Magistrate Judge K. Nicole Mitchell of the Eastern District of Texas recently denied patent owner Cellular Communications Equipment LLC (“Cellular” or “CCE”) motion for summary judgment that its asserted patents were not essential to a cellular standard, ruling that there was a factual dispute based on statements made by patent owner Cellular during the litigation.  This case illustrates problems in loosely referring to standard essential patents generically as patents relevant to a standard or erroneously stating that a patent was “declared essential.”  Declarations that patent owners submit to standard setting bodies typically do not declare that patents are essential to the standard, but identify patents that may be essential to the standard and what licensing terms, if any, they would offer if the patent actually is essential.  A patent is not actually a “standard essential patent” or “SEP” unless it is “essential” to the standard under the standard setting body’s intellectual property rights (IPR) policy.

Further, this case illustrates that,  just because a patent is infringed by one way of implementing the standard does not mean that the patent covers every way to implement the standard and, thus, may be “essential” and subject to a standard-setting licensing commitment.

In sum, for convenience, speakers, writers and parties may loosely talk about a patent or patent portfolio as being SEP(s) as a short-hand for patents that were declared potentially an SEP.  But, when making statements on which a court, agency or other decisions may rely, it may be helpful to be more precise or provide a caveat that the term SEP is being used as a short-hand and does not mean that a patent actually is essential to the standard. Continue Reading Judge Mitchell rules there are factual issues whether patent is “essential” to a standard (Cellular Eqpt v. ZTE)

Last week, Judge Orrick of the U.S. District Court for the Northern District of California issued an Order that enjoins Huawei from enforcing an injunction on Chinese standard essential patents (SEPs) entered by the Chinese People’s Court of Shenzhen (the Shenzhen Court).  The Chinese Shenzhen Court entered that injunction after considering Samsung’s arguments that the SEPs were subject to Huawei’s commitment to license them on fair, reasonable and non-discriminatory (FRAND) terms.  This case provides incremental insight into asking a U.S. court to bar enforcement of a foreign injunction based on foreign SEPs so that the U.S. court may consider FRAND contractual rights as to those foreign SEPs.

As with most cases, this decision is fairly fact specific.  Some of the key points from this decision include the following:

  • Filing Date of U.S. and Foreign Actions.  The patent owner (Huawei) filed this U.S. action and the Chinese action at the same time.  Technically, perhaps because of the time zone difference, the U.S. action was filed one day before the Chinese action.  The simultaneous filing indicated that the patent owner was not  filing the Chinese action as a run-around a much earlier filed U.S. action (as was the case in the Microsoft v. Motorola case where an antisuit injunction was entered).
  • First-To-File Race?  This case has a first-to-file flavor similar to what we see in selecting a forum for U.S. court actions–e.g., courts defer to litigating a case in the first U.S. district court where the matter is raised, rather than in another U.S. district court with a later-filed case on the same matter.  That first-to-file deference leads to a race to the court where the patent owner tries to  file a U.S. case in its preferred U.S. court before an accused infringer files a related declaratory action in another U.S. court, and vice versa.  The fact that Huawei technically filed this U.S. case one day before Huawei filed the Chinese case was a factor that Judge Orrick found to favor entering an antisuit injunction that gives preference to the first filed U.S. action over the later filed Chinese action.  Huawei essentially outraced itself in the first-to-file competition (i.e., filed its U.S. action before filing its Chinese action)
  • Scope of U.S. and Foreign Actions.  Although not totally clear from the record, the Chinese court apparently considered only whether the accused infringer (Samsung) was a willing licensee in its negotiations with the patent owner (Huawei) for a license under the Chinese SEPs.  In this U.S. case, however, the court would consider a much broader issue of whether Huawei breached its FRAND commitment and determine FRAND contract terms.  In other words, the U.S. court was not going to simply retry and decide the same issues already decided by the Chinese court and his decision would control whether the patent owner would be entitled to the injunctive relief granted by the Chinese court.
  • The Antisuit Injunction is Limited In Scope and Duration.  The U.S. court was entering an injunction of limited duration and scope.  The Chinese injunction that the patent owner (Huawei) was enjoined from enforcing concerned only 2 Chinese patents and was subject to an appeal in China that would not be decided for a few more months.  This U.S. case is scheduled for trial in December, after which the U.S. court would decide the contract issues and dissolve the antisuit injunction.  Accordingly, the antisuit injunction would preclude enforcement of the Chinese injunction for only a few months and impact only 2 Chinese patents.
  • Judicial Estoppel From Entering the Antisuit Injunction.  The accused infringer (Samsung) successfully argued against bifurcating the U.S. case that would have decided the FRAND contract issues first; rather, it argued that the U.S. court must first determine whether the patent owner’s (Huawei’s) patents were valid, enforceable, infringed and essential to the standard before the court could then decide the contractual FRAND issues.  The U.S. court agreed to proceed with the entire case–both the FRAND contract and U.S. SEP infringement claims–at the same time with a single two-week jury trial.  The accused infringer’s later request for an antisuit injunction “tempted” the court to hold that the accused infringer was judicially estopped from now arguing that an antisuit injunction was warranted so that the the contractual issues would be decided first (contrary to the accused infringer’s successful bifurcation argument).  But, rather than that, the court ruled that the infringer would be granted the antisuit injunction but could not argue that the FRAND contract issues could not be decided without evidence of whether the foreign patents were valid, enforceable, infringed or essential (if such determinations were outside the scope of the U.S. court’s jurisdiction).

Below is a more detailed discussion of the decision. Continue Reading Judge Orrick enjoins Huawei from enforcing injunction for infringing SEPs issued by China’s Shenzhen court (Huawei v. Samsung)

Judge Gorton of the U.S. District Court of Massachusetts recently entered an order granting a motion by Amphastar Pharmaceuticals (Amphastar) that bars Momenta Pharmaceuticals, Inc. (Momenta) from enforcing a patent against certain drug manufacturing control processes based on the equitable doctrines of waiver and estoppel that arose form Momenta’s failure to disclose a pending patent application to the standard setting organization (SSO) United States Pharmacopeia (USP) when deliberating on a USP National Formulary (USP-NF) standard.  This case found a duty to disclose a pending patent application that “reasonably might be necessary” to practice the standard based on the participants’ understanding of the SSO’s ambiguous conflict of interest policy that required participants to disclose financial or other interests “that may result in a conflict of interest or the appearance of interest.”  This case also provides insight on tailoring equitable relief when waiver or estoppel are found: the court ruled that the patent was unenforceable against two infringing processes used by the infringed that practiced the standard, but the patent was enforceable against a third process that fell outside the standard (if the patent otherwise is valid and infringed). Continue Reading Waiver and estoppel bar enforcement of undisclosed drug manufacturing patent (Momenta v. Amphastar)

Administrative Law Judg (ALJ) Lord at the U.S. International Trade Commission (ITC) recently issued an Order striking patent misuse claims against Philips Lighting (Philips) raised by WAC Lighting and other respondents that were premised on Philips filing its Complaint in the ITC without making a license available “on standard (reasonable) and non-discriminatory terms.”  This ruling provides incremental guidance on the specificity needed to plead a competition law claim based on standard essential patents (SEPs), including allegations of specific facts showing the anticompetitive effect of alleged improper SEP licensing activity. Continue Reading ALJ Lord dismisses SEP licensing-based patent misuse defenses (ITC Inv. No. 1081, Philips v. Feit Electric)

Judge Gilstrap recently issued an Order rejecting the equitable defense of patent misuse in a case involving standard essential patents (SEPs) subject to a commitment to license them on fair, reasonable and non-discriminatory (FRAND) terms.  Motorola Mobility LLC (Motorola) alleged that Saint Lawrence Communications LLC (St. Lawrence or SLC) was guilty of patent misuse by, among other things, requiring Motorola to take a worldwide license to FRAND-committed SEPs, using the threat of injunctive relief in Germany to coerce licensing of those SEPs, entering different license terms with different licensees and not disclosing effective royalties from licensing the SEPs under a patent pool when negotiating individual licenses.  This decision is another indication that competition law claims asserted against SEPs may not prevail when patent owners have followed traditional patent enforcement and licensing strategies or even if they breach of a FRAND commitment.  Rather, there must be something more egregious or deceptive with the particular patent owner’s conduct at issue to give rise to competition law claims that are required to address harm to competition beyond harm that can be addressed by more traditional patent or contract law remedies — e.g., a contract remedy for breach of a FRAND commitment or limits on patent remedies based on a FRAND commitment. Continue Reading Judge Gilstrap rejects patent misuse defense to alleged FRAND-committed SEPs (St. Lawrence v. Motorola Mobility)

This Wednesday, March 21, from 4pm to 5pm Eastern Time, our own David W. Long will present a free one-hour webinar hosted by the Licensing Executives Society (LES) entitled “What Does U.S. Case Law Currently Tell Us About Standard Essential Patent Licensing.”

The webinar will provide an overview of U.S. case law related to licensing standard essential patents (SEPs) that the patent owner committed to license on fair, reasonable and non-discriminatory terms (FRAND).  The discussion will include Judge Selna’s decision in TCL v. Ericsson, which is the most recent U.S. decision setting a FRAND rate for SEPs. (see our Jan. 3, 2017 post and Feb. 13, 2018 post on the decision).

Topics include:

  • Understanding how U.S. courts have treated SEPs that the patent owner committed to license on FRAND terms.
  • Understanding how to apply existing general patent law to FRAND committed SEPs as we await more FRAND-specific decisions.
  • Understanding Judge Selna’s TCL v. Ericsson decision and how that decision may or may not apply to other FRAND situations.
  • Understanding differences between litigating FRAND terms and negotiating FRAND terms.

The webinar is free to anyone interested in attending (e.g., you do not need to be a member of LES to attend).  Register using this link.

Today, the U.S. International Trade Commission (ITC) issued a Notice of Commission Final Determination  following its review of Administrative Law Judge (ALJ) Shaw’s September 2017 rulings concerning, among other things, three patents alleged to be essential to the Linear Tape Open (LTO) 7 standard (LTO-7). (see our Dec. 19, 2017 post summarizing ALJ Shaw’s decision).  Specifically, the ITC affirmed ALJ Shaw’s ruling that the ‘612, ‘106 and ‘805 patents are not essential to the LTO-7 Standard (with one caveat):

The Commission has determined to affirm with modification the Final ID’s finding that the asserted claims of the ‘612, 106, and ‘805 patents are not essential to the LTO-7 Standard.  In particular, with respect to the ‘106 patent, the Commission has determined not to reach the issue of whether the LTO-7 Standard requires a tape having a magnetic layer that contains an abrasive.  The Commission has determined to otherwise adopt the Final ID’s findings that the LTO-7 Standard does not require practice of the asserted claims of the ‘612, 106, and ‘805 Patents.  The Commission has determined not to reach any other issues concerning Sony’s essentiality defenses. [Notice at 5]

The last statement about not reaching any of Sony’s essentiality defenses presumably refers to Sony’s breach of contract, patent misuse, implied license, patent exhaustion, and waiver defenses, all of which were premised on the patent claims being essential to the LTO-7 standard.

The ITC further found that there was no violation of those patents, because they were not infringed or were invalid.  The ITC did decide there was a violation regarding another patent at issue in the investigation: the ‘891 Patent, which was not alleged to be essential to a standard.  The ITC issued a limited exclusion order and cease/desist order based on infringement of that ‘891 Patent.

Magistrate Judge Fallon recently Recommended Dismissing competition law counterclaims brought by TCT Mobile (TCT) against Godo Kaisha IP Bridge 1 (IP Bridge) and Panasonic and Judge Bataillon has now Adopted that ruling.  Those counterclaims were based on alleged improper conduct relating to standard essential patents (SEPs)  on European Telecommunications Standards Institute (ETSI) 2G, 3G and 4G wireless standards that IP Bridge acquired from Panasonic after those standards were adopted.  While the standards were under development, Panasonic had committed to license the SEPs on fair, reasonable and non-discriminatory (FRAND) terms.  TCT’s competition law counterclaims generally concerned allegations that:

  • Panasonic made FRAND commitments it did not intend to keep in order to induce the standards body to keep Panasonic’s technology in the standards;
  • After the standards were adopted, Panasonic transferred the patents to IP Bridge which offered to license the patents on terms that were not FRAND and
  • There was some type of improper concerted action between Panasonic and IP Bridge (this aspect is fairly redacted and unclear).

This case presents an interesting nuance of competition claims against a party (IP Bridge) that acquired SEPs from an original owner (Panasonic) who made a FRAND commitment.  In this case, TCT alleged that something about the transfer of the patents to IP Bridge was meant to circumvent Panasonic’s FRAND commitment (but the details of those allegations are redacted in the public court documents).

This case also indicates that an antitrust injury-in-fact cannot arise solely from a patent owner filing an infringement lawsuit on FRAND-committed SEPs.  That’s because a successful FRAND defense by the accused infringer will lead to remedies consistent with the FRAND commitment and, in any event, any relief ultimately granted by the court would be lawful.

The decision also has a unique procedural posture.  This is a decision by a magistrate judge that recommends to the presiding district court judge how to rule on the issue.  Such magistrate judge recommendations are common in patent  cases.  The presiding district court judge usually adopts a magistrate judge’s recommendation, but is not required to do so.  So we will await the district court judge’s decision whether to adopt Judge Fallon’s recommendation here.

Further, this decision concerns a Rule 12(b)(6) motion to dismiss causes of action based on the initial pleadings.  Such motions are difficult to win because of the tremendous deference the court must give to the challenged pleading — e.g., the court considers whether TCT states a “plausible” claim if the court assumes (without deciding) that all factual allegations TCT raises are true and draws all reasonable inferences in TCT’s favor.   And courts are even more reluctant to grant a Rule 12(b)(6) motion against competition law claims, which may be factually complex and require information in the hands of the alleged wrong-doer that can be obtained only in discovery.   In this case, however, TCT apparently had almost a year of discovery and two attempts to plead its competition law claims, which may have provided the court more comfort in its dispositive ruling here. Continue Reading Magistrate Judge Fallon recommends dismissing competition claims against SEP holder (Godo Kaisha IP Bridge v. TCL et al)

Yesterday, the U.S. Department of Justice (DOJ) Assistant Attorney General (AAG) for the Antitrust Division Makan Delrahim spoke  in Brussels about maintaining a close working relationship and coordination with European Union’s Directorate General for Competition (DG Competition) in competition law enforcement.  AAG Delrahim’s remarks included suggestion that the European competition authorities shift toward the more balanced  approach to standard essential patents (SEPs) that he recently articulated for the U.S. (See our Dec. 20, 2017 post on AAG Delrahim’s remarks on shift in U.S. DOJ’s SEP enforcement approach).  Some key points in AAG Delrahim’s remarks include:

  • “I believe that strong protection of these [IP] rights drives innovation incentives, which in turn drive a successful economy.”
  • “I worry that we have strayed too far in the direction of accommodating the concerns of technology licensees who participate in standard setting bodies, very likely at the risk of undermining incentives for the creation of new and innovative technologies.”
  • The tension between innovators and implementers “is best resolved through free market competition and bargaining.  And that bargaining process works best when standard setting bodies respect intellectual property rights … including the very important right to exclude.”
  • If a patent owner violates a standard-setting commitment, “remedies under contract law, rather than antitrust remedies, are more appropriate to address licensee’s concerns.”

Below is a a complete excerpt of AAG Delrahim’s remarks in Brussels with respect to intellectual property and SEPs: Continue Reading U.S. DOJ Antitrust Head Makan Delrahim brings his message of balanced SEP competition law enforcement to Europe

Today, Judge Selna issued on Order ruling on Ericsson’s motion to alter or amend his FRAND ruling. (See our Jan. 3, 2018 post summarizing FRAND royalty ruling).  Under the procedural posture of the Rule 52(b) motion for seeking modification of a judge’s bench trial findings of fact and law, Ericsson had to show that its proposed changes to that ruling were needed “to correct manifest errors of law or fact or to address newly discovered evidence or controlling law” or were not changes that “would not affect the outcome of the case or are immaterial to the court’s conclusions.” (Order at 2).  Given this difficult standard, Judge Selna only agreed to make minor word changes to his decision, which he will soon reissue with other clerical corrections and some corrections to be made based on TCL’s Rule 52(b) motions (which were also apparently minor changes).  To be clear: by “minor changes” we mean as far as significance in applying the decision to other cases between other parties; we could be mistaken and, moreover, have no comment on how significant the changes may be to the instant parties in this particular case.  The next substantive step in this case will be the Federal Circuit appeal that Ericsson already filed, but that has been stayed pending the outcome of the parties’ Rule 52(b) motions. Continue Reading Judge Selna will make minor changes to FRAND ruling (TCL v. Ericsson)