Source: https://ttlfnews.wordpress.com/2013/05/24/transatlantic-antitrust-and-ipr-developments-issue-no-22013-may-10-2013-2/
Timestamp: 2017-10-17 20:28:39
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Matched Legal Cases: ['CJEU ', 'CJEU ', 'CJEU ', 'CJEU ', 'CJEU ', 'CJEU ', 'CJEU ', 'CJEU ']

Transatlantic Antitrust and IPR Developments, Issue No. 2/2013 (May 10, 2013) | TTLF Newsletter on Transatlantic Antitrust and IPR Developments
Transatlantic Antitrust and IPR Developments, Issue No. 2/2013 (May 10, 2013)
and Nicole Daniel, TTLF Fellows
U.S. Supreme Court applies first sale doctrine to copies of copyrighted work lawfully made abroad and imported into the U.S. [Béatrice Martinet Farano]
U.S. Appeals Court for the 9th Circuit finds BitTorrent operator liable for contributory infringement on an inducement theory (Columbia Picture v. Fung) [Béatrice Martinet Farano]
U.S. District Court for the Southern District of New York holds that the first sale doctrine does not apply to the resale of digital music files [Béatrice Martinet Farano]
U.S. District Court for the Western District of Washington makes determinations of RAND licensing terms [Nicole Daniel]
U.S. FTC files amicus curiae brief supporting generics’ claim in patent dispute [Nicole Daniel]
U.S. District Court for the Southern District of New York rejects Meltwater’s fair use defense [Béatrice Martinet Farano]
U.S. Appeals Court for the 9th Circuit redefines the notion of control under the DMCA (UMG v. Veoh) [Béatrice Martinet Farano]
German Court makes reference for a preliminary ruling to the CJEU on standard-essential patents [Gabriele Accardo]
CJEU and U.S. Court issue contrasting decisions on the legality of streaming video/remote DVR services [Béatrice Martinet Farano]
European Commission market tests commitments offered by Penguin to close probe on e-books [Gabriele Accardo]
European Commission market tests Google commitments in relation to online search and search advertising [Gabriele Accardo]
European Commission sends charges to Motorola Mobility on misuse of standard-essential patents [Gabriele Accardo]
European Commission closes preliminary investigation into E5 [Nicole Daniel]
UK OFT investigates GSK and generics manufacturers over pay for delay deals [Gabriele Accardo]
Italian Competition Authority finds that Sky Italia did not abuse of its dominant position [Gabriele Accardo]
U.S. District Court for the Southern District of New York holds that the first sale doctrine does not apply to the resale of digital music files
On 30 March 2013, the U.S. Southern District of New York has held that the first sale doctrine was not applicable to the resale of digital music.
U.S. District Court for the Western District of Washington makes determinations of RAND licensing terms
On 25 April 2013 Judge Robart issued the non-confidential version of his Findings of Fact and Conclusions of Law in the Microsoft Corp. v. Motorola Inc. case. This is the first time that a U.S. court has made determinations of the RAND licensing terms for a standard essential patent (“SEP”) portfolio license between two parties.
This case regards Motorola patents covering the IEEE’s 802.11 (WiFi) standards and the ISO/IECS’s and ITU’s H.264 video codec standards. Motorola offered Microsoft in 2010 to license these patens at a royalty rate of 2.25% of the end product, i.e. each smart phone, PC/laptop or Xbox 360 implementing them. Microsoft then sought declaratory judgment that Motorola breached its FRAND obligations to the Standards Development Organizations (“SDOs”). Motorola in turn sued Microsoft for patent infringement. Microsoft argues that the absolute value of the royalty demand is unreasonable and far exceeds what it pays to other standard-essential patent holders. Importantly, the royalty offer is also unreasonable because it is not tied to the value of Motorola’s technical contribution and assesses the royalties in relation to the kind of product and not to Microsoft’s contribution to the product. Motorola argues that the royalty rate is within the industry norms, is offered for many years now and that Microsoft did not negotiate in good faith and therefore repudiated its right to receive a FRAND license.
Judge Robart determined a specific RAND royalty and a RAND royalty range. He noted that “more than one rate could conceivably be RAND”. However, more important than the amount of rates determined in this case is the methodology Judge Robart used as his order may serve as a precedent for the determination of RAND terms for a patent portfolio. Interestingly Judge Robart seems to have sided with Motorola regarding the methodology even though the rates he determined were much closer to those urged by Microsoft than Motorola.
Judge Robart analyzed what would happen in a hypothetical negotiation between the parties to the case using the factors outlined in Georgia-Pacific Corp. v. U.S. Plywood Corp. in a modified way. He modified those factors due to the unique aspects of this case, i.e. the standard-essential patent RAND licensing situation. In such a hypothetical negotiation the parties would look at the importance of SEPs to the standard as well as the importance of SEPs and standards to the product. Furthermore Judge Robart laid out the “economic guideposts” constraining the negotiations in the context of RAND cases.
On 1 May 2013 Motorola filed a letter motion asking the court to limit theories on which Microsoft may base its claims for damages. According to Motorola Microsoft has significantly expanded its claims by violating the Federal Rules of Civil Procedure and prejudicing Motorola in its preparation of their own case. [Nicole Daniel]
U.S. FTC files amicus curiae brief supporting generics’ claim in patent dispute
On 11 March 2013 the U.S. Federal Trade Commission (“FTC”) filed an amicus curiae brief in the case Actelion Pharms Ltd. V. Apotex Inc. which is being heard in the U.S. District Court for New Jersey supporting the defendants’ claim of the plaintiff’s anticompetitive use of Risk Evaluation and Mitigation Strategies (“REMS”).
This case is about the generic access to branded products for making Hatch-Waxman patent challenges. Actelion sued Apotex, Actavis and Roxane (“Apotex”) for a declaratory judgment to affirm the legality of its practice of not supplying generics that prevented Apotex from preparing an Abbreviated New Drug Application (“ANDA”) to the U.S. Food and Drug Administration (“FDA”) (an application for approving bioequivalent generic drugs under the Hatch-Waxman Act). Actelion claimed that the drugs in question were under a REMS program restricting access to the drug and therefore it had the near absolute right to refuse to sell even without the FDA mandate. The defendants countered by claiming that the plaintiff violated Sections 1 and 2 of the Sherman Act.
REMS programs allow certain drugs with known risks to be approved by the FDA, if their use is closely monitored in patients. One of the drugs in question (Tracleer) is under a REMS program including an ETASU (Elements to Assure Safe Use) provision which imposes drug handling restrictions on distributors and pharmacies. For the other drug in question, Zavesca, Actelion voluntarily implemented distribution restrictions, as it has a potential side effect concerning birth defects.
The FTC filed its amicus curiae brief when Actelion asked the courts to dismiss the counterclaims. The FTC makes three important points:
1. The Hatch-Waxman Act’s primary goal was to balance innovation and competition in that industry sector. Access to the branded product is necessary for generic firms since they need to reverse engineer and perform studies on the drug in question to demonstrate to the FDA the bioequivalence of the generic drug to the branded product. This mechanism provides for accelerated approval of generic drugs and has been successful in generating large savings for consumers and facilitating generic competition.
2. Refusing to sell a product to rivals may be regarded as exclusionary conduct which on the one hand does not serve the goal of balancing innovation and competition. On the other hand Section 2 of the Sherman Act cases may apply. More importantly, the FTC does not say whether there has actually been a violation of Section 2 of the Sherman Act. However, both the FTC and the Generic Pharmaceutical Association (“GPhA”), which also filed an amicus curiae brief, point out that according to the 2007 FDA Amendments Act a drug patent holder may not block or delay the approval of an ANDA by using safety assurances.
3. Distribution arrangement should not be immune from the application of antitrust rules because of REMS restrictions.
It will be interesting to see how the courts resolve this issue as the Supreme Court is reluctant to expand the application of antitrust rules where the conduct in question is already covered by sector-specific regulation.
The FTC will probably continue to assert the views it expressed in this amicus curiae brief in other similar cases. [Nicole Daniel]
U.S. District Court for the Southern District of New York rejects Meltwater’s fair use defense
On 21 March 2013, the U.S. Southern District of New York held that the publication by Meltwater of excerpts from Associated Press articles was copyright infringement for which the fair use defense was not available.
Meltwater is an online media monitoring service that offers its clients reports about news articles published on different topics, based on keywords selected by the client. To that end, Meltwater uses different algorithms to scrape content from different sources on the Internet. After noticing that Meltwater had distributed to its client various excerpts – most notably the headlines and the lead paragraphs – of several of its articles without asking for any licenses or authorization to use this content, AP sued Meltwater for copyright infringement. Meltwater primarily claimed that the publication of these excepts was transformative and therefore covered by the fair use defense since, akin to a search engine, it only provided a limited amount of copyrighted material in response to client’s queries.
The Court rejected this defense based on the four statutory fair use factors. In particular, the Court rejected the fair use defense based on three of the four fair use factors:
(i) Purpose and character of the use:
The Court observed that the use made by Meltwater of AP’s article was commercial and competitive, rather than transformative. In particular, the Court quoted limited evidence which showed that customers clicked through to the original AP articles only 0.08% of the time!
(ii) Amount of work used in relation to the work as a whole:
The Court stressed that Meltwater had copied a significant portion of AP’s articles (between 5 and 60%) and most importantly the title and lead paragraph of each article, allowing users to abstain from clicking on the original article.
(iii) With regard to the fourth factor, i.e. effect of the use on the potential market, such a use had a significant effect on AP’s potential market for his work since Meltwater’s excerpts effectively replaced the AP articles, depriving AP of substantial licensing revenues.
The Court concluded that Meltwater’s use of AP’s articles was not covered by fair use, emphasizing that Meltwater’s business model relied on the systematic copying of protected expression and that the sale of collections of these copies as reports competed directly with the copyright owner. [Béatrice Martinet Farano]
U.S. Appeals Court for the 9th Circuit redefines the notion of control under the DMCA (UMG v. Veoh)
On 14 March 2013, the U.S. Court of Appeals for the 9th circuit withdrew its decision in UMG Recordings (see Newsletter 1/2012 p.4-5) and replaced it with a new superseding opinion which included some useful guidelines regarding the application of the DMCA safe-harbor to third party content websites.
By way of background, Veoh operated a video-sharing platform where users could upload and share videos with other users. Although Veoh had implemented various procedures to prevent infringement, UMG noticed that many of their copyrighted works had been uploaded on this website without their authorization. UMG therefore filed suit against Veoh for direct and secondary copyright infringement but the District Court granted summary judgment to Veoh after determining that although Veoh may have had generalized awareness of infringement on its service, it was not aware of any specific infringing content which it would have failed to take down. The District Court therefore found that Veoh was protected by the DMCA hosting safe harbor defense.
The Ninth Circuit, in its original decision, affirmed this judgment, not only on the ground that Veoh arguably lacked “knowledge” but also “control” over specific infringing activity. The Ninth Circuit held that Veoh’s lack of control over infringing activity derived from Veoh’s lack of knowledge of specific infringing content. After the Second Circuit held last year in Viacom v. YouTube (see Newsletter 1/2013 p. 5) that this definition of the control requirement was incorrect, the 9th Circuit called for additional briefing and issued this revised decision.
In its new opinion, the 9th Circuit abandoned its earlier holding that item-specific knowledge was required in order to show the required “control over infringing activity” which disqualified a service provider from DMCA protection. Rather, the 9th Circuit adopts the Second Circuit’s holding in Viacom v. YouTube that the requisite control, for DMCA purpose, can be shown by a service provider’s “substantial influence on the activities of users, irrespective of whether it also has knowledge of such activity”. For the 9th Circuit, such a situation can notably occur where the service provider exercises “high levels of control over activities by users” or where he adopts a “purposeful conduct” as in Grokster.
Although the 9th Circuit essentially affirmed its earlier decision in UMG Recording v. Shelter, this new opinion introduces further guidelines and brings much welcomed consistency to the conditions of the DMCA safe harbor defenses. [Béatrice Martinet Farano]
German Court makes reference for a preliminary ruling to the CJEU on standard-essential patents
On 21 March 2013, the Landgericht Düsseldorf (“Düsseldorf Regional Court”) made a reference (the order is only available in German) for a preliminary ruling to the Court of Justice of the European Union (“CJEU”) in the context of the dispute between Huawei and ZTE on 4G/Long-Term-Evolution (“LTE”) technologies, notably in relation to the conditions of the compulsory license defense in standard-essential patents (“SEPs”) cases, and conversely, on the availability of remedies to the SEPs’ holder who has pledged to license them on Fair, Reasonable and Non-Discriminatory (“FRAND”) terms.
The Düsseldorf Regional Court considers that a preliminary ruling is needed in the circumstances because there are conflicting legal opinions on this issue, notably the German Supreme Court decision in the Orange-Book-Standard case (see Newsletter 3/2009, p. 4 for more background) and the statement of objections issued by the European Commission against Samsung on 21 December 2012 (see Newsletter 6/2012, p. 11 for more background). While 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 certain requirements are met (in very broad terms, if a user pays or deposits a reasonable license fee), on the other hand the Commission’s preliminary view in the Samsung case is that for such a defense to be successful it suffices that the defendant is “willing to negotiate” a license on FRAND terms.
Accordingly, the CJEU has been asked to clarify five questions as to whether a SEPs holder abuses its dominant position by requesting an injunctive relief, even if the infringer is willing to negotiate a license on FRAND terms, or whether the infringer is further required to comply with the contractual obligations that would exist under a FRAND license. [Gabriele Accardo]
CJEU and U.S. Court issue contrasting decisions on the legality of streaming video/remote DVR services
In less than a month, the CJEU and the U.S. Court of Appeal have issued two contrasting decisions with regard to the validity of two streaming video/remote DVR services.
The case pending before the CJEU deals with TVCatchup, a service offering any person who has already subscribed to certain terrestrial TV broadcasts to watch them online at the time of her convenience. Arguing that such retransmission infringed their exclusive right to authorize any “communication to the public” of their work, various UK broadcasters sued TVCatchup for copyright infringement.
Relying on the CJEU precedents in SGAE (case C-306-05) and FAPL (joined case C-403/08 and C-429/09) TVCatchup argued that their service was not a “communication” but a mere “technical mean insuring the reception of terrestrial television broadcast to its catchment area”, thus not requiring any authorization from the copyright holder. TVCatchup further argued that such a retransmission could not be considered a “communication to the public” since the service was limited to a group of users already “licensed” by the copyright holder.
In a decision issued on 7 March 2013, the Court of Justice of the European Union (CJEU) held that the online streaming of free-to-view terrestrial television broadcasts on a different platform (i.e. online) was in fact an unauthorized communication of the plaintiff’s work to the public (defined as an “indeterminate number of potential recipients, regardless of whether they already owned a license to this material”) and therefore infringed the author’s right to control communication of his work.
By contrast, on 1 April 2013, the U.S. Court of Appeal for the Second Circuit affirmed a District Court decision denying a group of broadcasters’ motion for preliminary injunction against a similar streaming video/remote DVR service run by Aereo, rejecting the argument that such a service infringed their public performance rights.
Like TVCatchup, Aereo offers its users access to broadcast television programs over the Internet for either live or for later viewing, after storage on a digital storage system. Differently from TVCatchup however, Aereo re-transmits these broadcasts through mini-antennas, individually assigned to paying subscribers on a dynamic basis.
Here again, the broadcast networks brought an infringement action against Aereo, arguing that the retransmission of their copyrighted content violated their “public performance” rights.
Relying heavily on its precedent in Cablevision, the Second Circuit held that Aereo was basically providing subscribers with three lawful services (i) a standard TV antenna for receiving TV broadcast, (ii) a remote storage DVR for recording and playing back these broadcasts and (iii) a device for accessing these programs on Internet. The Court also observed that Aereo’s targeted single subscriber transmission could not qualify as a public performance and concluded that a license was therefore not needed. The Court concluded that Aereo’s service did not infringe the plaintiffs’ public performance rights with respect to their copyrighted broadcast. The TV broadcasters have appealed the decision. [Béatrice Martinet Farano]
European Commission sends charges to Motorola Mobility on misuse of standard-essential patents
On 6 May 2013 the European Commission stated that it has issued formal objections to Motorola Mobility, alleging that the company’s seeking and enforcing of an injunction against Apple in Germany on the basis of its mobile phone standard-essential patents (“SEPs”) for the GPRS standard amounts to an abuse of a dominant position prohibited by Article 102 of the Treaty on the Functioning of the European Union (“TFEU”).
European Commission closes preliminary investigation into E5
On 7 March 2013 the European Commission announced that it had closed its preliminary investigation into E5, i.e. Europe’s five leading telecom operators (Deutsche Telekom, France Telecom, Telefonica, Vodafone and Telecom Italia), regarding the way standards for future mobile communications are developed.
On 15 March 2012 the Commission confirmed that it had requested information from the E5 and GSMA, the mobile sector association. This was after the Financial Times reported about the periodic meetings between the bosses of these five companies from 2010 onwards.
The Commission investigated whether the standardization process for future mobile communications services was being improperly used to strategically foreclose competitors.
The Commission noted that “the standardization work formerly conducted by the E5 has been transferred to the GSMA and other industry associations” as this allows for more stakeholder participation. This transfer is welcomed by the Commission which describes it as a positive step to reduce the risk of standard setting work affecting competition negatively. Accordingly, the Commission decided to close its preliminary investigation.
However, it has to be noted that GSMA represents the interests of mobile operators worldwide and of more than 100 mobile operators in the European Union. Accordingly, GSMA’s primary objective will be to support its members. In its press release the Commission therefore writes that it will remain watchful of the evolvement of the standardization process in the telecommunications sector. [Nicole Daniel]
UK OFT investigates GSK and generics manufacturers over pay for delay deals
On 19 April 2013 the UK Office of Fair Trading (“OFT”) issued a Statement of Objections to GlaxoSmithKline (“GSK”) and three generics manufacturers (Alpharma Limited, Generics UK Limited and Norton Healthcare Limited) alleging that they concluded anticompetitive agreements over the supply of paroxetine in the UK, notably to delay effective competition in the UK supply of paroxetine, a prominent antidepressant medicine, in breach of both the UK Competition Act 1998 and Article 101 of the Treaty on the Functioning of the European Union (“TFEU”). The OFT also alleges GSK’s conduct amounted to an abuse of a dominant position in the same market in breach of both the UK Competition Act 1998 and Article 102 TFEU.
In particular, according to the OFT, while the generics companies were each attempting to supply a generic paroxetine product in competition to GSK’s branded paroxetine product, Seroxat, GSK challenged the generic companies with allegations that their products would infringe GSK’s patents, and to resolve these disputes, each of the generic companies concluded one or more agreements with GSK. These agreements, so called “pay for delay” agreements, included substantial payments from GSK to the generics manufacturers in return for their commitment to delay their plans to supply paroxetine independently.
OFT’s Ann Pope noted that “The introduction of generic medicines can lead to strong competition on price, which can drive savings for the NHS, to the benefit of patients and, ultimately, taxpayers.” [Gabriele Accardo]