The ITC and District Courts

Part I of our summary concluded with a discussion about the potential impact of the recent U.S. Federal elections on the regulation of patents relating to industry standards, including with respect to the availability of injunctive relief. We pick up our discussion on a related note, by turning to the U.S. International Trade Commission (ITC), where the primary remedy is an exclusion order.

The International Trade Commission

As we mentioned here, the original focus of the 2013 Policy Statement (put forward during the second Obama administration following a Presidential veto of an exclusion order obtained by Samsung against Apple) was whether ITC exclusion orders issued pursuant to 19 U.S.C. §1337 were, as a matter of public interest, appropriate for patents subject to a licensing related commitment. In the wake of the dueling Policy Statements mentioned in Part I (that ended with there being no statement at all), the status of injunctions for such patents remained unclear.

For example, subsequent to the abandoned 2021 Draft Policy Statement, Federal Trade Commission (FTC) Chair Lina M. Khan and FTC Commissioner Rebecca Kelly Slaughter submitted a public interest statement  expressing concern that an exclusion order regarding a standard essential patent “has the potential to cause substantial harm to U.S. competition, consumers, and innovation” (see here for additional statements from the FTC concerning standards related patents made during the Biden Administration). This year, however, in the matter of Certain Mobile Phones, Components Thereof, and Products Containing Same (yet another front in the broader patent war between Ericsson and Lenovo), the Office of Unfair Import Investigations (OUII) stated, in a [Corrected] Initial Post-Hearing Brief, that “[s]hould a violation of Section 337 be found, the Staff recommends… that the appropriate remedy will be a limited exclusion order…”.

According to the OUII “[t]he weight of the evidence shows that Ericsson complied with its FRAND commitment by negotiating in good faith”, “…there is no credible evidence that Ericsson has engaged in patent hold-up in its negotiations with Lenovo”, and “…Lenovo has not presented any concrete evidence that would support concluding that, based on FRAND considerations, exclusionary relief would have adverse effects on any statutory public interest factor.” With respect to Lenovo’s argument that Ericsson acted improperly by seeking an injunction at the same time as making its initial offer, the OUII brief states that “it appears disingenuous for Lenovo to argue that filing a lawsuit on the same day as sending an offer [was improper] where Lenovo filed an ITC complaint against Ericsson on 5G SEPs two months before making its first offer to Ericsson.” The OUII brief further notes that “[f]iling an ITC complaint, even on the same day an offer is made, does not necessarily mean that an SEP owner violated its FRAND obligations because good faith negotiations may have occurred before the offer and negotiations may continue in good faith after the complaint is filed.” Lenovo’s “qualified” willingness to accept a FRAND determination (i.e. by the UK courts after all appeals are exhausted), and its undue delay in responding to Ericsson, also did not help its cause. Regarding the former, the OUII brief notes that “[t]he UK actions are not a reason to deny remedial orders” given such actions “will not resolve the issues in this investigation because they will not necessarily result in a license between the parties.” Accordingly, the OUII explains, delaying an exclusion order “would encourage implementers to delay negotiations, knowing that they can file a rate-setting action anywhere in the world to delay remedial orders addressing their unfair trade practices.” The OUII brief further notes that “[t]he Commission has never delayed its remedial orders or investigation due to copending FRAND litigation.”

While not binding on the Administrative Law Judge, nor the ITC itself, the OUII’s views are nonetheless influential. For example, the OUII’s Brief was referred to by the High Court of England and Wales in its decision to reject Lenovo’s request for a declaration regarding a short-term license, as noted in Part I of our year end summary. Most recently, an Initial Determination was issued in this matter. According to the related Notice, Ericsson “has proven by a preponderance of evidence that Respondents… have violated subsection (b) of Section 337 of the Tariff Act of 1930…”.

In another case pending before the ITC (Certain Electronic Computing Devices, and Components and Modules Thereof), this time involving patents relating to HEVC (H.265) technology, the OUII again sided with Ericsson based, in large part, on the shortcomings of Lenovo’s briefing, specifically noting its uncertainty regarding “where the alleged breach of any RAND obligations (if they even exist) by Ericsson fits” or how Lenovo’s arguments relate to a public interest analysis.  (see the OUII’s Initial Posthearing Brief).

According to the OUII “[e]ven with the Federal Circuit’s Ericsson ETSI Opinion, there is no blanket rule that an exclusion order may not issue where the Complainant is alleged to violate a RAND obligation under the ITU patent policy”. Further, the OUII noted that the language of the ITU patent policy did not support Lenovo’s position and that “the drafters of the ITU Patent policy considered, but did not adopt, prohibitions on injunctive relief.”

Finally, the OUII recognized that, in both cases, Ericsson had offered to arbitrate but its offers were not accepted by Lenovo.

G+ Communications v. Samsung

G+ Communications’ suit against Samsung in the Eastern District of Texas has been the source of several interesting interlocutory decisions.

One such decision involved the question of whether a prior owner’s actions taken before transferring the patents are imputable to a subsequent owner by virtue of FRAND licensing related obligations associated with the patents, which decision we wrote about here. Notably, prior owner ZTE retained “a 20% net royalty on all proceeds generated from G+’s licensing” and further agreed to “cooperate with G+ to facilitate G+’s licensing efforts.” According to Judge Rodney Gilstrap, neither the U.S. cases cited by Samsung, nor French law, would result in ZTE’s actions creating an encumbrance on the patents themselves. Judge Gilstrap left the door open, however, for Samsung to rely on ZTE’s past behavior for other purposes, such as defending against a claim of willful infringement.

Another decision stemming from this case saw the Eastern District of Texas District Court interpret a patent owner’s commitment to the European Telecommunications Standards Institute (ETSI), albeit in a manner not entirely consistent with the CAFC’s subsequent ruling in Ericsson v. Lenovo. As we wrote about here, Samsung sought a determination that “French law does not allow a SEP declarant to unilaterally discharge (and thus avoid) its irrevocable FRAND obligations, including its duty to negotiate in good faith and its obligation to license declared patents on FRAND terms.” Somewhat splitting the baby, the Texas District Court instead found that “the obligation to negotiate towards a FRAND license in good faith may be temporarily suspended.” Judge Gilstrap’s decision does not explain, however, the consequences of the obligation being suspended. Notably, this decision also included rulings by Judge Gilstrap that, as a matter French law, litigation costs and attorney’s fees are compensable losses for breach of one’s duty to negotiate in good faith, and that the obligation to negotiate in good faith is applicable both to patent owners and implementers purporting to want FRAND licenses.

G+ Communications v. Samsung also featured a new trial on damages given the court had “material concerns about jury confusion regarding the form of the reasonable royalty awarded [therein] – i.e., that the jury may have awarded damages in the form of a running royalty when it intended to award them as a lump sum.” Prior to the new trial on damages, G+ brought a motion seeking to prohibit Samsung from (1) arguing that G+’s damages request violates FRAND; (2) introducing the terms of G+’s settlement offers; and (3) alleging that a FRAND obligation attaches to the patents unless Samsung concedes the patents are essential. For reasons that are not entirely clear, especially in view of the prior ruling regarding suspension of the obligation to negotiate in good faith, Judge Gilstrap ruled against G+ Communications on all three fronts, leaving us to speculate that G+ Communications’ shifting positions on FRAND issues may have been a factor (see here for further analysis).

Nokia v. HP

Another interesting interlocutory decision coming out this year stemmed from the case between Nokia and HP before the United States District Court for the District of Delaware. This matter involved the H.264 and H.265 video-coding standards and saw HP bring both contract-based and antitrust counterclaims. In response to these counterclaims Nokia sought a partial motion to dismiss the former given HP did not plead the asserted patent claims were essential, nor did it properly plead a breach of contract. Regarding the latter, Nokia sought dismissal on the basis that HP did not plead any specific alternative technology not included in the standards because of Nokia’s actions, nor the existence of a relevant market.

With respect to the existence of an obligation, Judge Gregory B. Williams relied on black letter civil procedure law to rejected Nokia’s argument that HP had to “either plead that Nokia’s patents are essential to the standards, or deny that those patents are essential and concede its contract-based counterclaims.”  Citing Federal Rule of Civil Procedure 8(d)(3) the opinion notes that HP “may state as many separate claims or defenses as it has, regardless of consistency.”

Judge Williams also sided with HP regarding breach of the alleged obligation, rejecting Nokia’s contention that “HP’s breach of contract counterclaim (Count II), which is premised on Nokia’s request for injunctive relief, fails because HP does not cite language in the ITU-T Common Patent Policy or Guidelines (the “Guidelines”) that would be breached by a patent owner seeking injunctions against infringing products.” Despite not doing so, the court found that HP had “adequately pled that Nokia breached its FRAND obligations by refusing to grant a license on reasonable terms and conditions, and that the injunction which Nokia seeks is part of that breach”.

Judge Williams also disagreed with Nokia regarding the requirement to identify a “specific competing alternative technology” to plead a claim under Section 2 of the Sherman Act, but agreed with Nokia that HP had failed to plead a relevant market. According to the court this was because “…the Relevant Market that HP defined includes products that HP has not shown are relevant, and HP did not plead an alternative relevant market that is limited to technology that was competing with Nokia’s technology when Nokia’s technology was incorporated into the Asserted Standards.” Accordingly, Nokia’s motion to dismiss was granted in this regard, but with leave to amend. This case has since been terminated.

Philips v. Thales

The longstanding case between Philips and Thales in the United States District Court for the District of Delaware (which we wrote about in previous summaries here and here), also provided some interesting developments this year. Among other things, this case featured a noteworthy approach to scheduling trials in combined patent infringement / breach of FRAND contract actions.

As explained by Judge Colm F. Connolly in a MEMORANDUM ORDER dated July 15, 2024, a Phase I trial on FRAND issues was to precede a Phase II trial considering patent infringement, and “the only issue that the jury will be asked to decide at the [Phase I] trial is what would the FRAND licensing terms have been for Philips’ patents if the parties had negotiated a FRAND license for the period February 16, 2016 through August 2028” (emphasis in original). Related to this directive was a MEMORANDUM ORDER of June 25, 2024, pursuant to which Judge Connolly determined the time period for the jury’s FRAND determination. Philips had argued that the period should extend back to when Thales’ predecessor company began selling products implementing the standards, while Thales thought the period should be much shorter based on how past infringement of other licensees was previously dealt with by Philips. Somewhat disappointing both parties, Judge Connolly chose the date Philips first offered Thales a license, February 16, 2016. Following this ruling, and Philips formally objected to the court’s Order, pursuant to a joint letter of July 8, 2024,  for, among other reasons, “select[ing] a date that is not consistent with or supported by anything in the ETSI IPR Policy…, any French law interpreting the ETSI IPR Policy…, nor any of the expert opinion testimony that has been set forth in expert reports in this case… .”

Coming back to the July 15, 2024, order, Judge Connolly noted that the joint letter made clear that there was a “fundamental misunderstanding” about the court’s prior orders given “[t]he parties appear to be under the impression that they are trying the issue of damages at the [Phase I] trial.” In view of the only question to be put to the jury, Judge Connolly Ordered the parties to submit a revised joint letter taking into consideration various sub-issues that the parties would have considered had they successfully negotiated a FRAND license in February 2016. For example: would the license be for a lump sum, or a running royalty; how would a release for past infringement have been treated; and what would be the term of the license? Some of these issues are reflected in the competing verdict forms of Philips and Thales (see here and here). Not long after Judge Connolly’s ruling, the parties settled their dispute.