Hogan Lovells’s standard essential patent (SEP) updates report on recent SEP news and case decisions from around the globe. The March 2020 update includes reports from China, France, Germany, the Netherlands, Spain, the UK, the US, as well as global SEP updates.
Global News and Notes
The U-Blox v. InterDigital lawsuit filed last year ended with the inking of a new licensing agreement between the two companies. U-Blox had filed suit against InterDigital in January 2019, alleging that InterDigital's demand for higher licensing rates for its SEPs amounted to a Sherman Act (antitrust) violation. Shortly after the suit was filed, the Department of Justice (DOJ) indicated its intention to become involved in the lawsuit, noting that U-Blox's Sherman Act claims were "troubling" and that InterDigital's actions did not, in DOJ's view, amount to an antitrust violation. Late last year, U-Blox and InterDigital announced that they reached a new licensing agreement and agreed to dismiss the litigation. A U.S. district court judge has since granted the parties' stipulated dismissal, dismissing U-Blox's antitrust claims with prejudice.
Contributors: Joe Raffetto, David Brzozowski
The Chinese Patent Office (CNIPA) recently published a decision finding Conversant Wireless's SEP (ZL 200380102135.9) titled "System and method for providing selection diversity for multicasting content" valid based on amended claims. The SEP at issue relates to a method and system of providing multicast content in a network of cells, which was determined essential to 4G technologies under relevant 3GPP standards by the Intermediate People's Court of Nanjing (decision available here.) According to the CNIPA's issued decision on validity, Huawei filed an invalidation request before the CNIPA on 28 June 2019, and the CNIPA subsequently granted review of the validity of the patent on 22 July 2019. Following receipt of Huawei's invalidity arguments and related prior art, Conversant elected to amend claims 6 and 21 by bringing in features from claims 11 and 26, as well as deleting claims 11 and 26-30, submitting a re-numbered set of claims 1-30 for the CNIPA's consideration. It was noted that neither Huawei nor CNIPA objected to Conversant's claim modifications. Both parties then attended oral hearings at the Re-examination and Invalidation Department of the CNIPA on 12 November 2019. Following review of Conversant's claims, the CNIPA found Huawei's arguments with respect to written description issues, as well as some claims being indefinite or not having support in the specification, to be unpersuasive. Furthermore with respect to novelty and inventive step, the CNIPA found the new set of claims sufficiently novel, as well as inventive over the closest cited arts, which were "meeting reports" published by the Technical Specification Groups (TSG) of 3GPP. As such, CNIPA affirmed the validity of modified claim set 1-30. The CNIPA's decision is not final and can be appealed, at next stage, to the Beijing IP Court.
According to multiple reports (available here and here), the Shanghai Higher Peoples Court recently maintained the Shanghai Intermediate Peoples Court's decision of non-infringement by Shanghai Huaqin Communication Technologies' ("Huaqin") of Nokia's SEP related to data transmission in a wireless network. In particular, Nokia's asserted patent (CN1085473) provides establishment of a packet transmission channel between a mobile station and data service unit by using a virtual communication channel, which is considered essential to the GPRS standard. Nokia alleged that two mobile phone products (L109D and M90) manufactured and sold by Huaqin infringed the asserted patent. Here, the Shanghai Higher People's Court decided to first compare the technical characteristics of the allegedly infringed patent claim with the technical characteristics of a GPRS compliant mobile terminal, providing that if this comparison does not provide equivalence then further determination of (a) whether the mobile phones have adopted the relevant standard and (b) whether the technical characteristics of the alleged mobile phone and patent at issue are the same is not needed. Focusing on this issue first, the court determined that a GPRS-standard compliant mobile terminal falls outside the scope afforded by the technical solution of the asserted claim, and therefore, Nokia is unable to show the corresponding technical features of the mobile phones fall into the protectable scope of the patent. As such, the Shanghai Higher Court affirmed the Intermediate court's decision finding in favor of Huaqin for non-infringement.
Contributors: Katie Feng, Kevin Xu
In a summary decision dated 8 November 2019 (Docket No. 19/59311), the Paris Court of First Instance granted its first "anti-anti-suit" injunction, ordering two phone manufacturers to withdraw their motion for an anti-suit injunction, which they had filed in the United States against a SEP holder, insofar as this motion targeted patent infringement proceedings before French Courts.
The pending motion for anti-suit injunction was filed in the context of an action by the phone manufacturers in the United States to obtain a determination of global FRAND license rates on the patent portfolio of the SEP holder (which had made a commitment with ETSI to grant FRAND licenses on its SEPs). The requested anti-suit injunction would, notably, prevent the SEP holder from initiating infringement actions in any country worldwide, pending the determination of the FRAND rate by the U.S. court.
In its November, 2019 decision, the French judge found that, except in very specific circumstances, anti-suit injunctions constitute an inadmissible interference in the jurisdiction of national courts and are contrary to French international public policy. The French court ordered the immediate withdrawal of the motion for the anti-suit injunction, as far as it relates to France, under a daily penalty fine for each day of delay after the date of the order. It also enjoined the phone manufacturers to refrain from filing new motions for the same purposes in any foreign country.
Contributor: Stanislas Roux-Vaillard
The Regional Court Munich I, on February 4, 2020 published "guidelines on the handling of the antitrust compulsory license objection according to Huawei v. ZTE". An English translation of these guidelines can be found here.
The guidelines summarize some key principles of the approach which the Regional Court Munich I intends to apply regarding the FRAND defense. The Regional Court Munich I is one of the three most important first instance courts for patent infringement proceedings in Germany (the two others being the Regional Court Düsseldorf and the Regional Court Mannheim). The new guidelines have been developed jointly by the two division of the Regional Court Munich I handling patent infringement cases. The development phase was supported by an informal consultation procedure in which in particular the Presiding Judge of one of the patent divisions gave several presentations on the topic and asked stakeholders for comments. It is unusual for German courts to publish similar guidelines on substantive law issues, and the Regional Court Munich I is the only court in Germany that published such guidelines on FRAND/SEPs.
In a nutshell, the guidelines appear to be relatively SEP-owner friendly. Below, we summarize the most noteworthy principles laid down in the guidelines:
- Although the Huawei/ZTE decision clearly states that in particular the SEP owner's infringement notification and the FRAND license offer have to be made prior to filing a complaint requesting injunctive relief and/or destruction or recall from the market, all steps of the Huawei/ZTE procedure can be rectified until the end of the oral proceedings. That is, the parties may cure any shortcomings until the end of the second of the two hearings that usually take place according to the procedural regime of the court in Munich. This option will in particular allow SEP owners to adapt their license offers before the second hearing based on the legal assessment the court usually shares with the parties in the first hearing.
- The court only reviews whether the SEP owner's offer is FRAND if the alleged infringer made a counter-offer. That is, the alleged infringer has to make a counter-offer even if the SEP owner's offer is not FRAND. The only exception applies if the plaintiff's last binding offer is plainly unacceptable from an antitrust perspective which has to be demonstrated and proven by the defendant. The approach of the court in Munich insofar differs from the established case law of the courts Düsseldorf and Mannheim/Karlsruhe which consider the steps of Huawei/ZTE to be strictly consecutive, i.e. the alleged infringer only has to provide a counter-offer if the SEP-owner's offer it FRAND.
- The defendant cannot rely on the FRAND defense of its suppliers (e.g. based on the argument that the SEP owners refuses to grant FRAND licenses to the suppliers) if it made a counter-offer. The same is true if the SEP owner's offer includes provisions which make sure that, in case the SEP owner later grants licenses to suppliers, there is no double-dipping and that the defendant can rely on an exhaustion defense. Such provisions on exhaustion and double-dipping of course will never become relevant in practice if the SEP owner, as a matter of principle, refuses to grant licenses on the supplier level – if there are no licenses in the supply chain there is no exhaustion and double-dipping cannot become an issue. Therefore, the solution proposed in the guidelines appears to be unbalanced since the inclusion of such provisions into the license offer to the customer and later defendant would come without "costs" for the SEP owner. At the same time, the SEP owner deprives the defendant of any option to rely on a "derivative" supplier FRAND defense based on the argument that the SEP owner abuses its dominant position vis-à-vis the defendant's suppliers by refusing to grant them a license.
- If the SEP owner's license offer includes a reasonable, retroactive most-favored nation clause, then the royalty rate offered by the SEP owner prima facie is FRAND, and the alleged infringer has to demonstrate and prove that the rate is not FRAND. The Regional Court Munich I recommends such most-favored nation clause as a suitable approach particularly in scenarios where the SEP owner has not yet concluded license agreements regarding the respective portfolio. It will of course usually be very challenging, if not impossible, for the alleged infringer to demonstrate and prove that the rate is not FRAND.
- In order to prove that the offered rate is FRAND the SEP owner can rely on previous, comparable license agreements regarding the same portfolio including a similar rate. This is even true if the defendant can prove that the previous licensees concluded the agreements only under duress and the pressure of threatened patent infringement actions requesting injunctive relief. Only if the defendant can prove what license agreement parties would have concluded in pressure-free circumstances, including what lower rates, the previous license agreements lose their evidentiary value. Proving such hypothetical scenario will of course usually be impossible for the defendant.
- One of the few exceptions where the guidelines are relative implementer friendly is the step of providing a security after the SEP owner refused the counter-offer. According to the guidelines, it is sufficient to calculate the security based on the counter-offer (i.e. it does not have to be calculated based on the higher offer of the SEP owner). Further, the security only has to cover the turnover in Germany, even if the offer and or the counter-offer cover the worldwide portfolio. It should be noted that it is unclear whether the other courts in Germany follow this approach. Therefore, calculating the security on a worldwide basis may still be advisable.
It remains to be seen how the Regional Court Munich I will apply these principles in practice and whether other courts, including the Higher Regional Court Munich and the Federal Supreme Court, will follow these principles or interpret Huawei/ZTE differently.
Contributors: Dr. Benjamin Schröer, Dr. Daniel Kaneko
The Netherlands Updates
On 24 December 2019, the Court of Appeal of The Hague rendered judgment in the Philips v. Asus case relating to an alleged SEP for UMTS technology. The Court of Appeal held the patent valid and essential (and thus infringed) and issued an injunction against Asus.
The Court of Appeal confirmed its patentee-friendly reasoning on FRAND negotiations, as laid down in its judgment of 7 May 2019, between the same parties regarding a different patent of Philips' portfolio (see our summary here). In that decision, the Court of Appeal clarified that the steps set by the CJEU in Huawei/ZTE are not a strict set of rules but rather guidelines. In the decision of 24 December 2019, the Court of Appeal clarified that this does not mean that any of those steps can be completely skipped. The first step is for the SEP holder to notify the SEP user. This does not necessarily mean that the SEP holder must provide claim charts for all patents it considers to be infringed. The next step is that the SEP user must show that it is a willing licensee. If the licensee does not show willingness, then there is no duty for the SEP holder to submit a specific license offer and the SEP holder cannot be accused of abuse of power. The Court of Appeal confirmed that Philips was entitled to initiate the proceedings and, also, that the acts taken by Asus during the proceedings did not suggest willingness to take a license under FRAND conditions. The untimely offer that Asus made was based on the WiFi portfolio of Motorola, but Asus failed to show that the value of a patent from one standard could be compared to the value of a patent from a different standard.
The Court of Appeal rejected Asus' claim for disclosure of all license agreements between Philips and other parties relating to Philips' UMTS patent portfolio. The Court of Appeal held that the non-discriminatory element in FRAND only means that similar cases are to be treated equally. The determination whether cases are similar depends on various circumstances, and this in itself cannot be inferred from the terms and conditions of the license agreements. The Court of Appeal held that Asus' claim for access to all license agreements was insufficiently specified and amounted to an unallowable fishing expedition.
Contributors: Ruud van der Velden, Joost Duijm
The Commercial Courts of Barcelona and the European Union Trademark Courts located in Alicante issued a new "IP Fast Action Protocol" to facilitate the handling of IP-related disputes before and during the Mobile World Congress (MWC), which is the largest mobile communications event in the world. The 2020 Protocol, which was in force from 3 February 2020 through the end of the month, included, as a novelty, the urgent processing of inquiries and inspection proceedings that have been increasingly used by IP-rights owners to obtain evidence of infringement at the event. A number of protective briefs, pre-trial inspection proceedings, and ex parte preliminary injunctions proceedings are typically filed and processed by the courts on an urgent basis according to the Protocol. MWC 2020 was cancelled due to the coronavirus outbreak, so the application of the Protocol had a lower impact in 2020 than expected. Additional details regarding this IP Fast Action Protocol can be found on HL Engage here.
Contributors: Ana Castedo, Inmaculada Lorenzo
United Kingdom Updates
In Philips v. ASUS  EWHC 29 (Ch), Mr. Justice Marcus Smith decided that, as a matter of law, damages for infringement of UK SEPs should not be calculated "automatically" by reference to the FRAND terms for a (global) licence to these SEP families. Philips had argued that the licenses it offers for its UMTS/LTE portfolio are global in nature. As a result, the loss it suffered, because of ASUS's infringement in the UK, was the loss of a past release payment for global sales (which would have been part of the basis on which it would have licensed ASUS). According to Philips, the compensatory principle required ASUS to pay global "damages," despite ASUS only being held to infringe in the UK.
Mr. Justice Marcus Smith's judgment leaves open the possibility that, whilst not automatic as a matter of law, on the specific facts of this case Philips' basis for calculating damages may be appropriate. Philips is also putting forward two alternative bases – 1/3 of global damages (on the basis that infringement litigation is also being pursued in Germany and the Netherlands) and an uplift of at least 100% to the standard royalty rate (but for UK sales only). The trial to determine this issue is scheduled to take place at the end of March 2020.
On 18 November 2019, the Patents Court in IPCom v. Vodafone  EWHC 3323 (Pat) rendered judgment on IPCom's Application to adjourn the first of two technical trials, in proceedings aimed at requiring Vodafone to enter into a licence of IPCom's portfolio. IPCom's Application came five days before trial and sought adjournment for approximately six months, with permission for IPCom to amend its pleadings to assert infringement by Vodafone's UMTS network, infringement of additional patents, and to seek a post-expiry injunction.
The Application was triggered by Vodafone's disclosure that it had implemented a workaround of IPCom's EP'666 patent (without prejudice to its arguments on non-infringement by its LTE network, which were largely successful at trial). At the hearing IPCom asserted that the workaround meant Vodafone's LTE network did not infringe the patent, rendering trial of the issues as they stood pointless.
The Judge rejected IPCom's Application, specifically rejecting any suggestion that Vodafone had deliberately misled IPCom as to the operation of its LTE network until the last minute. To the contrary, the Judge found that Vodafone's hypothetical Declaration of Non-Infringement systems had given IPCom a very clear indication of how Vodafone intended to implement a workaround and that, given proceedings were expedited following years of delay, it was not surprising that it took Vodafone "a little while" to alter the function of its LTE network. In concluding, the Judge made clear that If IPCom no longer wanted the trial on the basis for which it was expedited, then that was IPCom's own concern.
A recent UK decision by Mr. Justice Nugee has considered whether a party should be allowed to introduce validity arguments as part of a FRAND trial. The judgment ( EWHC 3471 (Pat), dated 12 12 December 2019) related to one of a number of applications made in the ongoing Conversant v. Huawei litigation. Conversant argued that, in reality, the parties did not pay much attention to validity in licensing negotiations – as had previously been accepted by Mr. Justice Birss in the Unwired Planet case ( EWHC 2988 at ). On this point, however, Mr. Justice Nugee made it clear that his view was that there was no legal principle which would prevent the Court deciding the terms of a FRAND license from "hearing an argument that the particular patents in the portfolio were of such doubtful validity that the hypothetical willing licensor and licensee would attribute little or no value to them." As this was a question of fact, the Court was not bound to take the same view regarding validity that had been reached in Unwired Planet. What real negotiators would do was a matter of evidence, and an issue to be decided by the trial judge.
Contributors: Paul Brown, Ian Moss, Greig Shuter, Jemma Trainor
United States Updates
The Federal Circuit held in the TCL v. Ericsson FRAND appeal that Ericsson had a Seventh Amendment right to a jury trial to determine compensation for past infringement of SEPs. We previously reported on Judge Selna's landmark district court decision here and the oral argument before the Federal Circuit here. In the decision authored by Judge Chen, the Federal Circuit analogized the "release payment" set by the district court for past unlicensed sales to infringement damages. The Federal Circuit reasoned that because this type of compensatory relief was "in substance" a legal remedy, Ericsson was entitled to a jury trial. Therefore, the Federal Circuit vacated the district court's determination of the release payment, including the FRAND rate calculated by the district court, "because both determinations were predicated on common issues to the improperly decided release payment." The Federal Circuit also reversed the dismissal of Ericsson's patent infringement claims and TCL's invalidity and noninfringement counterclaims as no longer moot. Unfortunately, because the Federal Circuit resolved the appeal in its entirety on Ericsson's Seventh Amendment right to a jury trial, the court did not determine whether the approach used by Judge Selna in determining FRAND rates was inappropriate. The Federal Circuit remanded the case for further proceedings consistent with its opinion.
The Ninth Circuit heard oral arguments in the FTC v. Qualcomm appeal on February 13th. We previously reported on Qualcomm's appeal here and Judge Koh's decision here. DOJ also participated as amicus curiae in the oral arguments. At oral arguments, DOJ faced tough questioning, with the Ninth Circuit appearing skeptical of DOJ's argument that Judge Koh's injunction would pose a national security concern. The Ninth Circuit also pressed FTC, however, to explain what was anticompetitive about Qualcomm's licensing activities. FTC argued that Qualcomm's royalty rates were based on the fact that Qualcomm has a monopoly, and that OEMs were concerned that a failure to pay Qualcomm's royalties would prevent them from getting chips for their products. Qualcomm's primary response seemed that its royalty rates didn't amount to a surcharge because Qualcomm did not prevent OEMs from obtaining chips from other manufacturers. Qualcomm also argued that Judge Koh's decision was flawed in that little attention was given to competitive harm. A decision from the Ninth Circuit is still not expected for months.
The USPTO, in conjunction with the DOJ's Antitrust Division and National Institute of Standards and Technology (NIST), released a new "Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments." We previously reported on USPTO Director Andrei Iancu's comments on the now-withdrawn 2013 Policy Statement here. The new Policy Statement clarifies that the view of the issuing agencies is that the same legal rules that apply to all patents, such as injunctions and exclusion orders, should be equally available to SEPs. In a press release, the USPTO explained that the previous 2013 Policy Statement had been "misinterpreted" as limiting the remedies for infringement of SEPs. The USPTO explained that "[t]oday's joint statement seeks to ensure that U.S. patent law is appropriately calibrated to incentivize and protect ... standards-based technology." While the new Policy Statement is not legally binding, observers have speculated that the USPTO's position on SEP remedies may incentivize SEP owners to be more aggressive in licensing negotiations going forward.
Contributors: Joe Raffetto, David Brzozowski
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