2017 Brought Significant Changes to U.S. Patent System.
2017 patent litigation statistics are in, and they show several important trends and insights about the current landscape.
1. PTAB petitions remain historically high. but are on a downturn.
2. The rate of institution is slowly declining—but still remains above 50%.
3. The U.S. litigation landscape continues to change following the AIA and, more recently, the Supreme Court’s TC Heartland decision narrowing patent venue in favor of defendants. In particular, district court cases have dropped, while ITC and PTAB cases have risen.
4. The Federal Circuit maintains a high affirmance rate (75%) of PTAB decisions.
5. Following TC Heartland, patent owners have changed where they file patent infringement suits:
U.S. Legislation in 2018 is Not Certain.
Currently three patent-related bills are pending in Congress (see below). While the STRONGER Patents Act has the potential to reduce the deleterious effects of the PTAB on the U.S. patent system, its likelihood of enactment is unclear.
1. S.927, Patents for Humanity Program Improvement Act. Sponsored by Senator Patrick Leahy (D-VT). Introduced on Apr. 25, 2017.
This bill allows the holder or successor of an acceleration certificate issued pursuant to the Patents for Humanity Program (a pilot awards program established by the U.S. Patent and Trademark Office [USPTO] entitling awardees to accelerate certain USPTO proceedings for patented technologies addressing humanitarian needs among an impoverished population or for further research on humanitarian technologies) to transfer, including by sale, the entitlement to such certificate to another person.
2. S.1948, A bill to abrogate the sovereign immunity of Indian tribes as a defense in inter partes review of patents. Sponsored by Senator Claire McCaskill (D-MO). Introduced on Oct. 5, 2017.
3. S.1390, STRONGER Patents Act of 2017. Sponsored by Senator Chris Coons (D-DE). Introduced on June 21, 2017. This act would:
- Narrow claim construction in PTAB proceedings;
- Re-instate the presumption of validity in PTAB proceedings;
- Place a “clear and convincing” burden of proof on petitioners in PTAB proceedings;
- Apply the declaratory judgment jurisdiction standard to restrict standing for PTAB petitioners;
- Allow patent owners to appeal institution decisions;
- Prohibit the PTAB from granting successive proceedings on the same patent claims;
- Restrict the availability of PTAB proceedings aftera federal court determines a patent is valid. In that case, (1) the PTAB thereafter may not institute proceedings on the relevant claims; (2) the PTAB must stay proceedings pending appeal; and (3) if the patent is finally determined to be valid, then the PTAB must terminate proceedings.
The U.S. Supreme Court Could Make Patent Damages Available for Infringing Foreign Combinations under § 271(f).
On Jan. 12, 2018, the Supreme Court agreed to hear the case, WesternGeco LLC v. ION Geophysical Corp., Case No. 16-1011. WesternGeco has the potential to enhance U.S. patent rights by making it possible to recover lost profits arising from infringing foreign combinations of exported invention components under § 271(f).
Under 35 U.S.C. §271(f), it is an act of infringement to supply components of a patented invention from the United States with the intention that those components be combined in a foreign country. And under 35 U.S.C. § 284, patent owners who prove infringement are entitled to “damages adequate to compensate for the infringement.” But in this case, a divided panel of the Federal Circuit held that patentee WesternGeco (who proved infringement) is not entitled to recover lost profits arising from foreign combinations proven under § 271(f), citing non-extraterritoriality of the U.S. patent system. Therefore the question presented to the Supreme Court is:
Whether . . . lost profits arising from prohibited combinations occurring outside of the United States are categorically unavailable in cases where patent infringement is proven under 35 U.S.C. § 271(f).
There is a strong likelihood that the Supreme Court will reverse the Federal Circuit’s decision, and thus decide that a patentee can recover lost profits for infringing foreign combinations. This case is part of the October 2017 term, and so the opinion will issue by June 2017.
The Supreme Court’s interest in patent law continues to be strong. WesternGeco is the third patent case on the Court’s docket for this term. On November 27, 2017, the Court already heard argument in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, No. 16-712 (constitutionality of post-grant review proceedings at the USPTO) and SAS Institute Inc. v. Matal, No. 16-969 (obligation of the PTAB to address all arguments contained in post-grant review proceeding petition).
In China, Huawei Secures Injunction Against Samsung for Infringement of Two Standard-Essential Patents.
On Jan. 11, 2018, a Chinese court granted Huawei an injunction against Samsung as a remedy for infringement of two 4G standard-essential patents. This injunction represents a significant step forward for China as an increasingly reliable patent enforcement forum.
Huawei asserted its two SEPs in the Intermediate People’s Court in Shenzhen in March 2017. The two patents were 201110269715.3 (“Transmission control signaling and apparatus”) and 201010137731.2 (“Method for feeding acknowledgement [ACK]/negative acknowledgement [NACK] back during carrier aggregation, base station and user equipment”). Both of these patents had been declared essential to the 4G standards. During an 18-day trial, both Huawei and Samsung accused each other of refusing to meet the FRAND commitments, resulting in a negotiation stalemate since 2011.
The court ultimately enjoined Samsung from practicing Huawei’s two patents. The injunction was based on findings that (1) the patents were 4G standard-essential, (2) that Samsung breached its FRAND obligations, and (3) that Samsung had been selling infringing devices.
In 2017, China Saw a Double-Digit Increase in Patent Filings
The increasing magnitude of China’s patent filings suggests that the world increasingly sees China as an improved forum for intellectual property enforcement. The number of Chinese patent applications filed increased to 1.38 million, a 14.2% increase over 2016. Similarly, the Chinese Patent Office received a sizable bump in international PCT filings—51,000 of them, a 12.5% increase over 2016.
China Breaks into the Top 5 U.S. Patent Recipients
China’s global IP position has improved in another way—China appears to be accelerating its national rate of innovation. For the first time, in 2017 China was a top 5 recipient of U.S. patents. This new achievement follows years of consistent growth in China’s collection of U.S. patents—which was has increased tenfold in the past decade. On a yearly basis, in 2017 Chinese inventors received 11,241 patents—a 28% increase over that number in 2016. But China still remains behind the U.S., Japan, Korea, and Germany in the race for the most U.S. patents. In total, Chinese companies own 3.5% of the 320,003 U.S. patents issued in 2017.
Chinese-owned U.S. patents focus mostly on the electronic arts. This is evident from the identities of the Chinese companies within the top 50 U.S. patent owners: Huawei Technologies, Co. (No. 20), BOE Technology Group (No. 21), and Shenzhen China Star Optoelectronics Technology, Ltd. (No. 45). There is also a growing trend of Chinese biotech innovators—who were educated in the U.S.—to file for U.S. patents on various cutting edge treatments, including cancer treatments.
Read more at https://www.bloomberg.com/news/articles/2018-01-09/china-enters-top-5-of-u-s-patent-recipients-for-the-first-time.
Conservative U.S. Groups Support Trump’s 301 Investigation of China’s IP Policies.
In August 2017 President Trump asked the U.S. Trade Representative (USTR) to investigate China’s policies on intellectual property. Under § 301 of the Trade Act of 1974, the President can request such an investigation with an eye toward taking measures to stop foreign governments from actions that violate international trade agreements or harm U.S. trade. There is potential for President Trump to ultimately impose tariffs on a wide variety of Chinese imports. The USTR’s findings and recommendation is due in August 2018. Some have voiced concern that this investigation—or the President’s potential actions based on it—may undermine U.S.-China relations and impose higher operating costs on U.S. companies.
But on January 23, 2018, a group of sixteen conservative leaders wrote a letter to President commending his willingness to investigate and combat Chinese expropriation of U.S. intellectual property. The letter states that the recognition of private property rights inherent in intellectual property is an essential component of fair and reciprocal trade. In the authors’ view, the time has come for accountability for misconduct toward American firms, because the cost of not doing so is lost U.S. technological leadership, lost U.S. jobs, diminished U.S. economic growth, lopsided trade imbalance, and U.S. national security vulnerabilities.
Read more at http://www.ipwatchdog.com/2018/01/24/conservative-leaders-trump-301-investigation-china/id=92845/.
The U.S.-China Business Council’s 2017 Member Survey Shows that Chinese IP Enforcement is Improving—But is Still a Frustration to U.S. Businesses in China
In January 2018, the U.S.-China Business Council released its 2017 Member Survey, discussing the concerns and challenges faced by U.S. companies doing business in China. Of the top 10 challenges for U.S. companies, at least three relate directly to technology and IP-related issues: (5) IPR enforcement, (6) cybersecurity, and (9) data flow barriers.
Almost 20% of U.S. companies in China have been asked to transfer technology to China. 67% of such requests were made by Chinese business partners, 33% by the central government, and 25% by the local government. Most often (50% of the time), the U.S. company found the request unacceptable, but mitigated the request and ultimately did transfer some technology to China. 10% of the time, the U.S. companies withdrew from negotiations; 10% of the time, the U.S. company felt compelled to comply with the request; and 30% of the time, the U.S. company found the request acceptable.
IP issues remain one of the top concerns for U.S. companies in China. 34% reported being “very concerned” about the Chinese IP enforcement environment, 60% reported being “somewhat concerned,” and only 6% reported being “not concerned.” But U.S. companies generally report that China has significantly improved its IP enforcement. 5% say China has “greatly improved;” 40% say China has “somewhat approved;” 52% say China has “remained unchanged;” and only 3% say China has “somewhat deteriorated.”