Apple/ Ericsson Dueling FRAND Suits Highlight Issues With Recent Proposed Changes in DOJ’s SEP Policies

On January 19, consumer tech giant Apple filed a complaint with the U.S. International Trade Commission (USITC) asking the agency to institute a Section 337 investigation against Swedish telecom firm Ericsson, asserting a trio of patents related to millimeter wave technology used by electronic devices communicating on mobile 5G networks. The Section 337 complaint is the latest salvo in a legal battle that highlights the mounting tension surrounding standard-essential patents (SEPs) and where infringement litigation fits into the fair, reasonable and non-discriminatory (FRAND) obligations that standards-setting organizations (SSOs) impose upon SEP owners.

Apple’s Section 337 Complaint Accuses Ericsson of ‘Strong-Arm’ Licensing Tactics

Apple’s Section 337 complaint at the USITC charges Ericsson with being overly litigious, which “demonstrate[s] that [Ericsson] do[es] not want a Court setting fair, reasonable, and non-discriminatory (‘FRAND’) terms for their patents.” Apple alleges that Ericsson is using both its SEPs and other non-SEPs that have not declared for a technological standard as “ammunition to coerce Apple through injunctions to take an unfair, unreasonable, and discriminatory license to their purported SEPs.”

To the extent Respondents are willing to withdraw all of their lawsuits and legal actions, Apple is willing to do the same. However, if Respondents are not willing to agree to having the Texas court determine the FRAND terms of a cross license, Apple is forced to respond to Respondents’ infringement of Apple’s patents.

The Texas court referenced by Apple’s Section 337 complaint is the Eastern District of Texas, where Apple filed a complaint for declaratory judgment in mid-December alleging that Ericsson has breached both its license agreement with Apple and its FRAND obligations. Apple is also asking the Eastern Texas to set FRAND rates for Apple to license Ericsson’s SEPs globally, and a declaration that Ericsson’s SEPs are not standard-essential and are not infringed by Apple. In this complaint, Apple alleged that Ericsson has been engaging in “strong-arm tactics,” such as engaging secretive activity to obtain injunctive relief from a Dutch court and “su[ing] Apple in this Court six minutes later for allegedly being unwilling to agree to Ericsson’s ‘sticker price’ terms” after Ericsson presented “merely a summary of Ericsson’s publicly demanded license rates” to Apple. The Dutch injunctive relief to which Apple refers was an anti anti-suit injunction that Ericsson sought in the Netherlands last October to prevent Apple from filing parallel litigation in other jurisdictions.

Ericsson Fires Back With Declaratory Judgment, Patent Infringement Suits

Ericsson has itself filed multiple complaints against Apple regarding the consumer tech giant’s attacks against Ericsson’s negotiating tactics. Last October, Ericsson filed its own lawsuit in the Eastern District of Texas seeking declaratory relief that the 5G developer has complied with its FRAND obligations to the European Telecommunications Standards Institute (ETSI), the SSO developing various networking standards implemented into Apple’s mobile devices. Ericsson alleged that Apple has historically resisted licensing overtures from Ericsson and others “as part of a global strategy to devalue standard essential patents and reduce Apple’s royalty payments.” Part of that strategy involves Apple’s public accusations that SEP owners are engaging in “hold-up” by concealing licensing terms until after declaring patents as essential to various standards. Ericsson argued that Apple’s own public statements regarding the company’s core FRAND principles prejudiced licensing negotiations between the companies before they ever began.

In sum, even before the first licensing meeting between Apple and Ericsson, Apple had already publicly proclaimed Ericsson’s licensing program as discriminatory, Ericsson’s rates as violating FRAND, and had publicly committed that Apple would only license essential patents on its own, self-proclaimed terms and conditions intended to devalue essential patents.

A few months later on January 17, Ericsson filed another lawsuit including patent infringement allegations against Apple, this time in the Western District of Texas. Those infringement allegations centered on Ericsson’s SEPs that were covered in a 2015 global cross-license agreement between Apple and Ericsson, an agreement that has since expired, covering 2G, 3G and 4G mobile networking technologies. The four patents asserted by Ericsson in that lawsuit were declared to the 3rd Generation Partnership Project’s (3GPP) mobile networking standard as early as 2009 in some cases. Ericsson’s infringement allegations target Apple’s entire suite of mobile phones, tablet computers and smart watches that implement either the 4G Long-Term Evolution (LTE) or 5G mobile networking standards.

The legal tensions between Apple and Ericsson have been growing at the same time that the Biden Administration has stepped back somewhat from support for legal remedies for SEP owners like Ericsson against unwilling licensees like Apple. Last December, the U.S. Department of Justice’s (DOJ) Antitrust Division issued a draft joint policy statement in partnership with the U.S. Patent and Trademark Office (USPTO) and the National Institute of Standards and Technology (NIST) regarding licensing negotiations and legal remedies for SEPs subject to FRAND obligations. Many thought leaders in the IP community have given the DOJ’s joint policy statement mixed reviews at best, finding that the recent draft policy does little to address situations like Ericsson’s involving allegations that an unwilling licensee, here Apple, is refusing to willingly engage in FRAND negotiations. Recently, a coalition of 28 property rights groups sent a letter addressed to U.S. Attorney General Merrick Garland and U.S. Attorney General for Antitrust Jonathan Kanter calling the draft policy statement “misguided, unfounded, and dangerous,” asking those officials to withdraw the statement over concerns that it would embolden Chinese entities and Big Tech firms to ignore licensing discussions and instead infringe SEPs with impunity.

The Battle Wages On

The IP world has seen major battles involving SEPs loom large before resolving through rather anticlimactic settlements involving patent license agreements. Most recently, a legal battle between Qualcomm and Apple regarding Qualcomm’s own chip licensing practices worked its way through multiple jurisdictions before resolving with a licensing agreement between those two companies in April 2019, which dismissed all worldwide litigation between the two companies. Even that agreement hasn’t stopped Apple from trying to maintain validity challenges against patents covered by the licensing agreement with Qualcomm. Apple has recently filed a petition for writ of certiorari with the U.S. Supreme Court in an attempt to overturn a ruling by the U.S. Court of Appeals for the Federal Circuit that Apple’s licensing agreement with Qualcomm extinguished Article III standing to appeal unsuccessful validity challenges at the Patent Trial and Appeal Board (PTAB).

Image Source: Deposit Photos
Image ID:40634949
Copyright:Dmitry_Guzhanin