This is the fourth issue of WilmerHale’s FRAND Quarterly: Navigating the Global SEP Landscape, a bulletin that highlights developments about the licensing, litigation, and regulation of patents that are or are claimed to be essential to industry standards (SEPs) and are subject to commitments to be licensed on fair, reasonable and non-discriminatory (FRAND) terms. Each quarter, we cover important developments spanning the globe that impact SEP litigation and FRAND licensing.
As we approach the end of 2024, injunctions have been a crucial topic in SEP licensing and litigation. In particular, a divide seems to be sharpening relating to the treatment and effect that injunctions have in SEP licensing:
- On one side, German courts have continued to grant injunctions against prospective SEP licensees, and the UPC also granted an SEP injunction against Oppo at the end of November.
- On the other side, English and American courts as well as the European Commission have raised concerns about the use of SEP injunctions in foreign jurisdictions.
- The UK Court of Appeal noted the commercial impact that SEP injunctions have in pushing prospective licensees to accept higher royalty rates than what a court may determine are FRAND. The Court of Appeal described using injunctions for this purpose as “oppressive, vexatious and indefensible.” Separately, speaking in a personal capacity at a FRAND lecture in London, Mr Justice Mellor (of the High Court) commented that the availability of injunctions in Germany can lead to the extraction of supra-FRAND rates.
- In an amicus brief filed in Germany, the European Commission called for a more considered application of the Court of Justice of the European Union’s Huawei v ZTE (Case C‑170/13) decision before injunctions are granted. The European Commission might have the opportunity to further address the role of injunctions as Xiaomi filed a complaint against Panasonic alleging that Panasonic is using the coercive power of injunctive relief in multiple jurisdictions to force Xiaomi to accept Panasonic’s terms. Now that Panasonic and Xiaomi have, however, reached a settlement agreement, it is uncertain whether the Commission will investigate this complaint.
- The U.S. Court of Appeals for the Federal Court issued an opinion noting that when an SEP holder gives a FRAND commitment, it creates a contract that affects how such an SEP holder can enforce its SEPs, and for the FRAND commitment to mean anything of substance, it must mean that a SEP holder that has made such a commitment cannot seek injunctive relief without first negotiating in good faith. Importantly, negotiating in good faith is not merely satisfied by just making an offer if such an offer contains outlandish terms.
United States
OnePlus wins motion for new trial on the issue of damages in the Eastern District of Texas. Pantech Corp. v. OnePlus Tech., Co., LTD., No. 5:22-CV-00069 (E.D. Tex. Aug. 14, 2024), ECF No. 360. On August 14, 2024, the Eastern District of Texas granted OnePlus’s motion for a new trial on damages after the jury found OnePlus infringed three of Pantech’s SEPs as well as two non-essential patents (NEPs) and awarded damages of $10.62 million ($7.41 million for the SEPs and $2.85 million for the NEPs). That award was significantly higher than the highest number a damages expert offered at trial of $1.39 million.
The court determined a new trial on damages was appropriate because “there is no question this verdict is excessive” given the evidence presented at trial. Further, the court inferred impropriety because the verdict was so excessive to provide the appearance that it could “have resulted from passion or prejudice.” Here, the court was persuaded by OnePlus’s arguments that Pantech’s “excessive questions about litigation in the United Kingdom and Germany,” and its closing arguments suggesting the jury should “punish OnePlus for its holdout behavior,” were improper and could have inappropriately inflamed the jury. The court noted that the closing arguments were especially improper because any increase in damages related to willfulness is for the judge, not the jury, to decide.
Pantech attempted to argue that the jury may have simply miscalculated the royalty rate by basing the rate on an offer for Pantech’s entire portfolio when only five patents were at issue. The court found that this possibility in and of itself showed the award was based on impropriety. The court determined that a new trial, rather than remittitur, was appropriate because no simple mathematical solution could determine the maximum possible award, and the parties suggested maximum amounts were over $2 million apart.
District court judge in the Eastern District of Texas adopts report and recommendation as to whether asserted patents are subject to FRAND commitments to ETSI. Wireless Alliance LLC v. AT&T Mobility, LLC, No. 23-CV-00095-RWS-RSP (E.D. Tex. Oct. 21, 2024), ECF No. 235, rept. and recommendation adopted by Wireless Alliance, LLC v. AT&T Mobility LLC et al., No. 2:23-CV-95-RWS-RSP, 2024 WL 4648154, at *3 (E.D. Tex. Nov. 1, 2024), ECF No. 267. The magistrate judge recommended granting summary judgement that one of the three asserted patents is not subject to a FRAND commitment but denied the motion for the other two asserted patents.
The magistrate judge started the analysis by describing that defendants bear the burden of showing that patents are subject to FRAND commitments to the European Telecommunications Standards Institute (ETSI) by proving (1) a patent was or should have been declared essential to ETSI; and (2) the declared patent has been objectively found to be essential.
Taking the patents in turn, the court determined that the ’383 patent was not FRAND encumbered because neither Wireless Alliance nor its predecessor, Intellectual Discovery, was an ETSI member and neither had committed to follow ETSI’s Intellectual Property Rights Policy. The court also did not credit defendants’ argument that Wireless Alliance’s “previous statements and offers on allegedly FRAND terms show that it ‘fully embraced’ FRAND policies and raises a genuine dispute for trial” about whether the patent is FRAND committed.
Separately, the magistrate judge determined that there was a disputed question of fact with respect to the ’106 and ’662 patents, both of which had been declared to ETSI by Wireless Alliance. Although defendants’ primary position was that the patents are not essential, defendants also argued in the alternative that if the patents were found to be infringed by virtue of practicing the standard, then the patents must be essential and thus subject to FRAND commitments. The magistrate judge noted skepticism about this “essential only if infringed” argument but denied summary judgment on the issue, concluding that defendants could make arguments for essentiality based on Wireless Alliance’s representations about the patents. The district court explained that the finding of the magistrate judge was correct and there was no issue of material fact that the ’383 patent is not FRAND encumbered. Wireless Alliance, 2024 WL 4648154, at *2.
Last, the magistrate judge determined that because there was a disputed fact as to whether Wireless Alliance previously offered to license the asserted patents to on FRAND terms, defendants could present arguments incorporating FRAND obligations into the hypothetical negotiation analysis. However, the magistrate made clear that defendants must present evidence of the FRAND offers before using any such evidence in their presentation of a hypothetical negotiation analysis. The district court agreed with the magistrate judge’s analysis finding that “[d]efendants mainly re-iterate the arguments that the Magistrate Judge already considered and decided” and that there were “no clear error[s] in” the magistrate judge’s recommendation that defendants should present evidence of the FRAND offers. Wireless Alliance, 2024 WL 4648154, at *3.
On November 1, 2024, the court granted a motion to stay the case because the parties indicated they settled.
The Federal Circuit reverses denial of anti-suit injunction and holds that FRAND commitments require negotiating in good faith before seeking SEP injunctions. Telefonaktiebolaget LM Ericsson v. Lenovo, Inc., No. 23-CV-00095-RWS-RSP, 2024 WL 4558664 (Fed. Cir. Oct. 24, 2024). In the Eastern District of North Carolina, Lenovo sought an antisuit injunction to prevent enforcement of SEP injunctions Ericsson obtained in Colombia and Brazil. The district court denied Lenovo’s request, and on appeal, the Federal Circuit vacated the decision and remanded the case for further proceedings.
The Federal Circuit concluded that the district court had correctly relied on the antisuit injunction framework as articulated by the Ninth Circuit in Microsoft Corp. v. Motorola, Inc., 696 F.3d 872 (9th Circ. 2012). As the Federal Circuit explained, the Microsoft framework requires first, a threshold determination that the parties in the foreign and domestic suits are the same, and that the domestic suit will be dispositive of the foreign action to be enjoined. Microsoft, 696 F.3d at 882. Second, Microsoft requires that at least one of the following antisuit-injunction factors applies: (1) the “foreign litigation would ‘frustrate a policy of the forum issuing the [antisuit] injunction’”; (2) the foreign litigation would be “vexatious or oppressive”; (3) the foreign litigation would threaten the issuing court’s in rem or quasi in rem jurisdiction; or (4) the proceedings prejudice other equitable consideration. Id. at 885–86 (internal quotation marks and citation omitted). And third, Microsoft requires that the court consider the antisuit injunction’s impact on comity. Id.
In denying Lenovo’s request, the district court only reached the first threshold determination. The district court concluded that because the case before it would not necessarily result in a global FRAND license between the parties, it was not necessarily dispositive of the foreign litigations.
On appeal, Lenovo argued that “Ericsson’s FRAND commitment precludes Ericson from pursuing SEP-based injunctive relief unless it has first complied with the commitment’s obligation to negotiate in good faith.” Thus, Lenovo argued that “whether Ericsson has complied with [its FRAND] obligation—an issue before the district court—is dispositive of Ericsson’s ability to pursue its Colombian and Brazilian injunctions.” Ericsson countered that because the case would not necessarily result in a global license, it was not dispositive of the entire foreign proceedings.
Applying the Microsoft court’s reasoning, the Federal Circuit sided with Lenovo and found that the district court committed legal error in holding “that to be dispositive, the domestic suit must necessarily result in a global cross-license.” On the contrary, the Federal Circuit determined that to establish a case as dispositive under Microsoft, it is sufficient to show just that the issue before the domestic court could resolve the issue in the foreign court (even if the case may not necessarily fully resolve the foreign case). See Microsoft, 696 F.3d at 883-884 (finding no legal error in “[t]he district court’s conclusions that Motorola’s RAND [commitment] . . . governs in some way what actions Motorola may take to enforce its [SEPs]”).
Moreover, in its discretion, the Federal Circuit decided the FRAND contract interpretation issue that the district court had not reached. In doing so, the Federal Circuit agreed with Lenovo, and held that “a party that has made an ETSI FRAND commitment must have complied with the commitment’s obligation to negotiate in good faith over a license to its SEPs before it pursues injunctive relief based on those SEPs.” Specifically, the Federal Circuit explained:
Given the SEP-related concerns underlying the FRAND commitment, if the FRAND commitment means anything of substance, it must mean that an SEP holder that has made such a commitment cannot just spring injunctive actions against other standard implementers without having first complied with some standard of conduct. That standard of conduct, we conclude, must be—at a minimum—the very one imposed by the FRAND commitment’s good-faith-negotiating obligation.
In reaching this conclusion, the Federal Circuit looked to other courts that have addressed the nature of the FRAND commitment. Those cases included Realtek Semiconductor Corp. v. LSI Corp., where the district court held that “the SEP holders ‘breached their contractual obligations . . . by seeking injunctive relief against [the implementer] before offering [it] a license.’” 946 F. Supp. 2d 998, 1008 (N.D. Cal. 2013). The Realtek court limited its opinion to the specific situation before it, where the SEP holder “did not even attempt to offer a license, on [RAND] terms or otherwise, until after seeking injunctive relief.” However, in a footnote, the Federal Circuit expanded the holding and applied it to situations where “the SEP holder, before pursuing SEP-based injunctive relief, had made an offer but had otherwise not complied with its good-faith-negotiating obligation (e.g., had made only an offer with outlandish terms).”
Ultimately, the Federal Circuit concluded the “dispositive” threshold requirement was met “because (1) the ETSI FRAND commitment precludes Ericsson from pursuing SEP-based injunctive relief unless it has first complied with the commitment’s obligation to negotiate in good faith over a license to those SEPs; and (2) whether Ericsson has complied with that obligation is an issue before the district court.”
The Federal Circuit remanded the case to the district court to consider the final two factors in the Microsoft antisuit injunction analysis.
United Kingdom
Xiaomi obtains first interim license following Court of Appeal criticizing the pursuit of foreign injunctions pending FRAND-rate setting proceeding. As reported before (here), Xiaomi’s application for a declaration of the terms of an interim license and a declaration that a willing licensor would enter into such an interim license failed at first instance. The Court of Appeal, however, reversed the first instance decision and granted Xiaomi both declarations. Lord Justice Arnold gave the leading judgment with Lord Justice Moylan delivering a concurring judgment and Lord Justice Phillips dissenting. All three judges agreed that seeking parallel foreign injunctions while also invoking the English court’s jurisdiction to set a global FRAND rate was indefensible. In the Court of Appeal’s decision, Panasonic’s “oppressive” and “vexatious” course of action put Panasonic in breach of its good faith obligation under clause 6.1 of the European Telecommunications Standards Institute Intellectual Property Rights Policy. The Court of Appeal concluded that “Panasonic wishe[d] to use the exclusionary power of injunctions granted by the German courts and/or the UPC to try to force Xiaomi to pay more than the English courts would order.” The Court of Appeal reasoned that a SEP holder would want to be paid sooner rather than later, and therefore, a SEP holder in Panasonic’s position would want the implementer to enter into an interim license.
Lord Justice Phillips’s dissenting judgment related to (1) whether a declaration for an interim license was prohibited on comity grounds and (2) whether an antisuit injunction was the more conventional and appropriate remedy. Unlike Lord Justices Moylan and Arnold, Lord Justice Phillips considered that “[t]he real purpose and effect [of the interim license] can only be to influence the approach of foreign courts in relation to Panasonic’s infringement proceedings.” He concluded that such a result “smacks of jurisdictional imperialism.” Lord Justice Phillips considered the more appropriate remedy to be an anti-suit injunction. His reasoning was two-fold. First, an anti-suit injunction would be addressed to Panasonic, not to the foreign courts. Second, it would directly prevent Panasonic from continuing with its foreign parallel proceedings or face contempt proceedings in the UK. Notably, Xiaomi did not apply for an anti-suit injunction, and thus, the leading and concurrent judgments by Lord Justices Arnold and Moylan do not address this option. However, Lord Justice Arnold did address Panasonic’s argument that an interim license was a back door anti-suit injunction. He rejected this contention based on identifying two distinctions. First, an interim license will not prevent Panasonic from pursuing the German and UPC proceedings, as these courts are free to make their own assessment of the propriety of issuing such relief. Second, unlike in the interim license scenario, a party subject to an anti-suit injunction does not receive substantial royalties from the applicant party.
Finally, both Lord Justice Arnold and Lord Justice Moylan considered that the interim license would actually promote comity because if Panasonic reconsidered its position of seeking injunctions, it would relieve the German and UPC courts of “a great deal of burdensome and wasteful litigation.” Although Panasonic declared at the appeal hearing that it would not enter into an interim license, it ultimately offered and entered into one with Xiaomi and agreed to stay the proceedings before the UPC (see further details below).
In the UK, Xiaomi and Panasonic also sought a stay to the FRAND trial that was set to begin on October 28, 2024, before Justice Meade. Mr Justice Meade stayed the entire Panasonic FRAND trial including vis-à-vis Xiaomi’s co-defendant, Oppo through two consent Orders filed on October 25, 2024.
No interim injunction for Lenovo in the UK. The Court of Appeal denied Lenovo’s application for an interim injunction in the UK that would be lifted if Ericsson abandoned its own injunction requests against Lenovo in Colombia and Brazil. Lenovo argued that if the UK interim injunction was not granted, Lenovo would then be forced to abandon its litigation and take a supra-FRAND cross license due to the coercive pressure of Ericsson’s Colombian and Brazilian injunctions. The Court of Appeal rejected the application pointing to an earlier witness statement indicating that Lenovo would continue to litigate despite the injunctions in Colombia and Brazil because Ericsson’s rates “would cause significantly more damage than the short term pain which is being inflicted in those Colombia and Brazil jurisdictions.” Therefore, the Court of Appeal concluded that Lenovo’s evidence did not establish that Lenovo would be forced to accept the rates demanded by Ericsson. The Court of Appeal further held that Lenovo had not established a causal link between the infringement of its UK patent and the damages caused by the injunctions in Colombia and Brazil. The Court of Appeal also concluded that, even if Lenovo had a legitimate interest in protecting its position in Colombia and Brazil, the requested UK injunction was not framed to do so—it was merely intended to give Lenovo a lever in the negotiations between the parties.
Europe
The General Court of the EU (GC) largely upholds the fine on Qualcomm for abuse of dominance. On September 18, 2024, the GC of the EU issued its judgment in antitrust case T-671/19, Qualcomm v Commission. The GC largely upheld the European Commission’s (EC’s) finding of an abuse of dominance by Qualcomm on the UMTS chipsets market, but slightly reduced the fine imposed on the company.
The case started in June 2009, after British company, Icera (subsequently acquired by Nvidia), submitted a complaint against Qualcomm to the EC. In July 2019, the EC adopted the contested decision, imposing a fine of approximately EUR 242 million on Qualcomm for abuse of dominance by predatory pricing. The EC found that Qualcomm had sold some of its UMTS chipsets below cost to Huawei and ZTE, two of its key customers, with the intention to eliminate Icera as a competitor.
Qualcomm brought an action to annul the EC’s decision before the GC, raising fifteen pleas in law based mostly on procedural irregularities, alleged manifest errors of assessment of fact and of law, and insufficient reasoning in a number of aspects of the decision. In its judgment, the GC dismissed all pleas, with the exception of a plea concerning the calculation of the amount of the fine, which was partially accepted. Consequently, the GC reduced the fine to approximately EUR 238.7 million.
The European Commission reiterates the need for national courts to properly apply the CJEU’s Huawei v ZTE decision. On September 19, 2024, the European Commission made public an amicus brief intervention it submitted in the Munich Higher Regional Court in HMD v VoiceAge EVS. The intervention reinforced the procedural steps outlined by the Court of Justice for the European Union (CJEU) in its 2015 Huawei v ZTE decision and reiterated that national courts should make preliminary references to the CJEU when interpreting ambiguities. At a conference held in Brussels, Hanna Anttilainen, an official in the Commission's Competition Directorate was reported to have remarked (in an unofficial capacity) that she was “not necessarily in agreement with the way that Huawei-ZTE is applied or interpreted” by German courts. She added that the courts are “very much focusing on the ‘hold out’ and looking at the overall behavior of the implementer […] But there’s no looking at the overall behavior of the patent holder.” Ms. Anttilainen thought that the German courts should seek clarification from the CJEU.
The Higher Regional Court Munich introduces a FRAND framework. Following the European Commission’s amicus brief, on October 30, 2024, the Higher Regional Court Munich produced a notice to the parties, VoiceAge EVS and HMD (case ID: 6 U 3824/22 Kart) regarding a new FRAND framework based on the infringement proceedings for EP 2 102 619 (one of five Enhanced Voice Service (EVS) speech-coding standard patents the two parties are litigating over).
The court indicated that a closer look would be taken at the patent holder’s license offer and conduct during negotiation. Furthermore, the court noted that an implementer would satisfy its requirement for a “continuing willingness to license” by providing:
- a reasonable security based on the amount of the SEP holder’s offer (irrespective of it being FRAND: if multiple offers are made, it is for the implementor to choose which of the offers security should be provided for); and
- a binding declaration to pay the security if the SEP holder’s offer is proven to be FRAND.
However, the court noted that if a patent holder made an unsolicited license offer and the parties then entered negotiations, the implementer would not need to express a willingness to license. VoiceAge EVS and HMD will have time to submit written responses to the new FRAND framework, and a decision over the infringement is expected in February 2025.
The Munich Regional Court grants injunction against Amazon and Oppo. On September 19, 2024, the Munich Regional Court granted Nokia an injunction against Amazon, 11 months after it brought infringement proceedings in respect of Amazon’s Firestick (a streaming device) Later that month, on September 25, the Munich Regional Court found that Oppo infringed Panasonic’s patent and ordered a permanent injunction against Oppo.
Unified Patent Court (UPC)
The UPC holds its first FRAND hearing in remaining Panasonic and Oppo dispute. Following Panasonic’s win before the Munich Regional Courts in relation to the EP 2 019 559 patent (see above), on October 7, 2024 Panasonic and Oppo attended a 3-day hearing before the UPC’s Mannheim local division. Earlier, upon their joint request, Panasonic’s case against Xiaomi had been stayed following the UK’s Court of Appeal judgment (see above).
The FRAND trial between Panasonic and Oppo before the UPC nevertheless proceeded, with the parties addressing the court on the basis of the FRAND obligation and rate-setting. The much-awaited first FRAND decision was handed down on November 25, 2024, despite Oppo’s request for a stay of the decision the day before. The UPC found the Panasonic SEPs to be valid and infringed and Oppo to be an unwilling licensee. The three-judge panel issued an injunction against Oppo in Germany, France, Italy, the Netherlands and Sweden.
Brazil
Appeal court upholds preliminary injunction of Lenovo obtained by Ericsson. On November 27, 2023, the State Court of Rio de Janeiro granted Ericsson a preliminary injunction. On August 7, 2024, the Brazilian appeal court upheld the first court’s decision, and in a further injunction enforcement proceeding on August 27, 2024, the court ordered Lenovo to deposit the penalty monthly for each act of non-compliance to the State Court. To deter Ericsson from enforcing the injunction, Lenovo offered to pay Ericsson the full royalty rate claimed by Ericsson for sales in Brazil (which would then be offset against the final FRAND cross-license determined by the UK court). Ericsson rejected this offer.
Global
InterDigital and Lenovo settle global litigation in favor of arbitration. On October 9, 2024, InterDigital and Lenovo announced that they have agreed to enter into a new license agreement to be determined in a binding arbitration with both parties agreeing to withdraw their respective litigations, which included cases in the UK, US, Germany, and China.
Continued wave of global SEP settlements in October. Nokia announced on October 29, 2024, a signed licensing agreement with HP, resolving the parties’ multijurisdictional dispute relating to Nokia’s video coding patents. On the same day, InterDigital entered into a license agreement with Oppo settling all pending litigation.
