'Defending American Courts Act' presently looks more like PR stunt than serious and well-thought-out legislative proposal to combat foreign interference in U.S. patent enforcement

The "Defending American Courts Act" is by far and away the lowest-quality piece of work I've ever seen from U.S. lawmakers in an IP context. It's so poorly done that even if one totally agreed, for the sake of the argument, with its sponsors' objective as laid out in that jingoistic press release, it still wouldn't make sense. That is remarkable.

The world definitely has a problem with standard-essential patent (SEP) rulings that encroach on other jurisdictions. Patents are meant to be territorial rights, strictly country-by-country (with the upcoming Unitary Patent treating the EU's Single Market as a country), but SEPs involve questions under contract and/or antitrust law. Contracts, or even just offers to enter into contracts, can have global scope, and relevant antitrust markets or determinations on whether a party's conduct was fair can be global, too.

I discussed the problem of extraterritorial overreach last May and published the slide deck I used for my contribution to a European Commission webinar on SEP enforcement.

So I'm definitely not a denier--I just advocate symmetry and rationality. It's key to understand that some extraterritorial decisions are actually just a reaction to what previously went wrong in other places. Also I've consistently praised the restraint that American courts exercise: if one party declines to be bound by a global FRAND rate-setting decision, they don't force it into such a license agreement; and even if both parties ask a U.S. court to set a global rate for them, U.S. courts don't necessarily devote time to such an effort.

The EU is complaining about Chinese antisuit injunctions. Its pending request for consultations, which is a complaint by any other name, is soon going to be put before a WTO Dispute Settlement Body (DSB) panel as it's a given that the EU won't be satisfied with China's response no matter the content. The United States could advocate its approach--being the last major jurisdiction not to force SEP holders or implementers into global license agreement--at the WTO level and/or through bilateral talks. If everyone exercised the same restraint as American courts, there wouldn't be a problem left to be solved by the proposed bill. There would be no more global rate-setting decisions in China, no more UK patent injunctions that become enforceable unless a defendant takes a license on court-ordered terms, no more German patent injunctions that come down because all that an implementer is prepared to do to avoid a German sales ban is to take a license to the German part of a given SEP portfolio.

To be fair, SEP holders do have a point when they argue that negotiated license agreements are almost always global, and piecemeal resolution requiring litigation in numerous jurisdictions isn't practical. That's a very valid policy concern. Hold-out is a serious issue in the technology industry, and there are implementers who would have to lose in maybe five or ten (if not more) jurisdictions before they would come to reason and finally take a global license. I'm not denying that part either.

Let's not spend too much time on the press release, which is replete with anti-Chinese rhetoric. Just one observation: Those "so-called 'anti-suit injunctions'" are not a Chinese legal innovation. The first Chinese SEP-related antisuit injunction came about a decade after the Microsoft v. Motorola antisuit injunction in the Western District of Washington that (for good reason) barred Motorola Mobility from enforcing a pair of Mannheim SEP injunctions. Maybe the concept of an antisuit injunction is part of the "American Intellectual Property" that Senators Thom Tillis (R-NC), Chris Coons (D-DE), Tom Cotton (R-AR), Mazie Hirono (D-HI), and Rick Scott (R-FL) accuse "the Chinese Community Party" of "stealing"--though America inherited it from the UK as a common law instrument.

It just doesn't come across as very sophisticated and thoroughly-researched when a press release makes it sound like China had contrived something strange and the reality is that it's part of American legal tradition.

Now let's finally turn to the proposed statute (S.3772). The plan is to add an additional § 274 to U.S. patent law (35 U.S.C.) relating to "foreign interference." It then defines "anti-suit injunction" as "an injunction issued by a foreign tribunal that purports to restrict the rights of a person to file or maintain [...] a claim of infringement of any claim of a United States patent in a tribunal of the United States [or the equivalent in the form of an ITC complaint]" as well as the related appeals. Those of you who have litigated SEP antisuit (and anti-antisuit) cases may already have noticed a major flaw: it's a narrow definition of an "anti-suit" injunction that doesn't--or at a minimum does not with sufficient clarity--cover "anti-enforcement" injunctions. For instance, the Microsoft v. Motorola antisuit injunction that Judge James Robart ordered in Seattle (and which the Ninth Circuit upheld) was not strictly an antisuit injunction: Motorola remained free to litigate the case (as it did) and to seek damages. It just wasn't able to enforce an injunction.

The language of the proposed statute refers only to "claims of infringement" but not to the enforcement of injunctive remedies. I've looked up various legal dictionaries. Cornell Law School's Legal Information Institute explains the term "claim" extremely well:

"A set of operative facts creating a right enforceable in court."

That dictionary also clarifies that "'claim' is slightly broader [than 'cause of action']," but in my understanding--please let me know via my contact form if you find evidence to the contrary--that does not mean it's a synonym for the enforcement of remedies.

The way those SEP antisuit injunctions typically work--and again, we don't have to look to China but can find examples in the U.S., especially the seminal one from Seattle--is that the enforcement of injunctive relief (as it has the potential to force someone into a global license deal, which would resolve a global dispute, thereby depriving all other courts of jurisdiction) is barred until the enjoining court has decided its case, which may then lead to a global license agreement that does away with the foreign infringement action.

Not only does the bill wrongly focus on "claim" (rather than the enforcement of remedies based on a claim) but it then also envisions the wrong sanctions--and especially sanctions that make no sense with respect to those alleged Chinese infringers. Just when you think it can't get worse...

The sanctions for someone leveraging a foreign antisuit injunction would be that:

• § 274 (b) Civil Action Presumptions:

  • "(1) the infringement is willful when determining whether to increase damages under section 284; and

  • "(2) the action is exceptional when determining whether to award attorney fees under section 285"

• § 274 (c) PTAB: discretionary denial of IPR petition

If we assume, for the sake of the argument, that there is a need to prevent China from stealing U.S. intellectual property, what Chinese company would really be impacted or deterred by this? Where are those Chinese companies that sell tons of smartphones and similar devices in the U.S. so that treble damages would hurt? Americans sure buy lots of China-made phones, but those are mostly iPhones...

Even if it's not about China, but say, you have a dispute between Samsung and a U.S. patent holder, it still wouldn't make sense on the bottom line. Samsung does a lot of business in the U.S., sure. So damages could be costly (though Samsung would never actually have to pay them if a foreign court meanwhile forces the patent holder into a global license agreement, which resolves the global dispute). But what would be the point in Samsung (which obtained a Chinese antisuit injunction against Ericsson about a year ago) not getting a PTAB review of the U.S. company's patents-in-suit? If the PTAB upholds those patents, great. If it doesn't, then those patents are invalid, and invalid patents aren't property. But Samsung would also do U.S. defendants a favor by eliminating patents that shouldn't have issued in the first place. Samsung and Ericsson settled quickly, but Apple is now actually recycling Samsung's 2021 PTAB petitions.

A few constructive suggestions:

• Instead of taking ill-conceived unilateral action through legislation, U.S. Senators should have more confidence in their country's courts. In this context, U.S. judges are probably in a better position to come up with solutions than the legislature. For example, Judge Rodney Gilstrap in the Eastern District of Texas granted Ericsson an anti-antisuit injunction against Samsung's Chinese antisuit injunction. It was appealed to the Federal Circuit, but then they settled.

• As I said further above, the U.S. does stand on higher ground with respect to extraterritorial patent rulings. Its antisuit injunctions come down only in exceptional cases (and interestingly, Chinese courts perform a multifactorial analysis that is far more similar to the U.S. approach than what you see in the UK or Germany). With the EU and China having a WTO dispute over the issue, the United States could and in my view should call on all other jurisdictions (including the EU and the UK) to refrain from patent rulings, including patent injunctions, that effectively force one party or the other to take a global license.

• If you want to enact a Defending American Courts Act, just make it easy--or, in fact, mandatory--for American courts to decline to recognize unilaterally-imposed global patent license agreements with respect to U.S. patents. If a UK court forces Apple to take a global portfolio license, a German court threatens to enjoin Ford unless it caves to a SEP holders demands on a global basis, or a Chinese court orders a patent holder like Dolby at an implementer's request to grant a global portfolio license--just don't recognize the U.S. part of those contracts. Let the patentee enforce those U.S. patents as if that foreign-imposed contract didn't exist in the first place, or let the implementer (such as an Apple) ask a U.S. court to set a FRAND rate for the U.S. part of the portfolio and potentially seek a refund if the foreign-imposed license agreement requires the implementer to overpay. If in the next step a party avails itself of the foreign court to impose contempt sanctions on the other party only because it wants American courts to rule on U.S. patents, the sanctions in the U.S. should be draconian so they truly deter bad behavior.

However, if it's a mid-term election year and you just want to fire some cheap shots at China, the current legislative proposal may be good enough. But only if the objective has nothing or very little to do with actually defending American courts' jurisdiction over U.S. patents.

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Judge denies motion to preclude Oracle from arguing Google's Java copyright infringement was willful

Judge William H. Alsup of the United States District Court for the Northern District of California has just denied a Google motion to preclude Oracle from arguing at next year's retrial that the search giant's infringement of Java copyrights (through incorporation of the declarations of 37 Java API packages into Android) was willful. In its opposition to Google's motion, Oracle had pointed to a particularly "expressive" piece of evidence: a Google-internal email according to which one of its key Android developers found Android's original Java libraries "half-ass at best" and identified a need for "another half of an ass."

The federal judge sees two legal reasons for which Google's motion couldn't succeed. Willfulness would have a bearing on the deduction of certain costs from profits that would have to be disgorged. Should Oracle, however, elect to seek statutory damages instead of, for example, a disgorgement of profits, then up to $150,000 per work infringed, as opposed to the standard maximum of $30,000, would be available. No matter how unlikely Google (and presumably many observers) consider a later Oracle choice to seek statutory damages, Judge Alsup interprets the law as preventing his court "from compelling Oracle to elect its measure of damages early on."

But the outcome isn't all bad for Google. The good among the bad from Google's perspective is that Judge Alsup has simultaneously decided that the trial would be bifurcated. The jury would firstly rule on Google's "fair use" defense without being briefed on Oracle's damages theories; then, if Oracle prevails (which I'm sure it will), damages and willfulness evidence will be presented in the second phase of the trial.

After a "fair use" finding, the next factual issue for the jury to decide will be willfulness. Thereafter, depending on the outcome, cetain damages theories may or may not be presented.

This approach means Google avoids its worst-case scenario, which would have been for the jury to hear about evidence such as the second "half of an ass" before making a decision on the "fair use" defense. I don't know how Google and its lawyers feel about this, but I wouldn't be surprised if they were actually rather pleased. They might have known all along that it was (at best) a long shot to try to avoid any willfulness discussion, so this here may be the best outcome they could have realistically expected.

For now, it appears that Google will be able to present some evidence and argument relating to its equitable defenses. Oracle might use some of the evidence that also has a bearing on willfulness to counter Google's claims that it relied on certain public statements by Sun. If not, Oracle would be substantially disadvantaged as a result of Judge Alsup's pretrial decisions.

So I expect to see some fights further in the process over which pieces of evidence that relate to willfulness are admissible as evidence in the first trial phase anyway (because of some other kind of probative value).

It's worth noting that Judge Alsup was much less concerned back in 2012 about a jury hearing more evidence than necessary. At the time he decided to put Google's defenses, especially "fair use," before the jury even though he ultimately held the infringed declaring API code non-copyrightable (which, as everyone knows, the Federal Circuit reversed and the Supreme Court declined to even take a look at). If he had made his finding before the jury trial, and if it had been upheld (in a parallel universe), the first jury would never even have had to think about "fair use." But this remand is different in some respects, including this one.

A key issue to decide will be whether the court-appointed expert from the first trial, Dr. Kearl, can still testify even though he has in the meantime done work for Samsung, a Google Android partner. I would be extremely surprised if a judge who showed concern in 2012 about the court, including appeals courts, being potentially influenced by bloggers now had no problem with a court-appointed expert--who undoubtedly and massively influences the court and the jury--being aligned with one "camp." I can't imagine that we'll see Dr. Kearl appear at next year's trial, but a formal decision has yet to be made.

Here's the order:

15-09-18 Order Denying Google Motion to Preclude by Florian Mueller

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Google found its own Java libraries "half-ass at best", needed "another half of an ass", took Oracle's APIs

This morning I found out I had actually missed the funniest piece of evidence in that whole Oracle v. Google Android-Java copyright infringement case. I've been following the case ever since it started (it had its fifth anniversary last week) but just learned this morning, when reading a new filing by Oracle in the California remand proceedings, that a Google-internal email (by Android developer Chris Desalvo to his boss, Andy Rubin) stated the following (click on the image to enlarge or read the text below the image):

Subject: Java class libraries

With talks with Sun broken off[,] where does that leave us regarding Java class libraries? Ours are half-ass at best. We need another half of an ass.

-chris

Oracle points to this Google-internal memo (which I found on another blog that covered the 2012 trial but was totally biased in Google's favor, hence got the copyrightability part completely wrong and never wanted to draw attention to this rather telling email) as part of its argument that Google's use of the 37 Java APIs at issue in this copyright infringement case was willful and that Oracle should not be precluded (despite a Google motion in that regard) from telling the jury the whole story about Google's fully-intended infringement. This is the introductory section of the filing (the "ass" part comes after the part I quote here):

"Google is a willful infringer. Google copied and distributed without authorization Sun/Oracle's 37 Java API Packages (and RangeCheck and the eight decompiled files, for that matter). Google knew full well that this was copyrighted material, that it needed to take a license, and that its failure to do so subjected it to legal liability. Indeed, Google's employees were instructed to conceal the scope of the infringement for as long as possible as they 'scrubbed the js' from Android. At no point did anyone inside Google ever suggest that its unauthorized copying was 'fair use'--nor does it have an opinion of counsel justifying its actions.

Google simply didn't care that it was willfully infringing Sun's (and later Oracle's) copyrights. Sun was weak and Google needed to get to market with a mobile solution. When Oracle acquired Sun, Google again had the chance to do the right thing—and this time it faced an opponent that was not hemorrhaging revenue and watching its market capitalization drop through the floor. At that point, Google's executives candidly acknowledged that they needed the Java API Packages, because 'the alternatives all suck.' Google believed it would be 'out of business in 10 years' if it did not succeed in mobile. Still, Google did not do the right thing and take a license. Google stands alone among large companies who commercially exploit the Java Platform without complying with the license terms.

Now Google wants to escape any meaningful consequence for its actions. Google argues that the only consequence of a deliberate wrongdoing that earned it many billions of dollars in profit, severely harmed the Java Platform, and allowed Google to maintain a dominant market share in the search engine advertising market, is the difference between $75,000 and $150,000 in statutory damages. Google tries to convince this Court that it simply makes no difference at all that it knowingly and deliberately took the property of another in violation of the law while earning untold billions in the process.

Google is utterly wrong. Willfulness does matter—even when the infringement is on an epic scale. It matters because for hundreds of years, at law and equity, the courts have consistently recognized that conscious wrongdoers must be deprived of any benefit whatsoever from their knowing choice to disobey the law. The trier of fact has always had the discretion, at law and at equity, to take into account conscious wrongdoing when accounting for profits. The Supreme Court has repeatedly affirmed that rule in numerous contexts, the rule has been applied for decades in all types of intellectual property cases, and Congress legislated that rule when it explicitly adopted the rationale of one of those Supreme Court copyright cases, Sheldon v. Metro-Goldwyn Pictures Corp., 309 U.S. 390 (1940), in Section 504(b) of the 1976 Copyright Act. The jury is entitled to consider it here. Accordingly, Oracle proposes herein both a verdict and a jury instruction that properly address this issue."

The section quoted above makes reference to "fair use," the defense because of which the appeals court ordered a remand. This week Steven Huwig, a professional software developer (who among other things wrote software for a large New York bank), said the following about Google's "fair use" defense on Twitter, which suggests (without him using the same terminology) that he still considers the Android class libraries "half-assed":

"Oracle v. Google in a nutshell: Android is like a parody of Oracle JDK, but there's no fair use exception for this kind of parody."

Parodies in general do fall under the "fair use" exception, but not unintended ones.

If you're interested in more detail on Oracle's lawyers' legal argument as to why they should be allowed to present willful-infringement evidence to the retrial jury, here's the filing:

15-08-20 Oracle Opposition to Google Motion to Preclude Willfulness Evidence by Florian Mueller

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Oracle and Google agree on scope of supplemental Android-Java copyright infringement complaint

Further to last week's case management order in the Oracle v. Google Android-Java copyright infringement case, either party has filed a motion as ordered by Judge Alsup.

Google wants the court to preclude Oracle from presenting willful-infringement arguments to the jury unless Oracle definitively elects to seek statutory damages (as opposed to just claiming that it could do so later, no matter how likely or unlikely, given that statutory damages would be tiny as compared to what's at stake here). On that one, the parties disagree. I view this as part of the wider dispute between them over what the jury can be told next year. In a best-case scenario for Google, it would be able to confuse the jury as it did in 2012) with equitable-defenses arguments that are legally unrelated to fair use but easily mislead laypeople, while Oracle would not be allowed to argue that Google's infringement was (as it really was) reckless. In a best-case scenario for Oracle, the equitable defenses wouldn't play a role in the trial but Oracle would be able to present evidence for Google having willfully infringed (internal emails of the "making enemies down the road" kind support that one).

Oracle's motion is about supplementing its complaint in order to reflect new developments over the last few years (since the cut-off before the first trial). Google had said from the beginning that it would not oppose a mere supplementation in terms of making a few more years part of the trial scope, but that it wanted to prevent Oracle from (rather than just supplementing) amending its complaint. In other words, Google said they were fine with more of the same, but not with anything they would consider substantively new.

I wouldn't have expected this, but they have actually agreed on what Oracle can say in a supplemental complaint. Obviously, Google doesn't concede anything. It's not about merits, just about scope at this stage. Even the scope could still give rise to disagreements later in such contexts as discovery: the supplemental complaint would still be interpretable. But Oracle has made things easier for the court by dropping everything that Google would have considered to be an amendment and not merely a supplementation of the complaint. Unless the court has any concerns that Google doesn't have, this one will simply be approved now.

Here's the supplemental complaint (this post continues below the document with the key points ina bullet-point format):

15-08-06 Oracle v. Google Supplemental Complaint by Florian Mueller

A few key facts about the supplemental complaint:

• The additional Android versions Oracle says infringe its copyrights just like previous versions allegedly did are:

  • Gingebread (released in December 2010)

  • Honeycomb (released in February 2011)

  • Ice Cream Sandwich (released in October 2011)

  • Jelly Bean (released in July 2012)

  • KitKat (released in October 2013)

  • Lollipop (released in November 2014

• The 37 Java API packages at issue are (this is not new, just stating for a point of reference):

  java.awt.font, java.beans, java.io, java.lang, java.lang.annotation, java.lang.ref, java.lang.reflect, java.net, java.nio, java.nio.channels, java.nio.channels.spi, java.nio.charset, java.nio.charset.spi, java.security, java.security.acl, java.security.cert, java.security.interfaces, java.security.spec, java.sql, java.text, java.util, java.util.jar, java.util.logging, java.util.prefs, java.util.regex, java.util.zip, javax.crypto, javax.crypto.interfaces, javax.crypto.spec, javax.net, javax.net.ssl, javax.security.auth, javax.security.auth.callback, javax.security.auth.login, javax.security.auth.x500, javax.security.cert, javax.sql

• Oracle points to Android's expansion into various areas:

  • Android Wear

  • Android TV

  • Android Auto

  • Household appliances such as refrigerators, microwaves, washing machines, and air conditioners

  • Google Play, the "digital storefront [that] sells apps, television shows, movies, music, books, newspapers, and magazines for Android users to download and use on Android devices"

• Key market data Oracle's supplemental complaint cites (mostly from Gartner):

  • Android's mobile phone market share increased from 40% to 80% between 2011 and 2014

  • Android's tablet market share rose from 20% in 2011 to nearly 70% in 2014

  • more than one billion monthly active Android users

  • more than 8,000 different Android devices

  • app downloads (I'll try to contribute a tiny bit to that next year) increased from 10 billion in 2011 to now more than 50 billion

  • number of available apps increased from 300,000 in 2011 to 1.5 million now

  • mobile advertising: Android now the top platform by ad revenue (46% market share) and traffic (65% market share); Google also points to this CNET article on Android having three times the market share of mobile ad traffic as compared to iOS)

• Google's financials: annual total revenue more than doubled from $29 billion in 2010 to $66 billion in 2014

• On the basis of the foregoing data, the supplemented complaint argues that "Google is destroying the market for Java as a mobile platform"

It would be interesting to know what else Oracle wanted to say but left out so as to avoid opposition from Google. From the email correspondence between the parties' lawyers that Oracle attached to its motion I was able to glean the following two paragraphs (according to the documents I've seen, these were the last two paragraphs removed in order to reach an agreement):

24. Upon information and belief, Google has continued to refuse to make Android compatible with the Java platform, at least in part, because if Android applications were compatible with the Java platform, then another mobile OS provider could use the Java platform to create a mobile operating system compatible with those applications. If such a provider could attract users to a new mobile operating system capable of running both Android and Java applications, then Google would face a fundamental threat to its dominance in the market for search engine advertising, because it would not be able to direct users to its search engine.

25. Google, unlike Oracle, is not dependent upon revenues from the platform itself, because its real goal is to continue capturing search engine advertising revenues. Google is therefore able to offer at no charge what Oracle has worked hard to build and maintain, and in the process to destroy the value of the Java platform in a market that has become the most lucrative of this generation.

Basically, those two paragraphs are about the difference in business models and the implications it has. Those differences are obvious to all industry observers.

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