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)

Last week, the Federal Circuit denied en banc review by the entire court of the three-judge panel decision in the Apple v. Samsung case that had revived the ability to obtain injunctive relief against multiple component products, such as smartphones (see our Sep. 17, 2015 post).  In doing so, the original three-judge panel (Prost, Moore and Reyna) issued an Order that withdrew their original opinion and issued a revised opinion that focuses on the patented feature being “one of several [features] that cause consumers to make their purchasing decision,” rather than the patented feature having to be “the exclusive or significant driver of customer demand” as prior decisions had intimated.

Continue Reading Federal Circuit revised injunction decision to emphasize patented feature being one of several that drive purchasing decision (Apple v. Samsung)

Today, a divided Federal Circuit panel issued a decision that vacates district court’s decision not to permanently enjoin Samsung from selling mobile devices having features found to infringe Apple’s patents.  The majority decision breaths life back into injunctive relief against multi-component/multi-featured devices (like mobile phones) by not requiring the patent owner to show that its patented feature “drive[s] customer demand” for the infringing product in order to show a nexus between the infringement and alleged irreparable harm required for injunctive relief.  Rather, the patent owner need show “some connection” between the patented feature and consumer demand for the infringing product, which can be shown in “a variety of ways.”  For example, evidence that the patented features “is one of several features that cause consumers to make their purchasing decisions” or “makes a product significantly more desirable.”

Background

This case involves three Apple patents directed to features in touchscreen mobile devices:

  1. Slide-to-unlock image on touchscreen to unlock mobile device (the ‘721 Patent)
  2. Generating links within text upon detecting data structures, such as detecting a phone number in a text message and creating a link to dial that number (the ‘647 Patent)
  3. Automatic spell check and correction on touchscreen (the ‘172 Patent)

In 2012, Apple sued Samsung for infringing those patents (as well as others).  Samsung was found to infringe the three patents and a jury awarded Apple over $119 million in damages.  Apple then sought to enjoin Samsung from selling mobile phones or tablets with those infringing features — i.e., did not seek to enjoin sales of the mobile phone or tablets per se, just use of the infringing features in those devices.  Further, Apple proposed a 30 day “sunset period” before products would be enjoined, which time period coincided with Samsung’s representations at trial that it could quickly and easily remove the infringing features from the accused infringing Samsung devices.

But Judge Koh denied Apple’s request for a permanent injunction, finding that Apple failed to show it would suffer irreparable harm without an injunction.  Among other things, Apple had not shown that it lost sales to Samsung infringing devices, because Apple had not shown that the patented features drove customer demand for those products.

Decision

Judge Moore wrote the majority decision, which was joined by Judge Reyna, who also wrote a concurring opinion.  Judge Prost dissented.

The Federal Circuit’s standard of review here is whether the district court abused its discretion in deciding whether to grant injunctive relief based on the four eBay factors, which are whether the party seeking a permanent injunction has shown:

(1) that it has suffered an irreparable injury;
(2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury;
(3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and
(4) that the public interest would not be disserved by a permanent injunction.

The majority then walked through each of the four factors, the most decisive one in this instance being whether Apple had shown irreparable harm through a “causual nexus relat[ing] the alleged harm to the alleged infringement.”

Irreparable Harm.  The patent owner satisfies this first factor by showing it has been “irreparably harmed by the infringement” based on “proof that a ‘causal nexus relates the alleged harm to the alleged infringement.'”  The majority rejected Apple’s argument that there is no causal nexus requirement when the patent owner seeks only to enjoin infringing features, rather than an entire product.  The majority explained that “[t]he causal nexus requirement ensures that an injunction is only entered … on account of a harm resulting from the defendant’s wrongful conduct, not some other reason.”  This is “entirely independent of the scope of the proposed injunction.”

But the majority found that the district court erred by requiring Apple to show that the infringing features “drive consumer demand for Samsung’s infringing products” in order to establish irreparable harm based on a causal nexus between the infringement and Apple’s lost sales.  While making such a showing would establish the causal nexus, it is not required and may be “nearly impossible from an evidentiary standpoint [to show] when the accused devices have thousands of features, and thus thousands of other potential causes that must be ruled out.”  Rather, the patent owner need only “show ‘some connection’ between the patented features and the demand for the infringing products”:

Thus, in a case involving phones with hundreds of thousands of available features, it was legal error for the district court to effectively require Apple to prove that the infringement was the sole cause of the lost downstream sales.  The district court should have determined whether the record established that a smartphone feature impacts customers’  purchasing decisions.  Though the fact that the infringing features are not the only cause of the last sales may well lessen the weight of any alleged irreparable harm, it does not eliminate it entirely.

In a footnote, the majority provide more insight into the range of ways that “some connection” between the patented feature and customer demand may be shown, which provides further insight into this issue:

As we explained in Apple III [735 F.3d 1352 (Fed. Cir. 2013)], “some connection” between the patented feature and consumer demand for the products may be shown in “a variety of ways,” including, for example, “evidence that a patented feature is one of several features that cause consumers to make their purchasing decisions,” “evidence that the inclusion of a patented feature makes a product significantly more desirable,” and “evidence that the absence of a patented feature would make a product significantly less desirable.”  These examples do not delineate or set a floor on the strength of the connection that must be shown to establish a causal nexus.  Apple III included a fourth example to demonstrate a connection that does not establish a casual nexus–where consumers are only willing “to pay a nominal amount for an infringing feaure.” (using example of $10 cup holder in $2000 car).  There is a lot of ground between the examples that satisfy the causal nexus requirement and the example that does not satisfy this requirement.  The required minimum showing lies somewhere in the middle, as reflected by the “some connection” language.

Thus the district court erred in requiring Apple to show that “the infringing features were the exclusive or predominant reason why consumers bought Samsung’s [infringing] products.”  Rather, the court should have required Apple to show that “the patented features impact consumers’ decisions to purchase the accused devices.”

The majority then went through the record in the case and concluded that Apple had made the requisite showing here:

In short, the record establishes that the [patented] features … were important to product sales and that customers sought these features in the phones they purchased.  While this evidence of irreparable harm is not as strong as proof that customers buy the infringing products only because of these particular features, it is still evidence of causal nexus for lost sales and thus irreparable harm. … Apple does not need to establish that these features are the reason customers bought Samsung phones instead of Apple phones–it is enough that Apple has shown that these features were related to infringement and were important to customers when they were examining their phone choices. [emphasis in original]

The majority thus concluded that this irreparable harm factor weighs in favor of granting Apple’s requested injunction.

Inadequate Remedy at Law.  This second factor considers whether “remedies available at law, such as monetary damages, are inadequate to compensate” for the irreparable harm caused by continued infringement.  The district court had found that Apple’s lost sales “were difficult to quantify,” but still concluded that this factor weighed against an injunction because Apple had failed to establish irreparable harm.  The majority found this was error given its ruling on irreparable harm, finding that this factor “strongly weighs” in favor of an injunction given “the extent of Apple’s downstream and network effect losses are very difficult to quantify.”

Balance of Hardships.  This third factor concerns “assess[ing] the relative effect of granting or denying an injunction on both parties.”  The district court found that this factor favored injunctive relief based on (1) the proposed injunction targeting specific features, not entire products; (2) the proposed 30-day sunset provision and (3) Samsung’s repeated argument to the jury that “designing around the asserted claims … would be easy and fast.”  The latter point raises the typical Catch-22 accused infringers encounter when arguing that a patented feature has little value in order to avoid a large damages award, and then that argument being used against them when trying to avoid injunctive relief.  The majority held that this factor strongly weighed in favor of injunctive relief:

On this record, it is clear–Samsung will suffer relatively little harm from Apple’s injunction, while Apple is deprived of its exclusivity and forced to compete against its own innovation usurped by its largest and fiercest competitor.  Given the narrow feature-based nature of the injunction, this factor strongly weighs in favor of granting Apple this injunction.

Public Interest.  This fourth and final factor requires the patent owner to show that “the public interest would not be disserved by a permanent injunction.”  The district court found this factor favors injunctive relief, because (1) “enforc[ing] patent rights … promote[s] the encouragement of investment-based risk” and (2) “an injunction may prompt introduction of new alternatives to the patented features.”  The majority agreed, and then some, stating that “the public interest strongly favors an injunction” here [emphasis in original]:

Samsung is correct–the public often benefits from healthy competition.  However, the public generally does not benefit when that competition comes at the expense of a patentee’s investment-backed property right.  To conclude otherwise would suggest that this factor weighs against an injunction in every case, when the opposite is generally true.  We based this conclusion not only on the Patent Act’s statutory right to exclude, which derives from the Constitution, but also on the importance of the patent system in encouraging innovation.  Injunctions are vital to this system.  As a result, the public interest nearly always weighs in favor of protecting property rights in the absence of countervailing factors, especially when the patentee practices his inventions.  The encouragement of investment-based risk is the fundamental purpose of the patent grant, and is based directly on the right to exclude.

The majority thus vacated the district court’s denial of an injunction and remanded the case back to the district court for further proceedings consistent with this opinion.  The majority concluded that, “[i]f an injunction were not to issue in this case, such a decision would virtually foreclose the possibility of injunctive relief in any multifaceted, multifunction technology.”

Judge Reyna Concurrence.  Judge Reyna issued a concurring opinion, noting that the decision “leaves open the door for obtaining an injunction in a case involving infringement of a multi-patented device, a door that appears near shut under current law.”  He also would have ruled that irreparable harm would arise based on “injury that the infringement causes Apple’s reputation as an innovator.”  This type of harm, when it occurs, is irreparable. The majority decision written by Judge Moore, which Judge Reyna joined, stated that it need not reach that issue given the finding of irreparable harm based on lost sales.

Judge Prost Dissent.  Judge Prost dissented, finding that “[t]his is not a close case.”  Among other things, Apple did not use the patented spell correction feature and the other two patented features were “minor features (two out of many thousands) in Apple’s iPhone.”  The record does not show “clear error” in the district court’s factual findings underlying its decision to deny injunctive relief.

A significant portion of the international patent wars between Apple and Samsung have been brought to a close, according to a joint statement issued by the parties:

Apple and Samsung have agreed to drop all litigation between the two companies outside the United States. This agreement does not involve any licensing arrangements, and the companies are continuing to pursue the existing cases in U.S. courts.

We note that the statement is similar to the one that issued following resolution of the disputes between Apple and Google this May.

Since 2011, Apple and Samsung have been involved in cross-infringement actions in Australia, France, Germany, Italy, Netherlands, South Korea, and the U.K. Many of these non-U.S. cases involved significant SEP-related rulings. You may recall that earlier this year, the Japanese High Court denied Samsung injunctive relief against Apple while allowing FRAND-based damages on the asserted SEPs (see our May 21, 2014 post). In a separate proceeding related to the European Commission’s investigation of Samsung’s SEP enforcement against Apple, Samsung committed to not pursue any injunctions in the European Economic Area for a period of five years based on any SEPs related to smartphone/tablet technologies against companies that agree to a predetermined licensing framework, as discussed in our April 30, 2014 post.

Although litigation abroad has been brought to a close, the U.S. dispute between the companies moves forward — albeit without any notable SEP issues for the time being. In March, Judge Koh granted Apple and Samsung’s request to dismiss without prejudice Samsung’s SEP infringement claims and Apple’s related FRAND defenses and counterclaims (see our March 12, 2014 post).

 

 

Judge Essex issued a Notice Regarding Initial Determination in InterDigital’s ITC action against ZTE and Nokia (Inv. No. 337-TA-868) on Friday, indicating that there has been a finding of no violation with respect to any of the 3G and 4G devices at issue. The notice is sparse on details, indicating only that no violation of the Tariff Act of 1930, as amended, has occurred by reason of infringement. A public version of the Initial Determination should be available in the coming weeks, as well as the Commission’s decision whether or not to review the ALJ’s decision.

As discussed in our June 6 post, Samsung recently settled out of this investigation as part of a settlement resolving all disputes involving InterDigital’s 3G/4G cellular standard-essential patents. ALJ Essex issued a separate Initial Determination on June 9, granting a joint motion by Samsung and InterDigital to terminate the investigation as to Samsung based on the settlement agreement. Huawei also settled-out of this investigation earlier this year.

Yet another high-profile SEP case settled earlier this week, with InterDigital announcing that it has reached a licensing deal with Samsung. Similar to the InterDigital’s recent settlement with Huawei, the Samsung settlement brings to a close ongoing litigation in Delaware’s District Court and before the ITC (Inv. No. 337-TA-868) involving InterDigital’s assertion of 3G/4G cellular standard-essential patents. Having settled with Samsung and Huawei, InterDigital continues to litigate the FRAND issues raised by these patents with Nokia and ZTE.

InterDigital initiated this round of SEP litigation against Samsung, Nokia, and ZTE in January 2013, first filing suit in the District of Delaware and then initiating a corresponding ITC action against the phone manufacturers in February 2013. As you may recall from our February 2013 post, the respondents asserted several FRAND-specific defenses in addition to customary patent infringement defenses. Whereas Huawei, Nokia, and ZTE asserted defenses of patent misuse, implied license, unclean hands, breach of contract, and equitable/promissory estoppel generally arising from InterDigital’s SSO activities and FRAND obligations,  Samsung had taken a slightly different approach due primarily to its own attempts to procure exclusion orders on FRAND-pledged standard-essential patents in Inv. No. 337-TA-794 (against Apple) and Inv. No. 337-TA-866 (against Ericsson) and in Japan (see our May 21, 2014 post on how Samsung’s efforts at injunctive relief played out before the Japanese High Court).

Instead of arguing that a party undertaking a FRAND promise waives all rights to an exclusion order in the ITC, Samsung alleged that FRAND obligations and related defenses should be evaluated on a case by case basis and that here, InterDigital violated its FRAND obligations.  Samsung also took the position that it was willing to renew a prior license with InterDigital on FRAND terms, but that InterDigital has refused to do so. Samsung had previously entered into a royalty-bearing license with InterDigital in 2008, following resolution of a  patent dispute involving Samsung’s 2G and 3G productss incorporating the WCDMA and CDMA2000 standards, which was reported to extend through 2012.

Huawei settled-out of this round of InterDigital infringement actions earlier this year, leaving Samsung, Nokia, and ZTE to defend both the district court and ITC cases. As discussed in our May 30 post, Judge Andrews recently dismissed Nokia and ZTE’s FRAND counterclaims in the Delaware action and the ALJ’s initial determination in the ITC case is scheduled to issue later this month.

According to InterDigital, the resulting license with Samsung resolves all pending patent litigation between the companies and covers Samsung’s 3G and 4G products as well as certain future generations of wireless products. InterDigital’s press release quotes its President and Chief Executive Officer, William J. Merritt, as saying the newly minted agreement with Samsung demonstrates “how our longstanding patent licensing framework and process can lead to effective, productive discussions and eventual resolution on fair and reasonable terms.” Although the specific terms of the settlement are not public, there is speculation that the deal may involve quarterly payments in the tens-of-millions dollar range from Samsung in exchange for a license to InterDigital’s wireless patents. Following the announcement, InterDigital issued updated financial information, indicating recurring revenue was expected to increase by $17-$23 million per quarter beyond previous estimates until 2017. A company representative has indicated that not all of the additional revenue is attributable directly to the agreement with Samsung.

The Grand Panel of the Intellectual Property High Court in Tokyo issued three related decisions in the Samsung Apple dispute on Friday. While the official English versions of the decisions are not yet available, sources are reporting that the Grand Panel ruled Samsung could not obtain injunctive relief for Apple’s alleged infringement of a 3GPP standard-essential-patent, but that Samsung could nevertheless collect damages equal to a FRAND royalty.  We await the official English versions in order to see the particular rationale and any caveats regarding the injunctive and damages rulings.

The High Court’s decision arises from a review of three patent actions decided by the Japanese lower court, two of which were filed by Samsung seeking injunctive against Apple and the third filed by Apple seeking a ruling that Samsung was not entitled to monetary damages. Each of the three actions involve a single Japanese patent that is alleged to be essential to the 3GPP 3G mobile network standard and subject to FRAND obligations. The lower court ruled that Samsung was not entitled to injunctive relief in either of its suits and concluded in the third suit that Samsung was not entitled to monetary damages due to abuse of its patent rights.

On review, the High Court reportedly affirmed the lower court’s injunction decisions, finding Samsung’s bid for injunctive relief constituted an abuse of rights under Article 1(3) of the Civil Code. However, the High Court appears to have reversed the lower court’s third decision,  denying Apple’s absolution from damages and ruling that Samsung would be entitled to damages in an amount equal to a royalty on FRAND terms, which the Court calculated to be ¥ 9,950,000 (<$100,000). Only summaries of the High Court’s decisions were published by the Japanese Grand Panel, though the full rulings and accompanying English translations are expected to be released soon.

Yesterday the Federal Circuit issued a blank Rule 36 summary affirmance of the U.S. International Trade Commission’s (ITC) determination that Apple did not infringe a Samsung patent alleged to cover a UMTS standard.  Recall that last year the ITC entered an exclusion order against Apple products found to infringe a Samsung standard essential patent, but the U.S. Trade Representative disapproved that exclusion order (see our post of Aug. 3, 2013).  That ended the investigation as to that patent because the U.S. Trade Representative’s decision was not reviewable.

But Samsung appealed the ITC’s determination that Apple’s products did not infringe another alleged standard essential patent.  In that appeal, Apple raised issues with respect to its standard-setting body defenses including the propriety of entering an exclusion order for a standard essential patent (see our post of Feb. 5, 2014).  Samsung responded.  And the Federal Circuit issued a Rule 36 summary affirmance without comment on the standard essential patent or other issues, simply stating “AFFIRMED.  See Fed. Cir. R. 36.”

Although Samsung technically could seek rehearing at the Federal Circuit or even petition Supreme Court review, the likelihood that any such approach would succeed is questionable in a case involving summary affirmance of a non-infringement decision that may involve fact-specific technical arguments.  And so the case that received so much world-wide attention not so long ago may have gone gently into that good night.

Yesterday, the European Commission issued decisions in two antitrust proceedings centered around the enforcement of standard essential patents (SEPs). The decisions, one involving Samsung and the other Motorola, essentially create a “safe harbour” for willing licensees of FRAND-encumbered SEPs to avoid an injunction and address the circumstances under which an SEP holder may seek injunctive relief against a potential infringer.

Commission Vice President Joaquín Almunia stated that the decisions will provide “clarity to the industry on what constitutes an appropriate framework to settle disputes over ‘FRAND’ terms in line with EU antitrust rules” and encouraged other industry players to consider establishing dispute resolution mechanisms in line with yesterday’s decisions. These decisions significant as they will affect future analyses of whether various SEP enforcement strategies run afoul of EU antitrust rules.

The Motorola Mobility Decision

The first decision arises from Motorola Mobility’s efforts to enforce FRAND-committed SEPs related to the ETSI GPRS mobile communications standard (a part of the GSM standard) against Apple in Germany. According to the Commission’s press release regarding the Motorola decision, Apple had agreed to take a license and be bound by the German court’s FRAND determination. After receiving a complaint from Apple, the Commission opened an investigation in April 2012 and issued a Statement of Objections to Motorola’s actions in May 2013.

In yesterday’s decision, the Commission found that it was abusive for Motorola to both seek and enforce injunctive relief against Apple on the basis of FRAND-encumbered SEPs where Apple had agreed to be bound by the FRAND terms determined by a German court. The Commission also found Motorola’s insistence that Apple relinquish any potential infringement or invalidity challenges to be a violation of the EU’s antitrust regulations, particularly as Motorola’s demands were made under the threat of injunction:

Implementers of standards and ultimately consumers should not have to pay for invalid or non-infringed patents. Implementers should therefore be able to ascertain the validity of patents and contest alleged infringements.

Although Motorola was found to be engaged in anticompetitive behavior, the Commission declined to impose a corresponding fine, reasoning that (i) there is an absence of case-law by EU courts dealing with the legality of SEP-based injunctions under pertinent antitrust law prohibiting abusing a dominant position and (ii) European national courts have issued diverging opinions on the issue.

The European Commission commented in the FAQ memo that the decision “provides a “safe harbour” for standard implementers who are willing to take a licence on FRAND terms”, noting that such implementers may avoid getting hit with an SEP-based injunction if they are able to “demonstrate that they are a willing licensee by agreeing that a court or a mutually agreed arbitrator adjudicates the FRAND terms.”

The Samsung Electronics Decision

The second case arises from Samsung Electronic’s bid for injunctive relief against Apple based on FRAND-committed SEPs related to ETSI 3G UMTS mobile communication standards. According to the press release regarding the Samsung decision, Samsung began seeking injunctive relief for patent infringement in April 2011. The Commission opened an investigation of Samsung’s SEP enforcement in January 2012. In December 2012, the Commission issued a Statement of Objections, informing Samsung that it considered Apple to be a willing licensee of Samsung’s SEPs and expressing concern that Samsung’s SEP enforcement constituted an abuse of a dominant position under EU law. In response to the Commission’s concerns, Samsung offered a series of commitments regarding SEP enforcement and licensing.

Specifically, Samsung committed to not pursue any injunctions in the European Economic Area (made up of the EU plus Iceland, Liechtenstein, and Norway) for a period of five years based on any SEPs related to smartphone/tablet technologies against companies that agree to a licensing framework that provides for (i) a 12-month negotiation period and (ii) a third party FRAND determination if no agreement can be reached within the 12-month negotiation period (see our Oct. 18, 2013 post).

The Commission’s decision renders the commitments offered by Samsung  legally binding under EU antitrust laws. Similar to the statement issued in the Motorola decision, the Commission further commented in its FAQ memo:

Samsung’s commitments implement in this case the “safe harbour” concept established in the Motorola decision in practical terms. They provide for a “safe harbour” available to all potential licensees of the relevant Samsung SEPs. Potential licensees are protected against injunctions sought by Samsung on the basis of such SEPs if they submit to the licensing framework provided for by the commitments.

Other European Commission Statements on SEP/FRAND Issues

The European Commission also released a FAQ-style memorandum regarding antitrust decisions on SEPs, which it claimed “strike a fair balance between the interests of SEP holders to be appropriately remunerated for their IP and the interests of implementers of standards to get access to standardised technology on FRAND terms.” The FAQ summarized the Motorola and Samsung decisions as follows:

Today’s action by the Commission clarifies that it is anti-competitive to use injunctions in relation to SEPs in the following circumstances: when in a standardisation context, a SEP holder has committed to license the SEP on FRAND terms and the licensee is willing to take a licence on such terms. In these circumstances, the seeking of injunctions can distort licensing negotiations and lead to licensing terms with a negative impact on consumer choice and prices.

The FAQ-style memorandum addresses several other topics relevant to European patent disputes.

Injunctive Relief Reaffirmed. The Commission emphasized that it is not questioning the use or pursuit of injunctions by patent holders, noting that recourse to injunctive relief is generally a legitimate remedy for patent holders in infringement cases. The Commission further clarified that SEP-based injunctions should be available against unwilling licensees and that the Samsung and Motorola cases do not stand for the elimination of injunctive relief in view of anticompetitive concerns:

Rather, in the specific circumstances where the holder of a SEP has given a commitment to license on FRAND terms and where the company against which an injunction is sought is willing to enter into a FRAND licence agreement, the seeking of an injunction on the basis of SEPs can constitute an abuse of a dominant position.

Who are “willing licensees”? The Commission expressed the view that whether a company can be considered a “willing licensee” should be determined on a case by case basis. The Commission noted that while yesterday’s decisions provide a “safe harbour” for willing licensees, no findings have been made regarding the willingness of licensees that are not willing to have binding FRAND terms determined by a third party in the event of a dispute. The Commission also clarified that potential licensees who challenge validity, essentiality, or infringement are not unwilling, per se:

Potential licensees of SEPs should remain free to challenge the validity, essentiality or infringement of SEPs. It is in the public interest that potentially invalid patents can be challenged in court and that companies, and ultimately consumers, are not obliged to pay for patents that are not infringed.

What about FRAND calculations? Without providing specific guidance or input on how FRAND rates ought to be calculated, the Commission indicated that courts and arbitrators are well-placed to set FRAND rates in cases of disputes and encouraged national courts may seek guidance from the Commission on the interpretation of EU competition law. The Commission noted that Germany’s Mannheim Regional Court sought guidance on setting FRAND rates in the Motorola v. Apple SEP dispute in November 2013 and that the Commission’s responses to this inquiry would be posted on the Commission website at some point in the future.

Non-practicing entity US Ethernet Innovation’s (“USEI”) infringement action against Samsung was brought to a close last Friday, with E.D. Tex. Judge Michael H. Schneider granting the parties’ joint motion for dismissal with prejudice. USEI filed this action against Samsung and peripheral printing device manufacturer OKI Data Americas on June 22, 2012, alleging that certain OKI and Samsung printers employing Ethernet technologies infringe four USEI patents.

We previously commented on this case in our February 2013 post, when Magistrate Judge Love issued an order denying co-defendant OKI’s motion to dismiss for failure to state a claim and for improper joinder, holding, inter alia, that standards-compliant system-on-a-chip (SoC) suppliers may be properly joined with their customers under the AIA.  Samsung later moved for Summay Judgment of Invalidity, which was denied in October 2013. OKI then settled with USEI and was dismissed from the case in November 2013.

Last month, Samsung and USEI attended mediation before former Chief Judge David Folsom of the Eastern District of Texas.  The mediation apparently resolved the dispute, because Samsung and USEI jointly moved to dismiss the action and the Court entered final judgment dismissing the case with prejudice on March 21.