Patent Fraud Doesn't Void Attorney-Client Privilege

A federal judge in Philadelphia has preserved the attorney-client privilege for a pharmaceutical company that had been found to have defrauded the patent office.

Patent Fraud Doesn't Void Attorney-Client Privilege

A federal judge in Philadelphia has preserved the attorney-client privilege for a pharmaceutical company that had been found to have defrauded the patent office.

Patent Fraud Doesn't Void Attorney-Client Privilege

A federal judge in Philadelphia has preserved the attorney-client privilege for a pharmaceutical company that had been found to have defrauded the patent office.

Jury to Decide How Much More Samsung Must Pay Apple in Patent Case

In August last year, a California jury found that Samsung infringed on a series of Apple patents and needed to pay more than $1 billion in damages. But the judge later revisited that price tag and vacated about $450 million of that original award, saying it was unclear how the jury calculated the original figure.

Samsung was still required to pay Apple $600 million. And the judge, Lucy H. Koh, of the Federal District Court for Northern California, ordered the new trial to assess whether Samsung should pay more or less than the $450 million that was vacated.

For Samsung and Apple, the two biggest profit makers in the electronics industry, a single handoff of $1 billion would not greatly affect the companies’ finances. But the fight over damages is more about the future than the present. Samsung and Apple are embattled in multiple patent disputes, and the final award could influence another jury to make similar damage calculations in future cases.

“This is a judgment based on some of its products, particularly old products,” said James E. Bessen, a lecturer in law at the Boston University School of Law. “Samsung doesn’t want similar judgments on more recent products as well.”

In the original case, Apple accused Samsung of violating several of its patents and “ripped off” its iPhones and iPads. In the trial, which lasted about a month, Apple’s executives and designers detailed their design processes and compared Apple’s products with Samsung’s to illustrate how the products were similar.

Jury selection for the trial on the damages award started Tuesday, and is expected to last about a week. Some of Apple’s top leaders, including Philip W. Schiller, Apple’s senior vice president of worldwide product marketing, are expected to testify.

The trial will involve five patents, including one that covers the design of the face of a mobile device. It will also cover 13 products, including Samsung’s Galaxy Tab tablet and Samsung’s Captivate smartphone.

Much of the trial is likely to focus on how the damages should be calculated. The jury could decide Samsung has to pay for Apple’s lost profit as a result of Samsung’s products being in the market. Or it could also decide that Samsung must pay royalties for each device it has sold that carry the features covered by the patents.

The amount of damages may have become muddied in last year’s trial because the jurors were required to fill out a complex 20-page form when calculating the amount owed to Apple. In the new damages trial, jurors will instead be required to fill out a much simpler one-page form.

Apple and Samsung declined to comment.

In the trial last year, Samsung was criticized for engaging in some foul play, like when it publicly released some evidence that the judge had ordered to be excluded.

Samsung was scrutinized again last week in a separate case, in which a judge determined that the company violated a court-ordered agreement to keep some Apple documents secret. During the discovery process, Apple had given Samsung confidential patent licensing agreements with Nokia, Ericsson and other companies — privileged information only for Samsung’s lawyers working on the case.

But Samsung was found to have shared the documents internally with employees and unauthorized lawyers so it could leverage its negotiations with Nokia and Ericsson. Apple and Nokia are expected to recommend a punishment for Samsung in a hearing on Dec. 9.

In its patent feud with Samsung, Apple has been largely victorious in the United States. Both companies convinced the United States International Trade Commission that the other had violated patents, resulting in bans on each other’s products. However, the Obama administration ultimately vetoed the ban on Apple products, but upheld the ban on Samsung products.

Another battle between Apple and Samsung is not far away. The two companies are scheduled for another trial in March 2014, which involves a different set of Apple patents and some newer products, including Samsung’s popular Galaxy S III smartphone — a product that surpassed the iPhone in sales at one point. That lawsuit, which will also be overseen by Judge Koh, could result in even larger damages if Samsung were to be found guilty.

That lawsuit is most likely what Samsung is most concerned with, Mr. Bessen said. “People already are aware that Samsung was found guilty,” Mr. Bessen said. “Their new trial is coming up on some of the later products. If Samsung can show they were able to reduce the damages, it might help them.”

F.T.C. Targets Patent Companies

The action is only the first step in what is likely to be a lengthy and broad investigation, which could eventually result in antitrust lawsuits against the companies.

Edith Ramirez, the chairwoman of the F.T.C., said in June that she believed there is little real evidence about the costs and benefits of a rising tide of patent litigation.

By a 4-to-0 vote, the commission agreed to seek public comments on an investigation of “approximately 25 companies that are in the business of buying and asserting patents,” the agency said in a statement. It also will look at about 15 other companies that assert patents in the wireless communications industry, including manufacturers of smartphones.

After reviewing public comments, the trade commission will seek to issue subpoenas to the patent assertion entities, which are also known, unflatteringly, as “patent trolls.”

“Patents are key to innovation and competition, so it’s important for us to get a better understanding” of how the entities operate, Ms. Ramirez said in the statement Friday.

She said the Federal Trade Commission Act allows the agency to gather information about the financial operations of the companies, and it will seek to uncover how much they earn from patent lawsuits and licensing and how the profits are distributed to investors.

That information can form the basis of antitrust lawsuits, among other actions.

The purpose of the inquiry is “to expand the empirical picture on the costs and benefits” of the companies’ activity, Ms. Ramirez said. “What we learn will support informed policy decisions.”

The New York Times reported in June that Ms. Ramirez was trying to get the approval of the full commission to begin issuing subpoenas to the companies, which accounted for more than 60 percent of the 4,000 patent lawsuits filed in 2012. That figure was up from 29 percent two years earlier.

President Obama also has called for the federal government to ascertain how patent assertion entities are operating; he directed executive agencies to take steps to “protect innovators from frivolous litigation.”

The companies that are generally pointed to as the largest of the litigators say that while there is abuse of patents in some sectors, they are not themselves involved in frivolous litigation.

Patent assertion entities span a spectrum. On one end are companies that are essentially legal shells that send letters to businesses claiming infringement and demanding payments; in 2011, for example, such a company targeted coffee shops for setting up Wi-Fi networks for customers.

At the other end are companies like Mosaid Technologies and Intellectual Ventures, which buy large portfolios of patents from technology companies like Microsoft and Nokia, using them to generate licensing payments that run to the millions of dollars.

Patent Case Has Potential to Give Apple the Upper Hand

But if a final ruling in a case against Samsung goes Apple’s way on Friday, Apple would clearly hold the momentum in the patent disputes engulfing the mobile market.

The federal International Trade Commission is expected to say on Friday whether it will uphold a preliminary finding that Samsung mobile products violated a handful of Apple patents. A decision against Samsung by the commission could result in an import ban on some of the company’s mobile devices.

A decision for Apple would be its second major legal win against Samsung in less than a week. On Saturday, the Obama administration vetoed the federal commission’s ban on Apple mobile products in a separate case brought by Samsung.

That rare move — the first time for such a veto since 1987 — was a major victory for Apple and other companies that had argued that disputes over a class of patents known as standards-essential patents should not lead to import bans by the trade commission.

Carolina Milanesi, a Gartner analyst, said that if Apple were to score a second victory with the International Trade Commission this week, the company would climb to a significant position of power in patent feuds — not just against Samsung, but against other companies as well.

“Apple can use that as a warning and say, ‘Look, if it hasn’t worked with Samsung, why would it work with you?’ ” she said. “It’s not real power. It’s more like a mind game.”

The patent disputes have led to a possible political skirmish between the United States and South Korea, where Samsung is a celebrated hometown legend. The decision on Saturday vexed the South Korean government, which issued a statement expressing concern that the ruling may have violated Samsung’s patent rights. The government pledged to watch the commission’s ruling on Friday in the separate case for fairness.

Essential patents, like those at the center of the dispute in Saturday’s veto, cover basic technologies that companies have to support in their products to comply with industry standards. In the case between Apple and Samsung, the standard involved wireless communications. The Obama administration said it overruled the decision on Saturday partly because it feared essential patents, which holders agree to license on reasonable terms, were being used in ways that could hurt competition and consumers. Apple and Samsung disagreed on whether Samsung was offering to license it essential patents on reasonable terms.

The decision on Friday is not over essential patents. But if the commission hands Apple another victory, Robert P. Merges, a law professor at the University of California, Berkeley, said the Obama administration could again overrule any import ban the commission puts in place, as part of a strategy to diminish the power of patent litigation as an industry weapon.

“I think there are a lot of political implications,” he said, referring to the possible reaction by other governments. “You’ll have the obvious favoring-the-home-team problem. But I would be shocked if they didn’t think this through carefully.”

Kristin Huguet, an Apple spokeswoman, declined to comment on the case before the commission’s decision. David Steel, an executive vice president for Samsung, declined to comment.

Already, Apple has scored the biggest legal victory by far, by winning against Samsung in a federal court last year. In that case, a jury awarded Apple $1 billion in damages for violations of mobile patents related to the iPhone and iPad. That award was later reduced to $599 million by a judge, though the figure could go back up as the case drags on in court.

Although the case was a decisive win for Apple, the judge overseeing it denied a request by Apple for a permanent injunction against the sale of some Samsung mobile products. A Federal Appeals Court is expected to hear arguments on Friday from Apple about why such an injunction should be granted.

In another positive development for Apple, a Federal Appeals Court sent a patent case that Apple brought against Motorola Mobility, which is owned by Google, back to the trade commission this week. The ruling gives Apple another shot at winning an important ban on Motorola mobile products after the commission dismissed Apple’s complaint.

Apple has long argued that companies making smartphones based on Google’s operating system, especially Samsung, are copycats that have swiped many of the technical innovations that, at one point, gave the iPhone and iPad a huge edge.

But the wheels of justice grind along slowly, and as Apple’s suits have snaked their way through the courts in the last several years, the popularity of Android phones has continued to grow, swallowing much of the mobile market. In the second quarter of the year, Android phones accounted for almost 80 percent of global smartphone shipments, up from just under 70 percent the year before, according to IDC, the research firm.

The iPhone accounted for 13.2 percent of smartphone shipments in that same period, while Samsung’s share was 30.4 percent, IDC estimated.

It is unclear whether a series of legal setbacks would be more than a speed bump for Samsung, now the world’s largest mobile phone maker. Samsung has argued that it can modify the software in its phones so they steer clear of Apple’s patents, which could allow it to dodge sales bans.

Still, if the tide of legal battles begins to shift decisively in Apple’s favor, the company could extract a juicy financial settlement from Samsung and put the distraction of fighting its biggest rival behind it.

Justices Appear to Favor Fed. Courts as Forum for Patent Mal Cases

Lawyer malpractice cases, usually handled in state courts, rarely find their way onto the docket of the U.S. Supreme Court.

NPE: The Scarlet Letters of Patent Ownership

The continuing outrage against patent owners deemed nonpracticing entities (NPEs, aka trolls) appears to be part of our schizophrenia over wanting an economy dominated by creative business types and hating the creative business models that foster that domination. It now appears that there are further factures in what should be deemed a bad NPE and what should be considered a good NPE. In a recent congressional hearing, there were distinctions made among patent owners that just buy patents, patents owners that may have done research for some patents and may buy other patents and university research that produces patents that are commercialized by technology transfer departments.

NPE: The Scarlet Letters of Patent Ownership

The continuing outrage against patent owners deemed nonpracticing entities (NPEs, aka trolls) appears to be part of our schizophrenia over wanting an economy dominated by creative business types and hating the creative business models that foster that domination. It now appears that there are further factures in what should be deemed a bad NPE and what should be considered a good NPE. In a recent congressional hearing, there were distinctions made among patent owners that just buy patents, patents owners that may have done research for some patents and may buy other patents and university research that produces patents that are commercialized by technology transfer departments.

Bits Blog: The Patent, Used as a Sword: An Outtake From the 1980s

I.B.M. At the dawn of the PC era, I.B.M feared that Apple would move on its lucrative mainframe business.

In the long narrative tour of the patent system published on Monday, “The Patent, Used as a Sword,” one story line is the strategy of Apple as it seeks to fend off competition in the smartphone market. Apple’s main rival, of course, is Google and the handset makers that use its Android software.

For Apple, the pioneering innovator in smartphones, patents are a means to an end. Its goal is not money — at least not so much in the short-term sense of extracting licensing revenues. Instead, Apple is trying to use its patent portfolio as a weapon for competitive advantage. If Apple can force rivals to redesign their products, Apple can slow down Samsung and others.

Apple’s “sacred stuff,” as one former company executive put it, is its technology that controls the user experience of the iPhone and iPad, the look-and-feel features.

More than a quarter of a century ago, Apple found itself in a patent negotiation with the most powerful technology company of its day, I.B.M., shortly after Steve Jobs had been forced out.

By the mid-1980s, the I.B.M. PC, introduced in 1981, had been mimicked by clone makers, led by Compaq. I.B.M. was making the rounds collecting intellectual-property rent from the other companies in the personal computer business, starting with Apple, the unclone. The computer giant wanted money, yet it had a strategic agenda as well.

An I.B.M. team showed up at Apple’s headquarters in Cupertino, Calif., armed with a big pile of documents, patents it claimed Apple might be infringing. Apple had its own stack of patents, but far smaller than I.B.M.’s pile. So Apple owed I.B.M. some money, if far less than the clone makers would pay in their cross-licensing deals with I.B.M.

But I.B.M. had one other demand. In the contract between the two companies, I.B.M. insisted that Apple pledge it would not make a computer larger than a standard government desk.

“It was one of their hot buttons — I.B.M. was concerned that Apple would compete with them in mainframes,” recalled Irving Rappaport, former associate general counsel for intellectual property at Apple. “We just laughed.”