Chris Dubuc

A recent decision out of the Eastern District of Texas granted the plaintiff patent owner summary judgment with respect to the defendants’ counterclaim that the plaintiff breached licensing related obligations owed to the Institute of Electrical and Electronics Engineers (IEEE) by not communicating with the defendants prior to suing for infringement…. While the result is reasonable, the explanations provided by the court raise several questions.

Previously, we wrote about how alleged concerns of “hold-up” and a lack of “transparency”, two non-legal terms without accepted definitions, are being used to advocate for special rules applicable to patents subject to declarations regarding Fair, Reasonable and Non-Discriminatory (FRAND) licensing. These vague concepts are specifically chosen to obfuscate the real issues impacting FRAND licensing and used in an effort to shift traditional burdens of proof, regulate behavior previously found not to violate antitrust / competition law, and rewrite the express language of the commitment made by patent owners to the European Telecommunications Standards Institute (ETSI). The European Commission (EC) is the latest bull to enter the FRAND licensing China shop.

While 2022 was somewhat less eventful than 2021 in terms of significant developments in fair/reasonable and non-discriminatory (FRAND/RAND) licensing occurring in the United States, the past year still did not disappoint and underscores the continued and growing interest from government in the standards related patents space. In 2022, the most progress was made on matters and issues we wrote about last year: i.e. government policy developments, Continental v. Avanci, the IEEE’s standards-related Patent Policy, and Ericsson v. Apple / Apple v. Ericsson  (see here and here)

In the United States, the issue of whether or not one has complied with a licensing-related commitment made to a standards setting organization is often treated as a matter of contract. As we have written about before (here and here), some implementers wish to interpret such commitments so as not to lose entitlement to fair, reasonable and non-discriminatory (FRAND) licenses despite not negotiating in good faith or, as we like to say, to have their FRAND cake and eat it too. In a recently prepared article, we explore how such an interpretation lines up with basic contract law principles, particularly having reference to the language of the European Telecommunications Standards Institute’s (ETSI) Intellectual Property Rights Information Statement and Licensing Declaration [“the ETSI Licensing Declaration”].

A while back, we set up an email alert to advise us of any legal developments involving fair, reasonable and non-discriminatory (FRAND) licensing. Somewhat to our surprise, the notion of requiring FRAND terms and conditions for obtaining access to the otherwise exclusive property rights of others is not limited to patents essential to industry standards. Rather, FRAND licensing concepts, or minor variations thereof (e.g. “just, reasonable and nondiscriminatory”), appear in government regulation of stockyards (see 7 USC §208), vehicular air pollution information (see California’s Health and Safety Code §43105.5 (7)), and airports (see La. R.S. §1:135.1), to name a few.

As was recently reported by IPWatchdog (here and here), the U.S. Patent and Trademark Office (USPTO), the National Institute of Standard and Technology (NIST), and the U.S. Department of Justice, Antitrust Division (DOJ) issued a statement on June 8 withdrawing the December 19, 2019 Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments (2019 Policy Statement). A footnote to the statement further provides that “the agencies do not reinstate the January 8, 2013, Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments issued by the DOJ and the USPTO.” Curiously, this statement makes no mention of the 2021 Draft Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments (2021 Draft Policy Statement), which draft statement was criticized by a broad cross-section of industry participants for a variety of different reasons. Regardless, our question is simply this: why did the 2019 Policy Statement need to be withdrawn instead of simply not proceeding with the 2021 Draft Policy Statement or, alternatively, modifying those portions of the 2019 Policy Statement that the agencies did not agree with? By throwing the baby out with the bath water, patent owners are now left to guess where the agencies stand on such issues.

As we have previously explained, many implementers wish to require patent owners to establish (1) the need for licenses, and (2) that any terms offered are in fact fair, reasonable and non-discriminatory (FRAND), but without having to make any commitment to accepting FRAND licenses, and without ever losing entitlement to the same. With respect to the latter, recall, for example, Apple’s position it its case with PanOptis, namely that PanOptis had “no legal right under U.S. law to impose on Apple an obligation to negotiate a license to Plaintiffs’ portfolios of declared-essential patents or forfeit any defenses for failing to do so” (Apple Inc.’s Motion to Dismiss Count VIII for Lack of Subject Matter Jurisdiction, Optis Wireless Technology, LLC, Optis Cellular Technology, LLC, Unwired Planet, LLC, Unwired Planet International Limited, and PanOptis Patent Management, LLC v. Apple Inc., Civil Action No. 2:19-cv-00066-JRG (E.D. Texas, June 22, 2020)) [hereinafter Optis v. Apple]. Basically, such implementers want the option of capping their exposure at FRAND rates if ever found to infringe. We refer to this as an implementer wanting to have its FRAND cake and eat it too.

In Part II of this series, we considered the language of a specific licensing commitment made to European Telecommunications Standards Institute (ETSI) and the prevailing law relating thereto. In this Part III, we consider the 2021 Draft Policy Statement with a particular view to highlighting its inconsistencies with the ETSI framework and the inapplicability of the hold-up narrative to the situation involving an individual United States patent. Despite its purported purpose of providing the agencies’ views on “remedies for the infringement of standards-essential patents (or SEPs) that are subject to a RAND and/or F/RAND licensing commitment”, the 2021 Draft Policy Statement does not take a clear position on this issue, instead merely stating the following (some might say “the obvious”):