It’s July (and brutally hot on the East Coast), so you’ll have to excuse us if we’re moving a little slower than normal catching up on all the SEP litigation going around.  Earlier this month we posted about submissions by Microsoft and Motorola concerning the meaning of the “duty of good faith and fair dealing,” specifically as it applies in RAND-encumbered standard-essential patent licensing.  Not surprisingly, the parties followed up these briefs with dueling summary judgment motions, seeking to narrow issues or even potentially completely eliminate the need for the breach of contract jury trial set to take place next month in Seattle.  Last week, the parties also filed their respective oppositions to these motions.  You can take a look at the parties’ motions and oppositions below — and after the jump, we’ll give a brief synopsis of the arguments that each is making.

13.07.03 (D.E. 727) Microsoft Motion for Partial SJ and 13.07.15 (D.E. 758) Motorola Response to MS Partial SJ Motion

13.07.03 (D.E. 720) Motorola Motion for SJ and 13.07.12 (D.E. 740) MS Response to Motorola SJ Motion

Continue Reading With dueling summary judgment motions, Microsoft and Motorola seek to eliminate issues from next month’s RAND trial

This past Friday, Judge Richard Andrews of the District Court of Delaware held a hearing on InterDigital’s motions to dismiss several FRAND-related counterclaims in three district court cases InterDigital brought against Huawei, ZTE, and Nokia over 4G-essential patents.  For a brief refresher on the issues raised in InterDigital’s motions to dismiss — which have been pending for months — you can check out our prior posts:

After the July 12 oral argument, the court issued a written order memorializing its decision. The court granted InterDigital’s motion in part, choosing to dismiss some of the defendants’ FRAND-related counterclaims (although granting leave to amend and re-plead some of the claims).

[InterDigital Order on Motion to Dismiss]

Here’s a brief breakdown of the specific counterclaims that are affected by the court’s order:

Case Dismissed w/leave to amend Dismissed w/out leave to amend
13-cv-00008(Huawei) I (breach of contract)II (breach of contract – third party)

V (declaratory judgment re: FRAND offer)

VI (declaratory judgment re: FRAND determination)

 III (equitable estoppel)IV (waiver of right to enjoin)
13-cv-00009(ZTE) I (breach of contract)II (breach of contract – third party)

V (declaratory judgment re: FRAND offer)

VI (declaratory judgment re: FRAND determination)

 III (equitable estoppel)IV (waiver of right to enjoin)
13-cv-00010(Nokia) I (breach of contract, specific performance re: no injunctive relief)II (breach of contract, damages)

III (declaratory judgment re: FRAND determination)

V (breach of implied contract)

VIII (declaratory judgment re: FRAND offer)

 IV (promissory estoppel)VI (CA unfair competition law)

IX (implied license)

X (equitable estoppel)

Note that the court’s decision on the waiver of right to enjoin/seek injunctive relief is more consistent with the ITC’s recent Samsung-Apple decision than the decisions in the Microsoft-Motorola or Realtek-LSI cases, although it’s generally found that “waiver” is not by itself an affirmative claim.  We will have to wait to see if and when the defendants decide to re-plead some of these counterclaims, or whether they’ll rely on FRAND-related affirmative defenses in the parallel ITC case.

A couple weeks ago, we posted about an interesting pretrial damages ruling in a patent infringement case (actually, several cases) brought by non-practicing entity Wi-LAN against a number of standards-compliant device makers (Sony, Ericsson, Alcatel-Lucent, and HTC).  But yesterday, an Eastern District of Texas jury decided that the damages issue was irrelevant, finding that all of Wi-LAN asserted patent claims were not infringed and were also invalid.

[Wi-LAN Jury Verdict]

Wi-LAN had accused the defendants of infringing several patents by manufacturing and selling base stations and handsets that are compliant with the 3GPP High-Speed Packet data Access cellular standard (HSPA).  The jury apparently disagreed with Wi-LAN’s contention that these patents were actually essential to the HSPA standard, because it found that none of the defendants’ HSPA-compliant products infringed.  In addition, the jury found that each of the asserted claims were invalid, finding that the prior art both anticipated the claims and rendered them obvious.

It appears that SEP-specific issues such as duty of disclosure or RAND licensing obligations didn’t play a particular large role in this case (especially given that the jury didn’t end up awarding any damages).

Earlier this week, we took a quick look at the U.S. International Trade Commission’s landmark opinion in In the Matter of Certain Electronic Devices, Including Wireless Communication Devices, Portable Music and Data Processing Devices, and Tablet Computers (Inv. No. 337-TA-794) — and we promised an annotated version of the Commission’s rather lengthy opinion.  Well, without further ado…

[337-TA-794 Comm Opinion (Public – ANNOTATED)]

If you’re interested in this opinion and its potential ramifications for standard-essential patent litigation and licensing going forward, the IPO Chat Channel will be hosting a webinar this coming Thursday, July 11, at 2pm featuring our blog’s David W. Long (you can sign up from the link above).  And if you’re planning on checking out the webinar, we humbly think it would be useful to check out the annotated case beforehand.  Details on the webinar are below:

Standard Essential Patents at the ITC: Samsung v. Apple
Thursday, July 11 at 2:00pm ET

In June the U.S. International Trade Commission banned imports of some Apple products for infringing a Samsung wireless standard essential patent (SEP). The decision marks the first time the agency has ruled on the question of whether companies can win exclusion orders using SEPs that they have promised to license on fair, reasonable and nondiscriminatory (FRAND) terms.

The U.S. Department of Justice, the Federal Trade Commission and the USPTO have all recently suggested to the ITC that its mandate to consider the public interest before issuing an exclusion order encompasses the competitive harm that might stem from allowing SEP holders to use the threat of an import ban to demand higher royalties. Many experts see the agency’s decision to go forward with this ban as contradicting those views.

Our panel includes a patent litigator, the former chair of the ITC who is now at a law firm, and a litigator who works at the intersection of IP and antitrust. Among other things, they will discuss the 2010 Federal Circuit decision in Spansion v. ITC, which found that the standard for the ITC issuing an exclusion order is different than the eBay standard; a recent U.S. district court order that enjoined a patent plaintiff from enforcing exclusionary relief afforded by the ITC because of the plaintiff’s FRAND commitment; and the considerations facing the Obama administration, including whether to overturn the ban and how its decision might mesh with its recent patent litigation proposals.

Speakers:

Deanna Okun, Adduci, Mastriani & Schaumberg, LLP

Richard Taffet, Bingham McCutchen LLP

David Long, Dow Lohnes PLLC

Late last week, the ITC finally released the public version of its Final Determination and Commission Opinion in In the Matter of Certain Electronic Devices, Including Wireless Communication Devices, Portable Music and Data Processing Devices, and Tablet Computers (Inv. No. 337-TA-794) — the case where the Commission last month issued a controversial exclusion order based on Apple’s infringement of a Samsung 3G-essential patent.  The document, linked to below, includes both the Commission’s determination of a violation of Section 337 and its decision to issue an exclusion order despite the fact that Samsung had previously pledged to license the patent at issue on FRAND terms, along with a dissent by Commissioner Dean A. Pinkert from the decision to issue an exclusion order.

[337-TA-794 Commission Opinion (Public Version)]

As you can see, the Commission’s opinion is long and detailed, and we are in the midst of preparing an annotated version of the opinion that we’ll be posting later this week (similar to what we did with the Microsoft-Motorola RAND opinion).  But after the jump, we’ll give you a quick overview of the Commission’s determination and the dissent’s views on the FRAND and SEP-related public interest issues.

Continue Reading ITC releases public version of the Commission opinion (and dissent) in Samsung-Apple case (337-TA-794)

Later this summer, the second phase of the Microsoft v. Motorola RAND breach of contract trial will take place in Judge James L. Robart’s courtroom in Seattle, WA.  A jury will decide whether Motorola breached its SSO-related RAND licensing obligations by offering what Microsoft deems “blatantly unreasonable” licensing terms for its 802.11- and H.264-essential patents, and then following up with patent infringement suits.

In a prior summary judgment order, Judge Robart already concluded that in order to be permissible under its RAND obligations, Motorola’s license offers “must comport with the implied duty of good faith and fair dealing inherent in every contract.”  He noted that this inquiry is heavily fact-intensive, and best left to the jury to decide.  To this end, Judge Robart recently requested that both Microsoft and Motorola present background briefing on the parameters of what is required by the duty of good faith and fair dealing in contractual disputes.  This week, the parties complied with this request:

Both parties acknowledge that the issue of good faith and fair dealing is complicated — but understandably, the parties also differ quite a bit in their views on what should be considered.  After the jump, we’ll take a brief look at the filings.

Continue Reading In Microsoft-Motorola RAND dispute, “good faith and fair dealing” is in the eye of the beholder

Over the past few years, courts have begun cracking down on improper damages theories.  The Federal Circuit’s 2012 opinion in LaserDynamics v. Quanta is instructive on this point, noting that in the absence of evidence that the patented functionality is the source of the demand for the entire product, then damages must be based on the “smallest salable patent-practicing unit.”  This is an issue that has particular relevance to standard-essential patent litigation, as the functionality that allows for standards compliance is often implemented on a smaller chip within a larger consumer product device — think of a baseband chip within a smartphone, for instance.

In fact, this very issue just arose in a pending litigation (set to go to trial later this month in E.D. Tex.) brought by non-practicing entity Wi-LAN against Alcatel-Lucent, Ericsson, Sony Mobile Communications, and HTC, in which Wi-LAN accused the defendants of infringing several Wi-LAN patents by manufacturing and selling base stations and handsets that are compliant with the 3GPP High-Speed Packet data Access cellular standard (HSPA).  This past Friday, presiding Judge Leonard Davis granted in part a Daubert motion brought by Alcatel-Lucent, HTC, and Sony to exclude certain Wi-LAN expert testimony on damages.

[13.06.28 Wi-LAN v. Alcatel Lucent Daubert Order]

Wi-LAN’s expert, John C. Jarosz, had analyzed several existing Wi-LAN license agreements involving the patents-in-suit, and calculated a damages figure in the amount of a lump-sum royalty that was based on a reasonable royalty and a hypothetical negotiation between the parties.  But the court found that Mr. Jarosz did not tie the calculation of damages to the smallest saleable patent-practicing unit, instead using the price of the entire HSPA-compliant base station as a base without offering evidence that the patented features drove demand for the entire product.  The court noted that in fact, the base stations needed only an optional software upgrade and modem card to comply with the HSPA standard — and the patents-in-suit represent only a small portion of the overall HSPA standard.  As such, the court excluded Mr. Jarosz’s reasonable royalty calculations as being a violation of the Entire Market Value rule.  The court also rejected a “catch-all” statement by Mr. Jarosz that he had taken all the evidence into consideration in arriving at a final lump-sum royalty (based in part on a reasonably royalty), calling this “a poor substitute for the required analysis” that distinguishes between patented and unpatented features of an accused device.

The court did, however, allow for Wi-LAN to present an amended report by July 3, with subsequent (and expedited) depositions and rebuttal reports to follow if necessary.  Having expert damages testimony excluded can be crippling or even fatal to a patent owner’s case (as Apple and Motorola learned before Judge Posner last year), so you can bet that Wi-LAN’s expert is currently preparing a supplemental report.  We’ll keep you posted on any interesting trial and post-trial happenings in this case over the next few weeks.

On Friday, U.S. International Trade Commission Administrative Law Judge David P. Shaw issued a Notice of Initial Determination in In the Matter of Certain Wireless Devices with 3G Capabilities and Components Thereof, Inv. No. 337-TA-800.  This investigation was originally instituted nearly two years ago based on a complaint filed by InterDigital against Huawei, Nokia, ZTE, and LG, in which InterDigital accused the companies of infringing several InterDigital patents alleged to be essential to various 3G cellular communications standards.  The evidentiary hearing was held in January 2013, and the case involves the intersection of a two issues that have drawn a lot of attention lately — the assertion of standard-essential patents at the ITC (and what if any relevance FRAND licensing obligations have to the proceedings), as well as patent infringement cases brought by non-practicing entities (InterDigital is an NPE that has been deemed a “patent troll” by some, while others take a more favorable view of the company’s activities).

So far, it appears that InterDigital’s SEP infringement assertions have failed (at least for now).  While the public version of ALJ Shaw’s Initial Determination won’t become available for at least a few weeks, Friday’s Notice indicates that ALJ Shaw found no violations of Section 337 with respect to any of the seven remaining asserted patents.  Continue Reading ITC rules against InterDigital’s claims of 3G-essential patent infringement in preliminary finding

This past Tuesday, Judge James L. Robart held a telephonic hearing in the Microsoft-Motorola RAND breach of contract dispute taking place in his W.D. Wash. court.  As we discussed last week, the hearing centered on Microsoft’s request that the court release a previously-ordered $100 million bond — a bond that it had required Microsoft to post in connection with a preliminary injunction order that prevented Motorola from enforcing a German standard-essential patent-related injunction.  (For more background on this particular dispute, and the parties’ briefs, see our prior posts here and here).

The court hasn’t yet entered an order on the motion yet, but it appears that in an oral ruling during the telephonic hearing like Judge Robart sided with Microsoft.  Today, Microsoft filed a proposed order on its motion (presumably at the direction of the court) that includes the following passage:

MS Proposed Order

Microsoft’s justification for its original motion was that the bond was no longer needed, because the total royalties due to Motorola under the RAND rate determined by Judge Robart was a tiny fraction of $100M; Motorola contended that the bond’s purpose was not to secure payment, but to reimburse Motorola for harm caused during the inunction’s pendency in case Judge Robart’s ruling was overturned on appeal.  In a reply brief filed this past Monday, Microsoft explained further that (1) the bond was only supposed to prevent harm to Motorola during the appeal of the preliminary injunction to the 9th Circuit, which has been resolved in Microsoft’s favor (although as we pointed out, the Federal Circuit probably should have heard that appeal instead); and (2) even if the bond was relevant to the ultimate resolution of the case, Motorola has already agreed with the FTC that it won’t seek injunctions against willing licensees such as Microsoft.

A transcript of the hearing isn’t available, so we don’t know the reason(s) why Judge Robart agreed to release the bond.  Whatever it was, Microsoft has its money back — and the parties will continue marching toward a breach of contract jury trial that is now less than two months away.

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  • We recently prepared a Patent Alert on the Federal Circuit’s decision (penned by Chief Judge Rader) in Ultramercial v. Hulu, where the court reversed a district court’s prior finding (on a motion to dismiss) that Internet-related patent claims were not patentable subject matter under Section 101.  At IP Watchdog, Eric Guttag says that Judge Rader has “thrown down the gauntlet” before the Supreme Court on the eligibility of computer-implemented inventions, and offers seven “pearls of wisdom” to glean from the court’s decision.
  • Indirect infringement, particularly inducement, is often a very murky issue — and the Federal Circuit’s 2012 Akamai/McKesson en banc decisions (which found no single direct infringer was needed to show inducement) may have further unsettled things in this area.  But as Dennis Crouch at Patently-O notes, the Supreme Court may now be closer to granting a petition for certiorari to clarify some of these issues — it recently asked the U.S. Solicitor General for its views on the issue.
  • As part of Wired‘s op-ed series “The Patent Fix,” Prof. Colleen Chien of Santa Clara Law School wrote a thoughtful opinion piece titled “Everything You Need to Know About Trolls (The Patent Kind).”  Prof. Chien offers some useful insight into the scope of the perceived problems involving non-practicing entities, as well as numerous links to background literature, presentations, and studies on the issue.
  • Florian Mueller at FOSS Patents alerts us to a number of lawsuits filed by Cellular Communications Equipment LLC (an apparent Acacia Research subsidiary) against wireless device companies and service providers in the Eastern District of Texas, alleging these companies of infringing several patents (including some cellular standard-essential patents).  What’s notable about these cases is that the patents all appear to have been assigned to the plaintiff from Nokia, potentially in conjunction with a December 2012 settlement between Acacia and Nokia.
  • Shameless Plug Alert: Dow Lohnes attorneys and Essential Patent Blog founders David Long and Matt Rizzolo wrote an article that was recently published in the June/July 2013 issue of Today’s General Counsel magazine.  The article, titled “Design Patents May Be Next Troll Target,” takes a look at whether non-practicing entities might turn to design patents in an attempt to recover an accused infringer’s total profits.