In many patent suits, patent holders seek injunctive relief to prevent an accused infringer from continuingto practice the patented invention. Whether an injunction can be granted depends on various considerations a judge may weigh under her equitable powers. These considerations may become complicated when the patent is a standard-essential patent (SEP) encumbered by a commitment to license the SEP on fair, reasonable, and non-discriminatory (FRAND) terms.

Background of SEPs and FRAND Terms

An SEP is a patent whose subject matter is essential for compliance with an industry standard. Standard Setting Organizations (SSOs) set industry standards to ensure interoperability and efficiency of technologies in an industry. Participants in SSOs typically enter into an agreement to disclose their SEP patents and license such patents on FRAND terms.2 Two problems that may occur with SEPs are patent "hold-up" and patent "hold-out." Patent "hold-up" occurs when an SEP holder refuses to license its SEP on FRAND terms to potential licensees.3 Patent "holdup" prevents implementers from fully complying with an industry-standard because the implementer cannot negotiate a license for an SEP on FRAND terms. The agreements between SEP holders and SSOs are meant to mitigate patent "hold-up" by obligating the SEP holder to license on FRAND terms to any willing licensee.4 Patent "hold-out" occurs when an implementer refuses to pay a reasonable royalty rate for the use of an SEP.5 A "hold-out" issue may arise when it is unclear whether an SEP holder's FRAND commitments prohibit a court from granting injunctive relief in an infringement case against an implementer that refuses to negotiate a license.

Case Law on SEPs and Injunctive Relief

Prior to 2006, courts followed a "general rule" in patent cases that "an injunction will issue when infringement has been adjudged, absent a sound reason for denying it."6

Courts frequently granted injunctions for patent holders in infringement cases, except "in rare instances . . . in order to protect the public interest."7 However, the near automatic grant of injunctions in patent cases was halted by the Supreme Court case eBay Inc. v. MercExchange, LLC.8 In this case, the Supreme Court overturned the Federal Circuit's "general rule," and instead held that patent disputes are not unique from any other case when analyzing injunctive relief.9The Supreme Court emphasized that courts must follow the traditional four-factor test for granting injunctive relief, stating that the plaintiff must demonstrate "(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction."10

Following eBay, courts granted injunctive relief in infringement cases less frequently.11 This trend of denying injunctive relief impacted cases involving SEPs. Courts analyzed an SEP holder's FRAND declarations with SSOs, noting in some cases that "injunctive relief against infringement is arguably a remedy inconsistent with the licensing commitment" made by an SEP holder.12 Courts reasoned that in making certain broad FRAND commitments to the SSO, an SEP holder may implicitly guarantee that it will not seek injunctions against implementers, and instead should offer licenses in accordance with FRAND terms.13

In an exemplary case, Realtek Semiconductor Corp. v. LSI Corp.,14 the court analyzed whether an SEP holder may bring an action before the International Trade Commission (ITC) seeking injunctive relief.15 In this case, LSI owned an SEP related to the IEEE standard for wireless

Internet connectivity and sought injunctive relief against Realtek.16 In analyzing this case, the court found "the act of seeking injunctive relief . . . is inherently inconsistent and a breach of defendants' promise to license the patents on RAND terms."17 The court further noted that "[i]n promising to license on RAND terms, defendants here admit that monetary damages, namely a RAND royalty, would be adequate compensation for any injury it has suffered as a result of Realtek's allegedly infringing conduct."18 In denying injunctive relief, the court held that "[t]his conduct is a clear attempt to gain leverage in future licensing negotiations and is improper."19

In the district court case Apple Inc. v. Motorola, Inc.,20 the court analyzed damages related to patent infringement of a Motorola SEP for enabling communication between cell phones and cell towers.21 In arguing for damages, Motorola did not provide any evidence for calculating a reasonable royalty rate consistent with its FRAND obligations.22 Instead, Motorola argued it was entitled to injunctive relief.23 In analyzing Motorola's claim for injunctive relief, the court stated "I don't see how, given FRAND, I would be justified in enjoining Apple from infringing the '898 . . . By committing to license its patents on FRAND terms, Motorola committed to license the '898 to anyone willing to pay a FRAND royalty and thus implicitly acknowledged that a royalty is adequate compensation for a license to use that patent."24 The court concluded that a "FRAND royalty would provide all the relief to which Motorola would be entitled . . . and thus it is not entitled to an injunction."25

The Federal Circuit provided additional guidance on injunctive relief for SEP patents when it reviewed< em>Apple Inc. v. Motorola, Inc.26 In reviewing the district court's denial of injunctive relief to Motorola, the Federal Circuit stated "[t]o the extent that the district court applied a per se rule that injunctions are unavailable for SEPs, it erred."27 The Federal Circuit applied the four-factor test outlined in eBay to determine whether Motorola was entitled to injunctive relief.28 The court reasoned that the FRAND commitments made by Motorola were factors to consider in analyzing whether injunctive relief should be granted, but found there is no "separate rule or analytical framework for addressing injunctions for FRAND committed patents."29 The court noted that "a patentee subject to FRAND commitments may have difficulty establishing irreparable harm . . . [but] an injunction may be justified where an infringer unilaterally refuses a FRAND royalty or unreasonably delays negotiations to the same effect."30

Although the Federal Circuit stated there is no per se rule against injunctive relief, the court found that injunctive relief was not warranted in this case. In reaching this conclusion the court stated that "Motorola's FRAND commitments, which have yielded many license agreements encompassing the '898 patent, strongly suggest that money damages are adequate to fully compensate Motorola for any infringement. Similarly, Motorola has not demonstrated that Apple's infringement has caused it irreparable harm."31

Conclusion

As Motorola and similar cases show, courts may find that an SEP holder has not suffered irreparable harm warranting an injunction because receiving a royalty from the infringing party on FRAND terms is frequently found to be sufficient relief for infringement. Parties may wish to consider how to address this issue up front when formulating the license negotiations and litigation strategies.

Footnotes

2. Contreras, A Brief History of FRAND: Analyzing Current Debates in Standard Setting and Antitrust Through a Historical Lens, 80 Antitrust L.J. 39 (2015).

3. Colleen V. Chien, Holding Up and Holding Out, 21 Mich. Telecomm. & Tech. L. Rev. 1, 11 (2014).

4. Apple Inc. v. Qualcomm Inc., 2017 WL 3966944, No. 3:17-cv-00108-GPCMDD at *2 (S.D. Cal. Sept. 7, 2017).

5. Chien, supra n.2, at 20.

6. Richardson v. Suzuki Motor Co., 868 F.2d 1226, 1247 (Fed. Cir. 1989).

7. Rite-Hite Corp. v. Kelley, Inc., 56 F.3d 1538, 1547 (Fed. Cir. 1995).

8. 126 S. Ct. 1837 (2006).

9. Id. at 1841.

10. Id. at 1839.

11. Colleen V. Chien & Mark A. Lemley, Patent Holdup, the ITC, and the Public Interest, 98 Cornell L. Rev. 1, 2 (2012).

12. Microsoft Corp. v. Motorola, Inc., 696 F.3d 872, 885 (9th Cir. 2012).

13. Id.

14. 946 F.Supp.2d 998 (N.D. Cal. 2013).

15. Id. at 1000-01.

16. Id. at 1001.

17. Id. at 1006.

18. Id. at 1006-07.

19. Id. at 1008.

20. 869 F.Supp.2d 901 (N.D. Ill. 2012).

21. Id. at 911.

22. Id. at 913.

23. Id. at 913-14.

24. Id.

25. Id. at 915.

26. 757 F.3d 1286 (Fed. Cir. 2014).

27. Id. at 1331-32.

28. Id.

29. Id. at 1332.

30. Id.

31. Id.

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