United States explains Patent Office and Justice Department’s views on irreversible harm
The move came in the backdrop of the Radian Memory Systems vs. Samsung Electronics case
Recently, a Statement of Interest (SOI) was filed by the United States, describing the views of the U.S. Patent and Trademark Office (USPTO) and the Department of Justice (DoJ), Antitrust Division.
Related to Radian Memory Systems LLC, v. Samsung Electronics Co., Ltd., and Samsung Electronics America, Inc. (E.D. Texas, 2024), it was about “how to assess whether a plaintiff alleging patent infringement has demonstrated a likelihood of irreparable harm under the four-factor test for a preliminary injunction under the Supreme Court and the Federal Circuit precedent.”
While the SOI indicated that the US did not take a position on the factors, several statements provided an insight into the agencies’ mindset on related issues, including injunctions for infringement of patents related to industry standards.
Importantly, the SOI represents the most significant communication from the USPTO and DOJ on injunctive relief since the abandonment of the President Joe Biden era 2021 Draft Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments, and the subsequent withdrawal of the 19 December 2019 Policy Statement issued during the first term of President Donald Trump’s administration.
Radian Memory Systems’ complaint regarding patent infringement alleged that on standards specifications, based on its patented technology, “the company was cast out by the industry”, possibly because of “retaliation for its refusal to join the NVMe industry standard organization and associated Technical Working Groups. They required Radian to give the industry royalty-free licenses to any of its patents practiced by implementations of the standards specifications.”
It added that Samsung was a key participant in the industry, “serving not only as a member of the NVMe industry standard organization, but also as a member of the specific Technical Working Group.” It infringed Radian’s patents without obtaining a license.
However, Samsung retaliated, “Radian’s status as a non-practicing entity undercuts its claim of irreparable. A non-practicing entity expects that the compensation for the invention will come in the form of some kind of royalty from the manufacturer to whom it licenses the invention. In that case, monetary relief provides full compensation for the inventor.”
The USPTO and DOJ relied on ‘traditional principles of equity’, stating, “An ongoing patent infringement would, in many cases, result in irreparable harm based on the inadequacy of a monetary remedy, which can be difficult to calculate accurately.”
However, the government bodies disagreed with Radian’s position that “as per the law, the finding of ongoing infringement is irreparable harm. Such a categorical rule is inconsistent with the decision in the eBay Inc. vs MercExchange” case.
They further mentioned that the traditional principles of equity permitted an injunction “to prevent an ongoing violation of rights in a unique asset, regardless of who owns the asset” The agencies pointed out that in the eBay matter, “the court rejected the district court’s broad classification that a patentee who is willing to license could not establish irreparable harm.”
The USPTO and DoJ explained that “the position treats patents in this context like other unique assets that are difficult to value.”, noting that “the courts have found irreparable harm based on, inter alia, the loss of control over a unique product or business opportunity. The loss is relevant to the patent infringement, as it deprives the patent holder of the ability to control to whom it licenses its products and the terms of that licensing.”
For instance, the SOI mentions that patent owners may wish to control which “claims, competitors, markets, fields of use, geographies, or time frames are licensed. To adopt a broader rule that licensing is effectively dispositive of the right to exclude infringers would contradict eBay. It would risk creating a compulsory licensing scheme of the sort rejected by Congress.”
The government agencies explained writing about damages/releases for past infringement and also injunctions/licenses for future acts, and how the distinct concepts were often inexplicably conflated.
They cited, “Chief Justice Roberts joined the majority (in eBay) but also penned a concurrence, writing that since at least the early 19th century, courts have granted injunctive relief upon a finding of infringement in most patent cases. This long tradition of equity practice is not surprising given the difficulty of protecting the right to exclude through monetary remedies that allow an infringer to use an invention against the patentee’s wishes – a difficulty that suggests irreparable harm.”
The agencies stressed that the country’s recognition of the inadequacy of monetary remedies for protecting the future right is reflected in the SOI’s numerous references to, not simply infringement, but rather ‘ongoing’ infringement and to having control over how to ‘license’ the patent.
Thus, the likely greater ability to show irreparable harm following a negative determination of infringement, the ability to show irreparable harm is likely lower for a plaintiff seeking a preliminary injunction in a patent-infringement case, as compared to a permanent injunction. That’s because with the former, there was no final determination that the patent was infringed. The SOI stated that injunctive relief may not be equitable in situations where infringement is not willful and will not persist.
They referred to the difficulty and expense of calculating an ‘ongoing reasonable royalty’, and how ‘a court-imposed reasonable royalty lowered the patentee’s ability to control the scope and terms of its license. The notion of a reasonable royalty stemmed from the ‘Damages’ section of the patent laws (35 U.S.C. §284), ‘to compensate for the infringement.’
However, the argument lacked the depth of why district courts rejected patent owners’ attempts to impose licenses as a remedy (HTC Corporation, HTC America Inc v. Telefonaktiebolaget LM Ericsson, Ericsson Inc, (E.D. Texas, 2019), Memorandum Opinion and Final Judgment at 15-16.
It stated, “None of the cases that Ericsson cites in its motion, permit a court to impose a contract on a party, where not all of the material terms have been negotiated or agreed upon by the parties.”
Emphasis was laid on the courts of the United Kingdom, which do not impose a license as a remedy. We do not disagree with the agencies that calculating royalties to address future acts of infringement is difficult and expensive, but such forward-looking monetary remedies are not awarded, which supports their position.
Another interesting aspect of the SOI is the US’ recognition of how “the possibility of an injunction helps prevent potential licensees from viewing infringement as economically efficient”, because of damages not exceeding the cost of a license and not accounting for the patent owner’s enforcement costs, citing articles from IP watchdog contributors, Kristen Osenga and Adam Mossoff.
Even though the agencies viewed that if there was an established royalty rate based on prior licensing, irreparable harm was less likely to occur. For instance, “The US notes that sometimes the evidence will not support a finding of difficulties with calculating a royalty. For eg: if the plaintiff is willing to license and if there is already a well-established royalty rate for all comers, not disputed by the accused infringer, an injunction will not be appropriate, because the plaintiff would get everything it asked for if it wins on validity and infringement.”
The problem with the statement was that, even if an established rate existed, the plaintiff would not get everything if there was no remedy to address the ongoing infringement.
It was also confusing to note the agencies referring to infringers being incentivized not to pay when injunctive relief was unavailable. Even if the argument was accepted, it meant that damages could potentially deter future infringement. An approach places additional burden of enforcement on the patent owner. In comparison, the agencies note, “an injunction can shift the burden of determining costs from the court to the parties.”
Radian’s complaint involved a patent related to a standard developed by a private consortium in which Radian did not participate and did not bring an antitrust claim. The SOI provides, “There is a ‘potential for anticompetitive harm’ inherent in these standards-development organizations, which often have economic incentives to restrain competition. While the standard was developed by a private consortium rather than an SDO, given the similar collaborative nature of the private consortia and SDO activities, the two are analyzed under the same framework.”
This raises the question if this should be inferred that the agencies do not believe patents relating to industry standards should be treated any differently for purposes of assessing irreparable harm (largely consistent with the 19 December 2019 Policy Statement).
Moreover, the country’s concerns with efficient infringement also appear to echo statements made by former Assistant Attorney General Makan Delrahim, on standards related patents during President Trump’s first term.
“Often lost in the debate over the hold-up problem is recognition of a more serious risk: the hold-out problem. In this regard, I believe Judge Posner was badly mistaken in the Apple v. Motorola case, in which he held that IP owners who make FRAND commitments somehow sacrifice their right even to seek an injunction. Though the Federal Circuit corrected that ill-conceived decision, its ruling did not improve matters much. The court of appeals held that making a FRAND commitment and entering other licenses ‘strongly suggest’ that damages for infringement should be adequate relief, meaning that injunctive relief should be denied except in rare cases.”
As for the difficulty and expense associated with calculating patent damages, the SOI further explains, “Additional steps become necessary when the damages must be apportioned. For example, where a patent covers a component of a larger device or is part of an industry standard (i.e., a standard essential patent).”
A patent covers a component of a larger integrated system and also supports the finding of irreparable harm based on the ongoing infringement. It is in view of the impracticality of designing around. Though, the agencies indicate, “An injunction should not be punitive and is not designed to give a patent owner undue leverage, if the invention is essential to the value of the product, the injunction will provide greater leverage in license negotiations.”
Thus, if a patent is essential to an industry standard, in situations where the infringer has made no commitment to obtaining FRAND licenses following a finding of infringement (i.e. ongoing infringement is going to occur), shifting the burden of determining the terms of a license from the court to the parties seems more consistent with traditional principles of equity than requiring the patent owner to go to court repeatedly for damages. Especially, considering that an infringer can sue for breach or specific performance of any applicable FRAND licensing-related obligations if the patent owner’s license demands are inconsistent. The difference is that the burden of enforcement is then shifted to the infringer.