Source: http://www.fosspatents.com/2017/01/
Timestamp: 2019-04-20 01:09:57+00:00

Document:
The European Unified Patent Court: what can still go wrong?
This article reflects the personal opinion of the author.
The European patent reform has been long in the making. Although the project has always been treated as highly urgent (for reasons still unknown), it has faced significant fallbacks on a regular basis. These were mostly being dealt with along the lines of the "three wise monkeys principle", pressing ahead with convenient, but poorly considered "solutions" which, over time, made the reform lose much of its initial coherence. If there ever was the desire to make the acquisition of territorially broader patent protection and its enforcement easier in the interest of fostering innovation as it was frequently declared, this motif appears to have long been abandoned in favor of a reform for a reform's sake and regardless of its practical utility for the innovators.
The initially promised affordability of the "unitary patent" and Unified Patent Court (UPC) especially for small and medium-sized enterprises (SMEs), which was repeated almost mantra-like throughout the EU legislative proceedings as one reason why the reform was of utmost importance, ultimately turned out to be pretty much the opposite, with the level of representation costs to be reimbursed by the losing to the winning party amounting to up to more than five times the sum which can currently be claimed in patent litigation proceedings before the German courts (for more details on the cost situation created by the reform, cf. the article "Unitary patent and court system – A poisoned gift for SMEs" here).
Most recently, political operators and those close to them have engaged in reassuring the professional circles that the Unified Patent Court Agreement (UPCA) will enter into force later this year, envisaging its provisional application period to start in May 2017 with the aim of the UPC opening its doors for business in December 2017 (cf. the communication by the UPC Preparatory Committee here).
While such declarations of intent are neither new nor unusual, bearing in mind the function and background of the UPC Preparatory Committee, and also seem to serve the purpose of reassuring the user circles that everything was going as planned, the real situation does not appear to be as bright as these bodies would like to have the public believe.
II. Is "Brexit" going to break it?
The "Brexit" vote of the majority of the British electorate in June 2016 is the latest blow delivered to the patent reform and certainly has the potential to finally collapse it. It should be borne in mind that the UK – together with Germany and France – is one of the countries whose ratification is obligatory for the UPCA to enter into force. Furthermore, it is worthwhile noting that the initial draft Agreement for the creation of a European patent judiciary was rejected as incompatible with Union law by the European Court of Justice (CJEU) back in 2011. As a consequence, it was afterwards decided by the political operators that membership to the UPCA would be limited to EU Member States, with the obvious implications for a UK getting ready to "brexit" the EU.
It does not come as a surprise that UPCA supporters shifted into high gear after the "Brexit" vote, indicating that the UPC had nothing to do with the EU and that it was an international organization (cf. Art. 4(1) UPCA), thus trying to imply that the "Brexit" vote would not hinder the UK from pressing ahead with ratifying the UPCA. Of course, they stayed quiet as to the several obligations from Union law incumbent on the UPC and the inevitable involvement of the CJEU (for more details, cf. the paper "Unitary patent and court system - Squaring the circle after the 'Brexit' vote" here).
CONSIDERING that, as any national court, the Unified Patent Court must respect and apply Union law and, in collaboration with the Court of Justice of the European Union as guardian of Union law, ensure its correct application and uniform interpretation; the Unified Patent Court must in particular cooperate with the Court of Justice of the European Union in properly interpreting Union law by relying on the latter's case law and by requesting preliminary rulings in accordance with Article 267 TFEU;"
Most recently, certain circles from the UK, involving two associations of patent practitioners and one from industry, all of them interested in making the UPC a reality quickly, commissioned the preparation of an expert opinion by two allegedly neutral barristers on whether the "Brexit" vote and the UK's withdrawal from the EU hindered its participation in the UPCA. In their opinion, which became known as the "Gordon/Pascoe Opinion" and was widely circulated by its initiators, the authors reached the conclusion that "Brexit" was mostly unproblematic for the UK partaking in the UPCA.
Having a closer look at this piece, however, created the impression that it was nothing more than a mere courtesy expertise which, while being based on several doubtful assumptions and containing various contradictions, promotes results favorable to the initiating associations which they can use as a marketing tool to foster their interests. The commissioning associations still deny making public the voluminous written instructions which they had provided to the barristers and based on which their opinion was afterwards prepared, hence creating the impression that there is something to hide.
The full review of the "Gordon/Pascoe Opinion" can be found here.
Nonetheless, the UK government seems to be eager to ratify the UPCA, relying on said concept of emphasizing the UPC's formal status as an international organization and rather closing their eyes on the Union law obligations inevitably tied to it. After a statement on how the UK intended to proceed in terms of the UPCA after the "Brexit" vote had been long in the waiting, it was announced at the end of November 2016 at the EU Competitiveness Council meeting that the UK "is proceeding with preparations to ratify the Unified Patent Court Agreement", pointing out that "The UPC itself is not an EU institution, it is an international patent court." (cf. the press statement here).
This approach was also followed in a recent meeting of the Science and Technology Committee of the UK House of Commons in a statement by the new "Minister of State for Universities, Science, Research and Innovation, Department for Business, Energy and Industrial Strategy", Joseph Johnson, who is also responsible for intellectual property aspects (cf. footage here, starting at 11:07.22). Indicating once more that the UPC was "not an EU institution" and describing it as being "independent of our membership in the European Union", Mr Johnson started to flounder when asked whether non-EU members could remain members of the UPCA and just answered: "These are questions which will form part of the bigger discussion around the Brexit negotiations."
In short, the plan of the UK government appears to be ratifying the UPCA without knowing whether a continued membership will be possible after a withdrawal of the UK from the EU. Bearing in mind the industry's overarching fundamental need to be provided legal certainty on questions like these, this is a remarkable approach and reaffirms the impression of a reform for a reform's sake.
"That means taking control of our own affairs, as those who voted in their millions to leave the European Union demanded we must. So we will take back control of our laws and bring an end to the jurisdiction of the European Court of Justice in Britain. Leaving the European Union will mean that our laws will be made in Westminster, Edinburgh, Cardiff and Belfast. And those laws will be interpreted by judges not in Luxembourg but in courts across this country. Because we will not have truly left the European Union if we are not in control of our own laws."
While it may be unclear what "our laws" in fact refers to, the desire to end the jurisdiction of the CJEU in the UK seems to be clearer. However, if the plan is to abolish the legal authority of CJEU decision for the UK as announced by Mrs May, how can the UK government even consider ratifying an international Agreement like the UPCA which will create a new court which is bound by Union law and subject to the jurisdiction of the CJEU, while its decisions are binding in all the UPCA Contracting States (Art. 34 UPCA)? At first sight, the positions taken by Mr Johnson and Mrs May appear difficult to reconcile. There will need to be further political explanations on how they intend to align the further with the latter. From a legal point of view, this will not be a straight-forward task, but considering the various legal twists and turns applied in the procedure so far some sort of more or less convincing theory can be expected to emerge sooner or later.
IV. Violation of German Constitutional law?
Apart from the "Brexit" implications, further obstructions to the UPCA's entry into force may well happen in the ratification procedure in Germany, the German ratification, as indicated, also being required for the UPCA to come into effect. The ratification procedure was initiated by the German government at the end of May 2016, with the first reading in the German Parliament taking place in the late evening of 23 June 2016, the day of the "Brexit" vote in the UK, only to be suspended immediately afterwards. Despite its limited practical use due to its apparent bias, the mentioned Gordon/Pascoe Opinion has – unintentionally, as it would seem – underlined the UPCA's doubtful compatibility with Union law by noting that the political approach to align the two after the aforementioned CJEU decision in 2011 is merely an unworkable legal fiction, thereby joining sides with a number of commentators who have been arguing that the UPCA was incompatible with Union law for a number of reasons all along. More details can be found in the aforementioned article "Unitary patent and court system – The Gordon/Pascoe Opinion and the UPCA's incompatibility with Union law" here.
The specific relevance of the German ratification proceedings for this aspect lies in the fact that, in Germany, it is, in principle, possible to directly subject any legislative act approving an international Agreement to judicial review by the German Constitutional Court for its compatibility with the German Constitution before it will be allowed to enter into effect. The UPCA's doubtful compatibility with Union law is only one of a number of aspects on the basis of which its compatibility with the German Constitution might be challenged. Should judicial review indeed be requested on this basis, the German Constitutional Court will usually request a preliminary ruling from the CJEU on the Union law issues in question. Should the CJEU confirm the understanding that the UPCA is incompatible with Union law, this could well be the end of the UPCA, at least in its present form. As the legal effectiveness of the two European regulations on the "unitary patent" and its translation regime is bound to the UPCA's entry into force, the whole reform would be affected by such finding. Thus, such judicial review procedure could well constitute yet another major obstacle on the way to making the UPC a reality.
Ultimately, different from what political circles and the usual UPC proponents want to make the public believe, the UPCA's entry into force is not at all secured. Major political as well as legal decisions may still have to be made before the UPCA, and with it the European patent reform, will be allowed to come into effect.
I'm not surprised that Qualcomm's stock is tanking. This antitrust action is huge. Basically, what the FTC is saying is that Qualcomm is leveraging its monopolies (some in the form of patent rights and others due to the market position of its baseband processors) in ways that enable it to charge several times more for its standard-essential wireless patents than market prices and that its "no license-no chips" policy threatens to force the last remaining competitors, such as Intel, out of the market.
The KFTC decision had mentioned parties that participated in the proceedings, and they included Samsung, Apple, and Intel. Today's FTC complaint places particular emphasis on how Qualcomm has abused its monopoly against Apple and basically forced Apple into an exclusive deal. I remember from various Samsung v. Apple and Motorola v. Apple cases five years ago that Apple originally used Infineon chips; Intel acquired Infineon's baseband chip business; and then Apple switched to Qualcomm. As the FTC complaint notes in its paragraph 129, "Apple is a particularly important OEM from the perspective of a nascent baseband processor supplier and confers benefits on a nascent supplier that make the supplier a stronger contender for other OEMs' business" thanks to the large volumes of premium handsets it sells, the ways in which suppliers would benefit from engaging with Apple's engineering teams, the technical validation that being chosen by Apple means for a supplier (given Apple's high requirements), the opportunity to field-test processors in a global market, and a "reputation halo effect from selling to Apple."
The fact that the FTC brought this case in the Northern District of California (though Qualcomm is based further down south) suggests that Apple witnesses will play a key role in the further proceedings.
a. Qualcomm withholds its baseband processors unless a customer accepts a license to standard-essential patents on terms preferred by Qualcomm, including elevated royalties that the customer must pay when using competitors' processors ('no license-no chips').
c. Qualcomm's standard royalty rate has not fallen, even though many of Qualcomm's patents related to CDMA technology have expired; [...]"
I've consistently opposed royalties based on the entire price of a highly multifunctional end product. The smallest salable unit should be determinative. Now, with this FTC lawsuit, that principle may finally be recognized by U.S. case law.
The FTC is seeking a permanent injunction against what it deems anticompetitive, abusive behavior.
I'm sure it's no coincidence that the FTC decided to bring this complaint more or less on the eve of the inauguration of the 45th president of the United States, Donald J. Trump. The incoming administration will inherit this lawsuit. It will then have to decide how (and how vigorously) to pursue it.
While some antitrust offenders have previously been let off the hook by Republican federal governments after a transition, I'm optimistic that this case here is different. First, the president-elect is not an old-school Republican when it comes to certain aspects of economic policy and regulation. My loyal readers know that I've been a Trump fan for a long time; I already wrote about his "increasingly possible" presidency more than a year ago. I was amazed when a Republican convention, for the first time ever, supported the notion of penalizing companies for moving jobs out of the United States. To me, that is not the antithesis of conservatism but a long-overdue realization of what needs to be done, and similarly, there's no reason why antitrust enforcement would be incompatible with conservative principles. Without fair competition, there is no economic conservatism. Second, it's hard to imagine that the 45th POTUS would be more sympathetic to patent holders than to companies that make highly multifunctional products.
The FTC has a case against Qualcomm that has nothing to do with ideology. This is not about "big government" or "small government," let alone about "capitalism" versus "socialism." It's all about defending the principle of fair competition. I'll go into more detail on the issues here over time. What I can say is that the FTC's complaint is very impressive. The only question it raises is why it took so long. Well, better late than never.
Could a patent attorney (prosecution or litigation) lend pro bono help to Techdirt's Mike Masnick?
This morning I have just become aware of a Hollywood Reporter article on a defamation lawsuit (complaint, PDF) against the company behind and the principal author (Mike Masnick) of the Techdirt website brought by Dr. Shiva Ayyadurai, whom Techdirt has attacked over his claims to have invented email.
I have not communicated with Mike or anyone close to him in years and don't have any intention to do so. The only instance I remember was in 2012 or 2013: a brief exchange on Twitter regarding the monopoly power conferred by standard-essential patents. I don't remember for sure but it's possible that, whether or not my name was mentioned, I got attacked by him over my pro-copyright positions (Oracle v. Google). Also, far be it from me to endorse the way he wrote about this subject in general and Dr. Ayyadurai in particular. If I had taken an interest in the subject, I'd have done it differently.
The plaintiff is seeking damages of "not less than [$15 million]" plus punitive damages on top, a public retraction, and an injunction.
The attorney representing Dr. Ayyadurai, Charles J. Harder, previously obtained a $140 million verdict for Hulk Hogan against Gawker. While Peter Thiel had a hand in that case, I don't see any indication so far that Mr. Thiel has any involvement with the action against Techdirt. I would caution everyone against baseless speculation, and I'm saying so not only because I'm deeply grateful to Mr. Thiel for his support of Donald Trump's campaign and his service on the Trump transition team. He decided to swim against the Silicon Valley tide. By now, even liberals acknowledge that Silicon Valley has started to like Donald Trump's plans.
There must be enormous pressure on Techdirt to settle, which Dr. Ayyadurai would be able to portray as an indication of his claim of email inventorship being legit. Primarily, Techdirt needs help from a defamation lawyer. However, I believe Techdirt's defense would benefit immeasurably from the early involvement of a patent prosecution attorney or patent litigator. The key legal question will be whether or not the freedom of speech covers Mike's accusations, and that means the question of whether the plaintiff actually "invented email" will be at the heart of the case.
Patent law is the law of inventions. Even though the defamation question here will not come down to a patent validity analysis (there is no patent in play, just a copyright registration and earlier documents), I believe patent professionals are in the best position to perform the inventorship-related analysis that is needed for Techdirt to defend itself or, hypothetically speaking, to realize that there's no reasonable alternative to a settlement. Patent attorneys know how to determine whether the prior art fully anticipated something or whether any delta is (non-)obvious (and to compare this to what is nowadays deemed to constitute email). Even courts would likely be receptive to references to certain principles of patent law in this context.
In the ideal scenario for Techdirt, the case for total anticipation would be so strong that the case might be resolved in their favor even without a jury trial. If there was only partial anticipation, it would come down to whether the delta (if any) justified a claim of having invented email or whether it would only have supported a narrower claim such as (whatever may be the case here) having invented a particular feature or having independently come up with something that existed before.
The complaint cites all sorts of credit that was given to Dr. Ayyadurai, who has every reason to be proud of what those people said, but what is needed--and lacking so far--is a solid, professionally-crafted feature-by-feature analysis of the relevant prior art (see this email for a starting point) and the claimed invention. Also, it's a typical patent law question to determine what a person skilled in the art would have considered essential characteristics of "email" at the relevant point(s) in time.
In case any of you would like to help, please contact Techdirt directly. I wanted to help bring the truth about email inventorship to light by making this call and I'll be interested in the outcome of the case, but I won't play any role in it. If Mike made indefensible accusations, he should retract them and accept the consequences, but if other people, such as potentially Ray Tomlinson, deserve credit for having invented email, then the truth should be told in the further proceedings. And that's a question of facts, not of the color of one inventor or the other. Let's focus on the technical facts.
Tomorrow the Supreme Court wil formally issue its mandate to the United States Court of Appeals for the Federal Circuit based on last month's landmark decision in Apple v. Samsung. A day later, a panel of experts will discuss the Supreme Court opinion and the next steps in this process, and I'd like to share the invitation below with you here. Below the invitation, you'll also find my high-level take on what may or may not happen next.
WASHINGTON, DC – On Wednesday, January 4 2017 at 11:00am ET, a panel of distinguished intellectual-property and Supreme Court experts will hold a media briefing conference call on the U.S. Supreme Court's December 6 landmark unanimous decision in the Samsung v. Apple design patent case.
The case has been remanded to the Federal Circuit, which will officially receive the Supreme Court's decision on January 3. Once received, it is anticipated that the Federal Circuit will address the remaining outstanding issues and implications for innovation, consumers, and businesses of all sizes within a wide array of industries.
The panelist participants will discuss the Supreme Court's decision and its broader implications, as well as provide insight into the Court's anticipated next steps; the Federal Circuit's process; the impact on startups, small businesses, consumers, and innovation; and, finally, how the Federal Circuit will formulate a plan and what that plan should entail.
Carl Cecere (moderator), served as counsel for the National Grange, the Hispanic Leadership Fund, and the National Black Chamber of Commerce, in filing an amicus brief on their behalf in the case before the Supreme Court. Mr. Cecere operates his own law firm, where he focuses on Supreme Court and Appellate advocacy. He began his career in the Supreme Court and Appellate practice at Akin Gump Strauss Hauer & Feld LLP.
The first question is going to be whether the remand proceedings will become (primarily) a rule-setting effort or a record-digging exercise. Apple already tried to turn the Supreme Court hearing into the latter, which was legitimate: it's this old story of "if the facts are not on your side, argue the law; if the law is not on your side, argue policy", and here, if neither policy nor the law nor the facts are on your side, you (Apple) might still prevail on a procedural basis by harping on the record. There's no reason to assume Apple is not going to try this again before the Federal Circuit. The remainder of this post is based on the assumption that, as I hope, the Federal Circuit is not going to waste a first-rate rule-making opportunity.
Is the Federal Circuit likely to come up with a good rule here? It will be hard, not because it's the Federal Circuit (I actually think this panel, even though the Supreme Court just slapped it for the position it had taken the first time around, is not as unbalanced as some other panels might be and really has the potential to do a great job) but because only lawmakers could really fix the problem. The only fair solution would be apportionment, but as the Supreme Court already noted at the hearing, apportionment per se is not allowed by the statute. So instead of a smooth curve in a seamless spectrum, the current situation (absent a legislative amendment) is a step function. There's only a limited number of choices here. If a patent covers the outer shape of a smartphone, there's little more choice than either deeming the entire end product or the casing the relevant article of manufacture. If it's the casing, Apple's designs get undervalued without a doubt--but that's the far lesser evil than overcompensation of an absolutely devastating kind.
I wish the Supreme Court had made it explicitly clear that undercompensation is a lesser concern here than nuclear overcompensation. What will help Samsung here psychologically is that the Supreme Court opinion does point downwards for what should be the ultimate outcome.
Some advocates of overcompensation tried to troll me on Twitter after I noted that no design patent covers the inner workings of a multifunctional device such as a smartphone. They tried to interpret this as me arguing in favor of apportionment. Obviously, that's not what I meant. What I did mean is that the scope of those design patents should not make it too hard for Samsung and other defendants in the future to persuade courts and, to the extent necessary, juries of which approach (to the relevant article of manufacture) makes more sense and is better for innovation and competition.
The three design patents in the case raise different article-of-manufacture issues. Two of them are about the casing but what is the AoM for a screen layout patent? Should there by any AoM for that? As an app developer I'm obviously going to be even more interested in that question than in the physical stuff, though both issues are of great interest to me as a smartphone patent litigation watcher.
We'll definitely see some very interesting amicus briefs from the usual suspects if the Federal Circuit invites further briefing, which it presumably will. After all, the Supreme Court said it just hadn't received enough input from the parties on what the right rule should be, which is true but one can't blame either party: Apple's path to victory was affirmance and Samsung's only chance was reversal/vacatur. If Apple or Samsung had placed more emphasis on rule-making before the Supreme Court, they might have lost the wider battle simply as a result of poor prioritization. Now, there will be enough space and time for Apple, Samsung, the DoJ, designers, the tech industry, low-tech and non-tech companies, advocacy groups and whoever else to come up with suggestions.
If you're professionally interested in this case as a journalist, I recommend that you join the conference call on Wednesday.

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