Today the Federal Circuit (Renya, Bryson and Hughes) ruled that implied waiver may apply where the prior owner of a U.S. patent had a duty to disclose a related foreign patent application to ETSI even though ETSI had rejected that prior patent owner’s proposed contribution to the standard. This decision provides insight into several areas, including:
- Applying the equitable doctrine of implied waiver to the duty to disclose intellectual property rights (IPR) to standard setting bodies. Among other things, the decision indicates that there may not be a requirement to show reliance on the implied waiver.
- The importance of looking to the specific standard setting body’s IPR Policy at issue and providing evidence for interpreting that policy.
- The difference between disclosing patents that “may be” essential to the standard and a FRAND commitment that arises because the patent “actually is” essential to the standard.
- Failure to disclose is not a “gotcha'” defense; rather, you must show that the patent owner obtained some unfair advantage by its misconduct in not disclosing the patent.
As with many decisions, this case is fairly case-specific as far as interpretation of the ETSI IPR Policy. Only the patent challenger (Apple) provided testimony on interpretation of the ETSI Policy without any rebuttal evidence beyond the language of the IPR Policy itself. The Federal Circuit indicated that its decision was based on the specific record evidence–and lack of evidence–before it.
This case concerns U.S. Patent No. 6,477,151 (“the ‘151 Patent”) that is directed to a mobile station (e.g., a mobile phone) configured to synchronize to a base station (e.g., where cell phone tower is located) using the same timing Timing Advance Index (TAI) value for both uplink (mobile phone to base station) and downlink (base station to mobile phone) channels.
In 1997 and 1998, ETSI was developing a standard to address propagation delay in GPRS mobile networks. At that time, ETSI’s intellectual property rights (IPR) policy stated, in relevant part:
[Each ETSI 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 that member’s IPR which might be essential if that proposal is adopted.
essential [means] “it is not possible on technical (but not commercial) grounds, taking into account normal technical practice and the state of the art generally available at the time of standardization, to make, sell, lease, otherwise dispose of, repair, use or operate equipment or methods which comply with a standard without infringing that IPR.
IPRs [include] any intellectual property conferred by statute law including applications therefor other than trademarks. For the avoidance of doubt rights relating to getup, confidential information, trade secrets or the like are excluded from the definition of IPR. [emphasis added]
In 1997, a Nokia employee and named inventor of the ‘151 Patent submitted an internal invention report that, among other things, stated that his single TAI value concept was not yet in the ETSI GPRS standard, but it would be and attached a draft ETSI Change Request form seeking to put his concept into the standard. Nokia presented the proposal during ETSI working group meetings in November 1997. The working group initially recommended implementing it. At the same time, Nokia filed a Finnish patent application based on the TAI invention, to which the U.S. ‘151 Patent at issue in this case claims priority.
A few months later, during a January 1998 meeting, the ETSI working group rejected Nokia’s proposal and adopted a submission by some other company. That company’s proposal was similar to Nokia’s, except that using a single TAI was optional (not mandatory as Nokia proposed).
In June 1998, the standard was adopted. A couple years later, in July 2002, Nokia disclosed the Finnish patent application as well as the related U.S. patent application from which the ‘151 Patent issued.
Nokia assigned ownership of the patent to Core Wireless. Core Wireless later sued Apple for infringing two patents, including the ‘151 Patent. A jury found that Apple infringed the asserted claim of the ‘151 Patent and that the claim was not invalid.
The judge held a bench trial on Apple’s equitable defense that the ‘151 Patent was unenforceable based on implied waiver. The only testimony in the implied waiver trial was an Apple witness who had chaired the board of ETSI offered as an expert on ETSI’s IPR Policy. He testified that unpublished patent applications were not exempt from the ETSI disclosure requirement, such as the pending Nokia Finnish application that was subject to confidentiality within the Finnish patent office. He testified that the duty to disclose IPR arises the moment you submit a contribution that you believe might lead to that IPR being essential to the standard–i.e., “it has the potential to be essential”, “[s]o long as it might become essential, that’s all that’s required.”
The judge found there was no implied waiver because:
- There was not duty to disclose because Nokia’s proposal was rejected.
- There was no duty to disclose because the patent claims of the Finnish application were not finalized until 2002 (so scope of claims before then was uncertain).
- Apple presented no evidence that any ETSI member or other entity interpreted Nokia’s failure to disclose the patent in 1998 as evidence that Nokia relinquished its patent rights.
On appeal, among other things, Apple challenged that unenforceability ruling.
The Federal Circuit described the implied waiver standard generally as occuring “when 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.” As applied specifically to failure to disclose IP rights to a standard setting body, such conduct can be shown where:
- The patentee had a duty of disclosure to the standard setting body, and
- the patentee breached that duty. [Op. at 17]
The Federal Circuit disagreed with the three basis above that the trial court relied on to find no implied waiver.
ETSI Rejection of Proposal. First, the rejection of Nokia’s proposal did not of itself relieve Nokia of its duty to disclose. Under ETSI’s IPR Policy, members submitting a technical proposal must disclose IPR “that ‘might’ be essential ‘if that proposal is adopted'”, stating:
The district court’s interpretation of the policy would undermine the very purpose of disclosure, which [Apple’s expert] testified was to permit the standards-setting decisionmakers to make an informed choice about whether to adopt a particular proposal. Dr. Walker’s unrebutted testimony made it clear that an ETSI member’ duty to disclose a patent application on particular technology attaches at the time of the proposal and is not contingent on ETSI ultimately deciding to include that technology in an ETSI standard. [Op. at 19]
Here, the named inventor testified that his proposal and the one adopted in the standard are “different only because it made his idea ‘optional.'” [Op. at 20] Further, “there is no ground for dispute that Nokia’s proposal, if adopted, would have made its patent standards-essential.”
Pending Application. Second, there was no testimony that ETSI’s IPR Policy on disclosure exempted pending patent applications and Apple’s expert’s unrebutted testimony was that the IPR Policy did not exempt pending applications. Further, the ETSI IPR Policy “by its terms encompassed applications.”
Apple’s expert testified that, although the Finnish patent authority treats patent applications as confidential, “ETSI’s policy applied to unpublished patent applications without regard to whether they were confidential.” There is no trial testimony to support a contrary reading of ETSI’s IPR Policy.
Apple’s expert testified that disclosures should have been made no later than when the standard was adopted. So Nokia’s disclosure in 2002 after the patent issued was untimely since the standard was adopted in June 1998:
Again, Core Wireless’s reading of the policy, which would define a timely disclosure as one occurring as late as four years after the adoption of the standard, is unsupported in the record. As [Apple’s expert] testimony made clear, Core Wireless [sic: Nokia?] had a duty to disclose its IPR no later than June 1998; its later disclosure was clearly untimely and not sufficient to cure the earlier breach of its duty. [Op. at 21]
Third-Party Belief of Waiver. Third, “there is no requirement under the implied waiver doctrine that a third party must interpret the patentee’s conduct as constituting a waiver of its rights to enforce the patent; such analysis is more relevant to equitable estoppel.”
Unfair Benefit From Not Disclosing? The Federal Circuit remanded for further proceedings, however, so that the district court can determine whether the patent owner “unfairly benefited from its wrongful actions,” stating:
It is possible to interpret the district court’s ruling as being based on the conclusion that, because Nokia’s proposal was not adopted, no inequitable consequence flowed from Nokia’s failure to disclose its patent application. Equitable defenses seek to prevent a party from unfairly benefitting from its wrongful actions, and in some circumstances courts have held that an equitable defense will not be recognized if the offending party did not gain a benefit from its wrongdoing. As the Supreme Court has acknowledged, “the remedy imposed by a court of equity should be commensurate with the violation.”
Because implied waiver, like the doctrine of inequitable conduct discussed in Therasense, may render an entire patent unenforceable, the doctrine “should only be applied in instances where the patentee’s misconduct resulted in [an] unfair benefit.” Therasense, however, recognized an exception to the materiality requirement for “cases of affirmative misconduct.” In the analogous case of implied waiver, which like inequitable conduct involves the breach of a disclosure duty, the same equitable considerations require either a showing of prejudice or egregious misconduct sufficient to justify the sanction of unenforceability of the patent at issue. [Op. at 21-22]
It may be that Nokia (or its successor Core Wireless) obtained no “unjust advantage” since their proposal was not adopted; or, given similarities and Nokia’s participation it may be that having the feature “optional” gave them an “undeserved competitive advantage.” So the case is remanded for the district court to make those determinations.