Welcome to 2020! Here's what happened around the IP blogs while you were digital detoxing over eggnog.

Mittens is casually easing into another decade of IP blogging Source: Cats are on top

End of the year (and decade) content 

Patent industry insiders shared their Christmas wishlists on IP Watchdog. Their wildest IP dreams for 2020 range from no more monkeys in courtrooms (literally) to the USPTO Director taking on the responsibility of instituting America Invents Act trials and the US government maintaining a database of patent ownership and transactions.

IP Watchdog also asked its experts to gaze into their crystal balls and make predictions about the future. Some are looking forward to major IP decisions on the US Supreme Court docket, while others forecast more litigation on AI, deep fakes, cannabis, and paparazzi photos.

Patently-O made graphics showing the number of utility patents issued per year and per decade. 2019 and the 2010s both saw record numbers.

Kluwer Patent Blog shared it's top 10 most popular posts of 2019. Posts on management and leadership at the European Patent Office dominate the list.

Kluwer Copyright Blog also shared its top 10 most popular posts of 2019. The top spots are occupied by posts clarifying various aspects of the new Copyright Directive.

The 1709 Blog published a thorough, lengthy recap of copyright news in 2019. Catch up on the eventful year here.


Patents

Do some changes in the Inventor Rights Act of 2019 sound familiar to you? Patently-O explained their historical underpinnings.

Longstanding and economically efficient balance in Standard-Essential Patent (SEP) licensing is being destabilized by misinformation and manipulation of commercial practices and of benchmarks in Fair, Reasonable and Non-Discriminatory (FRAND) licensing. This is epitomized in litigation between Apple and Qualcomm, commencing January 2017, until settlement in April 2019 and in the US Federal Trade Commission’s antitrust action against Qualcomm also commencing around the same time and now on appeal. Find out more on IP Finance.

Trade Marks

Over the past few weeks, two courts cases dealt with the scope of protection of the PDO “Aceto Balsamico Tradizionale di Modena” and the PGI “Aceto Balsamico di Modena”. Both courts agreed that "Acerto" and "Balsamico" are generic and common terms which do not fall under the scope of protection of PDOs/PGIs, but one of them found enough “evocation” to establish infringement. Kluwer Trade Mark Blog wrote about these decisions. 


Copyright

In reaction to the impact of illegal distribution of audiovisual content, some important improvements in the fight against piracy were made. Kluwer Copyright Blog compared two types of court orders created for sport events: "fast injunctions" in Italy and "super injunctions" in the UK.

Huawei is a major holder of 5G patents (Source: The Economist)

The centrality of exclusivity in patent law

Every student of IP learns that patents exist to stimulate innovation [though an academic minority still advocates a rights-based conception of patent rights, an argument lucidly set out by professor Mossoff here]. There are various theories on how patents are supposed to achieve this goal: for instance, the idea that patents induce disclosure of knowledge that would otherwise remain secret, or that patent exclusivity is needed to recoup investments in innovation, or that it creates incentives for competitors to 'invent around' the patentee's exclusive domain.

All these theories share reliance on the idea that patent exclusivity – a patentee's virtually unfettered right to decide who uses their invention and under which conditions – is what drives the market's capacity to innovate. A large part of this Kat's research is aimed at understanding to what extent this assumption has stood the test of time.

Research suggests that industry reliance on patent protection is lessening. A classic 2008 study found "substantial differences between the health related sectors … in which patents are more commonly used and considered important, and the software and Internet fields, in which patents are reported to be less useful". The results are confirmed over time, also for Europe, where, at least in the UK, purportedly "[a] surprisingly small number of innovative firms use the patent system". Indeed, tech companies have long stated that they do better when there are fewer patents to deal with [see e.g. here for an analysis by the Financial Times], and also in Europe we see an increase in advocacy against perceived abuses or overprotection of the patent system [e.g. here].

But there are also industries that continue to rely strongly on patent protection and the pharmaceutical industry is a prime example, as discussed in the FT article. Traditionally, they were joined by innovator companies in the telecoms industry, whose business it is to design and implement mobile infrastructure.

For instance, four telecoms giants [Ericsson, Nokia, Philips & Qualcomm] jointly wrote a letter to the U.S. Secretary of Commerce last March urging him to embrace antitrust policy that would interfere minimally with enforcement of SEP's. The letter stresses that these innovators rely on the right to exclude, offered by their patents, in a balanced FRAND-system to recoup their investments and re-invest their profits into in further R&D to create the next generation of standards. Indeed, the undersigned companies are familiar players in European patent litigation and their enforcement efforts have dominated large parts of the European debate concerning FRAND.

It is therefore surprising that their competitor Huawei, which reportedly invested around USD 10 billion a year on research and development related to 5G base stations, has now decided to sell off its patent portfolio. True, Huawei is also a major manufacturer of mobile phones, whereas some of the other major patent holders in the telecoms industry are not [though they rarely restrict themselves to mere licensing of technology: Ericsson, for instance, is also a major provider of telecom hardware]. But just as in other cases, there are major investments behind Huawei's 5G patents, which makes it interesting that it is apparently choosing a radically different course for their exploitation. 

Modern times put before us difficult decisions (Meme credit: Hackernoon)

Modern times & novel patent strategies

None of this is to say that licensing patents is the only way for non-manufacturing entities to monetize their investments in R&D. It is well known that the sale of patents is (also) an important stream of revenue for innovator companies, as is shown by the recent sale by Nokia of part of its patent portfolio to Xiaomi, which was not the first time the Finnish giant sold off IP to competitors or new entrants. Rather, the offer by Huawei underlines the dynamism of the modern economy and the changing role that patents play therein.

Indeed, the uses to which patents are put in this environment are manifold. They are held defensively as leverage for cross-license deals in case of assertion by competitors, or to attain freedom to operate in an uncertain niche in the market, or to secure investment by funds, or to try and coerce small companies into paying license fees. As always, the business leads the way and the brains in the patent department figure out ways to utilize the patent system to optimize the chosen strategy.

The question, then, is how these changes in markets should influence patent doctrine. A similar debate is taking place in competition law, where the ascent of data is driving novel business models that traditional competition doctrine seems ill-equipped to deal with. A forthcoming paper by professor Wu, for instance, looks at the "blind spot" these doctrines have for platforms that generate income through user's attention, not their money [here]. Scholars like Wu argue that this requires reorientation of some of competition law's fundamental assumptions. The question is not merely academic: the European Commission, too, is working on how to retain the efficacy of competition law in the digital era [as becomes clear from a very elaborate study it published earlier this year].

What about patent law? It seems obvious that it, too, must get with the times and adapt to new ways in which patents are employed. But if it is difficult enough for competition law to keep up with protecting current markets, the challenge for patent lawyers, scholars and judges is even greater. Patents, after all, primarily serve to safeguard future markets, and what they will look like no-one can predict. Calls for reform of the patent system, then, are at once vital to its sustained credibility and risky business. Add to that the general tendency of legal systems to lag behind market developments, which to this Kat seems a feature rather than a bug, and patent lawyers have their work cut out for them. Interesting times indeed.

This morning, the Court of Appeal handed down its judgment in Conversant Wireless Licensing S.A.R.L v Huawei Technologies Co. Ltd, ZTE Corporation and Ors [2019] EWCA Civ 38.  As regular Kat readers will know, the appeal concerns the English court's jurisdiction to grant a global FRAND licence where UK sales only account for 1% or less of the sales on which royalties are claimed.  The Kat's correspondents, Jane Mutimear and Richard Vary, send this report:

On 30 January 2019 the Court of Appeal handed down its judgment in Huawei and ZTE's appeal against Carr J's refusal to dismiss the case brought against them by Conversant on jurisdictional grounds.  The Court of Appeal dismissed the appeal, with Lord Justice Floyd setting out the reasons with which Lord Justices Flaux and Patten agreed. 


Background

Conversant sued both companies on patents it claims are standard essential, seeking injunctive relief and damages, together with a declaration that it had made FRAND offers or a determination of the FRAND terms.  Huawei and ZTE challenged jurisdiction on two grounds: 1) that the case would raise validity and infringement of foreign patents which is not justiciable subject matter in the English Court and 2) that the Chinese court is the natural and appropriate forum so the Court should refuse permission to serve the Chinese entities out of the jurisdiction on forum non conveniens grounds.  Following the CoA judgment in Unwired Planet v Huawei, the appellants accepted that the justiciability point was no longer arguable before the Court of Appeal, so the Court only had to deal with the forum non conveniens ground (which Huawei had not argued in Unwired Planet).  The appellants also proposed that if the appeal failed on this point, questions should be referred to the ECJ.  The judgment goes through the background of licensing in the SEP area, quoting from the Court of Appeal's judgment in Unwired Planet, and explained briefly the wider fight between the companies, which includes proceedings commenced in China by Huawei China and ZTE China against Conversant seeking to invalidate Conversant's Chinese patents and seeking a FRAND determination.

Jurisdiction over UK defendants

The Court addressed the position as against the two UK domiciled appellants, turning to the Brussels Recast Regulation Article 4, which provides that "persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State" and relied on the CJEU judgement in Owusu v Jackson [2005] for authority that the English court could not apply forum non conveniens to decline jurisdiction over a claim against a person domiciled in a contracting state on the ground that the natural forum for the claims was the courts of a non-contracting state.  The question was whether this reasoning applied to cases involving Article 24 (giving Member States exclusive jurisdiction over proceedings involving registration or validity of patents).  The Court concluded that it was a matter of discretion for the court whether to assume jurisdiction under Article 4 when the subject matter fell within Article 24 (relying on the judgment of Andrew Smith J in Ferrexpo v Gilson [2012]).

Service out of the jurisdiction on Chinese companies

Turning to service on the Chinese entities, there was no dispute that the first two hurdles were met: 1) the claim falls within a gateway (CPR 6 PDB) and 2) there is a serious issue to be tried.  The dispute related to the third hurdle i.e. whether England and Wales is the proper forum to hear the case.  The "case" for this analysis is not just what the Claimant has pleaded; the court must have regard to the totality of the dispute, including the likely defence and the case must be characterised in a way which does not pre-judge the appropriate forum.

The evidence before the judge at first instance had caused him to conclude that the Chinese courts did not have jurisdiction to determine essentiality or infringement of non-Chinese patents, nor did they have jurisdiction to determine FRAND rates without agreement from both parties.  Conversant had not agreed to accept the Chinese court's jurisdiction for such determination and the judge had concluded that their refusal was reasonable.  It was on this basis that the judge had concluded that China was not an alternative available forum.

The appellants sought to adduce new evidence before the Court of Appeal to introduce the Guangdong Court Guidelines, which had been issued 10 days after Carr J had handed down judgment, but before the order was sealed.  These guidelines stated that where the territorial scope of the SEPs in question exceeded the territorial scope of the court and the other party did not object (or the objection was deemed unreasonable), the court could determine the royalty.  The Appellants sought to rely on this as evidence that the Chinese court would now exercise jurisdiction to determine essentiality, infringement and FRAND for a global portfolio in circumstances where both parties consented and their expert claimed that if the facts were analogous to this case, the court would take the view that the refusal to agree was unreasonable. Conversant's expert disagreed and pointed out that there was no case law on the circumstances in which it would be "unreasonable" for one party to object. The Court of Appeal agreed with Conversant's expert.  The Guidelines had been introduced for a trial period and it was speculative to interpret them in the way the appellants' expert was seeking to do.

In reaching its decision the Court of Appeal stated that it was clear that you could get different answers to the forum conveniens questions, depending on the level of generality at which the dispute is characterised.  If you just look at the relief which would be granted in the English court, that would be too specific.  But if you ended up making the claimant pursue a claim on a different property right with different underlying facts in the foreign forum, that meant it had been defined too broadly. Conversant's claim was closely analogous to the claim advanced in Unwired Planet and accepted by the Court – (i) the UK patents are essential to the standard; (ii) that the claimant has complied with its ETSI undertaking in making FRAND offers; (iii) that the defendants have not so complied without any reasonable ground for so doing; and (iv) that it is entitled to enforce its UK SEPs and obtain the usual relief for infringement, including a FRAND injunction and damages, and a determination of the FRAND terms.  If Conversant were made to seek a remedy in China, they would have to advance their case based on different patents, relying on different facts.  Floyd LJ pointed out that that it was not legitimate to characterise the claim as one for the enforcement of a global portfolio right, as no such right exists.  It is a dispute involving determination of infringement, validity and essentiality of UK patents.  The FRAND element is embedded in the determination of whether Conversant is entitled to the relief for infringement of their UK SEPs.  The FRAND element cannot be considered separately for the purpose of the forum conveniens analysis.

Relevance of the new evidence

Although the new evidence in relation to the Chinese Court Guidelines would be admissible under the first Ladd v Marshall test (couldn't have been submitted at first instance trial) it did not meet the second criteria of having an influence on the outcome of the case.  There was no guidance on how the court would apply the test of when refusal by one party was reasonable, and even Huawei's letter to the Supreme Court in relation to its petition to that Court for leave to appeal in Unwired Planet stated "[T]here is no decided case in which the Chinese courts have gone further, as the English courts did in these proceedings, by conducting a global royalty-setting exercise without the consent of the parties and then imposing the result thereof as a condition of avoiding a territorial injunction."

Rejecting reference to CJEU

Finally the Court refused the CJEU reference on the basis that first, the Court of Appeal in Unwired Planet was able to reach a decision on justiciability without a reference. Secondly, Huawei had never suggested that a reference was necessary in that case, and now accepts that the Unwired CoA decision precludes any justiciability argument before the Court of Appeal in this case. Thirdly, despite a lengthy draft produced by Huawei's counsel, Floyd LJ was not persuaded that there is any lack of clarity in the relevant EU law.