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A jury recently found that Huawei willfully infringed four patents owned by PanOptis alleged to be essential to mobile cellular standards and subject to a FRAND commitment as well as a fifth patent related to the H.264 video compression standard but was not subject to a FRAND commitment.   The jury awarded a reasonable royalty of $7.7 million for the single patent without a FRAND commitment, which was almost three times higher than the combined royalty awarded for the four FRAND-committed SEPs of $2.8 million.  But it is not clear at this point whether that difference is due to the FRAND-commitment or to the relative value of the patented technologies to the infringing products.

Prior to trial, the court also showed judicial restraint by limiting the case to determination of FRAND commitments on U.S. patents as a matter of U.S. law and not opining on FRAND commitments for foreign patents under foreign law.  For example, the court refused to enjoin a Chinese antitrust action based on alleged FRAND violations for related Chinese SEPs.  And the court refused to include in this case a determination of whether there was infringement of related foreign SEPs and whether licensing offers on those foreign SEPs complied with the FRAND commitment under foreign law.

The next steps in this case involves the court holding a bench trial (i.e., trial before the judge, not a jury) on whether PanOptis licensing offers complied with its FRAND commitments.  Further, the parties will file the usual post-trial motions that may challenge the jury verdict and ultimate bench trial ruling.  Those further filings may provide more insight into the case.  So stay tuned.
Continue Reading Jury awards running royalty for willfully infringed SEPs subject to FRAND commitment (Optis v. Huawei)

Magistrate Judge K. Nicole Mitchell of the Eastern District of Texas recently denied patent owner Cellular Communications Equipment LLC (“Cellular” or “CCE”) motion for summary judgment that its asserted patents were not essential to a cellular standard, ruling that there was a factual dispute based on statements made by patent owner Cellular during the litigation.  This case illustrates problems in loosely referring to standard essential patents generically as patents relevant to a standard or erroneously stating that a patent was “declared essential.”  Declarations that patent owners submit to standard setting bodies typically do not declare that patents are essential to the standard, but identify patents that may be essential to the standard and what licensing terms, if any, they would offer if the patent actually is essential.  A patent is not actually a “standard essential patent” or “SEP” unless it is “essential” to the standard under the standard setting body’s intellectual property rights (IPR) policy.

Further, this case illustrates that,  just because a patent is infringed by one way of implementing the standard does not mean that the patent covers every way to implement the standard and, thus, may be “essential” and subject to a standard-setting licensing commitment.

In sum, for convenience, speakers, writers and parties may loosely talk about a patent or patent portfolio as being SEP(s) as a short-hand for patents that were declared potentially an SEP.  But, when making statements on which a court, agency or other decisions may rely, it may be helpful to be more precise or provide a caveat that the term SEP is being used as a short-hand and does not mean that a patent actually is essential to the standard.
Continue Reading Judge Mitchell rules there are factual issues whether patent is “essential” to a standard (Cellular Eqpt v. ZTE)

Last week, Judge Orrick of the U.S. District Court for the Northern District of California issued an Order that enjoins Huawei from enforcing an injunction on Chinese standard essential patents (SEPs) entered by the Chinese People’s Court of Shenzhen (the Shenzhen Court).  The Chinese Shenzhen Court entered that injunction after considering Samsung’s arguments that the SEPs were subject to Huawei’s commitment to license them on fair, reasonable and non-discriminatory (FRAND) terms.  This case provides incremental insight into asking a U.S. court to bar enforcement of a foreign injunction based on foreign SEPs so that the U.S. court may consider FRAND contractual rights as to those foreign SEPs.

As with most cases, this decision is fairly fact specific.  Some of the key points from this decision include the following:

  • Filing Date of U.S. and Foreign Actions.  The patent owner (Huawei) filed this U.S. action and the Chinese action at the same time.  Technically, perhaps because of the time zone difference, the U.S. action was filed one day before the Chinese action.  The simultaneous filing indicated that the patent owner was not  filing the Chinese action as a run-around a much earlier filed U.S. action (as was the case in the Microsoft v. Motorola case where an antisuit injunction was entered).
  • First-To-File Race?  This case has a first-to-file flavor similar to what we see in selecting a forum for U.S. court actions–e.g., courts defer to litigating a case in the first U.S. district court where the matter is raised, rather than in another U.S. district court with a later-filed case on the same matter.  That first-to-file deference leads to a race to the court where the patent owner tries to  file a U.S. case in its preferred U.S. court before an accused infringer files a related declaratory action in another U.S. court, and vice versa.  The fact that Huawei technically filed this U.S. case one day before Huawei filed the Chinese case was a factor that Judge Orrick found to favor entering an antisuit injunction that gives preference to the first filed U.S. action over the later filed Chinese action.  Huawei essentially outraced itself in the first-to-file competition (i.e., filed its U.S. action before filing its Chinese action)
  • Scope of U.S. and Foreign Actions.  Although not totally clear from the record, the Chinese court apparently considered only whether the accused infringer (Samsung) was a willing licensee in its negotiations with the patent owner (Huawei) for a license under the Chinese SEPs.  In this U.S. case, however, the court would consider a much broader issue of whether Huawei breached its FRAND commitment and determine FRAND contract terms.  In other words, the U.S. court was not going to simply retry and decide the same issues already decided by the Chinese court and his decision would control whether the patent owner would be entitled to the injunctive relief granted by the Chinese court.
  • The Antisuit Injunction is Limited In Scope and Duration.  The U.S. court was entering an injunction of limited duration and scope.  The Chinese injunction that the patent owner (Huawei) was enjoined from enforcing concerned only 2 Chinese patents and was subject to an appeal in China that would not be decided for a few more months.  This U.S. case is scheduled for trial in December, after which the U.S. court would decide the contract issues and dissolve the antisuit injunction.  Accordingly, the antisuit injunction would preclude enforcement of the Chinese injunction for only a few months and impact only 2 Chinese patents.
  • Judicial Estoppel From Entering the Antisuit Injunction.  The accused infringer (Samsung) successfully argued against bifurcating the U.S. case that would have decided the FRAND contract issues first; rather, it argued that the U.S. court must first determine whether the patent owner’s (Huawei’s) patents were valid, enforceable, infringed and essential to the standard before the court could then decide the contractual FRAND issues.  The U.S. court agreed to proceed with the entire case–both the FRAND contract and U.S. SEP infringement claims–at the same time with a single two-week jury trial.  The accused infringer’s later request for an antisuit injunction “tempted” the court to hold that the accused infringer was judicially estopped from now arguing that an antisuit injunction was warranted so that the the contractual issues would be decided first (contrary to the accused infringer’s successful bifurcation argument).  But, rather than that, the court ruled that the infringer would be granted the antisuit injunction but could not argue that the FRAND contract issues could not be decided without evidence of whether the foreign patents were valid, enforceable, infringed or essential (if such determinations were outside the scope of the U.S. court’s jurisdiction).

Below is a more detailed discussion of the decision.
Continue Reading Judge Orrick enjoins Huawei from enforcing injunction for infringing SEPs issued by China’s Shenzhen court (Huawei v. Samsung)

Judge Gorton of the U.S. District Court of Massachusetts recently entered an order granting a motion by Amphastar Pharmaceuticals (Amphastar) that bars Momenta Pharmaceuticals, Inc. (Momenta) from enforcing a patent against certain drug manufacturing control processes based on the equitable doctrines of waiver and estoppel that arose form Momenta’s failure to disclose a pending patent application to the standard setting organization (SSO) United States Pharmacopeia (USP) when deliberating on a USP National Formulary (USP-NF) standard.  This case found a duty to disclose a pending patent application that “reasonably might be necessary” to practice the standard based on the participants’ understanding of the SSO’s ambiguous conflict of interest policy that required participants to disclose financial or other interests “that may result in a conflict of interest or the appearance of interest.”  This case also provides insight on tailoring equitable relief when waiver or estoppel are found: the court ruled that the patent was unenforceable against two infringing processes used by the infringed that practiced the standard, but the patent was enforceable against a third process that fell outside the standard (if the patent otherwise is valid and infringed).
Continue Reading Waiver and estoppel bar enforcement of undisclosed drug manufacturing patent (Momenta v. Amphastar)

Judge Gilstrap recently issued an Order rejecting the equitable defense of patent misuse in a case involving standard essential patents (SEPs) subject to a commitment to license them on fair, reasonable and non-discriminatory (FRAND) terms.  Motorola Mobility LLC (Motorola) alleged that Saint Lawrence Communications LLC (St. Lawrence or SLC) was guilty of patent misuse by, among other things, requiring Motorola to take a worldwide license to FRAND-committed SEPs, using the threat of injunctive relief in Germany to coerce licensing of those SEPs, entering different license terms with different licensees and not disclosing effective royalties from licensing the SEPs under a patent pool when negotiating individual licenses.  This decision is another indication that competition law claims asserted against SEPs may not prevail when patent owners have followed traditional patent enforcement and licensing strategies or even if they breach of a FRAND commitment.  Rather, there must be something more egregious or deceptive with the particular patent owner’s conduct at issue to give rise to competition law claims that are required to address harm to competition beyond harm that can be addressed by more traditional patent or contract law remedies — e.g., a contract remedy for breach of a FRAND commitment or limits on patent remedies based on a FRAND commitment.
Continue Reading Judge Gilstrap rejects patent misuse defense to alleged FRAND-committed SEPs (St. Lawrence v. Motorola Mobility)

Magistrate Judge Fallon recently Recommended Dismissing competition law counterclaims brought by TCT Mobile (TCT) against Godo Kaisha IP Bridge 1 (IP Bridge) and Panasonic and Judge Bataillon has now Adopted that ruling.  Those counterclaims were based on alleged improper conduct relating to standard essential patents (SEPs)  on European Telecommunications Standards Institute (ETSI) 2G, 3G and 4G wireless standards that IP Bridge acquired from Panasonic after those standards were adopted.  While the standards were under development, Panasonic had committed to license the SEPs on fair, reasonable and non-discriminatory (FRAND) terms.  TCT’s competition law counterclaims generally concerned allegations that:

  • Panasonic made FRAND commitments it did not intend to keep in order to induce the standards body to keep Panasonic’s technology in the standards;
  • After the standards were adopted, Panasonic transferred the patents to IP Bridge which offered to license the patents on terms that were not FRAND and
  • There was some type of improper concerted action between Panasonic and IP Bridge (this aspect is fairly redacted and unclear).

This case presents an interesting nuance of competition claims against a party (IP Bridge) that acquired SEPs from an original owner (Panasonic) who made a FRAND commitment.  In this case, TCT alleged that something about the transfer of the patents to IP Bridge was meant to circumvent Panasonic’s FRAND commitment (but the details of those allegations are redacted in the public court documents).

This case also indicates that an antitrust injury-in-fact cannot arise solely from a patent owner filing an infringement lawsuit on FRAND-committed SEPs.  That’s because a successful FRAND defense by the accused infringer will lead to remedies consistent with the FRAND commitment and, in any event, any relief ultimately granted by the court would be lawful.

The decision also has a unique procedural posture.  This is a decision by a magistrate judge that recommends to the presiding district court judge how to rule on the issue.  Such magistrate judge recommendations are common in patent  cases.  The presiding district court judge usually adopts a magistrate judge’s recommendation, but is not required to do so.  So we will await the district court judge’s decision whether to adopt Judge Fallon’s recommendation here.

Further, this decision concerns a Rule 12(b)(6) motion to dismiss causes of action based on the initial pleadings.  Such motions are difficult to win because of the tremendous deference the court must give to the challenged pleading — e.g., the court considers whether TCT states a “plausible” claim if the court assumes (without deciding) that all factual allegations TCT raises are true and draws all reasonable inferences in TCT’s favor.   And courts are even more reluctant to grant a Rule 12(b)(6) motion against competition law claims, which may be factually complex and require information in the hands of the alleged wrong-doer that can be obtained only in discovery.   In this case, however, TCT apparently had almost a year of discovery and two attempts to plead its competition law claims, which may have provided the court more comfort in its dispositive ruling here.
Continue Reading Magistrate Judge Fallon recommends dismissing competition claims against SEP holder (Godo Kaisha IP Bridge v. TCL et al)

Today, Judge Selna issued on Order ruling on Ericsson’s motion to alter or amend his FRAND ruling. (See our Jan. 3, 2018 post summarizing FRAND royalty ruling).  Under the procedural posture of the Rule 52(b) motion for seeking modification of a judge’s bench trial findings of fact and law, Ericsson had to show that its proposed changes to that ruling were needed “to correct manifest errors of law or fact or to address newly discovered evidence or controlling law” or were not changes that “would not affect the outcome of the case or are immaterial to the court’s conclusions.” (Order at 2).  Given this difficult standard, Judge Selna only agreed to make minor word changes to his decision, which he will soon reissue with other clerical corrections and some corrections to be made based on TCL’s Rule 52(b) motions (which were also apparently minor changes).  To be clear: by “minor changes” we mean as far as significance in applying the decision to other cases between other parties; we could be mistaken and, moreover, have no comment on how significant the changes may be to the instant parties in this particular case.  The next substantive step in this case will be the Federal Circuit appeal that Ericsson already filed, but that has been stayed pending the outcome of the parties’ Rule 52(b) motions.
Continue Reading Judge Selna will make minor changes to FRAND ruling (TCL v. Ericsson)

Judge James V. Selna of the Central District of California (“C.D. Cal.”) recently released the redacted, 115-page public version of his Memo of Facts and Law with his FRAND determination in the TCL v. Ericsson SEP dispute concerning 2G, 3G and 4G cellular technology in the European Telecommunications Standards Institute (“ETSI”) standards along with his Final Judgment And Injunction, which injunction has detailed terms like one would find in a licensing agreement.

Judge Selna ultimately ruled that Ericsson’s licensing conduct did not breach its FRAND commitment, but that Ericsson’s proposed licensing terms were not FRAND.  Judge Selna rejected the FRAND methodologies and resulting FRAND royalty rates proposed by both TCL and Ericsson.  Judge Selna did his own FRAND methodology based on the methods and evidence presented by the parties, following mainly a modified version of a “top down” approach proposed by TCL.  The FRAND rates determined by Judge Selna fell about half-way between TCL and Ericsson’s proposals, though direct comparison is difficult.  For example, for Ericsson’s 4G SEPs, the royalty rates from the parties and court varied as to scope (e.g., blended global rate versus regional rate) and required some conversion to compare (e.g., Judge Selna computed an effective “unpacked” royalty that accounted for lump-sum payments and royalty floors in Ericsson’s offers):

4G SEP Royalty Rate
(Percentage of Mobile Phone’s Net Price)
TCL’s Proposed 4G Global Rate 0.16% (Blended global rate)
Court’s 4G Rates (by region) 0.450% (U.S.)
0.314% (Rest of World; No 4G Sales in Europe)
Ericsson Effective U.S. 4G Rates
(Court calculated from Option A and B offers)		 1.074% (Option A Effective U.S. Rate) or
1.988% (Option B Effective U.S. Rate)

We provide below a bullet-list summary of some key points from the decision as well as a (rather lengthy) detailed discussion of Judge Selna’s decision.  We consider this an important decision to read, and encourage you to do so, because it is one of the few decisions that describe a court’s analysis in determining a disputed FRAND royalty.  But we also believe this case provides only incremental development of the case law itself given the highly factual nature of the decision in this still developing area of law.  Judge Selna  acknowledged that trying to obtain “precision and absolute certainty” here was a “doomed undertaking.”  In other words: Learn from this decision, but do not assume it represents a definitive proper FRAND analysis and is representative of a FRAND royalty for all FRAND cases. Its one step in a continuing journey …
Continue Reading Judge Selna determines FRAND Rate and enters contract-type injunction on ETSI SEPs (TCL v. Ericsson)

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)