Posts Tagged: "SEPs"

Chief Judge Randall Rader: Don’t Be Seduced by the Patent Hold-Up Misnomer

In his luncheon keynote address to attendees of IPWatchdog’s Patent Master’s Symposium: “Standard Essential Patents: Striking a Balance Between Competition and Innovation” on Tuesday, former Federal Circuit Chief Judge Randall Rader drove home a point made by multiple speakers during the event that the concept of “patent hold-up”—in which innovator companies use SEPs to hold up implementer companies from getting products to market via anti-competitive practices—is “one of the largest misnomers in our discipline.” Earlier in the day, David Kappos, former Director of the USPTO, explained that— although he signed off on the Joint Policy Statement, that it was thoughtfully and heavily negotiated and edited, and that he felt at the time that it was a good document and a compromised agreement—he stepped back after Delrahim’s announcement last year and has now reconsidered his view. “I was defending the IP system given everything we knew at the time,” Kappos said. “I didn’t think the guidelines were anti-innovation; I thought they were balanced. But in stepping back, I realized—between 2013 and 2019 we’ve learned a lot. Multiple empirical studies have shown us that the phenomena on which we based the guidelines— hold-up and royalty stacking — aren’t occurring. There is no evidence of our predictions.”

Antitrust Experts Characterize FTC v. Qualcomm Decision as Mangling of Sherman Act’s Section 2

Judge Douglas Ginsburg of the U.S. Court of Appeals for the D.C. Circuit, Professor Joshua Wright, and attorney Lindsey Edwards of Wilson Sonsini Goodrich & Rosati, have condemned the decision in FTC v. Qualcomm Inc. (N.D. Cal. May 21, 2019) in the George Mason University Law & Economics Research Paper Series. In their paper, “Section 2 Mangled: FTC v. Qualcomm on the Duty to Deal, Price Squeezes, and Exclusive Dealing,” the authors characterize the decision as being a part of “the misguided trend of using antitrust law to intervene in contract disputes between sophisticated parties negotiating over intellectual property rights.”

Searching for Answers to the Standard Essential Patent Problem

Later this year (likely in October), the United Kingdom’s highest court will hear arguments on questions arising in two disputes concerning standard essential patents (SEPs). The UK Supreme Court has agreed to hear appeals in Unwired Planet International Ltd and another v Huawei Technologies (UK) Co Ltd and another UKSC 2018/0214 and the joined cases Huawei Technologies Co Ltd and another v Conversant Wireless Licensing SARL UKSC 2019/0041 and ZTE Corporation and another v Conversant Wireless Licensing SARL UKSC 2019/0042. The arguments are likely to focus on one question: can a national court impose a global license in SEP cases? The closely watched appeal will be the culmination of years of litigation between the parties. In the Unwired Planet case, Mr. Justice Birss of the High Court heard five trials on the validity and infringement/essentiality of Unwired Planet’s patents. In April 2017, he then gave a mammoth judgment determining what a fair, reasonable and non-discriminatory (FRAND) license would be, and setting royalty rates. Critically, he found that only a worldwide license would be FRAND in the circumstances of this case. The England and Wales Court of Appeal upheld this conclusion, in a judgment in October 2018. The Supreme Court will likely sit in a five-judge panel in a hearing that will last about two days and will be live streamed on its website (the date and panel details have not been confirmed yet). It will hand down judgment later this year or early in 2020. (Ironically, patent specialist Lord Kitchin is a member of the Supreme Court but will not be sitting in this case as it is his own judgment that is under appeal.) You might have thought that—after decades of legal debate and academic writing, dozens of judgments addressing questions such as what constitutes a FRAND license and what are reasonable royalties, and extensive discussions between technology companies—the questions around SEPs would be close to being resolved. But that is far from the case. The outcome of the UK Supreme Court hearing, for instance, will have an impact on negotiations between owners of SEP portfolios and implementers worldwide, at a time when standards are set to become critical to many more industries.

Integrity, Quality and Secure IP Rights Are Standard-Essential

The decision came down to two technologies for detecting and correcting noise in signals transmitted over the air for 5G—one of the most fundamental features for wireless communications. Scientists and engineers in 2016 vigorously debated for months which one was technologically superior and most efficient. China had lined up Chinese companies’ and allies’ votes behind the “polar codes” technology led by Huawei. Ultimately, the technology that had broader technical support would share a role in the 5G standard with Huawei’s preferred polar coding. But the heightened political battle in a traditional technical arena was unprecedented. This incident highlights a growing threat. “China has politicized the standards-making process,” the Center for Strategic and International Studies (CSIS) reports. “Beijing expects Chinese companies to vote for [China-backed technologies] whether or not they are the best.”

Federal Circuit Struggles to Parse SEP Licensing Rates in TCL Communication v. Ericsson

On August 7, the U.S. Court of Appeals for the Federal Circuit heard oral arguments in TCL Communication v. Telefonaktiebolaget LM Ericsson, an appeal stemming from an action for declaratory judgment filed by TCL in the Central District of California. Among the various aspects of the district court proceedings being examined on appeal are the fair, reasonable and non-discriminatory (FRAND) rates set by the court for Ericsson’s standard essential patent (SEP) portfolio for cellular technology as well as whether the court abused Ericsson’s Seventh Amendment rights by entering a release payment based on factual issues that weren’t tried by a jury.

The FTC’s Qualcomm Case Reveals Concerning Divide with DOJ on Patent Hold-Up

On May 2, the Antitrust Division of the U.S. Department of Justice (DOJ) took the unusual step of submitting a Statement of Interest in the Federal Trade Commission’s (FTC’s) case against Qualcomm to take a position contrary to the FTC. The DOJ argued that “[b]ecause an overly broad remedy could result in reduced innovation, with the potential to harm American consumers, this Court should hold a hearing and order additional briefing to determine a proper remedy that protects competition while working minimal harm to public and private interests.” In response, the FTC informed the court that it “did not participate in or request” the DOJ’s filing, that it “disagree[d] with a number of contentions” made by the DOJ, and that the DOJ “misconstrues applicable law and the record.” In the end, the court agreed with the FTC and issued injunctive relief against Qualcomm without conducting the further remedy proceedings the DOJ advocated. The public feuding between the two federal antitrust enforcement agencies about how to resolve a case litigated by one them was a remarkable spectacle. It also brought into focus a broader divide between the FTC and DOJ on the role of antitrust law in addressing patents that are essential to industry standards (SEPs) and subject to commitments to license on fair, reasonable, and non-discriminatory (FRAND) terms.

Restoring IP Rights After the Destructive, Unjust Antitrust Rendering in FTC v. Qualcomm

If a judge ever botched an antitrust case involving patents, the prize may go to federal district Judge Lucy Koh for her ruling in favor of the Federal Trade Commission (FTC) in its antitrust action against Qualcomm. The intersection of intellectual property and antitrust is riddled with land mines and booby traps. The danger of getting an IP issue in this vicinity wrong becomes all the more likely after the Koh ruling and, thus, all the more dangerous and far-reaching. Judge Koh managed to step on several trip wires in her decision for the FTC in a case that should never have been brought, never tried, and should have been withdrawn or dropped. The damage from this ruling will reverberate far beyond the global leader in wireless connectivity technology the FTC unfairly hammered in this case. “Patents are a form of property,” Assistant Attorney General for Antitrust Makan Delrahim has said, “and the right to exclude is one of the most fundamental bargaining rights a property owner possesses. Rules that deprive a patent holder from exercising this right . . . undermine the incentive to innovate.” Basic principles like property rights, exclusivity, dynamic competition and the incentive to innovate escaped Judge Koh’s grasp.

Qualcomm Survives Apple Manipulation, But FTC Continues Reckless Pursuit

Now that Apple and Qualcomm have made peace it would be easy to allow the case and the issues to recede into the background. That is likely what Apple would prefer, and almost certainly why Apple made the decision to settle with Qualcomm rather than proceed with trial. The case presented an existential threat for Qualcomm, which would have required the San Diego tech company to fight as if the company depended on victory–because it did.  What is most shocking is how successful Apple was in its coordinated effort to manipulate the licensing market and effectively extinguish any reasonable notion of a fair, reasonable, and non-discriminatory rate (FRAND) in the process. Meanwhile, fabricated licensing rates wholly unrelated to the Qualcomm portfolio were used by Apple to dupe regulators into chasing Qualcomm across the world for committing phantom antitrust violations.

Innovator Organizations Applaud Delrahim Action on SEPs, Plead for Restoration of Injunctive Relief for Infringement

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.

District Court Denies FRAND Breach of Contract and Sherman Act Summary Judgment Motions by ASUS and InterDigital

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.

Dangers Lie in U.S. Government’s Conflicted Actions Toward Qualcomm, Huawei

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.

Proxy Wars: Standard Essential Patents in IP Litigation

Join Gene Quinn, President & CEO of IPWatchdog, Inc., for a wide-ranging discussion on the issue of Standard Essential Patents, Standard Setting Organizations, Fair Reasonable and Non-Discriminatory (FRAND) licensing requirements and related Antitrust investigations. Joining Gene will be Theodore Essex, former Administrative Law Judge for the International Trade Commission (ITC), and current Senior Counsel at Hogan Lovells.

Standard Essential Patents: The Myths and Realities of Standard Implementation

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.

Canada Patent Law Changes Are Bad News for Patent Owners

The effects of changes made to Canada’s patent law at the end of 2018 won’t be fully clear for some time, but Canadian patent owners and those looking to expand patent strategies into Canada may want to take heed.

On December 13, 2018, the Governor General of Canada gave royal assent to pass Bill C-86, known as the Budget Implementation Act, into law. The legislation makes several changes to Canadian patent law relating to how patent and trademark infringement cases are litigated in Canadian courts and prescribes new licensing requirements for patent and trademark agents operating in Canada. The amendments to the Canadian Patent Act are laid out in Part 4, Division 7, Subdivision A of the budget law.

FTC v. Qualcomm: Court Requires Licensing of Standard Essential Patents to Competitors

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.