Posts Tagged: "SEPs"

A number of organizations, including Ericsson, Nokia, Philips, Qualcomm, the Innovation Alliance and the Licensing Executives Society, have sent two separate letters to U.S. Attorney General William Barr, USPTO Director Andrei Iancu, and Secretary of Commerce Wilbur Ross stating their support for the United States’ decision to withdraw the Department of Justice, Antitrust Division’s assent to the 2013 joint DOJ-U.S. Patent and Trademark Office “Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments” (the 2013 Joint Policy Statement). The letter sent by Ericsson, Nokia, Philips, and Qualcomm begins by explaining that those signing the letters collectively spend many billions of dollars annually to “the development of cutting-edge that substantially contribute to the social welfare and quality of life of U.S. consumers,” and “and employ tens of thousands of people in the U.S.” The letter goes on to explain that injunctions are necessary to address the widespread patent infringement that has occurred in recent years; infringement that risks innovators’ ability to continue to innovate and create next generation technologies. Without property protections it is economically irrational to invest the billions of dollars required to create cutting-edge technologies.

In a decision published in redacted form on January 29, Judge Beth Labson Freeman of the Northern District of California denied ASUSTek Computer Inc.’s and ASUS Computer International’s (collectively, ASUS’s) motion for summary judgment that InterDigital, Inc.’s (InterDigital’s) standard essential patent (SEP) licensing practices breached its FRAND obligations. The court also granted-in-part and denied-in-part InterDigital’s motion for summary judgment, rejecting a request to dismiss ASUS’s Sherman Antitrust Act claim but granting summary judgment as to issues relating to judicial and promissory estoppel and as to a California competition law claim. ASUS Computer Int’l v. InterDigital, Inc., Case No. 5:15-cv-01716-BLF, ECF No. 367 (N.D. Cal. Jan. 29, 2018). The court’s ruling comes as the case is progressing toward a jury trial, presently scheduled for May 2019. Several of the issues addressed are fact-specific to the case, but the rulings relating to breach of contract, most favorable licensees, and the Sherman Act are of particular interest for SEP licensing and illustrate how the legal landscape continues to evolve.

5G, or 5th generation wireless communication, has reached the point of determining which core technologies will be used. Suddenly, decisions about which companies will be picked are upon us. And the stakes could hardly be higher — for the companies and for our national (and American citizens’) security. The two businesses in the ring, Qualcomm and Huawei, each find themselves in a tough fight to dominate the IP-based 5G technology on which countless devices—from automobiles to mobile phones to who-knows-what—will interoperate. The 5G platform will empower the Internet of Things, artificial intelligence writ large and more—a technological advance with tremendous potential as well as tremendous risk exposure to spies, hackers and such. Both companies face hurdles from the U.S. government. One makes sense. The other makes no sense.

Standard Essential Patents (SEPs) are patents that are unavoidable for the implementation of a standardized technology. They represent core, pioneering innovation that entire industries will build upon. These patents protect innovation that has taken extraordinary effort to achieve. Standard Development Organizations (SDOs) exist as a mechanism for industry innovators to work together to collectively identify and select the best and most promising innovations that will become the foundation for the entire industry to build upon for years to come. Those contributing patented technologies to the development of a standard are asked to provide a FRAND (which stands for Fair, Reasonable and Non-Discriminatory) assurance, in essence committing to providing access to patents that are or may become essential to the implementation of the standard.

The Qualcomm decision is unique in that it appears to be the first decision to require a SEP holder to license its patented technology to its competitors, and not just its downstream customers, on FRAND terms.  This decision casts doubt on the longstanding practice, common in industries such as the telecommunication and automotive industries, in which SEP holders seek to secure “FRAND” licenses with downstream companies that make finished products, while refusing to license (or licensing on non-FRAND terms) those same SEPs to their competitors or other companies further up the supply chain (such as component suppliers).  The decision also emphasizes U.S. courts’ focus on the express language of SSOs’ IPR policies and the willingness to review the SSO guidelines in interpreting the agreements SEP holders enter into with SSOs.  In this regard, the decision may bode well for SEP implementers, given the court’s broad understanding of what it means to “practice” a relevant standard and its view that SEP holders’ FRAND obligations extend to all potential licensees, irrespective of their position in the supply chain.

Qualcomm was not refusing to abide by its agreed to promises to license SEPs as required by the SSOs, as alleged by the FTC. Instead, Qualcomm wasn’t interested in licensing competing chip makers who wanted to used Qualcomm’s technology so they could make their own chips incorporating Qualcomm’s patented technology. Licensing competing manufacturers of chips is not what the IP policies of the SSOs require. What is required is that patent owners of SEPs not discriminate against applicants desiring to utilize the license for the purpose of implementing the technology. But that isn’t what a competing manufacture would be doing. A competing manufacturer would be creating the chip that enables, not implementing the technology into an end product. In fact, as Qualcomm pointed out, industry practice of SSOs is to require licensing only fully compliant end-user devices, and not components.

Antitrust agency communications, such as the EU Commission’s Horizontal Guidelines and the FTC/DOJ Licensing Guidelines underline that market power does not necessarily result from patent ownership as such. They contain, however, no specific language on standard-essential patents which are – if they are valid and truly standard-essential – different from other patents in that they must, by definition, be used in order to operate on the respective standard-based market. In Europe at least, it seems to be increasingly accepted that SEPs can convey market power but that they do not necessarily always do so. Advocate General Wathelet’s proposition (para. 57 et seq. of his opinion in the Huawei/ZTE case) to establish a rebuttable presumption that SEP ownership generates market power has not been taken up by the CJEU’s Huawei/ZTE-decision, probably because the parties already agreed that Huawei held a dominant position (para. 43). But court decisions from the UK (for instance Unwired Planet/Huawei, a summary of the case is provided here) and Germany (for instance LG Düsseldorf, 26.3.2015, 4b O 140/13) have taken a case-sensitive approach, looking not only at the leverage generated by a SEP but also at circumstances which may limit its holder’s power.

On November 10, 2017, the Department of Justice’s (DOJ’s) new top antitrust enforcer, Assistant Attorney General (AAG) Makan Delrahim, delivered a powerful speech on antitrust law and policy enforcement towards intellectual property rights (IPRs). Former USPTO Director David Kappos described it as “the most important DOJ antitrust speech on IP during my decades practicing law”. … The speech clarifies that the new AAG views “any policy proposals with one-sided focus on hold-up with great skepticism because they pose a serious threat on the innovating process,” and submits that antitrust law should not be misused to police the private commitments such as FRAND that IP holders make to SSOs. In this, the speech agrees with the view shared by several scholars that FRAND commitments are contracts and a potential breach of those commitments may not be best suited under the purview of antitrust law and that “there are perfectly adequate and more appropriate common law and statutory remedies available to the SSO or its members”.

On Wednesday, September 27th, the U.S. International Trade Commission (ITC) announced that it had decided to institute a patent infringement investigation against Chinese electronics manufacturer Hisense (SHA:600060). The investigation, which follows from a Section 337 complaint filed by Japanese electronics firm Sharp (TYO:6753), will seek to determine whether certain Wi-Fi enabled devices and their components, specifically televisions which are capable of wireless Internet connectivity, which are imported into the U.S. by Hisense infringe upon two patents covering similar technologies held by Sharp.