Thursday, May 30, 2013

On the Relation Between Unified Infringement and Validity Proceedings and the Right to Restitution in the Event of Subsequent Patent Invalidation

Suppose that A owns a patent and that B is contemplating the launch of a product that arguably would incorporate that patent.   Suppose further that both parties believe that (1) there is a 70% probability the patent is valid, (2) there is an independent 80% probability that B’s product would incorporate the patent; and (3) the present value of B’s expected profit from the arguable use of the patent, over and above what B would earn from using the next-best noninfringing alternative, is $2 million.  If the parties are equally good bargainers (meaning that they will share the gains from trade on a 50-50 basis), one would expect them to agree to a royalty under which B would pay A $560,000, calculated as follows:  $2 million x 0.7 x 0.8 x 0.5 = $560,000.

As I have noted previously, citing work by Kalos & Putnam, in the event B infringes rather than licenses, A should recover $1 million, not $560,000.  The reason is that if A knew she could recover only $560,000 if she went to trial, her expected payoff from going to trial would be $560,000 x 0.7 x 0.8 = $313,000.  In other words, there would be a double discounting problem unless the royalty awarded at the patent infringement trial attempts to replicate what A and B would have agreed to ex ante, on the assumption that they both knew the patent to be valid and infringed. 

However, my discussion the other day of remedies for the wrongful litigation or enforcement of patent rights has led me to realize that the above analysis is incomplete.  In particular, two other variables must be considered:   first, whether a patent infringement trial would decide both infringement and validity (as is the case in many countries, including the United States), or only infringement (as in several other countries, including Germany); and second, whether a subsequent decision finding the patent invalid would entitle B to restitution of any damages B paid to A (as in Germany) or not (as in the U.S., U.K., and France).  The answer, it seems to me, is that if infringement and validity are not decided in the same forum, B should be entitled to restitution (unless the damages award is discounted by the ex ante probability of invalidity).  Otherwise A may be getting a windfall, because her expected payoff from going to trial is $800,000 (that is, $1 million x 0.8), whereas she would have agreed to only $560,000 ex ante.  Similarly, if infringement and validity are decided in the same forum, B should not be entitled to restitution, because otherwise A’s (ultimate) expected payoff would be less than $560,000.

Seen in this light, the rules followed in Germany and in the U.S. seem to make sense.  As I understand it, German courts, like U.S. courts, do not take into account the possibility that A and B would have agreed to a discount reflecting the possibility of noninfringement or invalidity.  See Benkard, Patentgesetz, 10th ed., § 139, para. 64 (“Ein Abschlag, den vernünftige Vertragspartner mit Rücksicht auf eine vielfach gegebene Unsicherheit über materielle Schutzfähigkeit und Bestand des Patents machen, kann hier unberücksichtigt bleibe, da der Verletzer sich nicht dem Risiko aussetzt, für eine nicht schutzwürdige Erfindung zahlen zu müssen . . . .”)  One possible wrinkle, though, is this:  in Germany, licensing partners sometimes do agree that the licensee will pay an upfront premium which the licensor gets to keep in the event the patent is invalidated.  (If the patent is invalidated, the licensor is not required to give back royalties the licensee has already paid, even though the patentee may be required to give back its damages to the infringer.)  This rule would risk making the licensee worse off than the infringer, so German courts increase the royalty the infringer must pay above the normal rate in order to compensate for the infringer’s having avoided this risk.  In a sense, then, perhaps one could say that to some extent German courts may take the probability of invalidity into account in awarding royalties.  See Thomas Kühnen, Patent Litigation Proceedings in Germany:  A Handbook for Practitioners 541 (Frank Peterreins tr., 6th ed. 2013) (stating that a factor taken into account in terms of increasing the royalty is that “unlike the licensee, the infringer bears no risk of payment for invalid property rights, the level of the additional amount depending on the extent to which the patent in suit is actually in danger of being revoked”).  I'm not sure how German courts would go about estimating "the extent to which the patent in suit is actually in danger of being revoked," though sometimes estimates of this nature are made in connection with motions for preliminary injunctions.                      

Wednesday, May 29, 2013

Some Questions Relating to Patent Remedies in Edwards v. CoreValve

Most countries routinely award permanent injunctions to the prevailing patentee.  In the U.S., since the Supreme Court’s 2006 decision in eBay v. MercExchange, courts consider four equitable factors of irreparable injury, adequacy of the remedy at law, the balance of hardships, and the public interest.  As a result, U.S. courts now award permanent injunctions to prevailing patentees about 75% of the time; in the remaining quarter of cases, they award an ongoing royalty.

Over the past year the U.S. Court of Appeals for the Federal Circuit has given mixed signals as to how often courts should award patentees permanent injunctions.   I’ll have more to say about some of these opinions in future posts, but for today I’d like to focus on one case in particular, Edwards Lifesciences AG v. CoreValve, LLC, 699 F.3d 1305 (Fed. Cir. 2012), pet’n for cert. filed, __ U.S.L.W. __ (May 6, 2013) (No. 12-1325).  The patent in suit is for a medical device known as a transcatheter heart valve.  In 2011, a jury found the patent valid and infringed, and awarded Edwards lost profits of $72,645,555, along with $1,284,861 as a reasonable royalty.  If I understand the facts correctly, the device has been approved for marketing, and is not patented, outside the United States; as of the date of trial, however, the device was still awaiting FDA approval for marketing within the United States.  Thus all of the sales that Edwards allegedly lost to CoreValve occurred outside the United States.  (The manufacture of the allegedly infringing devices occurred within the United States, however.) The district judge denied a permanent injunction, however, based on, among other things, CoreValve’s representation “that it was immediately moving [its] manufacturing operation to Mexico, and thus that infringement would terminate.”   

Several issues were raised on appeal, but for present purposes I’ll focus exclusively on remedies.  First, on the issue of lost profits, the majority (in an opinion authored by Judge Newman) stated:

CoreValve argues “that the criteria for award of lost profits were not met, stating that it “could have manufactured its device overseas by March 2007,” CoreValve Br. 3, and thus would have avoided all liability for infringement, by avoiding infringement. CoreValve argues that this eliminates liability for damages based on its manufacture in the United States, or that at most it should be liable for only a modest royalty. Neither the jury nor the district court was persuaded by this argument. Nor are we. Whether or not CoreValve could have avoided infringement, it did not do so, although it was notified as early as 2005 of Edwards' position, and the record showed CoreValve's familiarity with the patents and the inventors.

 Second, the court reversed the denial of the injunction and remanded for further proceedings, stating:

A patentee's right to exclude is a fundamental tenet of patent law. Richardson v. Suzuki Motor Co., Ltd., 868 F.2d 1226, 1247 (Fed. Cir. 1989) (“The right to exclude recognized in a patent is but the essence of the concept of property.”) (quoting Connell v. Sears, Roebuck & Co., 722 F.2d 1542, 1548 (Fed. Cir. 1983)). The innovation incentive of the patent is grounded on the market exclusivity whereby the inventor profits from his invention. Absent adverse equitable considerations, the winner of a judgment of validity and infringement may normally expect to regain the exclusivity that was lost with the infringement. Edwards argues that the Court's ruling in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 126 S. Ct. 1837, 164 L. Ed. 2d 641 (2006) supports its position, for the willfulness of the infringement and other equitable aspects weigh in favor of restoration of the exclusive patent right.
The Court in eBay did not hold that there is a presumption against exclusivity on successful infringement litigation. The Court did not cancel 35 U.S.C. § 154, which states that “Every patent shall contain ... a grant ... of the right to exclude others from making, using, offering for sale, or selling the invention,” nor did the Court overrule Article I section 8 of the Constitution, which grants Congress the power to “secur[e] for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” The Court held that equitable aspects should always be considered, stating: “We hold only that the decision whether to grant or deny injunctive relief rests within the equitable discretion of the district courts, and that such discretion must be exercised consistent with traditional principles of equity, in patent disputes no less than in other cases governed by such standards.” eBay, 547 U.S. at 394, 126 S.Ct. 1837. Statutory and historical as well as commercial considerations impinge on every equitable determination.
Precedent illustrates the variety of equitable considerations, and responsive equitable remedy in patent cases; for example, the grant of a royalty-bearing license instead of imposing an injunction in situations where the patentee would experience no competitive injury, as in ActiveVideo Networks, Inc. v. Verizon Communications, Inc., 694 F.3d 1312, 1339–40 (Fed. Cir. 2012); or where there is an overriding public interest in continued provision of the infringing product, as in Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., No. 03–CV–0597 (D. Ariz. July 21, 2010), where the Gore vascular graft materials were not available from the successful patentee Bard. Another form of equitable response is illustrated in Broadcom Corp. v. Qualcomm Inc., 543 F.3d 683, 704 (Fed.Cir.2008), where the court postponed the effective date of an injunction for twenty months, to relieve hardship on the infringer.
In Advanced Cardiovascular Sys. v. Medtronic Vascular, Inc., 579 F.Supp.2d 554 (D. Del. 2008), the court observed that: “Courts awarding permanent injunctions typically do so under circumstances where plaintiff practices its invention and is a direct market competitor.” Id. at 558. Edwards argues that these conditions here prevail. However, the district court declined to impose the requested injunction. First, the district court responded to Edwards' argument that without exclusivity it would lose first-mover advantage and market share and reputation, by stating that these had already been lost—although Edwards states that this is incorrect, for sales in the United States had not yet been authorized by the FDA, as to either the Edwards or the CoreValve/Medtronic product. The district court also stated that Edwards had given up exclusivity by licensing the ′552 patent to another competitor. CoreValve does not dispute that the district court erred in its view of that transaction, and that no such license exists.
The district court's explanation of why it was withholding an injunction placed significant weight on CoreValve's statements that it was immediately moving this manufacturing operation to Mexico, and thus that infringement would terminate. Edwards at *16, 2011 U.S. Dist. LEXIS 12022, at *29 (“The remaining two eBay factors do not alter the court's analysis, since the only practical effect of a permanent injunction would be that CoreValve would be forced to move its United States manufacturing operations for the accused product to Mexico.”). The district court stated that if CoreValve should renew its infringing manufacture in the United States, then “[a]s it did in this case, Edwards can bring suit against CoreValve and seek damages if CoreValve continues its infringing manufacturing operations in spite of the judgment of infringement.” Id. at *15, 2011 U.S. Dist. LEXIS 12022, at *28. Edwards states on this appeal, and CoreValve does not deny, that CoreValve never stopped its infringing manufacture in California. Whether or not that representation was known to be false when made, the situation before us reflects, at least, changed circumstances.
In TiVo Inc. v. EchoStar Corp., 646 F.3d 869, 890 n. 9 (Fed. Cir. 2011) this court en banc noted that “district courts are in the best position to fashion an injunction tailored to prevent or remedy infringement.” Recognizing that the circumstances have not been fully explored in the record before us, we vacate the denial of the injunction, and remand to the district court for consideration in light of ensuing events and any other relevant factors.

Judge Prost, concurring in the judgment, wrote that she joined the majority opinion

in all respects except one—the majority's discussion of the permanent injunction standard. The majority opines that “[a]bsent adverse equitable considerations, the winner of a judgment of validity and infringement may normally expect to regain the exclusivity that was lost with the infringement.” Majority Op. 1314. To the extent that one reads this statement as creating the presumption of an injunction once the plaintiff prevails, which must be rebutted by the defendant, that is not the law.
Nor do the selected portions of eBay cited by the majority provide support for its position. First, while I agree with the majority that in eBay the Supreme Court did not cancel 35 U.S.C. § 154, the majority overlooks the Court's explanation that “the creation of a right is distinct from the provision of remedies for violations of that right,” such that “injunctive relief ‘may’ issue only ‘in accordance with the principles of equity.’” eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 392, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006) (quoting 35 U.S.C. § 283). Second, the majority excludes from its analysis the four-factor equitable standard, the preamble of which states that “the plaintiff must demonstrate” these factors. Indeed, the majority's analysis might be read to suggest that the defendant, not the plaintiff, bears the burden of establishing the equitable factors.
Some complain of areas of patent law in which our guidance is mixed or muddled. This is not—or should not be—one of those areas after the Supreme Court's clear pronouncement in eBay. eBay made clear that there is no general rule that a successful plaintiff is entitled to an injunction; rather, the plaintiff bears the burden of establishing the four equitable factors that weigh in its favor in order to obtain a permanent injunction. We should take care to avoid possible misinterpretation of an otherwise clear Supreme Court standard. Because the majority's statements appear to me to deviate from the standard articulated by the Supreme Court and our court, I respectfully concur. See Robert Bosch LLC v. Pylon Mfg. Corp., 659 F.3d 1142, 1149 (Fed. Cir. 2011) (recognizing that “ eBay abolishes our general rule that an injunction normally will issue when a patent is found to have been valid and infringed”).

In its May 6 cert. petition, CoreValve raises two questions, one relating to enablement and the other to injunctive relief, specifically “Whether the Federal Circuit’s holding that an injunction is presumptively warranted after a verdict of infringement conflicts with this Court’s decision in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006).”

Whether the Supreme Court decides to take the case or not, I find a couple of things notable about the majority opinion.  First, contrary to Judge Newman, I don’t see any reason in principle why a product lawfully manufactured and sold abroad cannot be a noninfringing alternative to which the defendant could have resorted in order to avoid infringement; under appropriate circumstances, the existence of such an alternative could demonstrate that the patentee suffered no lost profits.  If taken seriously, Judge Newman’s statements that we must focus on what the patentee actually did, not what it could have done, would overturn long-settled case law in the United States that the existence of noninfringing alternatives can reduce or eliminate a patentee’s entitlement to lost profits; indeed, Judge Newman’s language sounds a lot like the “reasoning” employed in the U.K. to deny the relevance of noninfringing alternatives to awards of lost profits (see my book, pp. 187-89).   The district judge’s actual reasons for entering the jury’s lost profits awards, however, seem more sound; in relevant part, Judge Sleet stated that “the jury also properly rejected CoreValve's noninfringing alternative of moving abroad because Edwards demonstrated that CoreValve had limited capital and could not design a marketable product abroad.”  See 2011 WL 446203, at *16 (D. Del.  Feb. 7, 2011).  If moving abroad wasn’t an available alternative during the period for which the lost profits award was calculated, then it was correct to award lost profits. 

I don’t claim to be familiar enough with the facts of Edwards to offer an opinion whether an injunction would be warranted or not.   As a general matter, however, my own view is that a presumption in favor of permanent injunctive relief wouldn’t be such a bad idea, as long as the presumption is a rebuttable one—though I recognize that this is not what the Supreme Court held in eBay.  More generally, I have argued that, as a theoretical matter, injunctive relief is often the better option because (1) if the patentee is the more efficient user of the patented invention, injunctive relief preserves the patent incentive by enabling the patentee to exclude others during the patent term; and (2) if the infringer is the more efficient user, the parties themselves can bargain toward an appropriate licenseand should have better information than a court would have as to the value of such a license.  When there is a risk of patent holdup, howeverin particular, where the patent reads on only one feature of a complex device, the infringement is inadvertent, and the value of a license ex post would be substantially greater than the value ex antecourts should deny permanent injunctions and enter ongoing damages instead.  See my book, pp. 53-62, 105-07. 

Readers may agree or disagree with my analysis, but I think it would be a brighter day if courts would focus on the underlying policies served by injunctions and damages rather than on formalistic legal doctrine.

Monday, May 27, 2013

Remedies for Wrongful Patent Litigation or Enforcement in Some Other Leading Patent Systems

I said I would follow up last week’s post on Remedies for Wrongful Patent Litigation or Enforcement Under U.S. Law with a post on the law as it exists in other jurisdictions.  A very good article on the topic is Christopher Heath’s Wrongful Patent Enforcement—Threats and Post-Infringement Invalidity in Comparative Perspective, 39 IIC 307 (2008), which I cite in my book at p.183 n.74 and at p.227 n.32.  Professor Heath summarizes the law on this topic in Germany, Japan, France, the U.K., and to some degree Italy.  I recommend the entire article to interested readers, but will mention a few salient points here.

First, Heath suggests that wrongful patent enforcement could occur when the patent is valid and infringed but “the actual enforcement is disproportionate either in view of the measures taken or the remedies sought.”  He notes, however, that so far “courts have taken little note of the issue of over-enforcement where an infringement could actually be proven,” with the one notable exception being the U.S. Supreme Court’s eBay decision.  (See also this recent post on the Kluwer Patent Blog reporting a recent German Federal Supreme Court decision holding that making an allegedly inflated damages claim for copyright infringement does not result in a forfeiture of the right to obtain an injunction.) 

Second, Heath discusses the possibility of liability attaching for the sending or publication of warning letters.  Here, the law in the relevant jurisdictions appears to diverge, though all of them appear to view with suspicion threats directed against so-called secondary infringers such as customers of the allegedly infringing manufacturer.  According to Heath, the German courts view such threats as being presumptively unlawful, subject to some exceptions (e.g., where “the primary infringer is domiciled abroad or otherwise unavailable”).  Liability under Japanese law appears to depend on a variety of circumstances, while under U.K. law the publication is lawful if the rights were infringed or “the patentee had no reason to suspect invalidity.” Again, I’d recommend reading his entire discussion, but the take-away point is that the U.S. appears to be something of an outlier in conditioning liability only upon proof by clear and convincing evidence that the false accusation of patent infringement was both objectively and subjectively unreasonable.  
Third, Heath discusses whether a defendant who has been found liable for infringement is entitled to a retrial and/or restitution of damages if the patent in suit is subsequently invalidated.  (I also, very briefly, mention this point and some of the relevant sources in my book at pp. 182-83 n.74.) To summarize, U.K. law (like U.S. law) would let the damages judgment stand, under principles of res judicata.  As a general matter, so would France, as the Cour de Cassation’s 2012 decision of February 17, 2012 holds.  (French text and an English translation both available here.)  On the other hand, Germany and Japan would both permit retrial and restitution.  (Indeed, in 2012 the German Federal Supreme Court held in Tintenpatrone III that restitution is available even where the patent is restricted in such a way that the infringement defendant’s conduct no longer falls within the scope of the claims.  For a translation of the decision into English, see 43 IIC 855 (2012).)   

Fourth, Professor Heath notes that article 9(7) of the E.C. Enforcement Directive requires that, where a court enters a preliminary injunction against a defendant but the defendant subsequently prevails at trial, the defendant is entitled to recover compensatory damages.  Specifically:
Where the provisional measures are revoked or where they lapse due to any act or omission by the applicant, or where it is subsequently found that there has been no infringement or threat of infringement of an intellectual property right, the judicial authorities shall have the authority to order the applicant, upon request of the defendant, to provide the defendant appropriate compensation for any injury caused by those measures.
Professor Siebrasse has pointed me to discussions of recent French and Spanish cases applying this principle, and informs me that it is found in Canadian law as well.   

In the U.S., there is no such rule, though courts require the patentee to post a bond in order to obtain a preliminary injunction so that the defendant will be compensated up to the amount of the bond if the injunction turns out to have been granted in error.  (For a discussion of U.S. practice and an argument that courts should impose a restitutionary recovery in the event of a wrongly-issued preliminary injunction, see Ofer Grosskopf & Barak Medina, Remedies for Wrongfully-Issued Preliminary Injunctions:  The Case for Disgorgement of Profits, 32 Seattle U. L. Rev. 903 (2009).)  There would be no other claim arising from the good faith, though ultimately unsuccessful, assertion of rights under a patent, as discussed in my post last week.  

Finally, perhaps we will soon know the extent to which European competition law requires patent owners who enjoy a dominant market position to make their patents available on FRAND terms and not to obtain injunctive relief.  As suggested in an earlier post, this question may arise in the EC’s pending investigations of Samsung and Motorola and in the referral to the CJEU of questions relating to the German Orange-Book-Standard framework.

Thursday, May 23, 2013

Some Thoughts on Remedies for Wrongful Patent Litigation or Enforcement Under U.S. Law

Developments over the past few days suggested that it might be useful to say a few words about remedies for wrongful patent litigation or enforcement under U.S. law.  I will probably follow up next week with a companion piece on this topic in Europe and other jurisdictions.

First, as reported earlier this week on FOSS Patents, on Monday United States District Judge Ronald Whyte entered a preliminary injunction against LSI Corporation and Agere Systems LLC, ordering those firms not to enforce “any exclusion order or injunctive relief by the ITC,” which obligation “shall remain in effect until this court has determined defendant’s RAND obligations and defendants have complied therewith . . . .”  The action before Judge Whyte is similar to the action pending before Judge Robart in Microsoft v. Motorola, in that the plaintiff (here, Realtek Semiconductor Corp.) alleges that the defendants have breached an enforceable contractual obligation to license certain standard-essential patents (SEPs) on RAND terms.  In his order on Monday, Judge Whyte granted “Realtek’s motion for partial summary judgment that defendants breached their RAND licensing obligations to Realtek by failing to offer a license to the declared standard essential ‘958 and ‘867 patents before filing a Section 337 action at the ITC seeking an exclusion order and injunctive relief,” and preliminary enjoined the defendants from enforcing any such an order they may obtain from the ITC.  In finding for Realtek, Judge Whyte concluded that Agere had made “a binding contract with the IEEE” to license its SEPs on RAND terms, and that Realtek was a third-party beneficiary.  He then concluded that “like in Motorola, the act of seeking injunctive relief (here, at the ITC before proposing a RAND license to Realtek) is inherently inconsistent and a breach of defendants’ promise to license the patents on RAND terms.”   The judge then applied the four-factor test for preliminary injunctive relief, and concluded that all of the factors weighed in favor of granting the injunction.   

My initial take is that the Ninth Circuit is likely to affirm, given its affirmance last year of a similar order entered by Judge Robart in Microsoft enjoining Motorola from enforcing against Microsoft any injunction it might receive from a German court relating to the patents in suit in that case.  See Microsoft Corp. v. Motorola, Inc., 696 F.3d 872 (9th Cir. 2012).  That case involved a foreign anti-suit injunction, in which comity weighed against the injunction (though the court concluded that the impact was comity was tolerable); the comity factor is lacking here.  Moreover, as Judge Whyte noted, Agere and LSI commenced the ITC litigation before offering Realtek a RAND license, a factor that wasn’t present in Microsoft (and Judge Whyte specifically limited his holding to the facts at hand, “where defendants did not even attempt to offer a license . . . until after seeking injunctive relief”).  So altogether I would tend to think that the likelihood of affirmance is good.

Assuming the opinion withstands appellate scrutiny, I think it is a welcome development.  As I have noted before, the ITC is not bound by the U.S. Supreme Court’s eBay decision and cannot award damages, so injunctive relief in the form of exclusion orders remain the norm there, even in cases in which the risk of patent holdup may be substantial.  Colleen Chien and Mark Lemley have suggested some ways around this problem; the ITC could deny an exclusion order if it believes the public interest would be disserved, for example, or it could delay entry of an order to afford the defendant time to design around (though this might not be very helpful if the patent in suit is standard-essential).  But Judge Whyte’s decision may provide yet another option for preventing ITC exclusion orders from enabling patent holdup, though it remains to be seen how broadly the opinion will be interpreted.

Second, this week the State of Vermont passed a law allowing the state Attorney General to seek injunctive relief, civil penalties, and/or restitution, and private parties to assert claims for injunctive relief and damages, against persons making bad faith assertions of patent infringement.  The text of the statute is here, and the AG’s office reports that it filed its first lawsuit under the act yesterday.  One possible hitch, as I see it, is that according to Federal Circuit case law a person asserting an unfair competition claim such as commercial disparagement or tortious interference with contract based on an allegedly false assertion of patent infringement must prove by clear and convincing evidence that the defendant acted in both objective and subjective bad faith.  See Adept, Inc. v. Murex Securities, Ltd., 539 F.3d 1354, 1370 (Fed. Cir. 2008); Dominant Semiconductors SDN BHD v. Osram GmbH, 524 F.3d 1254, 1260 n.5 (Fed. Cir. 2008).  The court's rationale seems to rest on both patent preemption principles and Noerr-Pennington concerns.  (The Noerr-Pennington doctrine is derived from antitrust case law in which the Supreme Court has held that a person’s right to petition the government for redress means that the person is immune from antitrust liability for, inter alia, the act of commencing civil litigation, unless the person asserting the antitrust claim proves objective and subjective bad faith by clear and convincing evidence.  Not all courts believe that Noerr-Pennington  applies outside the antitrust context; the issue is whether the doctrine is based upon the First Amendment or only an interpretation of antitrust law.)  The Vermont statute doesn’t discuss the burden of proof or the requirement of both objective and subjective bad faith, and without such a limiting construction I think the statute might fail the Federal Circuit's test--though whether the Federal Circuit's test is the last word on the subject is of course another matter.  It will be interesting to see how the AG’s action will compare with the unsuccessful effort by Cisco to invoke the federal racketeering act (RICO) against a patent assertion entity, see In re Innovatio IP Ventures LLC Patent Litig., __ F. Supp. 2d __, 2013 WL 427167 (N.D. Ill. 2013)).

A third possibility that I’ve been mulling over recently is whether it can ever be a violation of U.S. antitrust law for the owner of an SEP who has made a RAND commitment to attempt to obtain injunctive relief against an allegedly unauthorized user of the SEP.  (For violations of U.S. antitrust law, the available remedies include injunctive relief and treble damages.)  The FTC’s consent order relating to Google and Motorola Mobility included provisions prohibiting Google and Motorola from seeking injunctive relief against the infringement of SEPs (subject to exceptions), but that case may have been atypical because it involved an action under FTC Act section 5 and followed Google's acquisition of Motorola Mobility in May 2012.  In a case not involving such facts, I think the likelihood that a U.S. court would impose antitrust liability are low.  See, e.g., In re Indep. Serv. Orgs. Antitrust Litig., 203 F.3d 1322, 1325-28 (Fed. Cir. 2000) (holding that unilateral refusals to license patents are actionable only under extremely narrow circumstances); Intergraph Corp. v. Intel Corp., 195 F.3d 1346, 1356-62 (Fed. Cir. 1999) (narrowly construing the essential facilities doctrine); Image Technical Servs. v. Eastman Kodak Co., 125 F.3d 1195, 1218-20 (9th Cir. 1997); Data Gen. Corp. v. Grumman Sys. Support Corp., 36 F.3d 1147, 1187 & n.64 (1st Cir. 1994).  See also  Rambus, Inc. v. FTC, 522 F.3d 456 (D.C. Cir. 2008) (casting doubt on the use of antitrust law as a vehicle for redressing a lawful monopolist’s use of deception to extract higher royalties).  It’s also possible that the Noerr-Pennington doctrine would preclude such an antitrust claim, an issue discussed in this paper by Thomas Dillickrath and David Emanuelson--though I tend to think not, since the limitation on the patentee’s right to petition would only be a limitation as to one type of remedy, injunctive relief, and not as to damages.  But I need to think about the issue some more.  I will be addressing some of these antitrust issues in a forthcoming paper and may blog about them further.

Further to the above:  The Essential Patents Blog also has posts on both Judge Whyte's order and the Vermont AG's lawsuit.  Matt Rizzolo argues that Judge Whyte's order may be less significant than one might think because "Exclusion orders are automatically enforced by U.S. Customs and Border Protection".  I guess we'll see how it plays out.