U.S. Supreme Court
On April 16, 2018, the Justices seemed split at the oral argument held in WesternGeco LLC v. ION Geophysical Corp., No. 16-1011, dealing with the availability of damages for infringing foreign combinations. The patent laws generally do not apply outside the U.S., but § 271 contains a narrow exception: A company does not escape infringement liability by making components of a covered product in the U.S., and then shipping them overseas for assembly. The question in this case is—can the damages amount reflect the foreign sales of the assembled product? The Justices seemed to disagree. Justices Gorsuch and Breyer, for example, pointed out potential problems with awarding damages on foreign combinations—namely a company’s sales could be subjected to patent damages calculations multiple different times in multiple countries. On the other hand, Justices Alito and Kennedy were reluctant to limit damages to U.S. sales when the statute explicitly creates liability for foreign combinations. That result would create liability but offer no remedy. Close observers of the Supreme Court expect that the Justices will take a relatively long time to issue their decision.
U.S. Court of Appeals for the Federal Circuit
In Oracle Am., Inc. v. Google LLC, 886 F.3d 1179 (Fed. Cir. 2018), the Federal Circuit held that Google’s use of Oracle code to create the Android platform did not, as a matter of law, fall under the “fair use” exception to copyright infringement. Notably, the court overturned a jury verdict that had been based on extensive trial testimony presented by both sides. Oracle’s predecessor, Sun, created the Java platform in the 1990s. The language was free for software developers to use—and Oracle commercialized the Java platform by licensing it to companies who wanted to embed Java programs on an electronic device or use Java in a competing platform. In 2007, Google decided to use Java code to make the Android platform—and make it available to the public on a free and open-source basis. Soon, nearly all of Oracle’s Java business flocked to Android. The jury found that Google’s use of Java code was fair use. But the Federal Circuit reversed. Perhaps most importantly, Google’s use of the Java code was, without question, commercial use because Google has reaped billions of dollars from Android. The clear commercial nature of Google’s behavior cut against a finding of fair use. In addition, the Federal Circuit found that Google’s use of the stolen code was not “transformative” because it operated in the same way in both Java and Android.
In Exergen Corp. v. Kaz USA, Inc., No. 2016-2315, 2018 WL 1193529 (Fed. Cir. Mar. 8, 2018) (non-precedential), the Federal Circuit affirmed the validity of a claim covering a “body temperature detector” that had been challenged under § 101 as an ineligible natural law. The court agreed with the District of Massachusetts that the invention—although drawn to a natural law under Mayo/Alice step 1—was not well-understood, routine, or conventional. As an initial matter, the clear-and-convincing evidence standard of review insulated the district court’s factual finding that the claim was not well-understood, routine, or conventional under Mayo/Alice step 2. But moreover, the record showed that the invention took years and millions of dollars in research funds to come up with and had never before been achieved. Judge Hughes dissented: “In my view, the claimed inventions merely calculate a law of nature using conventional, commercially available technology.”
In In re Power Integrations, Inc., 884 F.3d 1370 (Fed. Cir. 2018), the Federal Circuit reversed the PTAB’s unreasonably broad claim construction, which led to its conclusion that the claim covering a “digital frequency jittering circuit” was invalid for anticipation. The PTAB had relied exclusively on the Webster’s Dictionary—and ignored the patent specification—to interpret “coupled” broadly as “joined.” But the specification imposed additional limitations on the meaning of “coupled.” For example, the invention sought to minimize circuit size, and thus excluded bulky coupling solutions such as the one disclosed in the asserted prior art.
In DSS Tech. Mgmt., Inc. v. Apple Inc., 885 F.3d 1367 (Fed. Cir. 2018), the Federal Circuit reversed the PTAB’s obviousness finding for having an inadequately explained basis—namely sheer “common sense.” The court’s precedent, Arendi S.A.R.L. v. Apple Inc., 832 F.3d 1355 (Fed. Cir. 2016), permits the PTAB to rely on common sense in certain narrow circumstances, such as where the technology is “unusually simple” and the alleged common sense fills only a small technological gap. But the requirements of Arendi were not met here. The technology at issue was not unusually simple, yet PTAB’s analysis spanned just one conclusory paragraph stating that the claimed technological advance was within the “ordinary creativity” (i.e., “common sense”) of a person of ordinary skill in the art.
In Google LLC v. Network-1 Techs., Inc., No. 2016-2509, 2018 WL 1468370 (Fed. Cir. Mar. 26, 2018) (non-precedential), the Federal Circuit vacated the PTAB’s claim construction on the grounds that it did not comport with the “broadest reasonable interpretation” standard. Specifically, the court agreed with Google that a broader—but still reasonable—construction was available to the PTAB, but the PTAB improperly opted for a narrower claim construction which kept the claims-at-issue alive.
In Arista Networks, Inc. v. Cisco Sys., Inc., No. 2017-1313, 2018 WL 1517195 (Fed. Cir. Mar. 28, 2018) (non-precedential), the Federal Circuit vacated the PTAB’s obviousness determination for a lack of adequate explanation:
The Board implicitly must have so found in determining that Kunzinger shows a forbidden “examination.” But the Board’s decision is lacking in explanation on this key element of its analysis. The decision “does not address, or at least does not clearly address,” the difference between the examination of tunneled packets in Kunzinger and the type of examination that is permissible in the tunneling process of the ’211 patent.
Id. at *3.
U.S. District Courts
In Huawei Techs. Co., Ltd. v. Samsung Elecs. Co., Ltd., No. 3:16-CV-02787-WHO, 2018 WL 1784065 (N.D. Cal. Apr. 13, 2018) (Orrick, J.), the court granted Samsung’s motion for an antisuit injunction, barring Huawei from enforcing its recently-obtained Chinese injunctions in the United States. According to the order, the injunction against Huawei will remain in force until Judge Orrick can reach his own conclusion on the merits of the case—namely whether injunctive relief is in fact appropriate. Trial is currently set in December. The court sidestepped the Chinese injunctions in part on the grounds that a breach of contract claim was asserted in the U.S. case, but not the Shenzhen case. The court also expressly declined to apply the usual four-factor test for preliminary injunctions, holding that a unique test articulated in E. & J. Gallo Winery v. Andina Licores S.A., 446 F.3d 984 (9th Cir. 2006), had completely supplanted the four-part test. A significant issue is the effect of the court’s decision on comity, i.e., the respect a country usually pays another country’s decisions. Judge Orrick found that his injunction had a “tolerable” effect on comity. Some commentators have looked skeptically on this conclusion, given the territoriality of the respective cases—and have also made the observation (ironic to some) that here China has been more aggressive than the U.S. in enforcing intellectual property. If Judge Orrick reaches a final decision in the merits, it will then be possible to directly compare the two countries’ approaches.
China Reorganizes IP Agencies to Improve Efficiency
China has announced plans to reorganize its IP agencies. China’s goal is reportedly to eliminate duplicative agencies and increase efficiency within its IP system, thereby enhancing IP protections. The number of government bodies administering IP law will decline by about 15. The administration of patents and trademarks would be combined to avoid “redundant” enforcement authority. A new, national State Market Supervision Administration (SMSA) will also emerge. To be determined is how SMSA and the Ministry of Commerce (MofCOM) will manage international IP, which appears to be within the purview of both bodies.
Read more at http://mp.weixin.qq.com/s/vh1sNuwovns_pF1f_nKPEw.
Chinese Academy of Sciences Holds Patent Auction
In March the Chinese Academy of Sciences (CAS) held its first patent auction. 932 patents were for sale—only a small fraction of CAS’s 46,000 patents—and the minimum starting bid was reportedly $15,700.
Read more at http://www.xinhuanet.com/english/2018-03/09/c_137027932.htm.
China Surpasses Japan as No. 2 PCT Filer
In 2017, China rose to the world’s number two PCT filer, surpassing Japan. U.S.-based applicants filed 56,624 applications, Chinese entities filed 48,882 applications, and Japanese entities filed 48,208. The largest category of Chinese PCT applications was computer technology (8.6%) followed by digital communication (8.2%), electrical machinery (6.8%), and medical technology (6.7%).
Read more at http://www.wipo.int/pressroom/en/articles/2018/article_0002.html.
The U.S. Issues Report Concerning China Under Section 301 of the Trade Act of 1974
On March 22, 2018, the U.S. Trade Representative issued a report describing several unfair commercial practices carried out by China with respect to U.S. companies. For example, the USTR found that China has enforced unreasonably burdensome technology transfer requirements on U.S. companies seeking to do business in China. In other words, to create “national champion” companies, China imposes restrictions on foreign ownership of companies and effectively requires that any intellectual property assets be transferred to China. In addition, the report described trade secret misappropriation in China as a rampant problem for U.S. companies. The Trump Administration announce three ways for the U.S. to respond to China’s alleged unfair conduct: 1) impose tariffs, 2) request an investigation by the World Trade Organization (WTO), and 3) restrict investment by the Chinese in industries and technologies that are important to the U.S. In addition, the Wall Street Journal cited an unnamed source for the report that the U.S. has asked China to take particular actions including buying more U.S.-made semiconductors and giving U.S. firms more access to the Chinese financial sector. China and the U.S. have apparently quietly begun negotiations.
Read more at https://chinaipr2.files.wordpress.com/2018/03/section-301-final.pdf; https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/march/president-trump-announces-strong#; https://www.wsj.com/articles/u-s-china-quietly-seek-trade-solutions-after-days-of-loud-threats-1522018524,\.
China Heightens Scrutiny of Tech Transfers to Foreign Entities
In a move that some believe was made in retaliation to the USTR’s Section 301 report (see above), China has issued new regulations that impose stricter scrutiny of technology transfers to foreign companies. The move reportedly is not intended to upset existing international relationship, but instead will create a better business environment in China. Technology transfers to foreign companies will be scrutinized for any impact of China’s national security as well as its “key technology innovation capability in key areas.”
Read more at http://www.xinhuanet.com/english/2018-04/01/c_137079620.htm.
China Set to Begin Awarding Punitive Damages
According to Shen Changyu, head of China’s State Intellectual Property Office (SIPO), China will soon begin enforcing intellectual property rights with punitive damages as another measure to strengthen IP rights in China.
Read more at http://www.xinhuanet.com/english/2018-04/12/c_137106496.htm.
China to Change Policies for the Pharmaceutical Industry
On April 12, 2018, China held an executive meeting of the State Council to adopt new policies for the pharmaceutical industry. The new policies are exempting cancer drugs from customs duty, reducing drug prices, streamlining of the process for approval of imported innovative medicines, and enhancing intellectual property protection and quality monitoring.
Read more at http://www.gov.cn/xinwen/2018-04/13/content_5282188.htm.