Judge Payne recently denied a request to proceed with all of the parties’ alleged FRAND-obligated standard essential patents in the same case, disappointing counterclaimants who had wanted to resolve together the single controversy over each of the parties’ standard essential patents. Huawei brought suit asserting patents alleged to be essential to 3GPP LTE standards and subject to a FRAND obligation. Nokia filed a counterclaim against Huawei on patents that also were alleged to be essential to 3GPP LTE standards and subject to a FRAND obligation. Judge Payne decided that it would be more efficient to proceed with the Huawei and Nokia patents in their own separate cases, rather than together.
Nokia raised three arguments why all of the parties’ patents should proceed in the same case, rather than separately:
- Severing the claims “would require eight jury trials to resolve a single controversy between these two parties over essential patents.”
- Both parties’ patents “cover similar technology because both ‘relate to the 3GPP LTE standards.”
- Both parties’ patents “share the common issue of being FRAND-encumbered.”
Judge Payne found that the patents do not share similar technology. For example, one Nokia patent covers allocating downlink and uplink resources between a base station and mobile device. In contrast, a Huawei patent concerns billing mobile device customers for data usage. Thus, “[a] fact-finder’s understanding of one patent will not inform her understanding of the other patent.” This finding, therefore, rejected Nokia’s first and second arguments.
Judge Payne also found that there may not be commonality in the FRAND issues for each patent, stating that “[d]amages assessments in FRAND cases raise highly patent-specific issues because in FRAND cases the focus is on apportioning-out the value of the patent from the standard.” He further indicated that FRAND cases may “de-emphasize the importance of shared facts such as facts about the parties,” explaining:
For example, the Federal Circuit has held that in FRAND cases, Georgia-Pacific factor 4 is not relevant. Factor 4 addresses a “licensor’s established policy and marketing program to maintain his patent monopoly by not licensing others to use the invention.” But, as the Federal Circuit has noted, this is irrelevant in FRAND cases because “patent monopolies” are not allowed under FRAND. See Ericsson, 773 F.3d at 1230. Thus, at least one shared fact is unimportant in FRAND cases and a fact-finder will not benefit from general testimony about a party’s patent licensing policy. See also Ericsson, 773 F.3d at 1230-31 (“[F]actor 5—‘[t]he commercial relationship between the licensor and licensee’—is irrelevant because Ericsson must offer licenses at a non-discriminatory rate.”). [citing Ericsson, Inc. v. D-Link Sys., 773 F.3d 1201 (Fed. Cir. 2014)]
The decision here should be considered in the context of its procedural posture–i.e., Judge Payne has broad discretion to control his docket and his rationale need not be perfect, just sufficient in exercising his discretion in this particular case. For example, some may take issue with the statement that “a fact-finder will not benefit from general testimony about a party’s patent licensing policy” if that were extended to how a party licenses its FRAND-encumbered SEPs to similarly situated licensee’s, which may be relevant to whether a proposed royalty is reasonable or non-discriminatory.
This case also provides another example where a party was disappointed when denied the opportunity to have cross-licensing of SEPs considered in assessing and committing to a court-determined FRAND royalty. For example, Judge Crabb dismissed Apple’s FRAND case against Motorola because Apple would not commit to be bound by a FRAND-royalty determination in that case for Motorola’s SEPs given, among other things, Apple’s desire to consider the value of its own SEPs in any ultimate cross-licensing deal with Motorola. (see our Jan. 7, 2013 post and Apple’s filing of Oct. 31, 2012 in that case). Judge Selna recently denied Ericsson’s motion to adjudicate a FRAND royalty-rate based on a cross-license of both Ericsson’s and TCL’s FRAND-encumbered patents, thus limiting the case to adjudicating only a FRAND-based royalty on Ericsson’s FRAND-encumbered patents (see Order of Nov. 6, 2015). This approach may further distinguish litigated FRAND rates from real-world bilaterally negotiated FRAND licenses where cross-licensing is common and often contemplated by a standard setting organization’s IPR policies, such as permissible reciprocity provisions in a FRAND commitment. (see also our Dec. 5, 2014 Ericsson v. D-Link post that notes potential disconnect between (a) acceptable real-world licensing with royalties based on end products and (b) litigation using the smallest-salable patent practicing unit evidentiary rule in some jury trials where royalty is based on a component of the end product).