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. Continue Reading Federal Circuit provides guidance on implied waiver defense applied to failure to disclose foreign patent application to SDO (Core Wireless v. Apple)

Earlier this week, the U.S. International Trade Commission (“ITC”) issued its public opinion in an investigation where the respondent Carsem raised standard-setting obligation defenses by alleging that a patent asserted by Amkor covered a standard set by the Joint Electron Device Engineering Counsel (“JEDEC”).  The ITC rejected Carsem’s FRAND-related equitable and legal estoppel defenses as well as public interests arguments and entered a limited exclusion order because, among other things, Carsem had not shown that the asserted patent was essential to practicing the JEDEC standard.

Equitable Estoppel Defense.  Carsem argued that equitable estoppel bars Amkor from enforcing the patent-in-suit because Amkor failed to disclose the patent to JEDEC.  Specifically, Carsem argued that (1) Amkor failed to disclose the patent when introducing its MO-220 standard proposal to JEDEC ; (2) Carsem relied on Amkor’s representations when voting on the MO-220 and MO-229 standards and designing the accused products to comply with the standards; and (3) Carsem is materially prejudiced by Amkor now seeking to enforce the patents.  Relying on the Federal Circuit’s 2003 decision in Rambus v. Infineon, which also concerned duty to disclose patents in JEDEC standard setting, the ALJ ruled that Carsem must present “clear and convincing evidence that there is a reasonable expectation that the [JEDEC] standard cannot be practiced without a license under the undisclosed [patent] claims”–in other words, show that the patent is essential to the standard.  Further, the duty is based on “the scope of the claimed invention that would cover any [JEDEC] standard” because “to hold otherwise would contradict the record of evidence and render the JEDEC disclosure unbounded”, quoting the Federal Circuit’s Rambus decision:

Under such an amorphous duty, any patent or application having a vague relationship to the standard would have to be disclosed.  JEDEC members would be required to disclose improvement patents, implementation patents, and patents directed to the testing of standard-compliant devices–even though the standard itself could be practiced without licenses under such patents.
[T]his duty encompassed any patent or application with claims that a competitor or other JEDEC member reasonably would construe to cover the standardized technology.  This does not require a formal infringement analysis.  Members are not required to perform a limitation-by-limitation comparison or conduct an equivalents analysis.  Rather, the disclosure duty operates when a reasonable competitor would not expect to practice the standard without a license to practice the undisclosed claims.  Stated another way, there must be some reasonable expectation that a license is needed to implement the standard.  By the same token, the disclosure duty does not arise for a claim that recites individual liitations directed to a feature of the JEDEC standard …

The ALJ rejected Carsem’s expert testimony on whether the patent covered the JEDEC MO-220 and 229 standards because (1) it was based on claim constructions not adopted by the ALJ and (2) was “of a general nature and does not make reference to particular claim terms in specific patents.”  Thus, Carsem had not established that the JEDEC standards “can only be complied with by using the claims in Amkor’s [patents].”  Accordingly, Carsem had not established the Carsem violated a duty to disclose on which the equitable estoppel defense relies.  The ITC affirmed the ALJ’s findings and ruling.

Legal Estoppel Defense.  Carsem argued that Amkor’s obligations to JEDEC required Carsem to license the patent-in-suit on fair, reasonable and non-discriminatory (“FRAND”) terms, but Amkor failed to offer FRAND terms consistent with offers made to other actual and prospective licensees.  The ITC ruled that the equitable estoppel ruling leads to the same result on the legal estoppel defense, because Carsem failed to show that the patent was “standard essential” so as to raise the FRAND obligation.  The ITC  noted that Carsem’s letter to JEDEC concerning the parent patent and related applications was “conditional on its face” in stating that such patents/applications “may apply to this registration.  If the current issued patent or later patents resulting from related applications do apply, Amkor Technology intends to comply with the JEDEC Patent Policy and License under reasonable terms and conditions that are demonstrably free of any unfair discrimination. [emphasis in original].”

Limited Exclusion Order.  The ITC also rejected Carsem’s argument that its allegation that the patent-in-suit covered the JEDEC standard precludes granting exclusionary relief, because Carsem had not shown that the patent was indeed standard essential:

The record, however, shows that the ‘277 patent is not essential to the practice of the JEDEC MO-220 and MO-229 standards, and also shows that Amkor has not breached any obligations to JEDEC.

The ITC considered the SEP allegation as part of its “public interest” query for granting exclusionary relief.  It resolved the issue, however, consistent with its determination of Carsem’s affirmative defenses in finding that the patent was not shown to be standard essential.  This led Commissioner Aranoff to give additional views that SEP-related defenses typically should not be considered separately for both affirmative defenses and the public interest query; principles of finality counsel resolving those arguments in the affirmative defense liability stage that, if successful, would mean no liability and hence no remedy.

The procedural issue in considering SEP allegations in the exclusionary relief stage no doubt stems from the U.S. Trade Representive’s disapproving the ITC’s granting exclusionary relief last year against Apple’s iPhones found to infringe Samsung’s patent alleged to be essential to a standard (see our Aug. 3, 2013 post).  In that investigation, the ITC entered an exclusion order where Apple had not presented evidence of whether Samsung’s patent covered the standard, what Samsung’s standard setting obligations would be, etc.–standard essential patent defenses did not appear to have been litigated in the investigation.  The U.S. Trade Representative nonetheless disapproved the exclusion order and instructed the ITC in future matters to take affirmative steps–even if the parties have not–to consider relevant standard essential patent issues, thus implying something beyond an accused infringer’s affirmative defense obligations.

Last month, the ITC issued a Notice of ALJ David P. Shaw’s Final Initial Determination on Violation in In the Matter of Certain Audiovisual Components and Products Containing the Same (Inv. No. 337-TA-837), the investigation into LSI/Agere’s allegations that Realtek and Funai infringed 802.11-essential and H.264-essential patents (as well as one non-SEP).  The ITC found that Funai infringed the non-essential patent at issue, but that none of the Respondents infringed the the SEPs at issue in the case. Yesterday, the ITC issued the public versions of both the ALJ’s Initial Determination and the ALJ’s Recommended Determination on Remedy and Bonding.

SEP Issues Addressed in the Initial Determination

The ALJ addressed three different types of SEP-related issues in his ID: (1) LSI/Agere’s infringement allegations based on the standards at issue; (2) the Respondents’ RAND-related defenses; and (3) the Respondents duty of disclosure-related defenses.


As to the standard-based infringement allegations, the ALJ found these to be insufficient, at least for the alleged H.264-essential patent — he concluded that the H.264 Reference Software that is provided by the ITU is merely “an aid to assist in the implementation” of the accused functionality, but does not prove that the Respondents actually implemented the functionality in the same way as the standard.  For the two 802.11-essential patents, LSI/Agere’s infringement allegations appear to be based both on the standard and code implemented by the accused products, so this same issue wasn’t present there.

RAND Defenses

Beginning on page 333 of the Initial Determination, ALJ Shaw extensively addressed LSI/Agere’s RAND obligations and the litany of Respondents’ RAND-related defenses (breach of contract, waiver, patent misuse, equitable estoppel, unclean hands, etc.).  In total, he spends over eighteen pages reciting the RAND-relevant facts. (However, of course, much of the specific numbers and information regarding the parties’ license negotiations has been redacted).  He notes that both LSI/Agere and all Respondents agree that the alleged SEPs at issue are in fact SEPs and are subject to RAND obligations (an issue that has been disputed in other cases, like the Samsung-Apple and InterDigital ITC investigations).

Ultimately, ALJ Shaw determined that the Respondents did not carry their burden of proof on any of the RAND-related defenses.  He found that the Respondents’ RAND-related defenses are based on LSI/Agere’s opening offer, and explained that he could find “no authority for the argument that a patent holder must make an initial offer for a specific fair and reasonable royalty rate.”  While the Respondents had compared LSI/Agere’s offered rate to the RAND royalty rates set by Judge Robart in Microsoft-Motorola, ALJ Shaw explained that Judge Robart’s order “did not necessarily set RAND royalty rates for the IEEE and ITU” — rather, that order was based on the specific patents and factual situation in that case.  ALJ Shaw also repeatedly cited the complexity inherent in RAND license negotiations, and appeared to fault the Respondents for not offering evidence showing which terms actually would constitute a RAND license.  (Again, much of this portion is redacted, unfortunately).

Finally, ALJ Shaw addressed the preliminary injunction entered by Judge Whyte of the Northern District of California that — due to a finding of a RAND breach — purports to prevent LSI and Agere from enforcing any ITC-related exclusionary relief against Realtek based on infringement of the 802.11-essential patents.  He found that the facts presented in the ITC investigation appeared to differ from those presented to the district court, specifically with respect to a licensing offer having been made to Realtek (the RAND breach was found mainly due to a finding that LSI/Agere filed the ITC complaint before making any license offer to Realtek).  ALJ Shaw also explained that based on his evaluation of the facts, the failure of the parties to conclude a RAND license agreement cannot be attributed to LSI/Agere.

Lastly, ALJ Shaw noted that “there is no indication at this time that the Commission, as a matter of law, has determined to treat RAND obligations as contractual obligations” that must be satisfied before exclusion orders may issue.  (Keep in mind that the confidential version of this order actually issued on July 18, before the USTR’s veto of the Samsung-Apple exclusion order).  In any event, he determined that the Respondents did not present evidence to define basic contractual elements (such as the parties, offer, acceptance, consideration) — let alone the elements of a contractual defense that extended to third parties.

Duty of Disclosure

The Respondents argued that the prior owner of the 802.11-essential patents, Lucent, (as well as the inventors) failed to disclose these patents and their applications to the IEEE, breaching a duty of disclosure — and that these patents are therefore unenforceable (under the doctrines of implied waiver / equitable estoppel).  LSI/Agere claim that there was no duty of disclosure under the IEEE patent policy, and because both Lucent and LSI submitted RAND letters of assurance, the IEEE patent policy was fully complied with.

Although he notably did not address the issue of whether the IEEE’s patent policy actually required disclosure of patents and pending patent applications, the ALJ concluded that these defenses failed for other reasons.  First — in contrast to his acknowledgement of the parties’ agreement regarding essentiality for RAND issues — he noted that the Respondents’ non-infringement arguments undercut their arguments that the patent was “actually essential” and that a duty of disclosure should therefore apply.  Second, he found that the RAND obligations entered into by LSI/Agere and Lucent mitigated any “patent hold-up” concerns that might be associated with a failure to disclose.  Lastly, he found that there was no reliance on the “silence” (the non-disclosure of the patents), which is an essential element of these defenses.

Recommended Determination on Remedy and Bonding

As we saw in the RD issued in the recent InterDigital ITC case, the ALJ here recommended that, in the event the Commission were to reverse his infringement findings on the asserted SEPs, an exclusion order and cease and desist order should issue. In doing so, the ALJ made an interesting (and potentially controversial) comment about the value of the SEPs at issue:

If the Commission determines that the asserted ‘958, ‘867, and ‘663 patents [the alleged SEPs] are infringed and essential patents that are required for downstream products to perform the functions of the 802.11 IEEE Wi-Fi standard or the H.264 ITU-T standard, respectively, then they would be of great value.  (emphasis added)

Some may argue that this value cited by the ALJ is the “hold-up” value, or the value conferred on the patents simply by their inclusion in the standard — as opposed to their actual technological value.

As for RAND issues, they did not play a role in the remedial portion of the RD, as the ALJ noted that because public interest issues were not delegated to him, this would need to fall within the purview of the Commission on any potential review.  But RAND did come into play in the recommended amount of bond that the Respondents would need to post to be allowed to import infringing products during the 60-day Presidential Review period (if a violation is ultimately found).  Because the standards at issue here (802.11 and H.264) were the same as in the Microsoft-Motorola case, the Respondents argued that the appropriate bond should not exceed the “RAND ranges” determined by Judge Robart — 0.555 – 16.389 cents/unit for 802.11, and 0.8 – 19.5 cents/unit for H.264.  The Respondents also argued that existing LSI/Agere license agreements were evidence of an upper bound of the bond.  Although the ultimate bond amount is redacted, it appears to be a percentage amount of the value of the allegedly-infringing products that accounted for these factors.

This case will now proceed to briefing on the parties’ petitions for review, which has actually already begun.  The target date for the Commission to issue its Final Determination is November 18. 2013.