Lawyers' opinion: A detailed interpretation of the "OPEN LETTER ON THE LEGAL RIGHTS OF THE ASICBOOST PATENT”

Translated from original version (Chinese): http://www.8btc.com/asicboost-getech-law-respond

By: Meng Dada

Date: 2017-05-19 16:07

The patent dispute about AsicBoost has not yet ended. Yesterday, Getech Law LLC published "AN OPEN LETTER ON THE LEGAL RIGHTS OF THE ASICBOOST PATENT" (the “Open Letter”), which was subsequently confirmed by Timo Hanke, one of the inventors of the AsicBoost patent application. In the Open Letter, Getech Law LLC states that the intellectual property derived from the pending AsicBoost patent is infringed by several chip producers and sellers. Therefore, these companies should "cease production and sales activities of any products in connection to the pending patent application."

In respect of this event, we interviewed Mr. Guan Gang, a legal professional engaged in patent dispute resolution and one of the partners of East & Concord Partners, who gave a profound analysis of this event from a legal point of view. Mr. Guan Gang specializes in various types of cases of intellectual property rights, especially resolution of disputes regarding patents, technical know-how, unfair competition, trademarks, and copyrights. He has worked at the State Intellectual Property Office and its Patent Reexamination Board for more than 10 years. In 2013, he joined a well-known law firm in China and began to be engaged in the business of intellectual property litigation. During this period, he represented in many important litigation cases of intellectual property rights.

The following is the full text of the interview:

Q: www.8btc.com

A: Mr. Guan Gang, one of the partners of East & Concord Partners

Q: An American law firm recently issued the Open Letter which aroused widespread concern in the bitcoin industry. As a lawyer specializing in intellectual property litigation, especially patent dispute resolution, are you also concerned about this event? Can you talk about this event from a legal point of view?

A: As a lawyer engaged in the resolution of patent disputes, I am very concerned about the developments in the field of new technologies, and have also noticed the event in the bitcoin industry. In the patent dispute settlement mechanism, patent infringement warning is in essence part of the dispute settlement mechanism by which the parties protect their rights through negotiation in addition to administrative or judicial procedure. Since infringement warning is a way of negotiating a dispute, the sending of it should follow certain rules and methods to safeguard the rights legally, and shall not engage in any improper act abusing infringement warning which may damage the legitimate rights and interests of other competitors and hinder competition. As a professional lawyer, I think that the following questions regarding the Open Letter need to be discussed.

1) The so-called "patent rights" in the Open Letter have no basis. According to the content of the Open Letter, the plaintiff did not really hold any legal and valid patent right.

2) The Open Letter does not satisfy the basic requirements for infringement warning that "its content should be specifically determined". As an infringement warning, the content of the Open Letter concerning the alleged infringement is ambiguous and lacks a description of the basic facts of infringement.

3) The object and manner of the warning in the Open Letter are not proper, and such a warning is likely to be an illegal warning which may damage the legitimate rights and interests of other competitors in the industry.

Q: You mentioned that the "patent rights" in the Open Letter have no basis. Can you talk about this specifically?

A: The first part of the Open Letter clearly states that it is based only on a patent application, which has not yet been granted a patent in any country or territory and is not a legally valid patent. We know that patent rights are regional, and any invention may have patent rights and protected by law in a region only if it is examined and granted by the competent government authority in such region according to its applicable laws. And the competent government authority examines a patent application to determine whether any patent claim in the application can be granted patent rights and the scope of the rights to be protected. The authorization of patent rights has a role of publicity, and the public has access to the scope of the rights of the patent through referring to the patent claims recorded in the official authorization documents in order to be able to reasonably avoid infringement of the patent rights of others. Any unauthorized patent application does not have any legal rights and cannot serve as the basis for the disputing party to defend its rights, since there is no right at all.

For example, Article 11 of the Patent Law of the PRC expressly stipulates that no entity or individual may, without the authorization of the patentee, exploit the patent, only after the grant of the patent right for an invention or utility model. Although Article 13 of the Patent Law of the PRC stipulates that the applicant may require the entity or individual practicing the invention to pay an appropriate fee. But only after the official authorization of the patent right may the patentee make such a request. If a patent application is not finally granted any patent right, no patent practitioner will be asked to pay for any fee. Therefore, no matter from any point of view, the official granting of a patent right is the basis for the patentee to exercise its rights.

Q: Can you talk about the ambiguity of the alleged infringement in the Open Letter you mentioned just now? To what extent should the content of the infringement warning be "specific"?

A: For judging whether any patent right is infringed, it is necessary to be specialized in not only patent laws but also the relevant field of technology, to determine whether the alleged infringement of the technical scheme falls within the scope of patent protection. Therefore, the problems of patent infringement are much more complicated than those of ordinary civil tort and infringement of other intellectual property rights. So even professionals often have controversy over whether or not to constitute patent infringement based on the same facts.

Moreover, a product or process may involve many patents as well as many freely available public technologies. In terms of patents concerned, the scope of protection of each patent is different according to its claims and restrictions. For example, the ASICBOOST technology mentioned in the Open Letter may involve many technologies, including many freely available public technologies. It is presumptuous to assume that any patent right will inevitably be infringed only because the patent seems to be related to any such product or process. Therefore, a patent infringement warning should be clearly based on specific facts, and its infringement allegation should at least be based on the following "specifically determined": 1) the specific patent right as the basis, at least a specific patent number, so that the warned party will be sure that the patent right does exist and determine the scope of the right actually protected by the patent; 2) the basic conditions of the product or method of alleged infringement, so that the warned party will determine which part of the technology is suspected of infringement, and such description may not be general; 3) a comparative analysis of the allegedly infringing technical scheme and the patent claims. Only after the above information is specifically determined is it likely for the warned infringer to have a preliminary judgment of the content of the warning, and may the warning really play the role of a negotiated dispute solution to achieve the basic purposes of the infringement warning system.

Q: You mentioned the problem of the infringement warning just now. What should the patent holder pay attention to when sending a patent infringement warning? What kind of infringement warning is an illegal warning? Will illegal warning result in any legal liability?

A: As mentioned above, the judgment of patent infringement is complex and professional. In order to minimize the damage which may be incurred to the legitimate rights and interests of the warned party and the damage to the environment of fair competition, any patent infringement warning should be directly targeted at the suspected patent infringer, and should not be arbitrarily extended to any counterparty or potential customers (the public) of the suspected patent infringer. Because if the infringement warning is not directly sent to the suspected infringer, but to any counterparty of the suspected infringer, i.e., any customer or potential customer of the suspected infringer, by means of an open letter or news report, etc., it may be aimed at affecting the normal production and operation of the suspected infringer in a "supposed" manner. This may cause irreparable damage to the operation of the suspected infringer and will involve the problem of malicious competition under the guise of right protection. Especially in case of suspected infringement with the basis of patent rights and infringement facts undetermined.

And it will constitute illegal infringement warning to prevent competition or obtain illegitimate interests rather than to resolve the dispute, or maliciously crowd out competitor, delay the pace of innovation of competitors, or disrupt the normal production and business activities of competitors, under the guise of patent infringement warning.

According to the applicable provisions of the Anti-unfair Competition Law, illegal infringement warning may cause damage to competitors' goodwill or constitute false promotion or other forms of unfair competition, and shall be liable for infringement under the Anti-unfair Competition Law. Common illegal warning is to send malicious infringement warning to competitors' customers or potential customers by way of advertising, news report, etc. And the essence of such illegal warning is not to resolve the dispute, but to hinder competitors and compete for the market.

Q: Would you please talk about the patent application related to ASICBOOST in the Open Letter?

A: As mentioned earlier, the open letter only relates to patent application. Any application for a patent, especially an application in the field of computer technology, may face several prominent questions: 1) the question of whether the subject of the application is the object of patent protection, as it is likely that the invention involving the computer program itself is not the object of patent protection; 2) the question of whether the invention meets the demanding requirements of the patent law for creativity, as thousands of technicians in this field optimize the software systems in various ways every day, but it is difficult to make genuine and creative improvements satisfying the demanding requirements of the patent law.

As disclosed in the Open Letter, the patent application relates to a method of mining bitcoins. Such an invention is very likely to make improvement of the computer program itself. The Patent Law of the PRC explicitly stipulates that a computer program itself is a rule and method of intellectual activities rather than the object of patent protection, and cannot be granted any patent right. In addition, other laws like the U.S. Patent Law also include relevant provisions that no "abstract concept" should be granted any patent right. Therefore, it is necessary to examine whether such a patent application is essentially for a computer program itself before determining whether it can be patented.

Secondly, the key of whether a patent application can be granted a patent is whether the technical scheme requested by the patent application to be protected satisfies the requirements for creativity under the patent law compared with the prior art as of the date of filing, i.e., whether the technical scheme is creative to a certain degree compared with the prior art.

In addition, the vast majority of patent applications are improvements of the inventions based on the prior art. Even if a patent application is finally granted, the scope of its final patent protection depends on the degree of the technical contribution made by the patent compared with the prior art. Any allegedly infringing technology constitutes infringement of a patent right only when determining that it has all the technical characteristics defined in its patent claims after detailed comparison with the patent claims granted.

Q: In addition, there have emerged in the current patent disputes some patent companies, commonly known as patent trolls, which neither develop any technology nor produce any patented product, but simply seek high damages or settlements by initiating or threatening to initiate patent litigations. Can you talk about this phenomenon?

A: Patent trolls, also known as speculative non-practicing entities (NPE), which constitute a chronic disease of the patent system. Patent trolls have become increasingly rampant in recent years, and have a negative impact on the normal management and operation of many enterprises around the world, even some of the world's leading enterprises.

The purpose of the patent system is to award real innovators with exclusive rights to their new technologies for a certain period of time, so that the innovators can benefit from their technologies to encourage innovation and promote scientific and technological progress and the overall social welfare. However, some enterprises or individuals themselves make no innovations or use patented technologies for production in practice, but abuse patent rights taking advantage of the legal systems encouraging innovation, high costs of patent infringement cases, the time costs of enterprises, market and other factors. And some even engage in patent blackmail to seek unfair benefits based on unauthorized patent applications.

It is generally accepted that patent trolls have had extremely adverse impacts on social innovation in many ways. For example:

1) They curb the innovation of enterprises as they harass large enterprises frequently. According to the statistics of PWC's 2017 Patent Litigation Study, the intermediate value of the damages awarded to speculative NPEs only in patent litigations initiated in the United States amounted up to $13,000,000 per year between 1997 and 2016. Patent trolls are more harmful to small and medium enterprises (SMEs), as their acts have virtually created barriers to SMEs and have dealt great blows to the innovation of SMEs.

2) They reduce social welfare, as enterprises need to "overcome all obstacles" step by step to prevent the harassment of patent trolls. For this purpose, more funds and human resources are needed, the cost of which are ultimately passed onto consumers, seriously reducing the welfare of the society as a whole.

3) They cause waste of valuable judicial resources, as patent trolls often obtain benefits through litigation and such improper means of profit-making actually take up a lot of judicial resources.