The standard-essential patent battle between InterDigital and Chinese handset makers Huawei and ZTE rages on in the U.S. District Court for the District of Delaware. Recall that the parties are awaiting an Initial Determination in ITC Inv. No. 337-TA-800, and are also involved in Inv. No. 337-TA-868. In the companion district court cases to the -868 investigation, Huawei and ZTE attempted to have the Delaware court expedite a determination of FRAND terms for InterDigital’s portfolio, an attempt that was rebuffed by the court. But now, in motion filed yesterday, InterDigital seeks to have Huawei and ZTE’s FRAND-related claims dismissed altogether. InterDigital argues that the FRAND counterclaims should have been asserted in an earlier litigation, are not ripe, and merely seek an advisory opinion. InterDigital also claims that Huawei and ZTE have failed to allege the existence of an enforceable contractual commitment under the applicable law.
Declaratory Judgment Claims
InterDigital argues that Huawei and ZTE’s declaratory judgment FRAND counterclaims — which seek a determination of FRAND terms for InterDigital’s 3G/4G portfolio — should have been asserted as compulsory counterclaims in an earlier litigation between the parties, and therefore should be dismissed as untimely. Additionally, InterDigital asserts that these declaratory judgment claims are unripe and merely seek an advisory opinion to which Huawei and ZTE will not be bound.
The main thrust of InterDigital’s argument is similar to what it previously stated in response to the attempts to expedite a FRAND determination — that even after a FRAND royalty is set, Huawei and ZTE will just use it as a bargaining chip and will continue to dispute validity and essentiality. Thus, InterDigital argues that the rate set by the court will not resolve any part of the parties’ dispute and will be an “exercise in futility.” InterDigital argues that unless Huawei and ZTE commit to taking a license under the FRAND rate set by the court and not to contest infringement, validity, and essentiality, any ruling on the declaratory judgment claims will be a hypothetical advisory opinion. InterDigital cites, among other things, the gamemanship by Apple in its dispute with Motorola Mobility in the Western District of Wisconsin (where Apple refused to commit to taking a license at anything more than $1/unit). It will be interesting to see if the Delaware court follows the lead of Judge Robart in the Microsoft-Motorola case and forces Huawei and ZTE to unconditionally commit to taking a license at the FRAND terms set by the court.
Huawei and ZTE alleged that InterDigital breached its FRAND commitments to ETSI by failing to offer and grant licenses to its 3G and 4G standard-essential patents on FRAND terms. InterDigital not only claims that this breach of contract claim should have been brought as a compulsory counterclaim to the earlier infringement action, but also that Huawei and ZTE have failed to allege the existence of an enforceable contract and an entitlement to specific performance.
More specifically, InterDigital argues that its FRAND commitments do not represent an enforceable contract to enter into a license agreement, but merely are unenforceable “agreements to agree.” Note that a similar argument was rejected by the court in the Microsoft-Motorola FRAND case, but InterDigital argues that there, Motorola actually stipulated to the existence of the contractual obligation. By contrast, InterDigital vehemently disputes that it is contractually bound. InterDigital also argues that even if an enforceable contract exists, Huawei and ZTE have not properly pled that they are entitled to specific performance or damages.