Transcript What is a standard?

Standards, Patents
and FRAND
Licensing
Jean-Nicolas Delage
Christian Harmsen
Demetrios Anaipakos
Matthew Vella
What is a
standard?
“Any sets of technical
specifications that either
provides or is intended to
provide a common
design for a product or
process.”
Interoperability
Where do standards
come from?
VoiceAge as
an
example
World leader in Narrowband &
Wideband standards for low bit rates
(6-48Kbps) speech and audio codecs
STANDARDIZATION PROCESS
•12-24 MONTH PROCESS
Competition: new requirements proposed
by the industry
Tests: multilingual and independent laboratories
Selection: technical and political compromise
Technical decision
Ratification
STANDARDIZATION & PATENTS
CCSA
TTC
› STANDARD CODEC APPROVED BY THE
STANDARDIZATION BODY
› Most of the time: Result of a Joint
collaboration
› +- 5 to 25 companies claim Standard
Essential Patents (SEP) to speech and
audio codec.
Patent holders waive their rights to block others (source code: public) but are entitled to
fair compensation => FRAND commitment for essential patents
FRAND Commitment
“When an ESSENTIAL IPR relating to a particular
STANDARD or TECHNICAL SPECIFICATION is brought to
the attention of ETSI, the Director-General of ETSI shall
immediately request the owner to give within three
months an undertaking in writing that it is prepared to
grant irrevocable licences on fair, reasonable and
non-discriminatory terms and conditions under such
IPR (…)”
EU View on SEPs
The Key Aspects for Litigation
Relevant Provisions of EU Law
Art. 102 TFEU (abuse of dominant position)
Any abuse (…) of a dominant position within the internal market or in a substantial part of it
shall be prohibited as incompatible with the internal market in so far as it may affect trade
between Member States.
Art. 101 TFEU (ban on cartels)
1.
The following shall be prohibited as incompatible with the internal market: all
agreements between undertakings (…) which have as their object or effect the
prevention, restriction or distortion of competition within the internal market, and in
particular those which
(b) limit or control (…) technical development (…);
2.
Any agreements or decisions prohibited pursuant to this Article shall be automatically
void.
3.
The provisions of paragraph 1 may (…) be declared inapplicable in the case of:
[any generally prohibited act] which contributes to (…) promoting technical or economic
progress, while allowing consumers a fair share of the resulting benefit, and which does not:
[impose unnecessary restrictions or eliminate competition]
Starting Point: The factual
background sets the course
Decisive factors:
• De facto standard vs. industry standard?
• Dominant position within the downstream product
market?
• IP-Declaration?
• Motion for injunctive relief by plaintiff in infringement
action?
• FRAND objection raised by the defendant?
Position in Germany prior to
Huawei./.ZTE
•
Case-law in Germany: Orange Book criteria (Federal Supreme Court,
judgment of May 6, 2009 – docket no KZR 39/06), as specified by lower
instance courts:
•
Seeking an injunction based on an SEP is abusive if
• Standard user makes unconditional license offer (i.e. no
condition that patent is actually infringed; no reservation of
nullity action)
• Standard user must fulfill duties of a licensee even if
patentee does not accept the offer: Accounting, royalties
(escrow)
•
Legal consequence if defense is successful: No injunction (otherwise:
injunction automatic result of infringement under German law)
Strict requirements – defense only very rarely successful
Decision of July 16, 2015
CJEU C-170/13
No violation of Art. 102 TFEU if proprietor of a (i) SEP, which has (ii) issued an IPdeclaration and is (iii) in a dominant position on the market, as long as:
•
prior to bringing that action, the proprietor has, first, alerted the alleged infringer of
the infringement complained about by designating that patent and specifying the
way in which it has been infringed, and, secondly, after the alleged infringer has
expressed its willingness to conclude a licensing agreement on FRAND terms,
presented to that infringer a specific, written offer for a licence on such terms,
specifying, in particular, the royalty and the way in which it is to be calculated, and
•
where the alleged infringer continues to use the patent in question, the alleged
infringer has not diligently responded to that offer, in accordance with recognised
commercial practices in the field and in good faith, this being a matter which must
be established on the basis of objective factors and which implies, in particular, that
there are no delaying tactics.
Art. 102 TFEU does not prohibit bringing an action for infringement against the alleged
infringer and seeking the rendering of accounts in relation to past acts of use of that
patent or an award of damages in respect of those acts of use.
Additional Statements by CJEU
• User may still challenge
infringement (No. 69)
validity
and
• Third-party
determination
of
royalty
(arbitration) only on common agreement of
the parties (No. 68)
Open Questions
• Application only to cases where FRAND commitment was given;
"Orange-Book" may still apply to SEPs without commitments and de
facto standards
• What is FRAND?
• Market definition (product or technology?; territory?) and market
dominance
• Exact method and timing of negotiations
 Extent of "Alert" prior to action (claim charts?, reference to website?)
 "prior" to action (before service?, violation remediable?)
 willingness of alleged infringer to take a license (communication?)
• Global vs national license
• Portfolio vs single licence
Recent Decisions
(Higher Regional Court Karlsruhe, 6 U 44/15 of April 23, 2015)
 NPE sues network provider based on SEP (speech coding standard AMRWB) for selling standard compliant phones; Defendant declares: not willing
to negotiate license  injunction granted by Regional Court Mannheim (2
O 103/14).
 Enforcement of 1st instance decision suspended! Defendant is mere
"distributor". Ratio: If SEP holder knows actual producer, distributors must
not be sued.
(Regional Court Düsseldorf, 4b O 140/13 of March 26, 2015)
 NPE sues mobile manufacturer based on SEP (NFC technology) for selling
standard compliant phones; Defendant raises FRAND defense.
 Court decides that the mere possession of an SEP does not provide a
market dominant position as such.
 Defendant failed to demonstrate a market dominant position of the
plaintiff.
 Injunction granted!
FRAND:
STATE OF THE LAW
IN THE UNITED STATES
COMMITMENTS TO SDOS
Standard Determining Organizations often require patent owners
contributing to a standard to:

disclose Standard Essential Patents, and

pledge to grant licenses under those SEP patents “to an
unrestricted number of applicants on ‘reasonable, and
nondiscriminatory’ (“RAND”) terms.”
FTC: NON-DISCLOSURE
OF SEPS
In re Dell Corp. (FTC 1996)
FTC found:
 patentee “failed to act in good faith to identify” SEP
 evidence that SDO “would have implemented a nonproprietary standard” if it knew about the SEP, so
 “enforcement action is appropriate”
121 FTC 616, 624
FTC: NON-DISCLOSURE
OF SEPS
Rambus, Inc. v. FTC (D.C. Cir. 2008)
DC Circuit reversed FTC:
 “Commission left open the likelihood that JEDEC would have
standardized Rambus’s technologies even if Rambus had disclosed its
intellectual property.”
 “Under this hypothesis, JEDEC lost only an opportunity to secure a
RAND commitment from Rambus.”
 “But loss of such a commitment is not a harm to competition from
alternative technologies in the relevant markets.”
522 F.3d 456, 466.
FTC: NO FRAND LICENSING
In re Negotiated Data Solutions (FTC 2008)

Original patentee, National Semiconductor, agreed to
license patents for Fast Ethernet standard used in IEEE
802.3 for one-time fee of $1,000

Subsequent patentee, Vertical, demanded per-unit royalties

Consent judgment: one-time fee of $1,000.
FTC File No. 051-0094.
THIRD CIRCUIT:
ANTITRUST—NO FRAND LICENSING
Broadcom v. Qualcomm (3d Cir. 2007)
Third Circuit reinstated antitrust complaint that alleged:
 patentee falsely promised to license on FRAND terms,
 SDO relied on that promise when including technology
in the standard, and
 patentee breached its FRAND promise.
501 F.3d 297, 314.
NINTH CIRCUIT: AFFIRMS
JUDGE ROBART (JULY 2015)

modified version of Georgia Pacific factors to determine
royalty.

hypothetical negotiation before standard is implemented.

licensing pool was probative of RAND rate.

royalty stack approach and “relative importance” of patents.

Robart: license rate is $1.8 million, not the $4 billion Motorola
demanded.

affirmed jury finding that Motorola’s attempt to seek
injunction violated FRAND.
DISTRICT COURTS:
CONTRACT—FRAND LICENSING
Apple v. Motorola (W.D. Wis. 2012)
“Apple is a third party beneficiary of the agreements between Motorola and
IEEE and Motorola and ETSI.”
886 F.Supp.2d 1061, 1085.
Microsoft v. Motorola (W.D. Wash. 2012)
“Microsoft … is a third-party beneficiary to the agreements between Motorola
and the IEEE and Motorola and the ITU.”
864 F.Supp.2d 1023, 1032.
In re Innovatio (N.D. Ill. 2013)
“Defendants … [are] third-party beneficiaries of the agreements between
Innovatio’s predecessors and the IEEE.”
956 F.Supp.2d 925, 933.
FEDERAL CIRCUIT:
FRAND CONTRACT
Ericsson v. D-Link (Fed. Cir. 2014)

FRAND commitment was undisputed

Jury determined damages
773 F.3d at 1209.
FEDERAL CIRCUIT:
FRAND DAMAGES
Ericsson v. D-Link (Fed. Cir. 2014)

District court instructed the jury with the fifteen Georgia
Pacific factors plus a sixteenth factor:
Jury “may consider … Ericsson’s obligation to license its
technology on RAND terms.”

Federal Circuit vacated the damages award
773 F.3d at 1229.
FEDERAL CIRCUIT:
FRAND DAMAGES
Ericsson v. D-Link (Fed. Cir. 2014)

“In a case involving RAND-encumbered patents, many of
the Georgia-Pacific factors simply are not relevant; many
are even contrary to RAND principles.”

“we do not hold that there is modified version of the
Georgia Pacific factors that should be used for all RANDencumbered patents.”
773 F.3d at 1231.
FEDERAL CIRCUIT: FRAND DAMAGES AND
THE
GEORGIA PACIFIC FACTORS
In Ericsson v. D-link, the following GP factors were not relevant:

licensor’s policy to maintain a patent monopoly

the commercial relationship between the licensor and
licensee
773 F.3d at 1230-31.
FEDERAL CIRCUIT: FRAND DAMAGES
AND THE
GEORGIA PACIFIC FACTORS
The following GP factors need to be adjusted for RANDencumbered patents:

Current popularity of the invention

Utility and advantages of the patented technology over the
old modes or devices

The nature of the patented invention and the character of the
commercial embodiment of it as owned and produced by
the licensor
773 F.3d at 1231.
FEDERAL CIRCUIT:
FRAND DAMAGES
Ericsson v. D-Link (Fed. Cir. 2014)
“As with all patents, the royalty rate for SEPs must be apportioned to
the value of the patented invention.”
Unique issues for SEPs:

“First, the patented feature must be apportioned from all of the
unpatented features reflected in the standard”

“Second, the patentee’s royalty must be premised on the value of
the patented feature, not any value adduced by the standard’s
adoption of the patented technology.”
773 F.3d at 1232.
FEDERAL CIRCUIT:
RAND DAMAGES
Ericsson v. D-Link (Fed. Cir. 2014)
Patent Stacking and Holdup:

Recognized that patent stacking and holdup could be a
concern for SEP patents

But held that D-Link failed to provide sufficient evidence to
warrant a jury instruction on patent stacking and holdup
773 F.3d at 1234.
INJUNCTIVE RELIEF FOR SEPS
Microsoft v. Motorola (9th Cir. 2012)
Upheld injunction preventing Motorola from enforcing a German
court’s injunction.
696 F.3d 872, 875.
Apple v. Motorola (Fed. Cir. 2014)
Upheld denial of injunction for SEP patent.
757 F.3d 1286, 1332.
INJUNCTIVE RELIEF FOR SEPS
Apple v. Motorola (Fed. Cir. 2014)

“A patentee subject to FRAND commitments may have
difficulty establishing irreparable harm.”

“On the other hand, an injunction may be justified where an
infringer unilaterally refuses a FRAND royalty or
unreasonably delays negotiations to the same effect.”

“To the extent that the district court applied a per se rule
that injunctions are unavailable for SEPs, it erred.”
757 F.3d 1286, 1331-32.
INJUNCTIVE RELIEF FOR SEPS
In the Matter of Motorola Mobility LLC and
Google Inc., FTC (2013)
“Google is permitted to seek injunctive relief only in the following four
narrowly-defined circumstances: (1) the potential licensee is not subject
to United States jurisdiction; (2) the potential licensee has stated in
writing or in sworn testimony that it will not accept a license for
Google’s FRAND- encumbered SEPs on any terms; (3) the potential
licensee refuses to enter a license agreement for Google’s FRANDencumbered SEPs on terms set for the parties by a court or through
binding arbitration; or (4) the potential licensee fails to assure Google
that it is willing to accept a license on FRAND terms.”
File No. 121-0120, Analysis of Proposed Consent Order to Aid in Public
Comment, p. 7.
IEEE POLICY ON INJUNCTIONS
IEEE Standards Board Bylaws, Approved Clause 6
(effective in Q1 2015)
“reasonable terms and conditions, including without compensation or
under Reasonable Rates, are sufficient compensation for a license to
use … Essential Patent Claims and precludes seeking, or seeking to
enforce, a Prohibitive Order except as provided in this policy.”
http://standards.ieee.org/develop/policies/bylaws/approved-changes.pdf
ITC EXCLUSION ORDERS
FTC’s Statement on the Public Interest, June
6, 2012
“ITC issuance of an exclusion or cease and desist order in matters
involving RAND-encumbered SEPs, where infringement is based
on implementation of standardized technology, has the potential
to cause substantial harm to U.S. competition, consumers and
innovation.”
ITC Investigation No. 337-TA-745.
ITC EXCLUSION ORDERS
DOJ and USPTO Policy Statement on Remedies for StandardsEssential Patents Subject to Voluntary F/RAND Commitments,
January 8, 2013
 “the public interest may preclude the issuance of an exclusion order
in cases where the infringer is acting within the scope of the patent
holder’s F/RAND commitment and is able, and has not refused, to
license on F/RAND terms.”
 “An exclusion order may still be an appropriate remedy in some
circumstances, such as where the putative licensee is unable or
refuses to take a F/RAND license and is acting outside the scope of
the patent holder’s commitment to license on F/RAND terms.”
THANK YOU!