Microsoft and Google announced that following their patent settlement, they have decided to end their long-running feud.

Microsoft’s spokesperson said that Microsoft will withdraw its regulatory complaints against Google. This step reflects its changing legal priorities. Google’s spokesperson said that the two companies came to an understanding that they wanted to compete on the merits of their products as opposed to legal proceedings.

In fall 2015, the two companies have since entered into a settlement agreement thereby dropping a number of patent lawsuits in the US and Germany.

Complaints to be dropped by Microsoft include a complaint filed in 2011 at the European Commission and complaints filed in Latin America.

This announcement is a further sign that the so-called worldwide smartphone wars are indeed winding down.

U.S. FTC urges the Appeals Court to revive the Loestrin Suit

By Nicole Daniel

On December 7, 2015, during oral argument, the U.S. FTC urged the Court of Appeals for the First Circuit to revive the Loestrin suit.

The case concerns a so-called reverse payment settlement. In 2009 Watson Pharmaceuticals agreed drop a challenge to a patent serving to protect Loestrin, which is a contraceptive pill, as long as it could market its own version six months before expiration of the patent. Warner Chilcott in turn agreed not to market its generic version of the drug for six months. Both companies are now owned by Actavis.

A number of drug buyers sued and argued that these companies essentially had agreed to divide up the market for Loestrin at the expense of the consumer. In September 2014 a district court judge threw out these suits, holding that a reverse payment not made in cash or in a very close analogue is not illegal.

Reverse payment settlements in the pharmaceutical sector have long been targeted by the FTC and others involved, e.g. drug buyers. In 2013 the Supreme Court made an important decision in the FTC v. Actavis case in this regard, holding that reverse payment deals can be challenged under antitrust laws. However, there is still debate on how to interpret “pay”. Accordingly, an ultimate decision in the Loestrin suit could help determine what counts as “pay” and set limits on what pharmaceutical companies can do to settle with their rivals that challenge their patents.

At the oral arguments a lawyer for the FTC said that the district court in this case elevated form over economic substance, and argued that a reverse payment need not be in cash.

The three judges on the panel seemed to be critical of the district court’s decision. Judge Juan R. Torruella said that in the dictionary the word payment is defined as the delivery of money or something equivalent. He also questioned the difference between a settlement including cash and a settlement including something other than cash.

Judge O. Rogeriee Thompson said that payment is “nothing but consideration“. Judge Sandra Lynch noted that the amount of profit for the generic company seemed “awfully large“.

A lawyer for Actavis argued that the court should not adopt a broad definition of payment, since payments should be quantifiable.

A decision from the Court of Appeals is expected next year.

Samsung/Apple update: Samsung will pay $548 million in patent damages to Apple

By Nicole Daniel

On December 3, 2015 Samsung and Apple submitted a joint filing in which Samsung agreed to pay $548 million in patent damages to Apple to satisfy a partial judgment.

In August 2012, a jury had awarded $ 1.05 billion in damages to Apple; however this amount changed a number of times during the appeals process over the last three years.

In September 2015 District Judge Lucy Koh entered a partial final judgment of $548 million for Apple after Samsung’s appeal of the damages award was denied by the Court of Appeals for the Federal Circuit. In that ruling the Federal Circuit vacated the trade dress damages.

The final amount of damages to be paid to Apple is not yet known as a second damages retrial is scheduled to start on March 28, 2016 before District Judge Lucy Koh in San Jose, California. In this retrial a jury will set the patent infringement damages for five smartphone models by Samsung which were found to infringe Apple’s patents and trade dress.

The joint filing acknowledges that Samsung is now at a point where it has to pay as there is no other legal avenue left to go. This brings a close to over three years of appeals in the patent and antitrust proceedings between Samsung and Apple.

In their joint filing Samsung informed Apple that they are ready to make the payment 10 days after the receipt of Apple’s original invoice.

European Court clarifies duration of effective patent protection for medicinal products

By Gabriel M. Lentner

In Seattle Genetics Inc. v Österreichisches Patentamt (Case C-471/14), the Court of Justice of the European Union (CJEU) clarified that the relevant date to be used by national patent offices when calculating the duration of a supplementary protection certificate (SPC) is the date when an applicant is notified of the decision granting a marketing authorization (MA).

 

Background

 

Under EU law, no medicinal product may be commercially exploited before the relevant authority has issued a marketing authorization (MA). In order to compensate for the period that elapses between the filing of a patent application and obtaining an MA, a supplementary protection certificate (SPC) extends the period of effective patent protection. An SPC thus aims to offset the loss of patent protection for medicinal products that occurs due to the compulsory testing and clinical trials required for obtaining an MA.

These issues are governed by Regulation (EC) No 469/2009 of the European Parliament and of the Council of 6 May 2009 concerning the supplementary protection certificate for medicinal products. Article 13(1) of the Regulation provides that “[t]he certificate shall take effect at the end of the lawful term of the basic patent for a period equal to the period which elapsed between the date on which the application for a basic patent was lodged and the date of the first authorization to place the product on the market in the Community reduced by a period of five years.”

Accordingly, the Regulation provides for an overall maximum of 15 years of protection from the moment the MA is first granted to the medicinal product in question.

The clarification of the Court was necessary since the Regulation does not further specify the relevant date for the protection to be calculated.

 

Results

 

Aside from legal certainty, the ruling can be seen as a victory for the pharmaceutical industry in Europe. The few additional days of protection (the duration between the grant of an MA and notification of approval to the applicant) are of significant commercial value. Furthermore, the Court set an important precedent for similar issues regarding the calculation of the period of regulatory data protection for medicinal products and the period of orphan market exclusivity for orphan medicinal products.

Google and Microsoft agree to end Patent Battle

By Nicole Daniel

On 30 September 2015 it was announced that the five-year patent battle between Google and Microsoft has come to a close. The companies decided to end all patent infringement litigation against each other and drop around 20 lawsuits in the United Stated and Germany. No financial terms of the deal were disclosed; instead the companies pledged that they will work together on certain patent matters to strengthen the defense of intellectual property.

Since 2010 Google and Microsoft were clashing over a number of issues involving a variety of technologies including smartphones, WiFi, patents and royalties related to technology in the Xbox game console.

The most famous and bitter feud concerned litigation involving Motorola Mobility, which Google owned from 2012 until January 2014, when was sold to Lenovo Group Ltd, while Google kept many of its patents.. In 2010 Microsoft claimed that Android infringed some of its patents and demanded royalties from smartphone makers (Samsung, Motorola Mobility) for Android licensing agreements.

This is a further sign that the so-called worldwide smartphone wars are winding down. In 2014 Samsung and Apple agreed to drop all litigation against each other outside of the United States.

Court of Justice of the EU clarifies when an action for infringement by SEP owner may amount to an abuse

By Gabriele Accardo

On July 16, 2015, the Court of Justice of the European Union (“CJEU”) handed down its preliminary ruling following a reference by the Landgericht Düsseldorf (“Düsseldorf Regional Court”) in the context of the dispute between Huawei Technologies (“Huawei”) and ZTE Corp. (“ZTE”) on 4G/Long-Term-Evolution (“LTE”) technologies (see Newsletter 6/2014 p. 16 and Newsletter 2/2013, p. 9, for additional background).

 

Facts of the case

The issues at stake in the main case concerned the conditions of the “compulsory license defense” in standard-essential patents (“SEPs”) disputes, or, conversely, on the availability of remedies to the SEPs’ holder who has pledged to license them on Fair, Reasonable and Non-Discriminatory (“FRAND”) terms.

Huawei is the proprietor of, inter alia, a European patent concerning method and apparatus of establishing a synchronization signal in a communication system. The European Telecommunications Standards Institute (“ETSI”), which granted SEP status, as the patent is essential to the LTE standard.

Huawei and ZTE engaged in discussions concerning the alleged infringement of the SEP and the possibility of concluding a licence on FRAND terms in relation to the products that ZTE put on the market and that operate on the basis of the LTE standard, thus using the SEP held by Huawei.

Huawei requested an amount which it considered to be a reasonable royalty, whereas ZTE sought a cross-licensing agreement instead.

Ultimately, no offer relating to a licensing agreement was finalized, whilst ZTE continued to sell its products without paying a royalty to Huawei or rendering an account to Huawei for past use.

Huawei brought an action for infringement against ZTE before the referring court, seeking an injunction prohibiting the infringement, the rendering of accounts, the recall of products and an award of damages.

 

Conflicting precedents

The Düsseldorf Regional Court considered that a preliminary ruling was needed in the circumstances because there are conflicting precedents on the issue at stake, notably the German Supreme Court decision in the Orange-Book-Standard case (see Newsletter 3/2009, p. 4 for more background) and the case brought by the European Commission against Samsung (The case was recently closed with a commitment decision. See Newsletter 2/2014, p. 14 and Newsletter 6/2012, p. 11 for more background).

In the Orange-Book-Standard case, the German Supreme Court held that a defendant in a patent infringement case may successfully raise an antitrust defense against the issue of an injunction provided that (1) it has made an unconditional offer to conclude a licensing agreement under terms that cannot be rejected by the patent holder without abusing its dominant position, and (2) to the extent that the defendant uses the teaching of the patent before the applicant accepts the unconditional offer, it is compliant with the obligations that will be incumbent on it, for use of the patent, under the future licensing agreement, namely to account for acts of use and to pay the sums resulting therefrom.

Thus, in principle, under the Orange Book case law, the Düsseldorf Regional Court considered that it ought to uphold Huawei’s action for a prohibitory injunction insofar as ZTE’s offers to conclude an agreement could not be regarded as “unconditional” (the offer related only to the products giving rise to the infringement, whereas ZTE did not pay Huawei any royalty).

However, the CJEU noted that in the Samsung case the Commission basically held that, in principle, the abusive nature of a refusal to license a SEP may successfully be raised as a defense where the defendant is “willing to negotiate” a license on FRAND terms. In other words, the referring court wondered whether the bringing of an action for a prohibitory injunction may be deemed as unlawful under Art. 102 of the Treaty on the Functioning of the European Union (“TFEU”), where that action relates to an SEP, the proprietor of that SEP has indicated to a standardization body that it is prepared to grant licenses on FRAND terms and the infringer is itself willing to negotiate such a licence, thus being apparently irrelevant that the parties in question cannot agree on the content of certain clauses in the licensing agreement or, in particular, on the amount of the royalty to be paid.

 

Answer by the CJEU

In essence, the CJEU had to clarify whether, and in what circumstances, a SEP holder abuses its dominant position by requesting injunctive relief against an alleged infringer of its SEP.

As a threshold matter, the CJEU considered that the particular circumstances of the SEP case in the main proceedings distinguished that case from all other cases where a company seeks to exercise its right to defend its intellectual property, as set out in previous EU case-law. Unlike that case law, the case at issue relates to the exercise of an exclusive right linked to a SEP established by a standardization body that has granted such SEP status only in return for the proprietor’s irrevocable undertaking that it is prepared to grant licenses on FRAND terms.

Unlike all other patents, patents that have obtained SEP status allow their proprietors to actually control the market, by preventing products manufactured by competitors from appearing or remaining on the market, if an SEP holder should threat them by seeking an injunction.

Yet, the CJEU made it clear that under Article 102 TFEU, the proprietor of the SEP is obliged only to grant a licence on FRAND terms, and that the proprietor’s irrevocable undertaking to grant licences on FRAND terms does not, in principle, negate the substance of the rights guaranteed to that proprietor by Article 17(2) and Article 47 of the Charter of Fundamental Rights of the European Union, including the right of access to a tribunal.

However, according to the CJEU, such “irrevocable undertaking” nonetheless justifies the imposition on that proprietor of an obligation to comply with specific requirements before bringing an action against an alleged infringer for a prohibitory injunction or for the recall of products. Specifically, the SEP owner would not abuse its dominant position, as long as:

  • First, before bringing such an action, the SEP holder alerts the infringer of the infringement complained about by designating that SEP and specifying the way in which it has been infringed;
  • Second, after the alleged infringer has expressed its willingness to conclude a licensing agreement on FRAND terms, the SEP holder has presented to the alleged infringer a specific, written offer for a license on FRAND terms, specifying, in particular, the amount of the royalty and the way in which that amount is calculated.

In turn, the alleged infringer must respond to that offer in a diligent and serious manner.

Accordingly, if the alleged infringer does not accept the SEP holder’s offer, it must promptly present the latter with a reasonable counter-offer that corresponds to FRAND terms, and has to provide a bank guarantee for the payment of royalties or deposit a provisional sum in respect of its past and future use of the patent, if that counter-offer is rejected. Where no agreement is reached on the details of the FRAND terms following the counter-offer by the alleged infringer, the parties may, by common agreement, request that the amount of the royalty be determined by an independent third party, by decision without delay.

Conversely, if the conduct of the infringer is purely tactical and/or dilatory and/or not serious, an application for corrective measures or for an injunction does not constitute an abuse of a dominant position.

The CJEU thus clarified that the alleged infringer may rely—as a defense—on the abusive nature of an action for a prohibitory injunction or for the recall of products, only if it has submitted a counter-offer.

Also, the alleged infringer cannot be held liable if, during negotiations, it reserves the right to challenge the validity and/or essential nature and/or use of that patent.

Finally, the CJEU held that the SEP holder does not abuse a dominant position in taking legal action to secure the rendering of accounts in order to determine what use the infringer has made of the teaching of an SEP with a view to obtaining a FRAND royalty under that patent, and in bringing a claim for damages in respect of past use of the patent, for the sole purpose of obtaining compensation for previous infringements of its patent.