Chief Administrative Law Judge (“ALJ”) Bullock of the U.S. International Trade Commission (“ITC”) recently issue an Initial Determination that accused infringer Hynix (respondent) had not established that patent owner Netlist (complainant) had breached a RAND commitment to JEDEC concerning computer memory technology standards.  He found that exclusionary relief would be proper and not against the public interest if the memory products infringe valid claims of the alleged standard essential patents (“SEPs”); but he found that the alleged SEPs were not infringed.

A key part of the RAND defense was the accused infringer’s argument that the licensing offer it received from the patent owner showed discriminatory licensing that violated the RAND commitment because it differed from licensing terms that the patent owner entered with someone else.  Specifically, the patent owner Netlist had entered a joint development agreement with Samsung that not only granted a license to the alleged SEPs, but also had other non-monetary consideration including a strategic partnership with Samsung that Netlist believed to have substantial benefits.  The accused infringer Hynix, however, argued that the non-monetary strategic partnership terms were a sham meant to cover-up what was essentially a royalty-based licensing agreement, thus allowing Netlist to improperly seek different–and discriminatory–effective royalty terms with Hynix or others.  ALJ Bullock rejected Hynix’s arguments, finding that the strategic partnership benefits did not have “no value” as Hynix had argued and that patent owner Netlist was not required to provide those same terms to Hynix.

This decision also provides some procedural insights into litigating SEPs at the ITC.  For example, ALJ Bullock ruled that the party raising a RAND defense has the burden to prove that defense.  Further,  parties should present their standard-setting license defense and rebuttal in the context of the law that governs the IPR policy at issue — i.e., in this case, the JEDEC Manual states that its RAND commitment is subject to interpretation under New York law.

Background

In September 2016, Netlist filed its complaint in the ITC alleging that certain memory modules of Korean-based Hynix infringed Netlist patents alleged to be essential to a standard of the Joint Electron Device Engineering Council (“JEDEC”).  The JEDEC intellectual property rights (“IPR”) policy provides that participants disclose potentially essential patents and indicate if they will license the patents on RAND terms.  Specifically, Section 8.2 “Patent Policy” of the JEDEC Manual of Organization and Procedure (“JEDEC Manual”) discusses an agreement or refusal to license as follows:

8.2.4  RAND Patent Licensing Commitment

Subject to the terms and conditions of section 8.2.4, each Committee Member, as a condition of Participation, agrees to offer to license on RAND [“Reasonable and non-discriminatory licensing terms and conditions” per definition’s section 8.2.1] terms, to all  Potential Licensees, such Committee Member’s Essential Patent Claims for the use, sale, offer for sale or other disposition of a portion of a product in order to be compliant with the required portions of a final approved JEDEC Standard issued during the period of membership in that Committee.  The licensing commitment does not apply to Essential Patents of a Committee Member where notice of a Refusal to License has been given by the Committee Member in accordance with 8.2.3.1.

The JEDEC Manual defines Essential Patent Claims as those “necessarily … infringed” when practicing the standard, stating:

Essential Patent Claims:  Those Patent claims the use of which would necessarily be infringed by the use, sale, offer for sale or other disposition of a portion of a product in order to be compliant with the required portions of a final approved JEDEC Standard.

NOTE  Essential Patent Claims do not include Patent claims covering aspects that are not required to comply with a JEDEC Standard, or are required only for compliance with sections that are marked “example,” “non-normative,” or otherwise indicated as not being required for compliance, or related to underlying enabling technologies or manufacturing techniques not specified in the standard.

The JEDEC Manual distinguishes between an “Essential Patent” and a “Potentially Essential Patent” based on whether the patent actually has essential patent claims and not simply claims reasonably believed to be essential:

Essential Patent: A Patent containing one or more Essential Patent Claims.

Potentially Essential Patent:  A Patent that is reasonably believed by a subject person to contain one or more Essential Patent Claims.

Note that this case concerns the prior July 2015 version JM21R version of the JEDEC Manual and not the current November 2015 JM21S version of the JEDEC Manual ; Judge Bullock’s decision in this case cites to Exhibit CX-0325 that is listed on Netlist’s exhibit list as “JEDEC Manual of Organization and Procedure JM21R (July 2015).”

Hynix argued that patent owner Netlist’s patent license offer to Hynix did not comply with the JEDEC RAND commitment for several reasons.  Note that, given the high-level of redaction in the Initial Determination, it is not clear what those licensing terms actually were.

First, Hynix argued that Netlist’s offer to Hynix was discriminatory.  Hynix compared that offer to a Joint Development and Licensing Agreement (“JDLA”) that patent owner Netlist entered with Samsung, which was the only license Netlist had given under the patents.  Hynix’s expert “unpacked” the different monetary and non-monetary consideration exchanged in the JDLA to determine an effective per unit royalty rate for standard-compliant products under the JDLA.  Hynix argued this demonstrated discriminatory licensing given the differences in the effective royalty Samsung pays under the JDLA and the actual royalty that Netlist offered to Hynix.

Second, Hynix argued that the licensing offer was unreasonable because the SEPs had minimal value given, among other things, prior art alternatives to the claim technology and the SEPs’ failure to cover key enabling technology in the JEDEC standards at issue.

In response, Netlist argued that Hynix was guilty of patent holdout and refused to engage meaningfully on a license to the SEPs.  Among other things, Netlist argued that Hynix failed to make any counter-offer to license the patents.

Netlist also argued that Hynix failed to show that the JDLA agreement with bilateral exchange of monetary and non-monetary consideration was comparable to the one-way RAND license contemplated by the JEDEC Manual.  Most of Netlist’s argument about the JDLA agreement is redacted.  ALJ Bullock summarized Netlist’s argument here as “present[ing] the JDLA as a wide-reaching agreement.” (ID at 189).

Netlist challenged the “unpacking” of the JDLA by Hynix’s expert.  Among other things, Netlist argued that the expert erroneously relied on accounting, not economic, principles.  Further, the expert failed to assign any value to certain benefits that Hynix obtained from the JDLA.  ALJ Bullock summarized Netlist’s argument being that the Hynix expert “ignored, or undervalued, benefits received by [patent owner Netlist] under the JDLA.”

Finally, Netlist challenged Hynix’s overall “nondiscriminatory” analysis as being erroneously akin to a “most-favored nations clause”, meaning “that a licensor would be required to offer the same effective rate to all licensees, regardless of whether market assumptions that led to one offer were no longer accurate at the time of a later offer.” (ID at 191)

Decision

The bulk of ALJ Bullock’s decision concerns whether the asserted patents are valid and infringed.  He ultimately ruled that the patents were valid, but not infringed.  Following ITC practice, however, ALJ Bullock further considered whether an exclusion order should be entered based on the public interest in the event that the full Commission decides that the patents are infringed.

RAND Defense In Public Interest Inquiry

As an initial matter, ALJ Bullock notes that the parties did not address the RAND defense in the initial liability phase of the investigation.  Rather, the parties addressed the RAND defense in the public interest phase.  Further, ALJ Bullock observed that he was authorized by the Commission to consider “the statutory pubic interest factors set forth in 19 U.S.C. 1337(d)(1), (f)(1), (g)(1),” but none of the parties tied the RAND defense to any of those specific public interest factors.  Nonetheless, he considers the RAND defense in the public interest inquiry since that is how the parties presented the defense. (ID at 181)

Essentiality

ALJ Bullock ruled that the JEDEC RAND commitment applies only to SEP patent claims that are actually essential to the standard, not simply claims that are “potentially” essential (i.e., claims one reasonably believes are essential), stating:

Thus, the JEDEC Manual articulates a system where committee members are required to disclose “potentially essential patents” to the other JEDEC committee members, but attaches a RAND licensing obligation only to those patent claims that are actually essential to a final approved JEDEC standard.  Thus, a necessary pre-requisite to any determination that Complainant has violated a RAND licensing obligation is a showing that the asserted patents in this investigation are actually standard essential.  If the asserted patents are not essential to a JEDEC standard, [patent owner] Netlist does not have a RAND licensing obligation for those patent claims according to the terms of the JEDEC Manual. [ID at 182]

In this case, ALJ Bullock had decided that the patent claims are not infringed.  If the patents are not infringed, then they cannot be essential and any RAND obligation is “purely hypothetical”:

In the absence of an infringement finding, as here, any RAND obligation on Netlist’s part is purely hypothetical, and cannot form a factual basis for foregoing or delaying an exclusion order on the basis of the public interest.

But ALJ Bullock acknowledged that the Commission may disagree with his finding that the patents are not infringed, in which case the RAND obligation may be relevant.  Importantly, a patent that is infringed is not necessarily essential to the standard.  So there should be some showing that infringed patent claims are essential to the standard.

In this case, Hynix submitted evidence that the patent owner Netlist asserted in interrogatory’s, deposition testimony and elsewhere  that the patents were essential to the JEDEC standard.  Further, the patent owner Netlist does not appear to dispute essentially.  ALJ Bullock, therefore, ruled that the patents may be considered essential to the JEDEC standard if the Commission finds that the patents are infringed. (ID at 184).

Implementer’s Burden To Prove RAND Defense

ALJ Bullock ruled that “the burden to prove an affirmative defense based on a breach of RAND obligations lies with Respondents [Hynix].”  He rejected Hynix’s argument that the JEDEC Manual placed the burden on the patent owner to show that its licensing was “demonstrably free of any unfair discrimination.”  Hynix was referring to the example License Assurance/Disclosure Form shown in the section A.3 Annex to the JEDEC Manual, which stated in relevant part:

Part 4

For any Essential Patent Claims held or controlled by the entity, pending or anticipated to be filed, the entity states:

__(i) A license will be offered, without compensation, under reasonable terms and conditions that are demonstrably free of any unfair discrimination to applicants desiring to utilize the license for the purpose of implementing the JEDEC Standard; or

__(ii) A license will be offered, with compensation, to applicants desiring to utilize the license for the purpose of implementing the JEDEC Standard under reasonable terms and conditions that are demonstrably free of any unfair discrimination.

ALJ Bullock observed, however, that there is some inconsistency in the manual whether the unfair discrimination must be “deontrabl[e].”  Specifically, the Licensing Assurance/Disclosure Form “section 8.2.5, by its own terms, only refers to ‘terms and conditions that are free of any unfair discrimination” (ID at 193) — i.e., uses only the term “free” and not “demonstrably free” of any unfair discrimination.  Hynix’s expert did not address that inconsistency.

In any event, ALJ Bullock ruled that the JEDEC Manual did not purport to address which party bears the burden of proof in a RAND dispute.  And the JEDEC Manual could not be used to set aside the ITC’s practice of “placing the burden of proof on the party advancing a RAND defense.” (ID at 193).  He ruled that placing the burden on the patent owner to prove there was no unfair discrimination would be contrary to the ITC enabling statute, stating:

[T]he undersigned is not persuaded that the JEDEC Manual, which does not even purport to address which party bears the burden of proof in a RAND dispute, can serve as a basis to set aside the Commission’s practice of placing the burden of proof on the party advancing a RAND defense.  To find otherwise would effectively add a new element of proof to section 337 investigations for RAND encumbered patents, i.e., complainants seeking to establish a violation based on their RAND encumbered patents would necessarily have to show that they made licensing offers that were free from unfair discrimination.  Such a requirement is untethered from the statutory language of section 337.  See 19 U.S.C. S 1337.  Of course, in the face of a prima facie showing of unfair discrimination by a respondent, a complainant would need to rebut that showing, but Respondents [Hynix] have failed to articulate a legal basis to place the initial evidentiary burden on Complainant for what is essentially their own affirmative defense. [ID at 193]

Is JEDEC RAND Commitment An Enforceable Contract?

ALJ Bullock raised questions whether the JEDEC RAND commitment would constitute an enforceable obligation under the New York law that governs its interpretation.  Specifically, the JEDEC Manual states that “[t]he Patent Policy will be interpreted and governed under the laws of the State of New York.” (ID at 194).  ALJ Bullock was concerned that the parties “ma[d]e no attempt” to analyze the RAND obligation under New York law, but instead erroneously rely on “unhelpful” economic expert testimony for a legal framework to interpret the JEDEC Manual, stating:

[T]he parties make no attempt to analyze Complainant’s RAND obligations according to the New York state law.  Rather, the parties have relied on the testimony of their economic experts to lay out what is essentially a legal framework for interpreting the JEDEC Manual.  That approach is largely unhelpful, as both experts’ opinions appear to be based primarily on policy concerns as opposed to controlling principles of law. [ID at 194]

Addressing New York contract law was important here, because “[a] court cannot enforce a contract unless it is able to determine what in fact the parties have agreed to ” and “[i]f an agreement is not reasonably certain in its material terms, there can be no legally enforceable contract.”  In this case, there is “a fundamental disagreement about what is required by the ‘reasonable’ and ‘unfair discrimination’ terms of the JEDEC patent policy.” (ID at 194)  ALJ Bullock found such disagreement unsurprising, because the JEDEC Manual did not define those terms and expressly leaves it to the parties to negotiate them “outside the context of JEDEC”, section 8.2.8 of the JEDEC Manual stating:

JEDEC makes no representation as to the reasonableness of any terms or conditions of the license agreements offered by such patent rights holders, and all negotiations regarding such terms and conditions must take place between the individual parties outside the context of JEDEC.

ALJ Bullock found that the JEDEC Patent Policy was intentionally ambiguous about what are reasonable licensing terms and the parties had not shown that a judge could “inject clarity into the RAND obligation when there is none in the JEDEC manual.”

Accordingly, ALJ Bullock questioned whether the RAND commitment would be an enforceable agreement under New York law. (ID at 195).  In this case, however, none of the parties–including the patent owner Netlist–have asserted that the RAND commitment is not enforceable.   So ALJ Bullock would assume that it was and continue his  RAND analysis.

Patent Owner Did Not Breach RAND Commitment

ALJ Bullock ruled that the implementer Hynix failed to show that patent owner Netlist breached its RAND commitment.

First, ALJ Bullock rejected Hynix’s argument that patent owner Netlist was required, but failed, to offer the same “effective rate” to Hynix that Netlist gave to Samsung under the JDLA. (ID at 195)  The JDLA agreement went beyond a mere license grant and had strategic partnership and other terms that Hynix’s expert erroneously assumed had no value:

The JDLA, however, is not the same type of agreement that is required under the JEDEC Patent Policy.  While the JDLA does include terms directed to a license to Samsung for Complainant’s asserted patents, it also includes a number of other terms that are directed to establishing a strategic partnership between Samsung and Complainant.  Respondents [Hynix] are overly-dismissive of these terms, and their expert … was only able to determine his low effective royalty by concluding that those terms had no value to Complaint [patent owner Netlist].  Those conclusions are at odds with the testimony of record. [ID at 195]

The evidence showed that, at the time the JDLA agreement was entered with Samsung, patent owner Netlist “believed it was receiving valuable consideration from having Samsung sign on as a strategic partner.” (ID at 196)  The JEDEC RAND commitment “surely cannot mean” that Netlist must offer the same JDLA terms without receiving the strategic partnership benefits that Netlist contemplated when entering the JDLA:

Whatever the RAND obligation means, it surely cannot mean that Complainant [patent owner Netlist] is required to offer a license to every JEDEC implementer on the same terms as the JDLA with Samsung, but without even the prospect of obtaining the strategic partnership benefits contemplated by the JDLA.

ALJ Bullock thus summarized his ruling on the RAND defense as follows:

In sum, Respondents have failed to tie their RAND arguments to a recognizable affirmative defense, a scenario that the Commission has previously noted with disapproval.  Assuming the RAND arguments are breach of contract arguments, the undersign finds that the underlying contract–the JEDEC Manual–lacks sufficient clarity to enforce its terms against Complainant [patent owner Netlist], which the Commission has also noted as a reason a RAND argument may fail.  And finally, even assuming that the RAND agreement is related to a cognizable affirmative defense, and that the terms of the JEDEC Manual are sufficiently definite to be enforceable, the undersigned finds that Respondents have failed to establish unfair discrimination based on the evidence of record. [ID at 196-197]

Today, the Supreme Court issued its decision in Impression Products v. Lexmark Int’l that draws a bright line for triggering the patent exhaustion doctrine when products are sold and leaves post-sale activity restrictions subject to any contractual rights between the parties, not patent law.  This decision is sure to have patent owners and licensees reviewing their existing licensing agreements and tweaking future ones.   The decision also provides another reason why patent owners may license their patents at an end product level, rather than a component level, to ensure that they have direct patent law remedies against the end product manufacturer that otherwise may be exhausted and unavailable if the patent is licensed at a component level.

The Supreme Court summarized its decision as follows:

This case presents two questions about the scope of the patent exhaustion doctrine:

First, whether a patentee that sells an item under an express restriction on the purchaser’s rights to reuse or resell the product may enforce that restriction through an infringement lawsuit.

And second, whether a patentee exhausts its patent rights by selling its product outside the United States, where American patent laws do not apply.

We conclude that a patentee’s decision to sell a product exhausts all of its patent rights in that item, regardless of any restrictions the patentee purports to impose or the location of the sale.

Importantly, the decision focuses on whether patent rights exist after an authorized sale.  The decision does not mean that the sale extinguishes other non-patent law remedies that a patent owner may have after the sale, such as remedies under contract law.

Continue Reading Supreme Court puts teeth into patent exhaustion (Impression Prods. v. Lexmark)

Today, the U.S. Supreme Court issued its decision in TC Heartland v. Kraft Foods that limits the venue — i.e., geographical location–of where patent cases may be brought.  For decades prior to this decision, venue was construed broadly to be essentially anywhere a defendant has minimum contacts.  By today’s decision, venue is  construed narrowly as limited to where the defendant either (i) is incorporated or (ii) has a regular and established place of business in which the defendant committed acts of infringement.

This ruling may substantially limit the number of patent cases that may be brought in the perceived patent-friendly Eastern District of Texas.  This also may increase the number of patent cases brought in patent-savvy Delaware, because that is where most companies are incorporated.  The decision also may make it harder to sue multiple defendants in a single action, because it may be difficulty to establish proper venue over all defendants.

This decision also takes more wind out of the sales of those seeking legislative changes to U.S. patent law.  Whether rightly or wrongly (we express no view here), the E.D. Texas has been used as an example of patent litigation abuse, venue shopping and the need for patent reform.  This decision may end that concern and follows other court decisions addressing patent litigation issues as well as the FTC’s patent assertion entity study that did not find the widespread patent litigation abuse that had fueled legislative efforts. (see, e.g., our Apr. 29, 2014 post on Supreme Court making it easier to get attorneys fees in patent cases and our Oct. 7, 2016 post on the FTC’s PAE study). Continue Reading Supreme Court limits patent venue statute (TC Heartland v. Kraft)

USTR SealThe U.S. Trade Representative (USTR) issued its annual 2017 Special 301
Report FINAL
 that “reviews the state of IP protection and enforcement in U.S. trading partners around the world.”  (Report at 1).  The report aims to “call out foreign countries and expose the laws, policies, and practices that failed to provide adequate and effective IP protection and enforcement for U.S. inventors, creators, brands, manufacturers, and service providers.”  (Report at 1).  Among the issues raised in this report are concerns that a foreign government may force U.S. standard essential patent (SEP) holders to enter license terms that devalue the patent and subject them to improper competition law enforcement. Continue Reading U.S. Trade Representative’s Report raises concerns about unfair foreign treatment of U.S. companies with standard essential patents

Today the Supreme Court ruled that the laches defense could not be used to limit 35 U.S.C. § 284 patent damages given the 35 U.S.C. § 286 statute of limitations that permits recovery of patent damages up to six years prior to filing an infringement suit.  Specifically, the Court ruled that “Laches cannot be interposed as a defense against damages where the infringement occurred within the period prescribed by §286.”  The result of the ruling is that the laches defense may limit equitable relief, such as an injunction, but will no longer preclude past damages in patent cases.

From a practical standpoint, the ruling may not be as significant as it otherwise might appear.  Laches is a frequently raised, but seldom successful, equitable defense in patent litigation.   Laches basically arises from a patent owner unreasonably delaying its assertion of a patent right during a period of time when the accused infringer made investments and the infringer would be prejudiced by the delayed assertion of the patent.  If successful, the defense traditionally would bar all past damages, limit injunctive relief and preclude future royalties on products purchased during the laches period.  The Federal Circuit’s en banc decision below in the instant case limited the defense so that it would no longer preclude any future royalties (see our Sep. 18, 2015 post explaining the en banc decision).  In sum, prior to today’s decision, the laches defense could limit damages prior to the filing of the lawsuit and limit injunctive relief.  This might have little impact in most patent cases where the period of past infringement may be relatively short and the patent has many years of life remaining for which future royalties would be paid even if an injunction were not granted.

Laches was a more promising defense when a litigation patent assertion entity purchased and asserted a near-end-of-life dormant patent (i.e., a never asserted patent) against defendants who have long-used the alleged infringing technology (see our Oct. 7, 2016 post on the FTC’s PAE Study and distinction between non-problematic “portfolio PAEs” and some problematic “litigation PAEs”).  In such circumstances, a laches defense could have a substantial impact because it would bar the bulk of the damages period (six years prior to the lawsuit) and would bar injunctive relief.  This would leave a remedy of only a future royalty for the short period of time remaining in the patent’s life.  For example, consider a patent with only a year remaining before it terminates.  The litigation PAE could seek seven years of damages: six years of damages prior to the lawsuit and one year of royalties before the patent terminates.  A successful laches defense would limit the damages exposure by over 85% — i.e., remove all six years of pre-suit damages, leaving only one year of future royalties before the patent expires.

The Supreme Court’s decision today will now permit six years of pre-suit damages notwithstanding a successful laches defense.  The related doctrine of equitable estoppel still remains as a defense.  Equitable estoppel is a somewhat harder defense to establish, because it requires proof that the infringer relied on some action by the patent owner indicating it would not assert the patent.  But equitable estoppel is a more effective defense, because it is a complete defense — i.e., it precludes all past and future damages and injunctive relief.

Below is a short summary of the case and the Supreme Court’s decision. Continue Reading Supreme Court rules laches cannot preclude statutory damages within the 6 year period before a patent suit is filed (SCA v. First Quality)

Judge Gilstrap recently ruled that  certain challenges to a damages expert’s testimony  went toward the weight a jury could give that testimony, rather than whether the testimony should be admitted.  Specific FRAND-related portions of the testimony that he would admit at trial include the following:

  • Expert could testify that the hypothetical FRAND royalty rate to be awarded for infringement damages (which presumes the patents are valid and infringed) would be higher than the royalty rate of a comparable FRAND license, which comparable license’s royalty rate may have been skewed low based on discounts made for litigation risks and costs.
  • Expert could testify about FRAND royalties that the accused infringer charges for its own SEPs.
  • Expert could testify about licenses negotiated in the context of German litigation and threat of injunction.

Judge Gilstrap indicated that the expert had sufficiently identified what he relied on and explained adjustments that he made to those proposed comparable licenses to account for differences from the hypothetical negotiated license.  The defendant’s challenges to that testimony goes to the weight the jury should give the testimony, not its admissibility.

Judge Gilstrap’s ruling is an interesting example of how FRAND litigation has matured since taking the main stage in Judge Robart’s first-of-its-kind FRAND royalty decision in Microsoft v. Motorola (see our May 1, 2013 post) and Judge Holderman’s following decision in In re Innovatio (see our Oct. 3, 2013 post).  Both of those 2013 decisions were based on, inter alia, a general failure of litigants to present sufficiently comparable licenses.  Since then, Federal Circuit decisions have leaned toward admitting comparable licenses where expert testimony sufficiently accounts for differences from the hypothetical negotiated license.

For example, the Federal Circuit’s 2014 Virnetx decision (a non-SEP case) counseled that, although “alleging loose or vague comparability … does not suffice,” a jury may consider comparable licenses where differences from the hypothetically negotiated license are explained to them (see our Sep. 17, 2014 post).  And the Federal Circuit’s 2015 Ericsson decision (an SEP FRAND case) stressed that, although real world licenses “are almost never perfectly analogous to the infringement action,” the jury may consider them if expert testimony accounts for “distinguishing facts when invoking them to value the patented invention.” (see our Dec. 5, 2015 post).  Litigants following the Federal Circuit’s guidance may find courts more willing to allow expert testimony on proposed comparable licenses despite their differences from the hypothetical negotiated license.

Continue Reading Judge Gilstrap permits damages expert testimony that litigated FRAND royalty should be higher than comparable license’s FRAND royalty that was skewed low by litigation risk discount (St Lawrence v. ZTE)

Magistrate Judge Payne recently ruled against prospective licensee T-Mobile’s motion to dismiss patent owner Huawei’s Declaratory Judgment Complaint that seeks a declaration that Huawei  complied with its FRAND commitments to ETSI regarding LTE standard-essential patents during Huawei’s license negotiations with T-Mobile.  Judge Payne did not rule whether or not Huawei had complied with its licensing negotiations; rather, he simply indicated that there was sufficient controversy between the parties and concern that T-Mobile might bring a breach of contract action against Huawei that the court could exercise declaratory judgment subject-matter jurisdiction to resolve the FRAND-compliance dispute.  This is a procedural ruling that is subject to review by the presiding district court judge, Judge Gilstrap.

This decision is interesting because it supports a way for patent owners with large SEP portfolios to resolve FRAND or other licensing disputes in a single action and, thereby, avoid complex and expensive patent infringement litigations on a patent-by-patent basis.  But the devil is in the details and we will await further developments as the case proceeds. Continue Reading Judge Payne rules patent owner may bring case seeking a declaration that it has not breached FRAND commitments (Huawei v. T-Mobile)

Today the Supreme Court in Life Technologies v. Promega ruled that 35 U.S.C. § 271(f)(1) liability for supplying from the U.S. “all or a substantial portion of the components of a patented invention” is a quantitative, not qualitative, analysis of the number of  components supplied such that supplying only a single component of a multicomponent invention does not give rise to liability under that section (though it might give rise to liability under § 271(f)(2) if that single component “is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use”). (see also our June 27, 2016 post on the Supreme Court’s grant of review of this case).  As Justice Alito’s concurrence states, the opinion “establishes that more than one component is necessary, but does not address how much more.”   So the art of litigating Section 271(f)(1)  will focus on the litigants’ ability to delineate how many separate “components” are in a claimed invention and whether the resulting number of such components supplied from the U.S. is “substantial.” Continue Reading Supreme Court rules that number of components supplied from U.S., not their importance to invention, is relevant to Section 271(f)(1) infringement (Life Tech. v. Promega)

The Korea Fair Trade Commission (“KFTC”) recently issued a press release stating its intent to issue a written decision that will impose an $865 Million sanctions and a corrective order against Qualcomm for abuse in licensing standard essential patents (“SEPs”) in the mobile communications industry.  Specifically, on December 28, 2016, the KFTC released a three-page English-translated summary of a 27-page Korean-language  press release.  Qualcomm issued its own press release, which includes an unofficial English translation of the 27-page KFTC press release.

This was only a press release by the KFTC and an actual written decision  has yet to issue from which any action will be taken.  Accordingly, at this point we provide a summary of the KFTC Press Release and conclude with important questions or issues to look for when the actual written decision of the KFTC issues.  For example, Korean-based Samsung had some of the same or similar licensing practices as U.S.-based Qualcomm and prevailed in U.S. litigation on whether such practices breached the same ETSI FRAND obligations at issue here.  The KFTC written decision may show why Samsung’s activities were okay, but Qualcomm’s were not.

To be clear:  This is a summary based on a review of an unofficial translation of the KFTC Press Release and may not reflect actual facts or the facts and theories upon which the KFTC ultimately bases its written decision.  In other words, assume that the qualification “The KFTC Press Release may indicate that …” applies to everything below since there could be error in the KFTC’s factual findings, the unofficial translation of it, or our summary thereof. Continue Reading Korea FTC proposes sanctions against Qualcomm’s SEP licensing practices

Magistrate Judge Nathanael M. Cousins recently denied Apple’s equitable defense that sought to hold a Core Wireless standard essential patent unenforceable because the prior patent owner Nokia allegedly failed to timely disclose to the ETSI standards body a pending patent application.  Judge Cousins also entered Final Judgment based on the jury’s recent verdict that awarded a $7.3 million lump sum reasonable royalty for Apple’s infringement of two SEPs (see our Dec. 15, 2016 post on the verdict).  This case provides incremental insight into litigating issues concerning a patentee’s alleged failure to disclose intellectual property rights to a standards body, at least with respect to the equitable theories of implied waiver and equitable estoppel.

In this case, the alleged failure to disclose related to a pending U.S. patent application that claimed priority to a Finnish patent application that was filed by the patent owner and pending while the standard was being developed.  The U.S. patent application did not issue as the patent-in-suit until several years after the standard was adopted.  Within a month or so of the patent’s issue, the patent owner disclosed the patent to the standards body, which was deemed to be “shortly after [the patentee] could point to the contours of its IPR with specificity because the claims were allowed.”

This did not give rise to an inference that the patent owner was relinquishing its patent rights as required to establish implied waiver.  And Apple, who did not create or sell its adjudged infringing products until many years later, did not show that it had relied on Nokia’s failure to disclose or was prejudiced by it, as required to establish equitable estoppel. Continue Reading Court denies Apple’s equitable defense that was premised on failure to disclose patent applications to a standards body (Core Wireless v. Apple)