Some Patent Injunctions Still Nearly Automatic, Says Cisco’s Top Lawyer
BERKELEY, Cal. -- The Supreme Court EBay v. MercExchange ruling of last year has district judges enjoining competing manufacturers for patent infringement, but not other kinds of defendant, said Gen. Counsel Mark Chandler of Cisco, owner of Scientific-Atlanta and Linksys. Justice Clarence Thomas wrote a unanimous opinion but concurrences varied, Chandler said Fri. at a Federal Circuit Bar Assn. symposium here. The concurrence generally being followed is Justice Anthony Kennedy’s, not Chief Justice John Roberts’s, he said. Chandler agrees with the ruling to make injunctions more discretionary, he said: “Equity has to be done can only be done on a case by case basis, looking at the 4-factor test” long assumed to govern the area.
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But fewer automatic injunctions mean judges are imposing the equivalent of compulsory licenses, Chandler said. “We are not in favor of compulsory licenses,” he said: “I would expect that everybody at this table would say the same thing.”
The decade has seen patent litigation grow from a “trickle” to a “torrent” for Cisco, Chandler said. Defending patent infringement claims “has become the largest single item in my budget,” he said, without quantifying. It’s an “ugly” picture because the work siphons “more and more” money into litigation at Cisco and other technology companies, he said.
The suits have an “in terrorem effect, with burdens on defendants far outweighing some plaintiffs’ contributions to the economy, Chandler said. The $612 million Research In Motion paid NTP to settle claims involving the BlackBerry was wealth “pulled out of the productive economy” over patents that the U.S. Patent & Trademark Office found unenforceable, he said. A defendant like RIM can find itself in a box, said Eli Lilly Gen. Counsel Robert Armitage. Calling an injunction unfair because it would shut down the company over a single central patent, he said RIM will have trouble fighting a large damages award with the argument that the infringement wasn’t very important.
Global disputes are growing despite the Trade-Related Aspects of Intellectual Property Rights (TRIPS) treaty, said Armitage. TRIPS was supposed to protect patent rights but has created new lawsuit opportunities, he said.
Patent reform is tricky because, as defendants, companies “have different interests that are stake,” Chandler said. Any Cisco product’s patent could be contested by thousands of patent holders, and the ease of designing around their rights varies widely, he said. The company wants the U.S. system to reduce the “very big burden for the defendant” of showing that an invention didn’t merit a patent, and it wants changes on injunctions and the measure of damages, Chandler said. He urged a chance in the wilfulness standard for infringement, saying he sees encouraging signs in that direction. Chandler also backs “apportionment of damages,” so a product’s entire value isn’t on the line with each of multiple infringement claims. But he opposed venue legislation against forum-shopping, calling it a “symptom of an underlying imbalance rather than a cause of a problem.”
Armitage plugged the Coalition for 21st Century Patent Reform, which he said is trying to make good on 2004 ideas from the National Academies of Sciences on opening the system to public participation so undeserved patents can be challenged before or after issuance. Patent examiners need much more guidance from applicants on “prior art” and other qualifications for protecting an invention, he said. “The Patent Office will almost cease to function” unless “the paradigm” changes to help examiners with the spiraling complexities, Armitage said.
Rambus’s business model -- as an innovator that sells rights to technology to other companies -- will be more prevalent as the economy keeps evolving away from integrated development and manufacturing companies, said Rambus gen. counsel, Tom Lavelle. “We are not a troll,” the term foes apply to critics regard the model as parasitic and exploitative, he said: “Rambus is in fact a product company. We are a different kind of product company.” Rambus has filed many patent infringement suits and triggered antitrust action by the FTC, which this month capped royalties on some of the company’s memory chip technology.
A Jan. Supreme Court ruling in MedImmune v. Genentech has been read as inviting licensors to insert in deals a provision that a license is void if licensees attack underlying patents’ validity, Sherry Knowles, GlaxoSmithKline senior vp, said. What’s less well recognized is that licensees can parry by demanding provisions that if the patents are knocked out, the licensees must be refunded all fees paid plus interest and penalties, she said.