Key U.S. FRAND / RAND Licensing Developments of 2024: CAFC and UK High Court Input; Post-Election Prospects

With respect to patents subject to a commitment regarding licensing on a Fair Reasonable and Non-Discriminatory (FRAND) or Reasonable and Non-Discriminatory (RAND) basis, 2024 saw several notable developments impacting the United States. Interestingly, some of the most notable developments involved attempts to have U.S. courts limit the enforcement of foreign patents, as well as attempts to have the rates for U.S. patents determined abroad. This year also saw another election in the United States, the results of which will likely impact government policy on such matters.

Hold Your Horses…  There’s a New Sheriff in Town

Earlier this year, the United States District Court for the Eastern District of North Carolina denied Lenovo’s request for an antisuit injunction preventing Ericsson from enforcing injunctions in Colombia and Brazil. Fatal to Lenovo’s request, in the eyes of the district court, was that the underlying licensing dispute would not be dispositive of the foreign actions because “Lenovo has neither committed to accepting Ericsson’s offer if [it’s] FRAND nor would it be forced to.” The United States Court of Appeals for the Federal Circuit (CAFC) vacated the district court’s decision, however, and remanded. According to the CAFC’s decision, the district court erred by finding that the suit before it would not be dispositive of the Colombian and Brazilian actions if Lenovo was correct in its assertion that “Ericsson’s FRAND commitment precludes Ericsson from pursuing [standard essential patent] SEP-based injunctive relief unless it has first complied with the commitment’s obligation to negotiate in good faith over a license to those SEPs” (emphasis in original).

Perhaps more significant than the antisuit injunction ruling was the CAFC making determinations, sua sponte, regarding the scope and performance of licensing declarations made to the European Telecommunications Standards Institute (ETSI). Notably, with respect to this “contract-interpretation issue”, the CAFC held as follows:

“On this issue, we conclude that a party that has made an ETSI FRAND commitment must have complied with the commitment’s obligation to negotiate in good faith over a license to its SEPs before it pursues injunctive relief based on those SEPs.”

Oddly, as we wrote about here, the CAFC did not consider the specific language of the ETSI licensing declaration (which makes no mention of injunctive relief), the laws of France that govern such declarations, or prior cases addressing such issues. Nor did the CAFC mention antitrust / competition law that was heretofore used to limit the seeking of injunctive relief. Further, adding even more confusion to an already complex issue, the CAFC did not set forth a clear standard for satisfying the obligation and seemingly ignored the condition of essentiality.

Citing the CAFC’s decision in the Ericsson and Lenovo case, Netgear recently brought a motion before the United States District Court of the Central District of California for an anti-enforcement injunction preventing Huawei from seeking injunctions in foreign courts for WiFi related patents, alternatively, seeking entry of an interim license (see Netgear’s MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION). Notably, in addition to breach of contract and antitrust claims, Netgear’s complaint in this matter also features racketeering claims.

Foreign Interference

Beyond the scope of a summary of FRAND / RAND related licensing developments impacting the United States, suffice it to say that the UK courts continue their path of determining the terms and conditions of global FRAND licenses, following a finding of infringement, for purposes of deciding whether to issue an injunction (i.e. if the determined terms and conditions are not accepted by the infringer). What is pertinent to the United States, however, was the High Court of Justice of England and Wales refusing a request by Lenovo, as part of its global dispute with Ericsson, for a conditional interim injunction enjoining Ericsson’s allegedly infringing products, unless Ericsson agreed to not seek or enforce any injunctive relief (including via the U.S. International Trade Commission (ITC)) and to having the UK courts determine the terms and conditions of a global cross-license (including with respect to Ericsson’ U.S. patents). In denying Lenovo’s request, Mrs. Justice Bacon pointed to, among other things, the disconnect between the infringement complained of and the relief sought by Lenovo, describing Lenovo’s request as effectively “obtain[ing] anti-suit relief by the back door, by forcing Ericsson to agree to terms which Lenovo plainly considers that it cannot ask the court to order” (emphasis added).

Additionally, Mrs. Justice Bacon found damages to be an adequate remedy for the loss being claimed by Lenovo. An appeal of the High Court’s decision was subsequently dismissed by the Court of Appeal for England and Wales. Notably, the appellate court distinguished Lenovo’s proposal from a determination of global licensing terms typically undertaken by UK courts following a finding of infringement:

“Lenovo argue that the relief they seek is not “anti-suit relief by the back door”, since it does not require Ericsson to withdraw any foreign claims. They accept that the order is designed to persuade Ericsson to do just that, but they argue that there is nothing wrong with that and draw an analogy with the grant of an injunction to restrain infringement of a UK SEP unless the defendant takes a global licence on the terms determined by the court to be FRAND. I do not accept the validity of this analogy, because in that scenario the court is simply putting the defendant to its election as to whether it wishes to rely upon its rights under clause 6.1 of the ETSI IPR Policy or not. If the defendant does rely upon its rights, no injunction will be granted. If not, the relief granted is an injunction to restrain infringement in the UK. Moreover, that injunction will be granted because the ordinary conditions for the grant of such an injunction have been satisfied.”

More recently, the High Court rejected yet another attempt by Lenovo to neutralize Ericsson’s injunction game, this time by seeking a declaration that Ericsson’s good-faith obligation required it to enter a short-term license until the terms and conditions of a global cross-license have been decided. According to the decision, Lenovo’s strategy could be summarized as follows:

“If the court makes the Declaration, Lenovo hopes that Ericsson would actually enter into the Short-Term Licence which would result in injunctions that Ericsson has already obtained falling away on the basis that Lenovo is licensed. If, by contrast, Ericsson is not prepared to enter into the Short-Term Licence, Lenovo hopes that courts overseas would decline to grant or continue any injunctions restraining Lenovo from using Ericsson’s SEPs on the basis that Ericsson is an ‘unwilling’ licensor.”

One factor weighing against Lenovo’s request was the fact that Ericsson had not agreed to having the UK courts determine the terms and conditions of a global cross-license. Rather, Ericsson sought a declaration from the United States District Court for the Eastern District of North Carolina that it complied with its FRAND obligations, failing which, asking the district court to determine a FRAND rate for a global cross-license. Related thereto, Mr. Justice Richards made the following observation regarding the UK Supreme Court’s decision in Unwired Planet International Ltd and others v Huawei Technologies (UK) Co Ltd:

“The Supreme Court did not formulate the limitation on a SEP-owner’s ability to seek an injunction by reference to the implementer giving an undertaking to accept any particular court’s determination of FRAND terms. Indeed, a formulation of the restriction in those terms would be at odds with the ETSI IPR’s focus on negotiation between the parties as the preferable means of fixing a FRAND licence.”

Further, Mr. Justice Richards was unable to conclude with “a ‘high degree of assurance’ that Ericsson’s actions in seeking injunctive relief are contrary to its FRAND Commitment” in part based on the findings of the “independent” U.S. Office of Unfair Import Investigations in a parallel matter before the ITC (see Part II of this article for more details). Finally, the High Court agreed with Ericsson “that such utility as the Declaration has would consist of an attempt to influence foreign proceedings by offering an unsolicited opinion on matters that overseas courts and bodies need to consider for themselves” and, as such, “considerations of comity and utility point against the making of the Declaration.”

The High Court of Justice also rejected a bid by Tesla to have the Court, among other things, declare Avanci’s 5G Vehicles program not in accordance with FRAND, determine the FRAND terms and conditions for a global license to such program (including all US patents involved), declare Avanci’s members cannot prevent the granting of such a license by Avanci, and declare that only a license from Avanci would be FRAND (i.e. bilateral licenses would not be). Key factors underlying the Court’s conclusion that there was “no obvious connection between the licensing claim and the jurisdiction of this Court” included the location of the patent owners involved in the program (“only a few Patentees are UK resident”), the large number of foreign patents involved (“only an estimated 7% of the 5G SEPs covered by the Avanci License are domestic UK or UK designated patents”), the limited number of pool participants named as defendants (InterDigital being the only patent owner), and the location of the defendants (“Tesla…, InterDigital and Avanci are all US companies, whose business is based in the US.”). The fact that InterDigital had not threatened to enjoin Tesla, and the availability of Delaware as an alternative forum for resolving the dispute, were also mentioned. Most recently, a two-day hearing regarding Tesla’s appeal of this decision occurred.

In contrast to the UK, and as we touched on last year regarding OPPO v. Nokia, Chinese courts have found that they have jurisdiction to set global FRAND licensing rates,. More recently, media reports indicate that the China’s Supreme People’s Court has found, in a case involving TCL and pool operator Access Advance, that such jurisdiction extends to setting rates for overseas patent pools / joint licensing programs. And even though the European Union (EU) has, reportedly, formally requested increased transparency regarding China’s global rate setting decisions, via the World Trade Organization (WTO), on the basis such decisions could impact the EU’s rights under the TRIPS agreement, the EU soldiers on with its own proposed regulatory framework for determining FRAND rates. The EU’s proposal was criticized by the Council for Innovation Promotion and former FTC General Counsel and IPWatchdog contributor Alden Abbott, among others, for opening the door for rival jurisdictions to do the same.

The Elephant in the Room

In view of the success of the Republican Party in the recent Federal elections, one cannot help but wonder: Will we see a return of the hands-off “New Madison” approach to governing standards related patents espoused by then Assistant Attorney General, Antitrust Division, U.S. Department of Justice, Makan Delrahim. Who will head up various government agencies that could be involved in regulating such patents? Will there by yet another attempt by the U.S. Patent and Trademark Office, the National Institute of Standard and Technology, and the U.S. Department of Justice, Antitrust Division to put forward a Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments? Or will we see a return of the 2019 Policy Statement that was withdrawn in 2022 following a proposed 2021 Draft Policy Statement that was met with widespread criticism? Will the 2020 letter filed by Makan Delrahim regarding a 2015 Business Review Letter from the Antitrust Division to the Institute of Electrical and Electronics Engineers’ proposed revisions to its Patent Policy be “refiled” yet again? And, last but not least, will any progress be made on the legislative front, including with respect to the RESTORE Patent Rights Act of 2024 (“to establish a rebuttable presumption that a permanent injunction should be granted in certain circumstances…”), on which a Senate IP Subcommittee hearing was held on December 18, or the Standard Essential Royalties Act proposed in 2022? For additional background information regarding such questions, see our prior year end summaries here and here.

Part II

In Part II, we will consider a pair of Office of Unfair Import Investigations briefs filed in actions before the ITC, as well as some interesting interlocutory decisions arising out of district court actions.

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