AIPLA Newsletter

Patent Law Committee Newsletter
May 2021
Chair: Theresa Stadheim
([email protected])
Vice-Chair: Marina Zalevsky
([email protected])
Hello and welcome to the Spring issue of the
Patent Law Committee Newsletter.
Along with my Vice-Chair, Marina Zalevsky,
and the great leadership of our subcommittees, I look
forward to providing a forum for our membership to
identify and discuss patent policy, educate ourselves
and the public, and assist with developing positions on
issues of patent law to be advocated by the AIPLA.
Please see below for some ways you can get
involved in the Patent Law Committee. We have some
exciting ongoing projects and are always looking for
new project ideas. We think you will find the enclosed
articles instructive for your practice as well.
It is my goal to continue finding opportunities
for us to make an impact in Patent Law practice. Please
let one of us know if you have other ideas for research
or advocacy in patent law. I look forward to working
with you all.
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What’s Inside:

Upcoming Events (page 2)

Volunteer Opportunities (page 2)

Patent Law Committee in action (page 3)

Patent Law Committee Sub-Committee
Contacts and Updates (page 3)

Article - Damages for Patent
Infringements: The Chinese Perspective
(page 9)

Article - Did You Know That Blockchains
Can Help You, Too? (page 13)

Article - Celebrities and Creative Geniuses
Rejoice (Page 15)
May 2021
Upcoming Events
May 4, 1 to 2 PM Eastern Time
Patent Law committee Business meeting, virtual
We will discuss:
- 35 U.S.C. § 112 draft response shell - review and request for comments
- 35 U.S.C. § 101 draft response shell - status and next steps
- Professional Programs committee - what they do and how you can help
- Recap of Patent Prosecution Bootcamp
- Presentation on different PTAB issues (tentatively with a short talk by PTAB judge)
- Updates from our subcommittees
Join event: https://zoom.us/j/91870184695?pwd=aHM4M0N0QnZPZEdqSUtaMHhOclo1dz09#success
Recap of 2021 Patent Prosecution Boot Camp (PPBC)
The AIPLA Patent Law Committee hosted the 2021 AIPLA Patent Prosecution Boot Camp virtually on March 22-26th.
The Boot Camp, now in its 21st year, drew over 140 attendees including practitioners and students from across the
globe, and was moderated by Stefan Osterbur, Tony Curtis, and Marina Zalevsky. The program kicked off with a virtual
networking hour on the evening of March 22nd, with the substantive program beginning bright and early the next
morning. During the program, the faculty of 36 practitioners from the private practice, in-house, and government
domains lent their expertise in lecture-style sessions on a variety of critical patent prosecution topics, and conducted
claim drafting and office action response workshops. The Patent Law Committee is grateful for the continued
dedication of the faculty to the program, and for the USPTO’s support by providing Supervisory Patent Examiners who
offered their insider perspective during the workshops. The moderators are grateful for these efforts, and for the
engagement of the attendees throughout the program, all of which was critical to the many compliments received
upon conclusion of the program.
Volunteer for one of these projects and/or leadership positions!
Ex-Parte subcommittee projects: Please see details below.
The Double Patenting/Terminal Disclaimer/Restriction Practice is looking for new leadership.
The Patent Law Committee is looking to form new 102 and 103 subcommittees to help with Ex Parte projects.
Please volunteer if you are interested.
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The Patent Law Committee in action
The Patent Law Committee provides comments and proposals to the AIPLA Board, USPTO, and other groups and
organizations on various patent law topics. This is a good way for members to be heard. For more details on any of the
below, please contact committee leadership.
Some of our recent efforts include:
The Patent Law Committee hosted the 2021 Patent Prosecution Boot Camp.
At the 2021 Midwinter Institute, the Programs – Stated Meetings subcommittee coordinated with the Mentoring
Committee and New Lawyers Committee for a February 4, 2021 program entitled: Getting and Keeping the Job:
Writing Skills to Impress Your Boss.
The committee started a project to put together office action response shells to help practitioners in responding to
various types of rejections. The committee started work with 101 and 112 rejections and will add 102 and 103 later on.
The committee is participating on a Final Rules Task Force in cooperation with Patent Agents, Corporate Practice, and
Patents-Relations with the USPTO Committee
For the rest of 2021 and beyond:
The Patent Law Committee will cooperate with various other committees to explore opportunities for collaboration on
committee activities, including CLEs.
One of suggested future activities is virtual PLC café to discuss current topics, projects, and challenges.
Patent Law Committee Sub-Committee Contacts and Updates
1. 35 U.S.C. § 101
Co-Chairs:
Deb Sengupta ([email protected]; John King ([email protected]), and
John Chau ([email protected])
This subcommittee serves as a resource, educator, and advocate for our members with respect to 35 U.S.C. § 101.
The subcommittee is currently working on a project with the goal of producing shell office action responses for 101
rejections, based on art area, alleged judicial exception, and other relevant criteria.
The subcommittee has completed Phase 1 of the project – Analysis of the Examples from USPTO Guidelines and is
finalizing format for cross-referring and sharing. The subcommittee started working on the final product, i.e., shell
responses.
The subcommittee will participate in Ex Parte project in relation to Section 101 issues before PTAB.
The subcommittee welcomes topic ideas and speaker volunteers for future meetings.
2. 35 U.S.C. § 112
Chair: Daniel Bliss ([email protected])
Vice-Chair: Mae Hong ([email protected])
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This subcommittee is dedicated to various projects concerning Section 112. Ongoing projects include monitoring and
writing about Federal Circuit and PTAB decisions with interesting Section 112 issues, participating in USPTO Section 112
studies, preparing educational materials, and arranging speakers on Section 112 topics for future AIPLA events. A current
outline includes:
1) 112 sixth paragraph
a. Impact of Fed. Circuit Williamson decision
b. Review Fed. Circuit decisions to identify any trends in applying Williamson
c. Develop practice tips
2) 112 second paragraph
a. Impact of S. Ct. Nautilus decision
b. Review Fed. Circuit decisions to identify any trends in applying Nautilus
c. Develop practice tips
3) Functional claiming
a. Review Fed. Circ. Decisions on functional claiming
This subcommittee generated a memo with practice tips and analyzing risk of Section 112 means-plus-function claims
under Williamson, which is now available on the microsite.
One issue under study is the different level of skill in the art applied by USPTO examiners for Section 112 purposes relative
to Section 103 purposes. Section 112 rejections often assume a lowly skilled artisan (e.g., someone unfamiliar with terms
of art or fundamental concepts in the art) while Section 103 rejections often assume an artisan with a higher level of skill
(e.g., someone who can modify complex machines to combine features of other complex machines for reasons that may
or may not be present in the cited art). The subcommittee believes that making the USPTO aware of this issue will reduce
the number of Section 112 rejections raised during prosecution.
This subcommittee drafted shell response and is currently working to finalize it for sharing.
The subcommittee will participate in Ex Parte project.
3. Broadest Reasonable Interpretation (BRI)
Chair: Ernie Beffel ([email protected])
Vice-Chair: Charlie Bieneman ([email protected])
This subcommittee has been approached about writing a book on BRI for use by Patent Examiners, based at least in part
of the judge’s guide on BRI. The subcommittee is working on a timeline for deliverables.
4. Double Patenting/Terminal Disclaimer/Restriction Practice
Chair: Vacant
Vice-Chair: Vacant
This subcommittee is looking for new leadership! This is an exciting opportunity to get involved with the Patent Law
Committee. Please contact Theresa Stadheim ([email protected]) or Marina Zalevsky ([email protected]) for
more information.
This subcommittee will look into issues in Double Patenting and Restriction Practice. The subcommittee is currently
investigating a proposal that modifies the USPTO’s rules for a terminal disclaimer based on a joint-research agreement
(37 C.F.R. § 1.321 (d)) so the rules are more similar to the rules for a terminal disclaimer based on common ownership
(37 C.F.R. § 1.321(c)), and into restriction topics related to improper Markush rejections.
The subcommittee is looking for volunteers to help with the projects.
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5. Ex Parte PTAB
Chair: Adam Stephenson ([email protected])
This subcommittee provides a forum for discussion and review of developments relating to ex parte proceedings before
the PTAB and to propose changes in the rules and practice for ex parte proceedings.
The ex parte appeals subcommittee was created to 1) study what could be learned by reviewing data from ex parte
appeals decisions from the PTAB and 2) determine whether any rule/policy changes could be identified for forwarding to
the USPTO or AIPLA Board for consideration.
At the present time, a significant body of ex parte appeals decisions data now exists covering the past 6+ years of
decisions. The subcommittee is kicking off projects to identify what we want to know.
The ex parte Appeals subcommittee is working on a proposal for the AIPLA resolution to be delivered to the USPTO to
engage in rulemaking to amend the Patent Rules to dispense with filing the reply briefs and potentially Examiner’ Answers
currently used in ex parte appeals to the PTAB. The briefing activities involved in preparation of the Examiner’s Answer
and the Reply Brief add many months to the appeal process not reflected in the PTAB’s current disposition statistics
(which only count pendency following docketing of an appeal). Research done by the subcommittee indicates that less
than 50% of filed notices of appeal actually result in a decision by the PTAB, resulting in considerable government fee
costs to applicants. The additional time spent in briefing and the added costs to applicants caused by these two additional
steps serves as a barrier for many applicants from pursuing appeals and likely impacts diverse applicants, independent
inventors, and startups in a disparate way during prosecution. In addition, the additional briefing increases overall
application pendency and consumes examiner time through the holding of the corresponding appeal conferences and
drafting of the Examiner’s Answers. The subcommittee plans to reach out to other committees for assistance in
developing a well-considered proposal supported by data demonstrating the benefits of this proposal to the Office and
to applicants, including underrepresented inventors.
Other projects the subcommittee is recruiting participants include the following:
1) A timing study of when patents issue following a PTAB Board reversal (looking to see if any
anomalies/delays by examiners can be identified).
2) An aggregate data study of whether oral arguments make a difference in the outcome of ex parte appeals
(for normal appeals not involving reexamination decisions).
3) A study ranking the most successful and least successful obviousness arguments in ex parte appeals before
PTAB. The output will include time trends by USPTO fiscal year to give a sense of movement by the Board
over time. This could become a yearly update publication for AIPLA by the committee.
Additional projects being considered by the subcommittee include the following:
1) A study to determine the correlation (positive or negative) between an Examiner’s allowance after an
interview statistics and what happens after filing a Request for Continued Examination (RCE) during
prosecution.
2) A study to produce affirmance/affirmance-in-part/reversal rates by issue on ex parte appeal (Sections 102,
103, 112, 101, etc.) for all active PTAB judges.
3) A study producing time trends by Technology Center for the reversal rate by issue on ex parte appeal for
the last 6 fiscal years, the goal being to identify disparities in examination performance as observed by the
PTAB.
The subcommittee is looking for volunteers to help with preparing the data analysis and particularly with analyzing the
results and writing up the conclusions. The data is being extracted from the Research interface in the Anticipat.com
website and participants will have free access to the website while the projects are ongoing. Please reach out to
committee chair Adam Stephenson at [email protected] for more information.
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6. IDS Subcommittee
Chair: Hayley Talbert ([email protected])
Vice-Chair: Mike Morris ([email protected])
This subcommittee identifies issues related to IDS as seen by practitioners.
The subcommittee researches and provides best practices for identifying when an IDS is needed and evaluating what is
“material” to patentability. Practitioners can benefit from training on ways to think about references, the timing of when
the references became known as compared to the timing during prosecution, and questions to ask to determine whether
to file an IDS.
This subcommittee is also investigating issues related to multi-jurisdictional patent prosecution. Other jurisdictions do
not have anything like an IDS requirement, yet a very high burden is placed on US applicants. Given the global nature of
patenting today, there is the risk that non-US inventors and foreign associates do not understand the duty of disclosure,
so much time and effort may be spent in educating inventors and foreign associates.
This subcommittee is planning to provide webinars on these and other topics. The next webinar planned will relate to
the Access to Relevant Prior Art Initiative.
7. Mechanical Patent Practice
Chair: Lisa Adams ([email protected])
Vice-Chair: Mitch Weinstein ([email protected])
This subcommittee is directed to mechanical practice. One of their activities is to develop and plan a joint program
between AIPLA members and the mechanical art units of the USPTO. An Educational Programming/Mechanical
Partnership Program subcommittee has been created and is chaired by Gauri Dhavan (Zoll Medical) to lead this effort.
The joint program is held annually at the USPTO and is directed to mechanical technologies and/or examiners and
practitioners focused on such technologies. A typical program includes 4-5 panels, with USPTO-provided topics sprinkled
throughout the day. Speakers include both USPTO personnel and practitioners specializing in the mechanical
technologies. Last years’ topics included patent office initiatives, a yearly case review, a panel focused on understanding
the drivers behind examiner and customer prosecution decisions, and a panel focused on best practices for
examiner/customer collaboration.
The subcommittee is working with the folks at the USPTO (Linda Dvorak and Chuck Marmor) to organize and coordinate
the programs.
For 2020, the Mechanical partnership event was scheduled for April 1 but got cancelled due to COVID-19. The new date
is November 4, 2021 (tentative).
The theme of the April event related to software issues in the mechanical space. As industries such as the medical and
transportation sectors become increasingly more high tech, strategies for protecting IP are evolving rapidly. If the event
is rescheduled, the examiners, prosecutors, and industry leaders will speak on interpreting computer-related claim
limitations, the use of functional language, the role of means-plus-function limitations in the mechanical arts, and how
to interpret and apply the newly revised Section 101 Guidance.
The program was going to include opening remarks from USPTO Director Andrei Iancu and an update on the JPO from
Japan Patent Office Director General Masanori Katsura, Patent Examination Department (Mechanical Technology).
The agenda also included two industry presentations. Joe Benz, Chief IP Counsel of Ford Motor Company, and Daniel
Shulman, Chief IP Counsel at Reynolds Group Holdings and Fram Auto Group, on how technological advancements are
impacting their IP strategies.
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8. Newsletter
Editor: Nelson Runkle ([email protected])
Regular newsletters are scheduled for release prior to or during each stated meeting. The committee requests articles
from its members as well as authors to prepare regular columns for the Newsletter.
9. Patent Exhaustion
Chair: Robert Mazzolla ([email protected])
This subcommittee provides a forum for discussion and review of developments relating to exhaustion of patent rights
in the context of contractual rights, such as sales and licenses. In particular, the Patent Exhaustion Subcommittee
monitors pending and decided cases of the Federal Circuit, Supreme Court, and District Courts; highlight important
developments in the law relating to patent exhaustion; analyze potential conflicts and contradictions in the law, including,
but not limited to, conflicting interpretations of Supreme Court and the Federal Circuit (e.g., Quanta and Mallinckrodt);
analyze statistics relating to decisions involving patent exhaustion issues, such as percentage of rulings in favor of
defendants asserting patent exhaustion, percentage of rulings in favor of defendants on particular grounds, tendencies
of particular judges or courts, trends in statistics over time, or any other statistics that may be useful for practitioners;
assess policies or practices for contracting parties seeking to avoid or track patent exhaustion in business negotiation
settings; discuss “open issues” for which there is not clear precedent; this may arise, for example, from changes in the
law (e.g., legislative changes), from Federal Circuit decisions that do not fully address an issue, from conflicting decisions
from District Courts, or from old precedents that may not be consistent with more recent trends; and pursue other topics
of interest to the subcommittee.
This subcommittee recently submitted a draft resolution for voting by Patent Law Committee members and hopes to
present the resolution soon to the AIPLA Board. The subcommittee also hopes to partner with the Legislation Committee
on such efforts.
The subcommittee also recently provided a condensed summary of the current state of patent exhaustion law and the
dualities that currently exist in patent exhaustion jurisprudence.
10. Patent Prosecution Boot Camp (PPBC)
Co-chairs: Stefan Osterbur ([email protected]) and Tony Curtis ([email protected])
This subcommittee plans the annual AIPLA Patent Prosecution Boot Camp. The 2021 boot camp was held virtually in
March 2021.
11. Programs – Hot Topics
Co-Chair: Gary Cohen ([email protected])
Co-Chair: Ben Borson ([email protected])
This subcommittee facilitates dialogue among AIPLA membership to drive a level of understanding and awareness, with
respect to selected legislation, rules and selected case law, that will permit the membership to better understand the
current state of patentability, as well as the impact of such current state on policy setting and optimal client service.
On January 21, 2021, the subcommittee organized a teleconference focused on patent eligibility under American Axle
Manufacturing v. Neapco Holdings (AAM). Speakers recruited from the membership, including student members,
discussed the patent at issue, U.S. 7,774,911, the district court discussion, appeal, denial of en banc hearing, denial of
motion to stay, and the petition for cert before the US Supreme Court.
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12. Programs – Stated Meetings
Chair: Charlie Bieneman ([email protected])
Vice-Chairs: Angel Lezak ([email protected]) and Ryan Connell ([email protected])
This subcommittee plans and serves as coordinators for the committee sponsored CLEs at the stated meeting. They work
with other committees to provide materials and coordinate educational sessions to AIPLA membership.
At the 2021 Midwinter Institute, the subcommittee is coordinating with the Mentoring Committee and New Lawyers
Committee for a February 4, 2021 program entitled: Getting and Keeping the Job: Writing Skills to Impress Your Boss.
The program is moderated by Mark Hollingsworth of Mueting Raasch Group. Ilene Rein, Executive Recruiter of Marking
and Sales Resources, Inc. will speak on job searching. Rochelle Lieberman of Lieberman & Brandsorfer will speak on
Patent/FTO searching skills. Matthew de Ruyter of SABIC will speak on patent drafting and prosecution skills especially
from view point of impressing inhouse counsel.
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Damages for Patent Infringements: The Chinese Perspective
Bashar Malkawi
Global Professor of Practice in Law, University of Arizona, James E. Rogers College of Law
As a country, China is the biggest player in the global patent market. In 2019,
approximately 4.381 million patent applications were submitted to the China National
Intellectual Property Administration (CNIPA)1. Furthermore, 452,804 patents were granted,
dwarfing the country in second place, the United States, with 354,430 patents granted,
and the European Patent Office at only 137,782.2 In addition, China is part of the World
Intellectual Property Organization (WIPO), having joined in 1980, as well as the Paris
Convention in 1985, and a member of both the Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS) and the Patent Cooperation Treaty (PCT). The recent
changes in approach by China to patent damages are, therefore, of high significance.
Chinese Patent Law: A Multi-layered Approach to Damages
China's Patent Law (CPL) was enacted in 1985 and amended in 1992,
2000 and 2008. Importantly, on 17 October, 2020, a new review was
passed, with the amendments due to take effect on 1st June, 2021.3
Compensation for patent infringement is one of the key areas of focus.
Because of the enormous pace of growth in recent years, and the
country's preeminent position highlighted above, China recognized
that reforms were needed to make the law sufficiently robust to tackle
the demands of the rapidly expanding market and create a better
playing field for both designers and investors.4 The aim, therefore, of
the new CPL is to improve patent quality and strengthen patent
protection,5 by ramping up law enforcement and increasing damages
for IPR infringements to act as a deterrent.
Rather like the legal approach in the U.S. and EU, the traditional
framework for calculating patent damages in cases of infringement in
China is multifaceted and founded on actual compensation. However,
in practice, China utilizes statutory damages in place of assessed
compensatory damages. According to research at Zhongnan
University, 97.25% of all patent infringement judgments are awarded
statutory damages,6 thus making it nigh on impossible to analyze any
About the author:
Bashar Malkawi is Global Professor of
Practice in Law at University of Arizona,
where he currently teaches corporate law,
intellectual property, and international
trade law. He is well-versed in teaching
and providing legal advice with 20+ years'
experience in private and public sectors.
He has written over seventy articles for
law reviews and professional publications,
which have appeared in such top-tier
journals as Journal of World Trade,
Harvard Negotiation Law Review, and
American Journal of Comparative Law.
Prof. Malkawi has received numerous
awards for his work. In addition to his
scholarship, he frequently consults for a
wide array of international organizations,
governments, and international law firms.
1
CNIPA Department of Strategic Planning, Intellectual Property Statistics Briefing 2019, Issue 28, January 3, 2019, 1
Statistica, ‘Ranking of the 20 national patent offices with the most patent grants in 2019’, Statista Research Department, (Dec 7
2020, London UK) <www.statista.com/statistics/257152/ranking-of-the-20-countries-with-the-most-patent-grants/> accessed: 8th
March 2021)
3
CNIPA, ‘Revised Law to Come into Effect in 2021’, (News, Media Perspective, 3rd November 2020)
<https://english.cnipa.gov.cn/art/2020/11/3/art_1347_154539.html>, accessed 8th April 2021
4
ibid
5
Can Huang, ‘Recent Development of the Intellectual Property Rights System in China and Challenges Ahead’, (2017) 13 (1)
Management and Organization Review, 13(1), 39, 41
6
Zhang Wei, ‘The overall amount of compensation for intellectual property infringement is low’, China Court Network (18th April
2018) <www.chinacourt.org/article/detail/2013/04/id/948907.shtml> accessed 8th March 2021, citing Intellectual Property Research
2
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judicially imposed royalty rates. Despite statutory levels not existing in U.S. law, the 25% ‘rule of thumb’ rule “is, in fact,
not meaningfully different from a statutory damages rule”,7 and their use in China is for similar reasons, namely the
benefit of simplicity and clarity.8 As Llewellyn writes, when using a traditional approach to assess damages, “a court is
almost inevitably forced to engage in speculation about what might have been: rarely is it merely a matter of looking at
how much profit did the plaintiff lose as a result of the defendant's infringing activity and awarding such a sum as
damages”.9 This adds a great degree of uncertainty as well as introducing complicated evidential problems. A fixed
royalty rate circumvents this problem, as do statutory damages (assuming the discretionary range is not too great).
However, in financial terms, China's statutory damages were of a significantly lower order of magnitude to the preUniloc 25% rule approach.10 This received much criticism from scholars and practitioners11, with patent infringement
awards being generally substantially lower in China than in the U.S.12 Following pressure to address the problem; this
gap has been reduced in the recent change of law, as highlighted below.
Actual Damages
The starting point in China is that compensation will be calculated based off the actual losses, calculated as the benefits
accrued to the infringer, the losses suffered by the patentee or a multiple of an assessed licence fee. Article 65 of the
2008 Patent Law states that: “the amount of compensation for the damage caused by the infringement of the patent
right shall be assessed on the basis of the actual losses suffered by the right holder because of the infringement”.13 If
difficult to assess, Article 65 goes on to state that profits earned because of the infringement can be used as the basis
(effectively, a disgorgement argument). If this also proves difficult, the “amount may be assessed by reference to the
appropriate multiple of the amount of the exploitation fee of that patent under a contractual license”.14 As in US law,
there is no fixed, statutory royalty rate.
However, the problem with actual damages is an evidential one. Ni Xiang explains that many Chinese companies fail to
keep transactional documents (either because of poor administrative practices or deliberately for tax evasion
purposes)15. This is exacerbated by the fact that China does not currently have a discovery process as they do in the US.
Center, ‘Report on Empirical Study on the Damage Awarded in the IP-infringement Cases’, (Zhongnan University of Economics
and Law, 2012)
7
Erik Hovenkamp & Jonathan Masur, ‘How Patent Damages Skew Licensing Markets’, (Coase-Sandor Working Paper Series)
(2016) 774 Law and Economics, 31
8
Robert P. Schweihs, ‘The Rule of Law Overrules the Rule of Thumb’, 2016, Economic Damages Insights, 86, 87
9
Gordon Ionwy David Llewelyn, ‘Assessment of Damages in Intellectual Property Cases: Some Recent Examples of "the Exercise
of a Sound Imagination and the Practice of a Broad Axe"?’ (2015) 27, Singapore Academy of Law Journal (Research Collection
School Of Law), 480 (paragraph 52)
10 The “Rule of Thumb” envisaged and disapproved of by them consists simply of a fixed ratio of 25:75 for determining a baseline
royalty, related respectively to the licensor and the actual or potential licensee, which then requires no further analysis to arrive at a
“reasonable royalty". trial courts to consider “[t]he portion
of the realizable profit that should be credited to the invention as distinguished from non-patented elements, the manufacturing
process, business risks, or significant features or improvements added by the infringer.” This factor is the embodiment of the Classic
25% Rule. See Robert Goldscheider, ‘The Classic 25% Rule and the Art of Intellectual Property Licensing’, (2011) 006 Duke Law
and Technology Review 1, 5, 11.
11 Yieyie Yang, ‘A Patent Problem: Can Chinese Courts Compare With the U.S. in Providing Patent Holders with Adequate
Monetary Damages’, (2014) 96, J. PAT. & TRADEMARK OFF. SOC’Y 140, 142
12
Patricia E. Campbell, & Michael Pecht, ‘The Emperor's New Clothes: Intellectual Property Protections in China’, (2012) 7 J. Bus.
& Tech. L. 69, 100
13
CCPIT Patent and Trademark Law Office, ‘Patent Law of the People’s Republic of China (2008)’, (Beijing 100031, China)
<www.ccpit-patent.com.cn/node/1068/1129>, accessed 9th March 2021
14
ibid, article 65
15
NI Xiang, ‘New Developments in Statutory Damages for Patent Infringement in China’, [2019]
Peking University School of Transnational Law Review, <https://stllawreview.com/index.php/2019/04/29/new-developments-instatutory-damages-for-patent-infringement-in-china/> accessed 9th March 2021
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Moreover, many right holders are reluctant to disclose the necessary evidence because it can reveal sensitive business
information. Irregular licence agreements also make it difficult to prove if licence fees have been paid or not, rendering
the royalty rate method ineffective.16
Statutory Damages
Because of these problems, Chinese courts rely heavily on statutory damages. Although not an option in most Western
systems, Chinese law specifically enables this: Article 65 states that if the first three methods of assessing actual
damages already listed are too ‘hard to determine’, the court may award statutory awards instead, with the current
range being from 10,000 yuan to 1 million yuan (approximately $1,490 to $148,950).17 In theory, therefore, statutory
damages are the fourth and last resort method in the hierarchy. Despite being considered by some to be ‘inadequate’
and ‘one size fits none’,18 statutory damages have become the standard remedy. However, this has a self-fulfilling
effect because, with exceptionally few awards being based on actual losses, unfair profits or a multiple of royalty rates,
many lawyers and industry specialists do not even consider these as options.19
Although case law shows a move towards higher patent damages claims,20 in practice many are settled prior to
judgment,21 and political pressure is also a factor,22 making it difficult to discern a consistent legal thread. Moreover,
the Supreme Court’s 2016 Judicial Interpretation shows that, for increased awards, the primary focus is on the first two
methods of calculation, i.e. proof of actual losses and profits, rather than royalty rates.23 The result is that royalty rate
assessments are broadly overlooked as a calculation method.
The New CPL 2021
Punitive damages
As a significant step to further the deterrent principle, the 2021 reforms in China will introduce punitive damages for
the first time. Despite reservations by certain scholars over litigation abuse and innovation suppression,24 the CNIPA
explained that this is part of the move towards a more prescriptive, stricter approach to compensating patent
infringements.25 From June 2021, Chinese law will allow the judge to award up to five times the original compensation
(the benefits of the infringer or the losses of the patentee) in punitive damages if he/she deems that the infringement
has been severe, wilful and/or persistent.26 This obviously mirrors the US remedy of ‘enhanced damages’ allowed under
16
ibid
Order of the President of the People's Republic of China No.8, ‘Patent Law of the People's Republic of China’,
<www.wipo.int/edocs/lexdocs/laws/en/cn/cn028en.pdf> accessed 9th March 2021, article 65
18
Xiaowu Li & Don Wang, ‘Chinese Patent Law's Statutory Damages Provision: The One Size That Fits None’, (2017) 26 Wash. L.
Rev. 209, 210
19
NI Xiang, n. 106
20
General Protecht Jiangsu Co, Ltd. v Bull Group Co. Ltd, 4 March 2019, Nanjing Intermediate People’s Court. GP claimed approx.
1 billion RMB for Bull’s alleged patent infringement.
21
In April 2019, Qualcomm and Apple resolved their extensive litigation in China (over 20 patent infringement lawsuits), as reported
in: Camilla Hodgson, ‘Apple and Qualcomm sign peace deal to end litigation’, Financial Times, (17th April 2019)
22
GP, n1. The Chinese Patent Office declared the patents invalid.
23
China Patent and Trademark Law Office, ‘Interpretation Of The Supreme People’s Court On Several Issues Concerning The
Application of Law In The Trial of Patent Infringement Cases (Ii)(effective as of April 1, 2016)’ <www.ccpitpatent.com.cn/node/3219/3218> accessed 9th March 2021
24
Zhu Li , ‘Punitive Damages Under Patent Law: Where Should We Go After Halo?’, (2017) 1 China Patents & Trademarks, 25, 33
25
CNIPA, ‘Revised Law to Come into Effect in 2021’(3rd November 2020) <China National Intellectual Property Administration
IPR Special Revised Law to Come into Effect in 2021 (cnipa.gov.cn)) accessed 9th November 2021
26
Jian Xu, ‘Ten Highlights of China's New Patent Law’ (Gowling WLG, 21 October 2020) <https://gowlingwlg.com/en/insightsresources/articles/2020/ten-highlights-of-china-s-new-patent-law/> accessed 9th March 2021
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May 2021
the 2009 Patent Act27. However, although considerable, US enhanced damages are only on a multiple of three, not five.
Chinese courts, therefore, now have very significant deterrent powers.
Increased Statutory Damages
The fourth revision of the Chinese Patent Law also includes an increase in statutory damages. The maximum will be five
times higher, with statutory damages being raised from a range of 10,000 yuan to 1 million yuan ($1,490 to $148,950)
to a new range of 30,000 to 5 million yuan. However, based on the current statute, there is only very general guidance
given to courts to gauge the assessment within this range.28 With a wider range, and significantly higher maximum, the
problems of a significant discretionary element will continue.
Accordingly, it is clear that, although permitted, a calculated reasonable royalties approach is very rarely used by
Chinese courts to assess patent infringement damages. The new reforms of 2021 will not alter this position.
27
28
U.S. Patents Act 2009, 35 U.S.C. § 284
CPL, 2008, Article 65, states that factors include ‘the type of patent right, nature of the infringement and seriousness of the case’.
AIPLA PLC NEWSLETTER
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May 2021
Did You Know That Blockchains Can Help You, Too?
Jeffrey R. Madrak and Agatha H. Liu, PH.D.
About the authors:
Blockchain technology has been popular in the news over the last few
months. Surging popularity and prices of blockchain-based
cryptocurrencies, such as Bitcoin, have been leading financial headlines
across the globe. Over the last few years, cryptocurrencies have gained
the support from institutional investors, such as big banks and public
facing billionaires including Elon Musk and Mark Cuban. Additionally,
companies, such as Square and PayPal, have begun integrating
cryptocurrencies into their products as a method of paying for goods and
services.
But the blockchain is so much more than just Bitcoin. In short, the power
of the blockchain is based on a ledger of transactions that is distributed,
stored, and maintained among multiple computing nodes of a blockchain
network. In a basic setup, each time that a user of a blockchain network
intends to perform a group of transactions, a group of corresponding
transaction entries are stored in a new, standalone block that is
propagated to and thus replicated on computing nodes of the blockchain
network. Once the block is received by each computing node, each
respective computing node independently executes verification software
to ensure that the received block is consistent across the blockchain and
can be added to the blockchain. If a consensus is reached among the
computing nodes according to a consensus algorithm, a block is then
added to the local copy of the blockchain on each computing node. The
added block includes a reference to (and thus is chained to) the previous
blocks in the blockchain and a cryptographic signature that is based on
metadata (e.g., a hash representing the current state)) of the previous
block. Therefore, any attempt to alter, add, or delete a block in the
blockchain affects the verification of all subsequent blocks and thus
would hardly succeed, especially when the block is early in the
blockchain. Overall, this framework ensures the integrity of the
blockchain by making it largely immutable and auditable.
There are several blockchain platforms which power blockchain
technology to enable the development of blockchain applications. For
example, enterprise cloud services providers, such as Amazon, provide
managed blockchain services using their powerful cloud-computing
resources. Such blockchain services make it easy to join public blockchain
networks by creating nodes in such blockchain networks or create and
manage scalable private blockchain networks using proprietary software
or open-source frameworks, such as Hyperledger Fabric and Ethereum.
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Agatha H. Liu, Ph.D.: Dr. Liu’s practice
concentrates on IP analysis, portfolio
management, and strategic counseling.
She routinely advises investors,
business owners, and inventors on all
areas of IP related to computer
technology. She also speaks and writes
extensively on different IP topics, such
as eligibility for IP protection, IP
protection for emerging technology,
and global IP protection. Prior to
entering the legal profession, Dr. Liu
held positions in technology and
management consulting. She has a
significant research background in
artificial intelligence as applied to
Internet communications, database
system management, computational
biology, and speech recognition.
Jeffrey R. Madrak: Mr. Madrak is a
native of Pennsylvania and has studied
and worked in the Silicon Valley area
since 2013. He focuses his practice on
patent prosecution and has worked on
a variety of technologies ranging from
databases to social networks. He has
experience in patents for electronics
inventions, transaction law, and
establishing and managing invention
development programs. Prior to joining
the firm, he co-founded several
technology startup companies and
worked as a mobile app developer and
design engineer at various Bay Area
startups. During law school, he worked
in Munich prosecuting foreign and
domestic patent applications pending in
the European Patent Office.
May 2021
Some blockchain networks, such as ones offered by Ethereum, provide enhanced functionality referred to as “smart
contracts”. Smart contracts use blockchain technology to capture, validate, and enforce agreed-upon terms between
multiple parties. A smart contract can define rules, like a regular contract, and automatically enforce them via
programming code of functions. Specifically, the functions are automatically executed when associated conditions are
met. Users can interact with a smart contract by submitting transactions to the corresponding blockchain network,
which may cause executing a function defined on the smart contract and ultimately enforcing the smart contract
without further human intermediaries. Therefore, the terms of the contract and records of related transactions exist
across a distributed, decentralized blockchain, being generally trackable and irreversible. A good analogy is a vending
machine. With any typical vending machine, a user provides money and a snack selection as input, and if the conditions
are satisfied by the inputs, the vending machine provides the selected snack as output.
In addition to smart contracts, the desirable features of blockchain technology lend themselves to many uses. In the
agriculture and food industries, a supply chain from farmers growing crops to customers consuming agricultural
products can clearly benefit. A blockchain can help track the flow of goods and services and improve the transparency
and efficiency of the processes1. In the entertainment industry, online music theft, fraud rates for digital tickets, and
online advertising fraud cost companies billions of dollars annually. Blockchain technology provides transparency to
digital transactions and delivers newfound trust to media, entertainment and advertising by tracing the access of
copyrighted work or other digital data that is designed for single or other restricted use2. In the pharmaceutical and
healthcare industries, issues surrounding health data — including interoperability, transparency, accuracy, and
regulatory compliance — cut across all participants in the ecosystems. By managing relevant data including patient
records, drug information, and government regulations, blockchain technology can provide faster access to trusted
information (under appropriate access control) across multiple stakeholders while facilitating compliance with
applicable rules3. In the public sector, blockchain technology can similarly improve the management of and trust in
governmental processes, such as criminal prosecution and election voting4.
The excitement surrounding blockchain technology has led to a rush in patent application filings related to blockchain
technology. Several areas of blockchain technology are ripe for patenting. A first area is related to building the blocks of
a blockchain. This area includes techniques for improved hashing in building the digital signature, and enhanced speed
in block creation and propagation of blocks to computing nodes of a blockchain network. A second area is related to
consensus. This area includes techniques for more efficient consensus algorithms that solve speed and efficiency
problems related to existing consensus algorithms, such as Proof of Work (PoW) and Proof of Stake (PoS). A third area
is on the blockchain ecosystem level. This area includes performing efficient searches of a blockchain, integrating smart
contracts with existing industries, and mechanisms for quickly and efficiently deploying computing nodes of a
blockchain network.
As discussed above, the largely immutable and auditable nature of a blockchain can effectively facilitate the
management of digital data and complex workflows. Therefore, the possibilities of new application and the
opportunities for innovation abound. On the other hand, not every blockchain innovation is ready for patent
protection. Some blockchain-based inventions will encounter difficulties meeting subject matter eligibility requirements
and some will find difficulty being distinguished from existing technologies.
Disclaimer: This article is purely a public resource of general information that is intended, but not guaranteed, to be correct and complete. It is not
intended to be a source of solicitation or legal advice and is for informational and entertainment purposes only. The information is not intended to
create, and receipt does not constitute, an attorney-client relationship. The laws of different jurisdictions may be implicated, and facts and
circumstances can vary widely. Therefore, the reader should not rely or act upon any information in this article, but should instead seek legal
counsel for individualized legal advice. For more information, please contact a firm attorney through www.hickmanbecker.com.
______________________________________________________________________
1
See, for example: https://www.ibm.com/blockchain/solutions/food-trust.
See, for example, https://www.vezt.co/.
3
See, for example, https://medicalchain.com/en/.
4
See, for example, https://www.agora.vote/.
2
AIPLA PLC NEWSLETTER
14
May 2021
Celebrities and Creative Geniuses Rejoice
Jeffrey R. Madrak and Agatha H. Liu, PH.D.
Non-fungible tokens, or “NFTs” are taking the digital world by storm. Jack Dorsey, the founder of Twitter, recently sold
an autographed tweet associated with an NFT for $2.9 million. Super Bowl champion Tom Brady just announced the
launch of the NFT platform he has cofounded that will offer digital collectibles. Such popular use with highly appraised
items begs the question – What actually is an NFT? And for those of us in the high-tech world, the further question –
How do NFTs relate to intellectual property?
WHAT IS AN NFT
An NFT is a digital version of a certificate of authenticity (a token), secured and embedded in a blockchain. When an
NFT is created, digital information including the creator’s name and other programmatic details such as the creator’s
blockchain wallet address are linked to an underlying asset and stored in a blockchain (while the underlying asset might
not be stored in the blockchain). Because NFTs are secured by a blockchain, no one can modify the record of ownership
or copy/paste a new NFT into existence.
We discussed the blockchain technology in a previous article. An NFT is a special application of the blockchain
technology directed to the management of unique digital assets. The most popular and leading NFT blockchain
network, Ethereum, created a specification the ERC-721 standard in 2018 that provides a formal, unified interface
especially suited for tracking and transferring digital art and other collectibles. For example, some of the events
implemented under the standard include ownerOf() to find the owner of an NFT and Transfer() to change the
ownership of an NFT. Such an interface can be captured in the corresponding smart contract. The ERC-721 standard
specifically contemplates tracking not only virtual collectables, but also physical property (through a digital link).
Currently, there is no full-proof way to prove that a creator of an NFT possesses rights to the underlying asset that is
linked to the NFT. However, to authenticate the owner of the underlying asset of an NFT, some NFT marketplaces are
providing “Proof of Authenticity” labels associated with for-sale NFTs. A “Proof of Authenticity” label appears as a
sticker below a for-sale item description in the marketplace, similar to how platforms like Instagram and Twitter
provide a “verified” badge for public figures and global brands. A “Proof of Authenticity” label means that the
marketplace’s in-house curators can attest to the provenance of the work or that the artist is who they claim to be. In
some cases, a marketplace issues a “Proof of Authenticity” label simply based on a personal attestation from the author
of the underlying asset.
As such, NFTs provide a form of digital ownership, similar to what a deed is for physical property, and can represent
images, audio, video, or anything else in the digital or physical domain. NFTs can be transferred or sold to other people,
together with the associated rights in the underlying asset, as further discussed below.
As noted above, NFTs comprise smart contracts i.e., programs stored in a blockchain, that people interact with by
communicating with the smart contracts and then receiving proof of interaction. While an NFT that operates on
Ethereum is likely complying with the ERC-721 standard, the smart contract behind an NFT can be programmed in a
variety of different ways to allow different approaches for people to interact with the NFT.
NFTs are ‘Non-fungible’ because each NFT is treated as a unique entity. NFTs can represent a one and only “original,”
such as a unique work of art. In contrast, units of cryptocurrency that also resides in blockchains, such as Bitcoin or
Ethereum, or even real fiat currency such as the U.S. Dollar are used in an interchangeable manner, or are “Fungible”.
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May 2021
NFTs are useful because their uniqueness and chain of ownership can be verified using a blockchain, they can be
utilized across applications developed by different companies. Standardization made possible by ERC-721 and other
specifications promoted by mainstream blockchain networks facilitates the ease of use and widens the scope of use. As
a result, NFTs can now be traded easily through secondary markets. These phenomena open up a new world of
possibilities for new use cases and business models.
HOW ARE NFTS ARE MANAGED
NFTs can be created on one of any number of public and private blockchain networks. A popular NFT platform and
marketplace running on the Ethereum blockchain network is OpenSea, which allows anyone to create NFTs. In a simple
process, anyone looking to create an NFT will deposit some cryptocurrency such as Ethereum to pay for the creation of
the NFT on an Ethereum blockchain, accept the platform terms of service, and start creating the NFT. Typically,
payment in the form of cryptocurrency is accepted to facilitate all transactions within blockchain networks.
Creating the NFT can include uploading an image, video, or audio file, which is typically stored outside of a blockchain,
and adding a name, owner, and description. As discussed above, this data is combined into a smart contract that is
stored in a blockchain that represents and controls the NFT.
In the case of digital assets such as images or media files, the digital asset can be stored on the blockchain or
referenced by a link such as a Uniform Resource Locator (URI). In the case of physical assets, the description needs to
make it clear that the underlying asset is a physical work, such as including a serial number or another identifier of the
physical work that can easily be digitized. Alternatively, physical assets can be digitized and an NFT can be created for
digital version of the physical asset.
Additionally, through the incorporated smart contract, an NFT allows the creator of the NFT to decide whether they will
collect a royalty for future resales of the NFT, potentially a powerful tool that would allow a creator to profit from any
future sale of the NFT. For example, some NFTs have a feature that can be enabled that will pay a royalty fee to the
creator of the NFT every time the NFT is sold or changes hands, making sure that if a work gets super popular and
balloons in value, the creator see some of that benefit. For artists, NFTs provide an additional way to sell digital works
that there otherwise might not be much of a market for. For buyers and collectors, NFTs provide an avenue to
financially support artists.
The NFT could also be associated with other rules or conditions that govern the use of the associated asset in general.
Various options currently exist on different platforms and additional options will undoubtedly be developed in the
future. A detailed guide for entering the NFT marketplace can be found here.
INTELLECTUAL PROPERTY PREVIEW
It is important to note that ownership of an NFT does not necessarily convey ownership of the underlying asset or
artistic work. Generally, a creator of an NFT decides the terms of the NFT and how ownership of the NFT relates to the
underlying asset. Absent governing terms, the copyright of an underlying work that is represented by an NFT is not
transferred to the NFT owner.
In practice, marketplaces that list NFTs are providing blanket copyright licenses for NFTs that are purchased through
their marketplace. For example, the NBA Top Shop license grants the owner of an NFT a non-exclusive license “to use,
copy, and display” the NFT solely for “personal, non-commercial use”.
Undoubtably, the rise of NFTs raise many legal questions such as how to verify that someone actually owns an
underlying asset that is associated with an NFT, how to effectively attach terms and conditions to an NFT, and how to
enforce such terms.
AIPLA PLC NEWSLETTER
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May 2021