This is the first of a couple posts we intend to make on the FTC v. Qualcomm litigation that recently concluded a bench trial last week and is awaiting decision by Judge Koh in the Northern District of California (San Jose Division) federal court. This case occurs at a historical point of opportunity and transformation
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.…
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.…
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.…
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.…
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).…
Administrative Law Judg (ALJ) Lord at the U.S. International Trade Commission (ITC) recently issued an Order striking patent misuse claims against Philips Lighting (Philips) raised by WAC Lighting and other respondents that were premised on Philips filing its Complaint in the ITC without making a license available “on standard (reasonable) and non-discriminatory terms.” This ruling provides incremental guidance on the specificity needed to plead a competition law claim based on standard essential patents (SEPs), including allegations of specific facts showing the anticompetitive effect of alleged improper SEP licensing activity.…
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.…
Today, the U.S. International Trade Commission (ITC) issued a Notice of Commission Final Determination following its review of Administrative Law Judge (ALJ) Shaw’s September 2017 rulings concerning, among other things, three patents alleged to be essential to the Linear Tape Open (LTO) 7 standard (LTO-7). (see our Dec. 19, 2017 post summarizing ALJ Shaw’s decision). …
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.…