A few months ago, we posted about patent infringement suits filed by Zenith Electronics (“Zenith”), Panasonic Corporation (“Panasonic”), U.S. Philips Corporation (“Philips”) and The Trustees of Columbia University in the City of New York (“Columbia”), licensors to the MPEG LA Advanced Television Systems Committee (“ATSC”) digital television patent pool, against electronics makers Curtis International (“Curtis”), Viewsonic Corporation (“Viewsonic”), and Craig Electronics (“Craig”). The complaints accuse Curtis, Viewsonic and Craig, of infringing four alleged standard essential patents (“SEPs”) through their making/selling/using televisions that comply with the ATSC Standards.
This past Friday, November 22, 2013, defendant Viewsonic filed its Answer, which included FRAND-related affirmatives defenses and counterclaims against Zenith, Panasonic and Philips, as well as a FRAND-related Third-Party claim against MPEG LA.
Implied License Defense. Viewsonic’s Twelfth Affirmative Defense is “Implied License,” and alleges that:
On information and belief, Plaintiffs’ claims for recovery are barred, in whole or in part, by the doctrine of express license and/or implied license for reasons including, without limitation, that Plaintiffs are barred from asserting claims of infringement of one or more of the Asserted Patents against ViewSonic under the MPEG LA ATSC Patent Portfolio License and the MPEG LA Agreement Among Licensors.
FRAND Breach Defense. As its Eighteenth Affirmative Defense, Viewsonic asserts that Plaintiffs’ claims are barred by their breaches of alleged FRAND obligations to Viewsonic: “Plaintiffs do not offer licenses to the Asserted Patents on fair, reasonable and nondiscriminatory terms and therefore the Plaintiffs are not entitled to any recovery.”
But in a pleading that may be counter to having a FRAND obligation, Viewsonic’s Seventeenth Affirmative Defense directly challenges the alleged essentiality of Plaintiffs’ patents: “On information and belief, one or more of the Asserted Patents is not essential to the ATSC standard.”
Sherman Act Section 2 Violation. Viewsonic also asserts four counterclaims involving FRAND/SEP-issues. In its first counterclaim, Viewsonic alleges that Zenith and Philips violated Section 2 of the federal Sherman antitrust Act by failing to offer a license to their alleged SEPs on FRAND terms. Specifically, Viewsonic asserts that Zenith and Philips falsely represented to the ATSC that they would license their patents on FRAND terms if their technology was adopted into the ATSC standard. Then, “having succeeded in using false promises . . . to get their technology incorporated into the ATSC standard, they now seek to utilize the patents allegedly covering the technology to raise prices [for consumers] and exclude competition” from entities that are willing to accept a license on FRAND terms. “Unless [the] Court declares that the conduct of Zenith and Philips has violated the antitrust laws, there exists a dangerous probability that they will succeed in monopolizing the relevant market” for products that are ATSC-compliant and which infringe Zenith and Philips’ alleged SEPs.
Sherman Act Section 1 Violation. Viewsonic’s second counterclaim also brings a third-party claim against MPEG LA, and asserts that Zenith, Panasonic and Philips – “horizontal competitors of Viewsonic” – violated Section 1 of the federal Sherman antitrust Act by conspiring “with MPEG LA to reduce or eliminate competition from low price-tier television sellers such as Viewsonic,” specifically by agreeing “not to compete on pricing for the royalty rate for the ATSC patent pool” as well as agreeing to set “a non-FRAND royalty rate for the pooled patents.” According to Viewsonic, these entities “have used the cover of the ATSC Patent Pool” to further unreasonably restrain trade by, inter alia: 1) “engaging in patent hold up;” (2) “demanding royalty rates that are excessive in light of the fact that some patents in the ATSC Pool have [expired] or will soon expire;” (3) “demanding a royalty rate for products sold outside the statutory period of limitations for infringement claims;” (4) “demanding duplicative royalties for the same products on which royalties have already been paid or are already due from third parties in violation of the patent exhaustion doctrine;” and (5) demanding that Viewsonic “license the ATSC Pool and/or each individual Plaintiffs’ ATSC patent portfolio, including non-US patents, despite failing to demonstrate essentiality of all patents and despite having inadequate safeguards to ensure that the pool is limited to patents actually essential to the ATSC standard.”
FRAND Breach. Viewsonic’s third counterclaim alleges that Zenith, Panasonic and Philips each breached their agreement with the ATSC by “failing to license their allegedly standard essential patents on FRAND terms” to Viewsonic. In support of this claim, Viewsonic alleges that these entities’ “demands for unreasonable royalties and/or failure to license their allegedly essential patents on FRAND terms was based on their failure to consider” a number of factors, including, but not limited to the fact that the “patents in the ATSC Pool have [expired] or will soon expire, and the royalty rates should decrease as patents in the pool expire.”
Promissory Estoppel. Viewsonic’s fourth counterclaim is for promissory estoppel, and alleges that, as a result of Plaintiffs’ promises to the ATSC to license their patents on FRAND terms, Viewsonic “invested substantial resources developing, marketing, and selling products that are alleged to utilize the ATSC Standard, with the expectation that [Plaintiffs] would comply with their promises and offer licenses to any essential patents on FRAND terms.” According to Viewsonic, “Plaintiffs are estopped from defaulting on these promises under the doctrine of promissory estoppel.”
In its Prayer for Relief, Viewsonic requests that the court enter an order “[c]ompelling Plaintiffs to offer licenses to the Patents in Suit on FRAND terms” and to also award it treble damages for Plaintiffs’ alleged violations of the Sherman Act.
Zenith, Panasonic, Philips and MPEG LA are obligated to file answers to Viewsoinc’s counterclaims/third-party claim and/or file a motion to dismiss. We will continue to track the case for further developments.