Federal Circuit Vacates District Court’s Denial of Antisuit Injunction in FRAND Case

The U.S. Court of Appeals for the Federal Circuit (CAFC) in a precedential decision today vacated a district court’s denial of Lenovo’s request for the court to issue an “antisuit injunction” against Ericsson prohibiting it from enforcing injunctions granted by Brazilian and Colombian courts relating to Ericsson’s 5G standard essential patents (SEPs).

The CAFC ruled that the district court erred in determining whether the U.S. lawsuit was dispositive of the South American actions when it concluded that the U.S. action must result in a license between the parties to the standard essential patents (SEPs) at issue.

District Court Dismisses Antisuit Injunction Under Microsoft’s Dispositive Requirement

Lenovo sued Ericsson in Eastern North Carolina last October following failed negotiations on a global cross-license to many patent assets, including 5G telecommunications SEPs owned by Ericsson. The following month, Ericsson sued Lenovo in Brazil and Colombia and obtained injunctions against Lenovo on its 5G SEPs in force in those countries. Last December, Lenovo filed counterclaims in the Eastern North Carolina suit, asserting its own 5G SEPs and alleging that Ericsson had failed its fair, reasonable and non-discriminatory (FRAND) obligations by failing to negotiate an SEP license in good faith.

Two weeks after filing its counterclaims, Lenovo moved for its antisuit injunction against Ericsson. Applying the three-part analytical framework from the Ninth Circuit’s 2012 decision in Microsoft v. Motorola, the district court determined that Lenovo’s infringement suit in the U.S. was not dispositive of the South American actions, thus failing the first threshold requirement under the Microsoft test. The district court concluded that the case would not necessarily result in a license if it determined that Ericsson’s negotiations had fulfilled the company’s FRAND obligations.

Under Microsoft’s framework, which both parties agreed to in the district court proceedings, a court first looks to whether the parties and issues are the same in both the domestic and foreign cases, and whether the domestic suit is dispositive of the foreign action to be enjoined. Following this threshold requirement, a court assesses whether the foreign litigation would: frustrate a policy of the forum issuing the antisuit injunction; be vexatious or oppressive; threaten the issuing court’s in rem or quasi in rem jurisdiction; or prejudice other equitable considerations. Finally, Microsoft requires a court to consider whether the antisuit injunction’s impact on comity is tolerable.

The Federal Circuit began its reasoning by recounting the facts of Microsoft, which, like the present appeal, involved SEPs subject to FRAND commitments. In that case, Microsoft alleged that Motorola breached its SEP licensing commitments and moved to prevent Motorola from enforcing injunctive relief stemming from a German SEP infringement action. After the district court issued the antisuit injunction to Microsoft, the Ninth Circuit affirmed, finding that the court’s determination of the contractual issues stemming from Motorola’s licensing obligations would determine whether the German injunction fell within Motorola’s commitment to reasonable licensing terms.

SEP Holders Must Comply with Standard of Conduct Before Pursuing Injunctions

The Federal Circuit noted that nothing in Microsoft required a patent license to result for the U.S. action to be dispositive of the foreign injunction. Pointing out that Motorola was still free to pursue foreign litigation minus injunctive relief following Microsoft, the Federal Circuit nixed Ericsson’s arguments that the entire foreign proceeding must be resolved by the U.S. court’s decision for an antisuit injunction to issue.

The Federal Circuit further found that Microsoft’s dispositive requirement was met in this case. The district court’s ruling on Ericsson’s compliance with its FRAND obligations would determine whether it was capable of pursuing injunctive relief under those obligations, the appellate court held. Although the district court did not reach this contract-interpretation issue, the Federal Circuit found it appropriate to resolve the issue as it was briefed on appeal and resolving the issue serves judicial economy.

“[I]f the FRAND commitment means anything of substance, it must mean that an SEP holder that has made such a commitment cannot just spring injunctive actions against other standard implementers without having first complied with some standard of conduct.”

While Ericsson contended that the Brazilian or Colombian courts should be deciding the issue of interpreting the FRAND obligations under the European Telecommunications Standards Institute’s (ETSI) 5G standard, the Federal Circuit held that this was more appropriate to consider under the second or third part of the Microsoft test. Although the patent rights in the South American actions are independent from the patents asserted in the U.S. case, the Federal Circuit pointed out that this appeal involved a contract issue, not an issue of patent rights.

In footnotes, the Federal Circuit stated that this decision should not be read as concluding that Ericsson had not negotiated in good faith, nor does it foreclose Lenovo’s alternative theory that its request for the district court to set a global FRAND cross-license also meets Microsoft’s dispositive requirement. The Federal Circuit remanded the case to the district court to assess the rest of the Microsoft test, declining requests from both Lenovo and Ericsson to decide the antisuit injunction on appeal.

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