Posts Tagged: "SEPs"

Senator Jim Inhofe (R-OK) yesterday introduced the “Protecting American Innovation and Development (PAID) Act of 2021,” a bill that would give the U.S. Department of Commerce authority to hold accountable bad-actor Chinese companies that refuse to pay licensing and royalty fees to free-market developers of wireless technologies. Covered by standard essential patents (SEPs).

Judge Rodney Gilstrap of the U.S. District Court for the Eastern District of Texas yesterday issued an order enjoining  Samsung Electronics from taking any action to interfere with Ericsson’s U.S. FRAND (“fair, reasonable, and non-discriminatory” terms) lawsuit against Samsung in his court. Samsung had filed a lawsuit on December 7, 2020 in the Wuhan Intermediate People’s Court of China but did not provide notice to Ericsson of the action. “Unaware of the Chinese Action,” according to Judge Gilstrap’s order, Ericsson filed a complaint against Samsung on December 11, 2020 in the Texas court, alleging that Samsung breached its obligation to license its Standard Essential Patents (SEPs) on FRAND terms, and “notified Samsung of its Complaint in this Court that same day.” Samsung subsequently asked the Wuhan court to issue an “anti-suit injunction” (ASI) to prevent it from seeking relief relating to the SEPs at issue anywhere else in the world. The Wuhan Court issued the ASI on December 25 for the “duration of the Chinese Action and until a future judgment in that Action becomes effective.” The Wuhan Court gave Ericsson notice of the ASI after it had issued on December 25. Ericsson thus asked the Texas Court for an emergency temporary restraining order (TRO) on December 28, which the court granted.

Earlier today, Judge Rodney Gilstrap of the United States Federal District Court for the Eastern District of Texas issued a temporary restraining order against Samsung in a FRAND (fair, reasonable and non-discriminatory licensing rates) lawsuit filed by Ericsson on December 11, 2020. The Order gives Samsung until January 1, 2021 to file any opposition to the continuation of the temporary restraining order, and gives Ericsson until January 5, 2021 to respond if, or more likely when, Samsung, files an objection. At first glance to the trained eye this seems shocking, but as is so often the case in the world of standard essential patents (SEPs) and FRAND, there is much more than meets the eye.

This is the fifth and final article in a series of articles analyzing statements made by various entities in the cellular industry regarding licensing Standard Essential Patents (SEPs) on a Fair, Reasonable and Non-Discriminatory (FRAND) basis. The fourth article focused on the obligations of SEP owners in the process of FRAND licensing. This article considers the obligations of implementers.

A wave of thousands of 5G Self-Declared Standard Essential Patents (SD-SEPs) applicable to everything from devices to network infrastructure is fast approaching. The value of these patents is 6-10% of the retail product value, if recent LTE SEPs court decisions are to be believed. However, ex ante 5G licensing rates announced by traditional licensors Qualcomm, Ericsson, Nokia, and Interdigital total around $18 (or 3.6%) on a $500 handset. Yet these licensors hold less than 17.4% of the relevant 5G SD-SEP families, which would make the total royalty burden 20% or higher. Implementers faced with high SEP licensing cost and uncertainty typically mitigate risk by: (1) using licensed components, (2) receiving indemnification, and (3) leveraging defensive portfolios. But there is another strategy that should be considered given the tools which are now available: preemptively challenging patent family validity in foreign jurisdictions that are relatively quick, inexpensive and often more effective.

During a recent panel discussion at IP Watchdog’s SEP 2020 Conference, a question arose as to the difference, if any, between a reasonable royalty for infringement of a U.S. patent and a fair, reasonable and non-discriminatory (FRAND) rate for licensing standards essential patents (SEPs). The following discusses this question and highlights some recent related judicial developments. According to an article titled “The Effect of FRAND Commitments on Patent Remedies”, appearing in the Utah Law Faculty Scholarship (hereinafter “Contreas et al.”), “there appears to be nothing in U.S. law that compels courts to utilize either the Georgia-Pacific framework, or patent damages law in general, to determine royalties complying with an SEP holder’s FRAND commitment”. The authors further note that “these two concepts (patent damages and FRAND royalty rates) arose via different historical pathways and are intended to achieve different goals”; the former being rooted in statutes and case law, the latter being contractual in origin.

This is the fourth in a series of articles analyzing statements made by various entities in the cellular industry regarding licensing Standard Essential Patents (SEPs) on a Fair, Reasonable and Non-Discriminatory (FRAND) basis. The third article considered the royalty base to which FRAND rates apply. This article focuses on statements made regarding the obligations of SEP owners in the process of FRAND licensing.

On day one of IPWatchdog’s SEP2020, keynote speaker David Kappos told IPWatchdog President and CEO Gene Quinn that the IP community should not panic about what a Biden administration might mean for standard essential patents (SEPs), or IP more broadly. “I have reason to believe we could see a positive continuation of what we’ve seen in recent years,” Kappos said. “President-Elect Biden comes from a background where he under[stands] IP. I worked with him on IP issues under the first Obama administration and he demonstrated an appreciation for the balance that involves intellectual property. He comes from a state – Delaware – that means business about IP, with a strong specialty chemicals industry in that state, and a strong patent jurisprudence.” Additionally, Biden would have people like Senator Chris Coons (D-DE), who has been “an extremely strong advocate for strong intellectual property,” around him. “I have a tremendous faith in [Coons] as a force for making sure we continue going in the right direction,” Kappos added.

This is the second in a series of articles analyzing statements made by various entities in the cellular industry regarding licensing Standard Essential Patents (SEPs) on a Fair, Reasonable and Non-Discriminatory (FRAND) basis. The first article focused on statements relating to transparency. This article looks at statements regarding unconditional offers to license on a FRAND basis, arbitration of FRAND terms and conditions, specific FRAND rates, the application of such rates, and portfolio licensing.

In a previous article, we laid out the basics of “patent pools”, which license patents that are declared essential for technology standards. A recent article published in the University of San Diego Law Review, titled Glory Days: Do the Anticompetitive Risks of Standards-Essential Patent Pools Outweigh Their Procompetitive Benefits? (Glory Days), criticized patent pools, alleging inefficiencies and anticompetitive risks of pools for standard essential patents (SEPs). While the authors make several rebuttable suggestions, the crux of the authors’ complaints about SEP patent pools is that SEP pools should bear all the burdens and expenses of verifying with a litigation-grade level of certainty that all patents in the pool are essential and valid before an implementer will even engage in a licensing discussion with the pool. This approach is not economically or practically realistic and is designed to justify hold out and provide cover for implementers to refuse to engage in licensing discussions.

Implementers of standard essential technology such as Long-Term Evolution (LTE) are constantly attempting to reduce costs for implementation. This behavior has led to certain inefficiencies in the marketplace, such as innovators not being compensated for their contributions to technological standards. The symbiotic relationship between innovators and implementers cannot continue where one side takes all the risk and the other side reaps all the reward. One construct put in place by innovators to extract compensation from the marketplace are patent pools that license patents that are declared essential for technology standards.

Over the years, several entities have published statements related to licensing 4G/5G cellular wireless Standard Essential Patents (SEPs) on a Fair, Reasonable and Non-Discriminatory (FRAND) basis.  These include entities that are primarily licensors of SEPs, entities who sell network equipment products or components and who are also significant licensors of SEPs, entities who sell end user products and who are significant licensees of SEPs, an association focused on FRAND policy development and a patent pool.  An analysis of these statements reveals several common themes, but also a wide range of opinions on such issues. Below is the first in a series of articles that will review these statements with a view to highlighting some of these differing viewpoints, and provides context for these statements by way of reference to the policies of standards setting organizations and related legal pronouncements.

While 5G technology is quite well known by many in popular culture, thanks to nearly ubiquitous television commercials, it is not the only new wireless technology that promises revolutionary support for the fast-growing Internet of Things and associated devices. Wi-Fi 6 (or “802.11 ax”) also promises to offer consumers vastly improved wireless speed and performance, although it is not yet nearly as pervasive as 5G technology. As new technologies are developed and eventually used by customers, disputes about patent rights, licensing and royalties typically follow, and we can be certain that will be the case as wireless telecommunications continue to offer faster speeds and devices continue to become interconnected. The speed revolution will open horizons not yet imagined, and economies will change. Sorting out who deserves what for each innovative contribution will become increasingly important and complicated (at least under current paradigms).  

The 2019 USPTO-NIST-DOJ Joint Policy Statement on Standard-Essential Patents Subject to Voluntary RAND or FRAND (fair, reasonable and non-discriminatory) commitments “intended to solve [judicial] misinterpretation, and to encourage balance in our patent ecosystem, and to further strengthen patent rights,” USPTO Deputy Director Laura Peter said in her keynote at a recent IP-antitrust event. Peter delivered the remarks at an event hosted by the Eagle Forum Education & Legal Defense Fund, a conservative public policy and grassroots organization founded by the late Phyllis Schlafly, titled, “Inventing Dynamic Competition: Intellectual Property, Antitrust, and Competition” September 30 in Washington, D.C.

On October 5, the United States Supreme Court denied TCL Communication’s petition for certiorari in TCL Communication Technology Holdings Ltd. V. Telefonaktiebolaget LM Ericsson. Of course, the issue wasn’t quite as simple or straight forward as TCL suggested. While Ericsson was under a FRAND obligation, TCL was engaging in infringing activities during a period in which they had no license to use the Ericsson patents. Thus, the threshold question was really whether the relief sought was equitable or legal in nature. The United States Court of Appeals for the Federal Circuit, in an opinion authored by Judge Raymond Chen and joined by Judges Pauline Newman and Todd Hughes, determined that the payment for past infringing activities sought a legal remedy requiring a jury trial under the Seventh Amendment to the U.S. Constitution. The Supreme Court’s decision not to grant certiorari lets stand this decision.