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Issue #24-1 | May 9, 2013

District Court judge offers specific amounts that fit the criteria for ‘fair, reasonable, and nondiscriminatory’

Standard-setting organizations establish rules governing the ownership of IP rights that apply to the standards they adopt. Companies that help establish the criteria gain an advantage in having their technology included in standards; therefore, one rule commonly adopted is that any patent that applies to a standard can only be licensed on “fair, reasonable, and nondiscriminatory” terms (FRAND). A problem arises on exactly what is FRAND.

Now, following the suggestion of Motorola’s own expert that in the event of a disagreement the court has to step in and say what is fair and reasonable, U.S. District Court Judge James Robart has ventured an amount to be considered FRAND, deciding in Motorola v. Microsoft that Microsoft should pay one-half cent per unit for video-decoding technology and 3½ cents per unit for wireless technology, far less than the 2.25% of retail price demanded by Motorola Mobility. An Xbox retails for about $199, so Motorola was seeking $4.50 on every unit sold.

Microsoft had argued that, when a patent holder makes a commitment to FRAND, it gives up the right to employ the conventional basis for license negotiations. Motorola experts had offered sample licenses that resulted from normal negotiations. Microsoft countered with licenses deemed comparable in a FRAND setting.

What happens when an expert moves from testifying to consulting in a case?

It’s fairly common for a valuation analyst to sign on to a legal case in a “consulting” capacity. Not only might this reduce costs during the preliminary phases of litigation, but it also shields communications between the expert and attorney—and any preliminary reports or work papers—from disclosure and discovery, absent “exceptional circumstances” (the standard under the federal rules). Should the case heat up and head for trial, the attorney can “promote” the expert to a testifying expert, subjecting his or her opinion to the applicable rules, including the recent amendments in federal court and Tax Court that now protect most draft reports and communications from discovery.

But what about the opposite situation? Under what circumstances may an attorney change the use of an expert from testifying to consulting? For instance, an attorney may seek to de-designate its expert to prevent the other side from discovering an opinion or report that is unfavorable to the client’s position. According to a new article from the Gibbons law firm, at least one court has held that, once an expert is designated as testifying, she or he “can be deposed and possibly called at trial,” particularly when that expert has already issued a report. By contrast, another cited case followed the majority approach that requires “exceptional circumstances” to depose a de-designated expert.

Damage award cannot be based on extraterritorial sales

As reported by Joseph Speyer, McDermott Will & Emery LLP, in the National Law Review, the U.S. Court of Appeals for the Federal Circuit has held that a patentee’s damages award cannot be based on extraterritorial sales (Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., Case Nos. 11-1218, -1238 (Fed. Cir., March 26, 2013) (Reyna, J.)). Power Integrations had argued such damages were appropriate because it was foreseeable that Fairchild’s domestic infringement would cause Power Integrations to lose sales in foreign markets. The Federal Circuit disagreed, finding that “entirely extraterritorial production, use, or sale of an invention … is an independent, intervening act that, under almost any circumstances, cuts off the chain of causation initiated by an act of domestic infringement.”

A recent federal ruling distinguishes between digital and physical media when it comes to the first sale doctrine

James Kang writes in IP Law Alert that in Capitol Records, LLC v. ReDiGi Inc., No. 12 Civ. 95 (S.D.N.Y. March 30, 2012), Judge Richard Sullivan declared that a file sent over the Internet is not a simple transfer of the same “material object”; rather, it is a reproduction of the file, so the first sale doctrine does not apply. The first sale doctrine provides that once sold a copy of a copyrighted work can be resold without the authorization of the copyright owner. 

It follows that the process of uploading and downloading of digital media files to be sold in ReDigi’s marketplace is defined at once as unauthorized reproductions and distribution of those reproductions. Accordingly, Judge Sullivan “ruled that ReDigi violated Capitol’s digital media reproduction and distribution rights.”

ReDigi’s marketplace for “used” digital music files is similar to what Amazon is planning with its patent for an “electronic marketplace.” Both Amazon and ReDiGi software make sure copies of files uploaded to the marketplace are not retained on the original storage medium, which will probably form the basis of ReDigi’s appeal.

Nokia’s weak earnings continue to show promise in one area: IP licensing

Nokia, the once-mighty mobile phone vendor whose fortunes have fallen with the rise of smartphones, owns over 10,000 patents, many in the critical LTE wireless area, and it has over 40 licensing deals already in place. CFO Timo Ihamuotila estimates this fiscal year will bring in over $650 million in IP licensing revenue, and CEO Stephen Elop could be tipping his hand in terms of who will be Nokia’s next target. Apple and BlackBerry are already licensees, other large wireless vendors are currently in litigation, and Elop’s reference to watching “changing market shares” indicates he is likely looking closely at the Android players.

Three ongoing European studies that seek to inform public policy on commercialization of innovation are wrestling with IP valuation

Within the European Commission, there is ongoing government debate about the role that IP plays and the different approaches used to place a value on that IP.

As reported in IP FinanceJackie Maguire of Coller IP wrote, “There are now three parallel studies ongoing that are seeking to inform policy surrounding these issues: one funded by Scottish Enterprise, one commissioned by the UKIPO, and another funded by the European Commission. Each seeks to understand how IP is valued and could be used to secure the investment often required in the early stages of growth.”

Maguire and others have been appointed as IP valuation experts for the European Commission. “The work of this Expert Group will help implement the Innovation Union by looking at the very specific issue of the valuation of IP, the various purposes for which it is required, and how new tools and mechanisms might open up the trading of IP assets.

“IP valuation mechanisms in the context of litigation, accounting and financial transactions are being currently researched and best practice examples are being compiled to show what can be achieved at a national and European level. This includes how IP is valued with respect to awarding damages and how financial institutions are lending against IP assets. The group will report at the end of the year and aims to recommend measures which will be implemented at a European level to unlock IP value.”

WIPO’s PATENTSCOPE now exceeds 29 million fully searchable patent documents

The addition of over 10 million documents from the national patent collection of the United States Patent and Trademark Office (USPTO), dating from 1790, has brought WIPO’s PATENTSCOPE to over 29 million searchable patent documents, including 2,220,787 published international patent applications filed under the Patent Cooperation Treaty (PCT).

 

 


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