Chief Administrative Law Judge (“ALJ”) Bullock of the U.S. International Trade Commission (“ITC”) recently issue an Initial Determination that accused infringer Hynix (respondent) had not established that patent owner Netlist (complainant) had breached a RAND commitment to JEDEC concerning computer memory technology standards. He found that exclusionary relief would be proper and not against the public interest if the memory products infringe valid claims of the alleged standard essential patents (“SEPs”); but he found that the alleged SEPs were not infringed.
A key part of the RAND defense was the accused infringer’s argument that the licensing offer it received from the patent owner showed discriminatory licensing that violated the RAND commitment because it differed from licensing terms that the patent owner entered with someone else. Specifically, the patent owner Netlist had entered a joint development agreement with Samsung that not only granted a license to the alleged SEPs, but also had other non-monetary consideration including a strategic partnership with Samsung that Netlist believed to have substantial benefits. The accused infringer Hynix, however, argued that the non-monetary strategic partnership terms were a sham meant to cover-up what was essentially a royalty-based licensing agreement, thus allowing Netlist to improperly seek different–and discriminatory–effective royalty terms with Hynix or others. ALJ Bullock rejected Hynix’s arguments, finding that the strategic partnership benefits did not have “no value” as Hynix had argued and that patent owner Netlist was not required to provide those same terms to Hynix.
This decision also provides some procedural insights into litigating SEPs at the ITC. For example, ALJ Bullock ruled that the party raising a RAND defense has the burden to prove that defense. Further, parties should present their standard-setting license defense and rebuttal in the context of the law that governs the IPR policy at issue — i.e., in this case, the JEDEC Manual states that its RAND commitment is subject to interpretation under New York law.
We provide a summary of the decision below.