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.
In November 1997, Nokia submitted to ETSI a change request to a GSM specification. That change request apparently had been submitted internally at Nokia as part of an invention report by a person who ultimately would be a named inventor on the ‘151 Patent at issue in this case. Around the same time in November 1997, Nokia filed a Finnish patent application based on that invention; the ‘151 Patent-in-suit claims priority to that Finnish patent application.
At this time, ETSI’s 1997 IPR policy stated, in relevant part, as follows:
Each member shall use its reasonable endeavors to timely inform ETSI of ESSENTIAL IPRs it becomes aware of. In Particular, a MEMBER submitting a technical proposal for a STANDARD shall, on a bona fide basis, draw the attention of ETSI to any of the MEMBER’s IPR which might be ESSENTIAL if that proposal is adopted.
ETSI rejected Nokia’s change request. The “freeze date” for the GSM standard at issue was in June 1998. Four years later, in June 2002, Nokia received an office action that allowed the ‘151 Patent claims. The next month, in July 2002, Nokia disclosed the ‘151 Patent to ETSI. The Apple products at issue in this case that were found to infringe the ‘151 Patent were not produced until about nine years later in 2011.
The court considered the equitable theories of implied waiver or equitable estoppel based on a bench trial, where Apple presented an expert on ETSI’s IPR policy, and the parties’ briefing (see Apple Motion and Core Wireless Opposition).
The court defined implied waiver as follows:
To support a finding of implied waiver in the standard setting organization context, the accused must show by clear and convincing evidence that the patentee’s conduct was so inconsistent with an intent to enforce its rights as to induce a reasonable belief that such right has been relinquished. This can be shown when the patentee had a duty of disclosure and breached that duty. [internal quotes and citations omitted]
Judge Cousins found that Nokia did not have a duty to disclose regarding the ‘151 Patent “because (1) Nokia’s proposal [i.e., change request to ETSI] was rejected; and (2) the patent claims were not finalized until 2002.” Further, Nokia did disclose the patent “shortly after it could point to the contours of its IPR with specificity because the claims were allowed.” Thus, “Nokia’s conduct does not appear to be inconsistent with an intent to enforce its rights.” Further, there was no evidence that anyone had “interpreted Nokia’s failure to disclose the patent in 1998 as evidence that Nokia relinquished its patent rights.”
The court defined equitable estoppel as follows:
To support a finding of equitable estoppel, the accused must show that (1) the patentee, through misleading conduct, led the alleged infringer to reasonably infer that the patentee does not intend to enforce its patent against the alleged infringer; (2) reliance on the conduct; and (3) due to its reliance, the alleged infringer will be materially prejudiced if the patentee is allowed to proceed with its claim. [internal quotations and citations omitted]
The court rejected Apple’s equitable estoppel argument, finding that “Apple did not present evidence that it relied on Nokia’s failure to disclose, or that it was prejudiced by Nokia’s failure.” Further, “[b]ecause Apple did not create or sell the accused products until 2011, … Apple could not have relied on Nokia’s alleged misleading conduct in failure to disclose the ‘151 patent prior to 2002.”