On September 27th, 2013, the Federal Trade Commission (FTC) announced that it had voted to collect public comments and gather information on 25 companies known as patent assertion entities (PAEs). The study was intended to shed more light on the PAE business model and create a better understanding of how their patent litigation activities affect innovation and competition in the U.S. economy. As defined by the FTC, PAEs are companies that do not produce, manufacture or sell goods but rather acquire patents from third parties which the PAE monetizes through negotiating licenses or litigating against an alleged infringer.
On October 6th, 2016, the FTC released the long-awaited findings of this report, titled Patent Assertion Entity Activity: An FTC Study, which includes analysis of 22 PAE respondents and more than 2,500 affiliates and related entities, conducted between January 2009 and mid-September 2014. The report’s findings and recommendations for legislative and judicial reform were intended to “balance the needs of patent holders with the goal of reducing nuisance litigation,” according to a quote attributed to FTC Chairwoman Edith Ramirez in the FTC’s official press release. Specifically, the FTC had concerns about the ex post nature of PAE patent transactions, in which licenses or settlements occur after a target has already developed a technology for marketing.
In a unanimous decision delivered by Chief Justice John Roberts (left) in Halo Electronics, Inc. v. Pulse Electronics, Inc., the United States Supreme Court recently did what much of the patent world expected it would do; they overruled the Federal Circuit’s “unduly rigid” test for the awarding of enhanced damages for willful damages put in place by In re Seagate Technology, LLC, 497 F. 3d 1360, 1371 (2007)(en banc).
Under Seagate, in order for a patent owner to be entitled to receive enhanced damages of up to triple the original damages award, the patent owner first had to “show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.” Then, the patentee was required to demonstrate, again by clear and convincing evidence, that the risk of infringement “was either known or so obvious that it should have been known to the accused infringer.” The Supreme Court held that this test was not consistent with the express language of 35 U.S.C. §284.
In the Supreme Court’s recent decisions in Highmark Inc. v. Allcare Health Management Systems, Inc., 134 S. Ct. 1744 (2014) and Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014) the Court, interpreting 35 U.S.C. § 285, found that there was no textual support in the statute to impose an onerous, rigid test for the awarding of attorneys’ fees to a prevailing party in a patent infringement lawsuit. Most notably, the Supreme Court explained to the Federal Circuit that they misinterpreted a key ruling of the Supreme Court when they created their test, which would result in attorneys’ fees almost never being awarded.
That same exact misinterpretation was at the heart of Federal Circuit case law relating to an award of enhanced damages to a victorious patent owner, which was why so many believed that the Supreme Court would grant district courts the same discretion with respect to enhanced damages that they were given with respect to attorneys’ fees in 2014 in Highmark and Octane Fitness.
On April 1, 2016, Rovi Corporation filed a patent infringement lawsuit against Comcast in the Eastern District of Texas, Marshall Division. In the complaint, which is quite detailed and very long (174 pages), Rovi is asking for a preliminary injunction, a finding that Comcast’s infringement is willful and deliberate, a finding that the case is exceptional and attorneys fees’ are appropriate, as well as damages for the infringement.
The lawsuit alleges that 12 years ago, Comcast took a license to Rovi’s patent portfolio, but that license expired on March 31, 2016, without being renewed. Rovi says that Comcast has failed to remove any of its products and services from the market and also continues to provide those products and services, all of which are now infringing because of the expiration of the patent license agreement.
“We disagree with Rovi’s accusations and intend to defend the cases vigorously,” said Jenni Moyer, Senior Director of Corporate Communications for Network & Operations at Comcast. “Beyond that, we can’t comment on pending litigation.”
On Monday, March 21, 2016, the United States Supreme Court agreed to hear the matter of Samsung Electronics v. Apple, Inc., a dispute between two giant technology companies that at its core relates to how much Samsung owes Apple for infringing certain design patents.
So far, these two technology giants have shown little interest in playing nice. A jury found that Samsung infringed Apple design patents, Apple utility patents and also diluted Apple’s trade dresses. The infringed design patents are U.S. Design Patent Nos. D618,677 (“D’677 patent”), D593,087 (“D’087 patent”), and D604,305 (“D’305 patent”), which claim certain design elements embodied in Apple’s iPhone. The infringed utility patents are U.S. Patent Nos. 7,469,381 (“’381 patent”), 7,844,915 (“’915 patent”), and 7,864,163 (“’163 patent”), which claim certain features in the iPhone’s user interface. The diluted trade dresses are Trademark Registration No. 3,470,983 (“’983 trade dress”) and an unregistered trade dress defined in terms of certain elements in the configuration of the iPhone.
On Tuesday, February 23, 2016, the United States Supreme Court will hear oral arguments in Halo Electronics, Inc. v. Pulse Electronics, Inc. (14-1513) and Stryker Corporation v. Zimmer, Inc. (14-1520), which have been consolidated for appeal. These two cases will force the Court to dive into one of the most thorny patent litigation issues – the issue of enhanced damages for willful patent infringement.
The statute in question says very little that is relevant, merely saying that the district court judge “may increase the damages up to three times the amount found or assessed.” 35 U.S.C. § 284. Simple and straightforward enough, but over the years the United States Court of Appeals for the Federal Circuit has issued rulings that make it virtually impossible for a victorious patent owner to ever receive enhanced damages. The rigid structure of the enhanced damages test has effectively removed the permissive and discretionary language of the statute, which just says that the district court judge “may increase the damages.”
In the Supreme Court’s recent decisions in Highmark Inc. v. Allcare Health Management Systems, Inc., 134 S. Ct. 1744 (2014) and Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014) the Court, interpreting 35 U.S.C. § 285, found that there was no textual support in the statute to impose an onerous, rigid test for the awarding of attorneys’ fees to a prevailing party in a patent infringement lawsuit. Most notably, the Supreme Court explained to the Federal Circuit that they misinterpreted a key ruling of the Supreme Court when they created the test that would result in attorneys’ fees never being award. That same exact misinterpretation is at the heart of Federal Circuit case law relating to the awarding of enhanced damages to a victorious patent owner.