Everything You Ever Wanted to Know About the Current State of Patents and Patent Law

Imagine a "who's who" list of patent scholars, practitioners, in-house counsel, government officials, IP brokers and policy makers - who were all placed in a single room with a microphone for 6 full days to speak individually about their experiences and opinions on various aspects of patent law. A transcript of the speeches/discussions would surely be a valuable asset to anyone looking to learn from the practices and observations of others.

The Federal Trade Commission (FTC), who recently completed a whirlwind tour of public hearings in California and Washington DC has now begun publishing transcripts of these meetings and has made many of them available, along with the presentation material provided with each session. While some of the transcripts are missing from the FTC site, the 271 Blog has done some sleuthing and has located copies elsewhere, with the exception of the May 4-5 hearings.


FTC HEARING ON THE EVOLVING IP MARKETPLACE


DECEMBER 5th (2008) HEARING
Panel 1: Developing Business Models
Panel 2: Recent and Proposed Changes in Remedies Law
Panel 3: Legal Doctrines That Affect the Value and Licensing of Patents

TRANSCRIPT (link)

Panelist Presentations:
• Thomas Cotter, Remedies for Patent Infringement: Theory and Practice
• Peter N. Detkin, To Promote the Progress…of Useful Arts: Investing in Invention
• Q. Todd Dickinson, Federal Trade Commission Workshop: Recent and Proposed Changes in Remedies Law
• Brian Kahin, The Patent Ecosystem in IT: Business Practice and Arbitrage [Written Version]
• Daniel P. McCurdy, Unique Operating Companies Involved in Patent Litigation with NPEs; Patent Litigation Involving NPEs and Operating Companies
• Roderick R. McKelvie, Seagate Plus One: How the District Courts are Implementing Seagate; Seagate Plus One (Article)
• Joseph Scott Miller, Testimony of Professor Joseph Scott Miller, Lewis & Clark Law School - Legal Doctrines That Affect the Value and Licensing of Patents (Panel 3)
• Raymond Millien, The IP Marketplace Players
• John A. Squires, Patent Remedies: Can Quanta Finish What eBay Started? [Written Version]
• Jay Thomas, Patent Damages: Principles and Current Problems
• Duane R. Valz, Yahoo! Inc- FTC Hearing on The Evolving IP Marketplace
• Mallun Yen, Cisco Systems, Inc. FTC Hearing on the Evolving IP Marketplace [Written Version]

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FEBRUARY 11th - 12th HEARING, WASHINGTON DC
February 11 - The Evolution of Remedies (Damages)
Panel 1: Patent Damages
Panel 2: Industry Roundtable discussion


TRANSCRIPT (link)


February 12 - The Evolution of Remedies (Damages)
Panel 1: Changes in Injunction Law
Panel 2: Industry Roundtable discussion

TRANSCRIPT (link)

Panelist Presentations:
• Paul Janicke, Patent Damages
• Aron Levko, 2009 Patent Damages Study - Preliminary Results
• Bryan P. Lord, Hearing on Patent Damages
• Steve Malin, Empirical Analysis Of Permanent Injunction Decisions Following eBay
• Marian Underweiser, Towards an Efficient Market for Innovation
• Donald R. Ware, Introductory Remarks and Presentation

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MARCH 18th - 19th HEARING, WASHINGTON DC

March 18 - Industry Roundtables
Panel 1: Universities and Entrepreneurs
Panel 2: The IT and Electronic Industries
Panel 3: Manufacturing and Diversified Companies
Panel 4: Life Sciences Industries


TRANSCRIPTS: Session 1 (link), Session 2 (link), Session 3 (link), Session 4 (link)


March 19 - The Operation of IP Markets
Panel 1: Economic Perspectives on IP and Technology Markets
Panel 2: Fulfilling the Patent System's Public Notice Function


TRANSCRIPTS: Session 1 (link), Session 2 (link), Session 3 (link)


Panelist Presentations:
• Ashish Arora, Markets for Technology and the Division of Innovative Labor: A View from the Ivory Tower
• James Bessen, Patent Notice and Markets for Technology
• Robert Hunt, The Federal Trade Commission’s Hearing on “The Evolving IP Marketplace”
• Ron D. Katznelson, “The Evolving IP Marketplace” Hearings on The Operation of IP Markets
• F. Scott Kieff, The Importance of Marinating on Patents
• Scott Stern, The Impact of the Patent System on the Market for Technology

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APRIL 17th HEARING, WASHINGTON DC

Panel 1: Roundtable Discussion
Panel 2: Recent Scholarship in Patent Markets

TRANSCRIPTS: Session 1 (link), Session 2 (link), Session 3 (link)

Panelist Presentations
• Iain M. Cockburn, Licensing: a view from the trenches (Selected findings from the LES Foundation Surveys)
• Stuart Graham, Patents and Technology Markets: How is the market operating, and can it be improved?
• James E. Malackowski, FTC Hearings on Developing Business Models and a National IP Economic Infrastructure
• Mark A. Lemley, Ignoring Patents; How To Make a Patent Market
• R. Polk Wagner, Patent Portfolios [Written]; Understanding Patent Quality Mechanisms

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MAY 4th-5th HEARING, BERKELEY, CA
May 4 - IP Marketplaces
Panel 1: The IP Marketplace in the Life Sciences Industries
Panel 2: The IP Marketplace in the IT Industry
Panel 3: Markets for IP and Technology: Academic Perspectives

May 5 - Notice and Remedies
Panel 1: The Notice Function of Patents
Panel 2: Patent Remedies

(Transcripts & Presentations not currently available)

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Anyone looking to get more insight on current patent issues and read first-hand accounts from industry and academic leaders are strongly advised to read through the materials. It's a lot of information - a few hundred pages in transcript material alone - but is well worth the read.

The FTC page for these hearings may be viewed here (link), which contains much of the aforementioned material, with the exception of some of the transcripts listed above.

Thursday Shorts

Federal Circuit Updates Internal Operating Procedures - After providing proposed changes to the public on Internal Operating Procedures (IOPs), the court recently voted to approve the changes. In addition to general changes to update the IOPs, the Federal Circuit also added two new sections in response to suggestions from the public. First, the Federal Circuit added a new paragraph briefly explain how cases are assigned to merits panels. Second, the Federal Circuit added a new paragraph that briefly explains how precedential opinions are circulated before issuance. Download a copy of the procedures here.


Chamber of Commerce Publishes Draft Report on "Fixing" the PTO - classifying the Office as an "agency in crisis", the 41-page draft outlines many of the problems, and provides recommendations on:

- Improving the quality of U.S. patents
- Providing adequate resources to do the job
- Reforming the patent examiner production system
- Improving timeliness of administrative actions
- Strengthening the PTO's relationship with the user community
- Enhancing organizational management
- Appointing a well-qualified under secretary and director
- Permitting applicants to defer patent examination
- Rethinking the current fee schedule
- Enhancing efficiency of the examination process by reforming examiner/applicant incentives.

Download the draft here (courtesy of Patent Hawk)


FTC Hearings on IP Marketplace - earlier studies (2003) by the FTC were cited copiously during last year's patent reform efforts, and now, the agency wants to update its information on IP and patents.

Beginning on December 5, 2008, in Washington, DC, the FTC will examine changes in IP law, patent-related business models, and new learning about the operation of the IP marketplace since the issuance in October 2003 of the Commission report To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy (link).

The Commission seeks the views of the legal, academic, and business communities on the issues to be explored at the hearings. In its Federal Register Notice the agency set out a list of specific questions on which it is particularly seeking comments. The agency will consider any comments received as it prepares for the hearings.

Get more details from the FTC website here.

View the agenda and press release.

The FTC is also making a Webcast available, where a live webcast will be available on the day of the event (bookmark this page and come back on December 5 to link to the webcast).

Danforth: FTC Patent Reform Is Needed

Last month, John Danforth, former general counsel of Rambus and legal adviser published an article in the Legal Times that was highly critical of the FTC's "much ballyhooed but misguided antitrust case against Rambus Inc." that was recently overturned by the DC Circuit (see earlier 271 coverage here).

Last week, the FTC filed a Petition for Rehearing En Banc seeking reversal of the DC Circuit opinion that rejected antitrust sanctions against Rambus for its alleged non-disclosures in a standard setting organization (“SSO”) called ‘JEDEC.’ This move by the FTC set off another response from Danforth who states that the petition "clearly and inherently evidences the need for reform," citing four ways in which the FTC is overstepping its bounds against Rambus in the petition:

(1) The FTC continues to “aggressively” overstate its case,
(2) The FTC takes an aggressive approach to other parts of the record in the case,
(3) The FTC’s en banc petition is merely the latest example of the FTC’s inability to acknowledge that its theory against Rambus did not hold up -- and has been overwhelmed by new developments and more recently discovered facts, and
(4) The FTC has added the potential for yet further delay in its six year old, now-very-stale case.

Notes Danforth:

Litigators litigate. Zealotry is often regarded as a virtue. But when, as with the FTC, the prosecutor and the judge are one and the same, restraint and reassessment should be built into the process. This is even more true when, as in the Rambus matter, the FTC has interests in a case relating to its budget and the scope of its own agency mission. There needs to be accountability and some level of detachment. There cannot be reliance on the donated legal work of self-interested third parties. There need to be occasional checks and balances on cases as they progress through discovery. In the end, there ought to be a policy – or perhaps a new law passed by Congress -- that important FTC antitrust cases be litigated in Federal courts, just as important DOJ antitrust cases already are.

Read Danforth's draft paper here.

Read the FTC's petition here.

See HP, Cisco & Sun Microsystems Motion for Leave and Invitation to file Amicus Curiae Brief In Support of the FTC (link).

See also S.M. Oliva's recently-filed Amicus brief opposing Rehearing En Banc (link). From the brief:

The FTC is not protecting the competitive process, but rather forcing the market to reach particular outcomes, namely the avoidance of patented technologies by SSOs or, alternatively, licensing of patents on terms that the Commission deems “reasonable.” The “but for” analysis that the Commission relies upon for its remedy is nothing more than an attempt to re-write market outcomes to satisfy the personal preferences of the commissioners. This far exceeds the constitutionally permissible scope of Commission conduct.

FTC Looking to Break Down "Patent Walls" For Standardized Technologies

Federal Trade Commission (FTC) Commissioner J. Thomas Rosch presented a speech before the Newport Summit on Antitrust and Economics on May 31, where he discussed the effect of "patent trolls", standardized technologies, and potentially anticompetitive "patent walls", where

[A] firm independently develops and manufactures a product that competes in what constitutes a relevant market for antitrust purposes, and then files multiple patent applications covering certain features of the product and the patents issue. After competing products are brought to market, the firm acquires additional patents from third parties. It then uses those patents, and its prior existing patents, to threaten its present and potential competitors with litigation and “build a wall” around the market, eliminating competition and preventing entry.

According to Rosch, the FTC has been looking more closely at two "viable enforcement tools"to curb such activities: Section 5 of the FTC Act, and Section 7 of the Clayton act and Sherman Act.

Under the Supreme Court's ruling in FTC v. Sperry & Hutchinson Co., section 5 of the FTC Act was given an expansive reading to empower the Commission to “define and proscribe an unfair competitive practice, even though the practice does not infringe either the letter or spirit or the antitrust laws” and to “proscribe practices as unfair . . . in their effect on competition.” While previous section 5 FTC actions dealt more with "invitation to collude" situations and facilitating practices, the FTC clearly has now started focusing more on patent practices, particularly in the context of standardized technologies.

In January of 2008, the FTC filed a complaint against company Negotiated Data Solutions ("N-Data") for allegedly charging "excess" licensing royalties for patents related to Ethernet technology in violation of Section 5 of the FTC Act. N-Data obtained the Ethernet-related patents from National Semiconductor Corp, who previously agreed to let the IEEE incorporate them into its Ethernet Standard in exchange for one-time royalties of $1,000 per license. After N-Data tried to "renege" on the original agreement, and tried to increase the royalty payment, the FTC decided to take action. According to the complaint:

N-Data reneged on a prior licensing commitment to a standard-setting body and thereby was able to increase the price of an Ethernet technology used by almost every American consumer who owns a computer. Based on the facts developed by staff during the investigation, we find reason to believe that this conduct violated Section 5 of the FTC Act.

(See earlier 271 Blog coverage here). The Commission emphasized that it was the standard setting context that was crucial to its finding of an unfair method of competition, and that a mere departure from a previous licensing commitment is unlikely to constitute an unfair method of competition. However, according to Rosch, "[s]tandard setting displaces the normal give and take of competition, thus any subversion of that process can have extremely detrimental effects on competition."

Regarding "patent wall" situations, Rosch suggested that "Section 7 of the Clayton Act and the Sherman Act are viable law enforcement tools in this scenario."

In fact, this is not a new scenario. In United States v. Singer Manufacturing Co., the Supreme Court held that, in the context of a broad monopolistic scheme, the transfer of a patent from a Swiss manufacturer to its U.S. licensee to facilitate bringing infringement actions against Japanese competitors violated Section 1. Similarly, in Kobe, Inc. v. Dempsey Pump Co., the Tenth Circuit found the acquisition, nonuse and enforcement of "every important patent" in the field with a purpose to exclude competition, together with other anticompetitive acts, constituted a violation of Section 2. And in Xerox Corp., the Commission entered into a consent decree with Xerox settling a Commission challenge to Xerox's acquisition of the Battelle patents on plain paper copiers allegedly with the purpose and effect of monopolizing the plain paper copier market.

While acknowledging that such actions aren't "bullet-proof" and that additional policy concerns exist, Rosch suggested that the FTC would consider filing such actions after a “careful, intense factual investigation" reveals that "anticompetitive combinations of innovation efforts” are afoot.


- Read Rosch's speech in its entirety here.

- See Rosch's speech from April 2007 on Pharmaceutical Antitrust issues here.

- See FTC study "To Promote Innovation: The Proper Balance of
Competition and Intellectual Property Law and Policy" (Oct. 2003) (link)

Appeals Court Throws Out FTC Ruling Against Rambus

Earlier, the Federal Trade Commission determined that Rambus, while participating in a standard-setting process on DRAM memory, deceptively failed to disclose to the standard setting organization (JEDEC) the patent interests it held in four technologies that were standardized.

On appeal, Rambus argued that the Commission erred in finding that it violated any JEDEC patent disclosure rules and thus that it breached any antitrust duty to provide information to its rivals. Second, it asserted that even if its nondisclosure contravened JEDEC’s policies, the Commission found the consequences of such nondisclosure only in the alternative: that it prevented JEDEC either from adopting a non-proprietary standard, or from extracting a RAND commitment from Rambus when standardizing its technology. As the latter would not involve an antitrust violation, there would be insufficient basis for liability.

The Appeals Court agreed with Rambus, noting that they had "serious concerns about the breadth the Commission ascribed to JEDEC’s disclosure policies and their relation to what Rambus did or did not disclose." Noted the court:

Here, the Commission expressly left open the likelihood that JEDEC would have standardized Rambus’s technologies even if Rambus had disclosed its intellectual property. Under this hypothesis, JEDEC lost only an opportunity to secure a RAND commitment from Rambus. But loss of such a commitment is not a harm to competition from alternative technologies in the relevant markets. . . . Indeed, had JEDEC limited Rambus to reasonable royalties and required it to provide licenses on a nondiscriminatory basis, we would expect less competition from alternative technologies, not more; high prices and constrained output tend to attract competitors, not to repel them.

The court pinged the FTC for stretching a very thin evidentiary record to establish anticompetitive behavior. The parties stipulated earlier that, as of Rambus’s last JEDEC meeting, it held no patents that were essential to the manufacture or use of devices complying with any JEDEC standard, and that when JEDEC issued the SDRAM standard Rambus had no pending patent claims that would necessarily have been infringed by a device compliant with that standard.

As such, the only apparent grounds for supporting the FTC's opinion was that Rambus failed to fully disclose pending applications, as well as disclose progress on unfiled amendments at the PTO. However, the Appeals court found that the JEDEC policies did not explicitly address such situations, and, after looking at the trial record, concluded that "[w]e don’t see how a few strands of trial testimony would persuade the Commission to read this language more broadly."

Also, the Court had some words to share on the JEDEC patent policy:

As the Federal Circuit has said, JEDEC’s patent disclosure policies suffered from “a staggering lack of defining details.” . . . Even assuming that any evidence of unwritten disclosure expectations would survive a possible narrowing effect based upon the written directive of Manual 21-I, the vagueness of any such expectations would nonetheless remain an obstacle. One would expect that disclosure expectations ostensibly requiring competitors to share information that they would otherwise vigorously protect as trade secrets would provide “clear guidance” and “define clearly what, when, how, and to whom the members must disclose.”. . . This need for clarity seems especially acute where disclosure of those trade secrets itself implicates antitrust concerns; JEDEC involved, after all, collaboration by competitors. . . . In any event, the more vague and muddled a particular expectation of disclosure, the more difficult it should be for the Commission to ascribe competitive harm to its breach.

The D.C. Circuit's decision does not end the Rambus litigation, but merely returns the case to the FTC for possible retrial consistent with the court's opinion.

Download the opinion here (link)

SIDE NOTES: From CNNMoney.com: "Michael Cohen, an analyst at Pacific American Securities, has estimated that Rambus could realize as much as $11.7 billion in total royalties from all makers of DRAMs, assuming the company was able to clear all of its legal hurdles."

Rambus currently has patent-infringement cases against many DRAM makers, including Samsung Electronics Co., Micron Technology Inc., Hynix Semiconductor Inc., and Nanya Technology Corp.

FTC Asserts Antitrust Authority on Patent Licenses in Standardized Technologies

In the Matter of Negotiated Data Solutions LLC (File No. 0510094)

In an unusual move, the Federal Trade Commission decided in a 3-2 ruling that the FTC had the authority to file a complaint against company Negotiated Data Solutions ("N-Data") for allegedly charging "excess" licensing royalties for patents related to Ethernet technology in violation of Section 5 of the FTC Act. N-Data obtained the Ethernet-related patents from National Semiconductor Corp, who previously agreed to let the IEEE incorporate them into its Ethernet Standard in exchange for one-time royalties of $1,000 per license. Now, N-Data is trying to increase the royalty payment. According to the FTC's complaint:

The Complaint in this matter alleges that N-Data reneged on a prior licensing commitment to a standard-setting body and thereby was able to increase the price of an Ethernet technology used by almost every American consumer who owns a computer. Based on the facts developed by staff during the investigation, we find reason to believe that this conduct violated Section 5 of the FTC Act.

The impact of Respondent’s alleged actions, if not stopped, could be enormously harmful to standard-setting. Standard-setting organization participants have long worried about the impact of firms failing to disclose their intellectual property until after industry lock-in. Many standard-setting organizations have begun to develop policies to deal with that problem. But if N-Data’s conduct became the accepted way of doing business, even the most diligent standard-setting organizations would not be able to rely on the good faith assurances of respected companies. The possibility exists that those companies would exit the business, and that their patent portfolios would make their way to others who are less interested in honoring commitments than in exploiting industry lock-in. Congress created the Commission precisely to
challenge just this sort of conduct.

The Commission accepted a proposed consent agreement premised on two separate violations: (1) N-Data’s alleged conduct was an unfair method of competition, and (2) their conduct was also an unfair act or practice. Notably, the FTC did not pursue the action under traditional Sherman Act principles, but under "broader authorities" vested in the Commission. Noted the Commission:

We recognize that some may criticize the Commission for broadly (but appropriately) applying our unfairness authority to stop the conduct alleged in this Complaint. But the cost of ignoring this particularly pernicious problem is too high. Using our statutory authority to its fullest extent is not only consistent with the Commission’s obligations, but also essential to preserving a free and dynamic marketplace.

Read the Statement of the Commission here (link)

Read dissenting statements of Chairman Majoras (link) and Kovacic (link)