TIPLJ: Volume 22
Issue 1 – Summer 2013
Patenting Thoughts. The Computer Implementation of a Mental Process: Insufficient to Overcome § 101’s Inventive Concept Requirement
Citation: 22 Tex. Intell. Prop. L.J. 1 (2013-2014)
Author: J. Ryan Lawlis
About: J.D. Candidate 2013, Chicago-Kent Law School. The author would like to thank Professor David Schwartz for his input and advice. This article was submitted for publication on May 25, 2013.
Abstract: Since the first commercial use of the computer some sixty years ago, federal courts have struggled to define a computer’s relevance to the patentability of a process or method. In that time, the Supreme Court has offered broad guidance to the lower courts, and the CAFC has responded with an attempt to use that guidance to assemble an explicit test. This debate has led to over a decade of computer-related inventions being taken on a roller coaster ride in and out of eligibility. Most recently, the CAFC granted a request for rehearing en banc on this issue, and has requested briefing on specific questions regarding computers and patentable subject matter, in order to create a test tailored specifically to certain computer-implemented claims. Because it may present a new test of patentability specifically for these computer-implemented claims, the opinion that the court creates will significantly impact the progress and industry of the internet generation.
This paper will analyze the questions presented by the CAFC in CLS Bank International and suggest the appropriate test. In Part I, it will present relevant history of subject matter eligibility. In Part II, it will address the special problem of uncertainty in patent litigation. In Part III, it will present a solution in the form of a “mental process” exclusion, or “inventive concept” requirement, for patent-eligible subject matter. In Part IV, it will apply this solution to the questions presented by the CAFC in CLS Bank International.
Aesthetic Functionality: Trademark Law’s Red Herring Doctrine
Author: Noa Tal
About: Corporate Counsel at IMERYS. The views expressed herein are her own.
Abstract: The goal of this article is to dig past our initial tendency to take a superficial stand on trademark imitation, considering the fact that trademarks are themselves widely considered to be superficial indications of source and status. The cases in which aesthetic functionality is potentially applicable are cases in which there is a market for imitating trademarks. These cases tend to involve luxury goods such as jewelry, accessories, or cars. This article does not seek to champion the cause of the makers or consumers of luxury items or to generate sympathy for their potential loss of profits. It looks beyond the inclination to cast imitation aside as a bourgeois person’s problem and discusses the economic and social consequences of eroding trademark protection. The arguments presented focus on logical problems with the doctrine of aesthetic functionality and reveal potential economic and social consequences of trademark erosion that could reach people and places all around the world; that is to say, far beyond the Champs-Élysées.
Standard-Setting, FRAND, and Opportunism
Author: Christopher S. Yoo
About: John H. Chestnut Professor of Law, Communication, and Computer & Information Science and Founding Director of the Center for Technology, Innovation and Competition, University of Pennsylvania.
Abstract: Dennis Carlton and Allan Shampine have offered an important contribution to the debate over how to interpret the obligation imposed by standard-setting organizations (SSOs) that holders of standard-essential patents license them on fair, reasonable, and non-discriminatory (FRAND) terms. One of their central contributions is to distinguish between two distinct ways that participants can act strategically in the standard-setting process to generate returns that exceed the benefits associStated with their innovation.
FRAND in China
Author: D. Daniel Sokol and Wentong Zheng
About: Sokol is an Associate Professor, University of Florida Levin College of Law and Senior Fellow, George Washington Law School Competition Law Center. Zheng is an Assistant Professor, University of Florida Levin College of Law.
Abstract: This article discusses FRAND antitrust issues in China. Part I provides an overview of China’s antitrust regime and its interaction with intellectual property rights. In doing so, it offers an explanation of the nature of the Chinese antitrust regime that builds upon both industrial organization and political economy literature. Part II discusses standard-setting in China and how FRAND-related issues are handled under Chinese standard-setting laws and regulations. Part III explores recent developments in Chinese courts that impact FRAND. In particular, it discusses Huawei v. InterDigital and its implications for global FRAND licensing. Part IV offers thoughts on the lack of transparency in China’s antitrust regime as well as the use of industry policy in the FRAND setting and how these issues may negatively impact consumer welfare.
Problems in Sharing the Surplus
Author: Roger D. Blair and Thomas Knight
About: Department of Economics, University of Florida
Abstract: Dennis Carlton and Allan Shampine have addressed opportunistic and strategic behavior by standard-essential patent owners. After a standard has been specified, and sunk investments have been made by those who would implement the standard, the holder of a standard-essential patent can demand more for the patent license than it could have demanded ex ante. This sort of ex post opportunism can lead to economically inefficient outcomes. The solution is to limit such patent holders to “fair, reasonable, and non-discriminatory” (FRAND) patent license fees. Carlton and Shampine have advanced our understanding of precisely what this means.
The remainder of this article is organized as follows. Section II examines the difficulty that economic analysis has in predicting a unique bargaining solution and presents a number of different market arrangements that affect that prediction. Section III briefly explores the possible resort to eminent domain and compulsory licensing. As will be shown, neither of these approaches solves the problem. Section IV closes with concluding remarks.
Issue 2 – Winter 2014
The Disclosure Function, Academic/Private Partnerships, and the Case for Affirmatively Used, Multinational Grace Periods
Author: William G. Giltinan
About: The author is a practicing patent attorney and an adjunct professor at Stetson University College of Law. An earlier version of this paper was submitted to the 2013 Marcus B. Finnegan Writing Competition. Copyright © 2013 by William Giltinan, all rights reserved.
Abstract: In recent years there has been an increasing focus on promoting technology transfer through partnerships between research institutions and private entities interested in commercializing innovations resulting from such research, particularly smaller entities. This paper examines the impact that one aspect of intellectual property law, patent grace periods, can have on such partnerships. Comparing and contrasting grace period provisions under the European Patent Convention, Japan’s patent laws, and the U.S. America Invents Act, and illustrating how each set of laws impacts a theoretical partnership between an academic research institution and an early stage technology startup demonstrates how choices in grace period policies can support or hinder technology-transfer initiatives and create biases for and against small and large businesses. It also illustrates how liberal grace periods that can be used affirmatively are more supportive of patent law’s disclosure function than restricted grace periods. Additionally, it discusses how discordant grace period provisions outside the United States mitigate the benefits of progressive grace period policy implemented under the America Invents Act (AIA).
The second part provides a general introduction to patent law, grace periods, and pre-filing disclosure policies implemented under the laws of the United States, Japan, and the European Patent Convention. The third part illustrates the impact that each system’s laws are likely to have on a hypothetical partnership between an academic research institution and an early stage technology startup and the corresponding impact on patent law’s disclosure function. The fourth part then proposes a unified set of grace period provisions and discusses the legal and political challenges facing grace period harmonization. Ultimately, this paper concludes that, due to the combination of increasing political pressure to promote technology transfer and the unilateral move by the United States to a first-inventor-to-file system with the passage of the America Invents Act, the conditions for implementing a harmonized, multinational grace period are more favorable now than at any time in recent history.
A Unified Framework for Competition Policy and Innovation Policy
Author: Keith N. Hylton
About: William Fairfield Warren Distinguished Professor, Boston University. Professor of Law, Boston University School of Law, email@example.com. I thank Heath workshop participants at the University of Florida for helpful comments.
Part II presents two models of antitrust enforcement. The first, which this article refers to as the static enforcement model, is the now-standard efficiency theory of antitrust enforcement. Under the static model, antitrust enforcement should aim to internalize consumer harm. In the second model, which incorporates innovation, the internalization policy is observed to be too punitive and reduces overall welfare relative to a more lenient policy. The relative leniency results because punishment must be constrained in order to maintain innovation incentives.
Part III discusses some implications for modern antitrust policy, as exemplified by the Supreme Court’s decision in FTC v. Actavis, Inc. and recent enforcement policies of the United States and the European Union. From the perspective of this article’s framework, modern antitrust policy is in many respects misguided. The innovation implications of antitrust enforcement received little consideration in Actavis, and current enforcement policies on matters such as patent infringement litigation reflect the same failure.
Judging Monopolistic Pricing: F/RAND and Antitrust Injury
Author: William H. Page
About: Marshall M. Criser Eminent Scholar, University of Florida Levin College of Law. I thank Herbert Hovenkamp, Mark Lemley, Rosanna Lipscomb, Luke McLeroy, and John Page for their comments. I also thank the participants at a conference on FRAND and the Antitrust/Intellectual Property Interface at the University of Texas School of Law and a workshop at the University of Florida Levin College of Law. I thank Robert Levine for research assistance.
Abstract: This article compares Judge Robart’s RAND analysis, stripped of its bargaining language, to these determinations of antitrust injury and damages. Microsoft involved only a claim for breach of contract. The determination of the RAND ranges was a step in the determination of liability—whether a breach of the RAND commitment occurred—rather than a step in the determination of damages. Nevertheless, the calculation of a RAND rate is parallel in theory, structure, and practice to the calculation of damages for an illegal overcharge under a standard of antitrust injury. Both exercises, moreover, have the goal of creating incentives that enhance social welfare. Paradoxically, this analysis may actually limit the role of antitrust enforcement in the RAND context. Standard-setting and RAND requirements raise antitrust issues, but if contract enforcement can protect the antitrust interest, even by drawing insights from antitrust law and economics, then antitrust enforcement becomes correspondingly less necessary or appropriate.
The next part of this article describes the economic function of the RAND mechanism. It then shows in Part III how Judge Robart interpreted the RAND requirement and applied it to Motorola’s SEPs. Part IV compares his analysis to the calculation of overcharges caused by monopolistic exclusion.
Facilitating Negotiation for Licensing Standard-Essential Patents in the Shadow of Injunctive Relief Possibilities
Author: Haksoo Ko
About: Seoul National University School of Law. Address: Gwanak-ro 1, Gwanak-gu, Seoul 151-743, Korea. Email: firstname.lastname@example.org. Phone: +82-2-880-2602. The author benefited tremendously from the comments of Dong Pyo Hong, Tae Hyuk Ko, Kyoung-Soo Yoon, and participants at various seminars. Financial support from Qualcomm is graciously acknowledged.
Abstract: This article examines the justifiability of granting an injunction to holders of SEPs who made a FRAND commitment when those patent holders are in disputes with implementers regarding specific terms of a license arrangement. In doing so, this article explores how relevant transaction costs can be reduced. From a policy perspective, when an injunction is available, the main policy concern is about patent holders engaging in ex post opportunism of hold-up and demanding an exorbitant royalty amount from patent implementers. On the other hand, with no possibility of injunctive relief, the main concern is about patent implementers not engaging in good faith negotiations with the patent holder on royalty and other important license terms, and thus unduly delaying the negotiations. Indeed, if no injunction is available, an implementer may use a “wait-and-see” approach, trying to gauge the attitude of the court and of the patent holder. This type of opportunistic behavior is called reverse hold-up.
This article proceeds as follows. Section II summarizes the court proceedings in Korea between Apple and Samsung with a focus on the issues related to FRAND terms. Section III examines how parties may engage in opportunistic behavior like hold-up or reverse hold-up, depending on their business strategies and also on the court’s attitude regarding the availability of an injunction. Section IV proffers a new mechanism that discourages parties from engaging in hold-up or reverse hold-up and instead prompts parties to engage in negotiations to reach an agreement on specific license terms in relation to the associated FRAND commitment. Finally, Section V provides a conclusion.
Issue 3 – Spring 2014
Patent Litigation, Standard-Setting Organizations, Antitrust, and FRAND
Author: Dennis W. Carlton & Allan L. Shampine
About: Dennis W. Carlton is the David McDaniel Keller Professor of Economics at the Booth School of Business of the University of Chicago, research associate for the National Bureau of Economic Research, and affiliated with Compass Lexecon. Allan L. Shampine is Executive Vice President at Compass Lexecon. The authors have consulted on several matters involving FRAND and patent infringement, including for Apple adverse to Motorola Mobility and HTC adverse to IPCom. This article draws heavily on our prior work, including Dennis W. Carlton, Patent Ambush in the US and the EU: How Wide Is the Gap? The Economics of Patent Ambush, 2 Concurrences 6 (2011) and Dennis W. Carlton & Allan L. Shampine, An Economic Interpretation of FRAND, 9 J. Competition L. & Econ. 531 (2013).
Abstract: There has been extensive discussion recently about the shortcomings of the patent system and how those shortcomings can lead to the creation of market power in standard-setting organizations (SSOs). This article first describes some of the salient characteristics of the U.S. patent system as well as some of its shortcomings. It then turns to the role of SSOs, which are collective organizations that set standards that by their very nature will trigger certain patents. Such patents are called standard-essential patents (SEPs). This article discusses the key potential antitrust problems raised by collective standard-setting and the mechanisms that SSOs have used to address those problems. Specifically, it focuses on the requirement SSOs often impose on their members to commit to license SEPs on fair, reasonable, and non-discriminatory (FRAND) terms. This article explains how those terms should be interpreted in an economic sense in order to mitigate the antitrust problems that are identified. It concludes with a discussion of the limitations of FRAND commitments to address all problems associated with market power in standard-setting situations, the way that patent system reforms might address some of the remaining concerns, and the likely response of institutions to the problems created by our patent system.
Casting a FRAND Shadow: The Importance of Legally Defining “Fair and Reasonable” and How Microsoft v. Motorola Missed the Mark
Author: Rebecca Haw Allensworth
About: The author is an Associate Professor at Vanderbilt Law, and she has published articles in journals including Texas Law Reviw, University of Pennsylvania Law Review, and Northwestern Law Review.
Abstract: This essay proceeds in four parts. Part I provides an overview of Judge Robart’s “fair and reasonable” rate determination in Microsoft v. Motorola. Part II then points out the importance of establishing a legal definition of the “FR” (“fair and reasonable”) in FRAND terms. Part II goes on to advocate using a patent’s pre-standard incremental value over alternatives as its ex post “fair and reasonable” rate, but also identifies the difficulties of measuring that value. Part III then argues that by trying to avoid the vagaries of counterfactual reasoning that an ex ante incremental value determination requires, Judge Robart’s “fair and reasonable” analysis in Microsoft v. Motorola is less useful to potential FRAND litigants than it could have been. Part IV suggests that in FRAND disputes, courts should consider setting “fair and reasonable” rates by simulating a pre-standard bargain not between the parties to the ex post FRAND dispute, but rather between the patent holder and the SSO itself. Using these parties for the hypothetical bargain may address some of the informational uncertainties that plague counterfactual reasoning about “fair and reasonable” rates while also approximating the ex ante incremental value of the technology.
Goodwill Appropriation as a Distinct Theory of Trademark Liability: A Study on the Misappropriation Rationale in Trademark and Unfair Competition Law
Author: Apostolos Chronopoulos
About: Research and Teaching Associate, Centre for Commercial Law Studies, Queen Mary, University of London. I wrote this paper during my research stay as a visiting scholar at Stanford Law School. My gratitude goes to Professor A. Mitchell Polinsky who made my research stay possible in the first place. I was very happy to have the opportunity of meeting and discussing my research project with Professor Mark A. Lemley, who has been my sponsor at Stanford, and with Professor Paul Goldstein. Any errors or omissions are mine only.
Abstract: This paper conveys the argument that trademark rights may be extended in scope so as to protect the competitive interests of the rights-holder independent from a finding of consumer confusion and at the same time promote the effectiveness of competition to the benefit of consumers. Various trader interests have been put forward as justifications of rational theories of trademark protection, most of them leaning towards the idea that the rights-holder has an interest in the economic exploitation of the advertising message incorporated into his trademark. The antecedent analysis examines the legitimacy of protecting trader interests in the internalization of advertising value through exclusive rights in trademarks.
Comparative Law and Economics of Standard-Essential Patents and FRAND Royalties
Author: Thomas F. Cotter
About: Briggs and Morgan Professor of Law, University of Minnesota Law School. I have presented or will present versions of this paper at events sponsored by the Munich Intellectual Property Law Center, the University of Florida Fredric G. Levin College of Law, the UCLA School of Law, and the University of Texas School of Law. I thank (in advance, where appropriate) participants of these events for their comments and criticism. Thanks also to Norman Siebrasse for comments and criticism, to the University of Minnesota Law School for a summer research grant, to our library staff for assistance in tracking down sources, to the Max Planck Institute for Intellectual Property and Competition Law for making its library available to me during the summers of 2011 and 2013, and to Katherine Bryan and Matthew Sung Woo Hu for research assistance. Any errors that remain are mine.
Abstract: Part I presents the positive perspective by examining the ways in which courts and other entities in the United States, Europe, and Asia have begun to address these issues as a matter of legal doctrine. Part II provides a normative analysis of the comparative advantages and disadvantages of injunctions versus licensing, and of patent law versus antitrust as a means for achieving optimal outcomes. My principal normative conclusion is that courts generally should allow SEP owners to obtain damages only, and not injunctions, for the SEP’s unauthorized use; and that, in principle, it would be preferable to use contract and patent law to achieve this result, as opposed to antitrust. At the same time, however, I recognize (and have argued elsewhere) that policies that may seem ideal in isolation and as a matter of abstract theory are not always the policies that are best suited for use within a specific legal environment. It may be rational for different legal systems to approach similar issues in different ways and with the use of different tools, given the assumptions, constraints, and institutions under and within which these systems operate. In the present context in particular, I will suggest that, for the time being, an approach under which patent law plays a dominant (and antitrust a subservient) role in addressing problems raised by SEPs may be optimal for the United States and perhaps some other common-law jurisdictions, whereas in Europe and elsewhere competition law arguably should (as it does) play the larger role. Part III then examines, from both a positive and normative perspective, the related issue of how courts should calculate FRAND royalties, if and when they are called upon to do so. Part IV concludes.