The Top U.S. FRAND / RAND Licensing Developments of 2023 Part I: Everybody into the Pool!
“Given the European Commission’s concern for SMEs in the burgeoning IoT industry, Sisvel’s increasing momentum, coupled with the new programs launched by Avanci, are particularly significant for providing examples of industry led solutions to licensing new categories of implementers without the need for government intervention.”
With respect to patents subject to a commitment to license on a Fair Reasonable and Non-Discriminatory (FRAND) or Reasonable and Non-Discriminatory (RAND) basis, 2023 saw many interesting developments. This includes several new pool-based licensing programs being launched, and others gaining traction, various interlocutory decisions, the dismissal of some antitrust suits, and, as always, the specter of possible government intervention.
Patent Pools
Avanci’s New Patent Licensing Programs
This has been a busy year for Avanci, which launched six new licensing programs to date. First came the announcement of Avanci’s “Aftermarket” program in February, followed by announcements in March regarding its new Broadcast and Video programs. August saw Avanci announce a 5G Connected Vehicle program, and in the fourth quarter, Avanci has so far announced a Smart Meter program and, most recently, an EV Charger program.
With respect to the 5G Connected Vehicle program, which followed on the heels of Avanci’s highly successful 4G Connected Vehicle Program, Mercedes-Benz was revealed as a first licensee, while newcomer Huawei was listed among the 59 initial participants on the licensor side (Huawei also joined Avanci’s 4G Connected Vehicle Program). According to an analysis by Tim Pohlmann of IPlytics, “the Avanci 5G program gathers over 80% of all 2G-5G granted and active patents when considering the IP5 jurisdiction [US, EP, CN, KR or JP] and even a higher share at 83% when only considering US and EP granted patents.” In contrast to the rates for the 4G Connected Vehicle Program, which were initially $15/vehicle and later raised to $20/vehicle, Avanci’s 5G license pricing is listed as $32/vehicle, though an “early licensee pricing” of $29/vehicle is available for a “5G license signed before the later of February 16, 2024 or first sale of 5G connected vehicle…”.
Sisvel’s IoT Cellular IoT Pool
Sisvel also announced this year that Huawei joined its Cellular IoT technology patent pool. According to the announcement, Huawei is “a major contributor to the development of cellular IoT”. As of the time of writing, Sisvel’s webpage indicates that its “Cellular IoT programme offers a license to LTE-M and NB-IoT standard essential patents held by…” 26 listed companies, with another “company name to be announced soon”. Given the European Commission’s (EC) concern for Small and Medium Enterprises (SMEs) in the burgeoning IoT industry (see the EXPLANATORY MEMORANDUM section of the EC’s proposed regulations for example), a concern recently echoed by several federal agencies in the United States (as discussed in Part II in more detail), Sisvel’s increasing momentum, coupled with the new programs launched by Avanci, are particularly significant for providing examples of industry led solutions to licensing new categories of implementers without the need for government intervention. Hopefully, these developments will assuage lawmakers’ concerns and convince them that they are jumping the gun and/or being unduly influenced by the astroturfing efforts of implementers in other well function markets (e.g. smartphones and connected vehicles).
Damages Awards
3G Licensing v. HTC
In addition to having success adding new participants to its Cellular IoT pool, Sisvel also prevailed in the court room. Notably, a Delaware Jury found HTC willfully infringed two standards related patents owned by Sisvel’s subsidiary 3G Licensing, S.A. and owed $0.37 per product for one patent, and either $0.37 or $0.43 per product for another. An article by frequent IPWatchdog contributor, Steve Brachmann, provides an excellent summary of the case and notes “the jury’s willful infringement finding could lead to trebled damages…”. A Sisvel press release indicates that the verdict reflects a recognition of Sisvel’s position that “… FRAND rates are only available to willing licensees.”
Another interesting aspect of this case is that, prior to the trial, summary judgment was granted with respect to HTC’s “FRAND Affirmative Defenses” as Judge Leonard Stark found that no reasonable juror could find HTC had satisfied its burden of proving essentiality. Oddly, however, the Memorandum Opinion, 3G Licensing, S.A., Koninklijke KPN N.V., Orange, S.A., v. HTC Corporation, Case No. 1:17-cv-00082-LPS (Delaware, Oct 2, 2020) states that “Defendants will be unable to argue that any of the asserted patents are standard-essential and FRAND-encumbered” on the one hand, but also that “[t]he Court’s ruling does not, however, prohibit Defendants from introducing FRAND-related evidence to establish the proper damages award” on the other. As we have written before, an unexercised contractual right of a third-party beneficiary is not a defense to patent infringement, and the commitment made to the European Telecommunications Standards Institute, for example, says nothing about releasing past acts of infringement (but rather refers to being “prepared to grant irrevocable licenses” (i.e. permission regarding future acts)). In our view, therefore, granting summary judgment on this basis would have been more appropriate than comingling patent damages and contract law issues.
Interlocutory Decisions
Atlas Global v. TP Link
Another decision reaching a favorable result for owners of patents subject to FRAND/RAND type licensing commitments, but taking a strange path to get there, is set forth in the REPORT AND RECOMMENDATION of Judge Roy S. Payne in the matter of Atlas Global Technologies LLC, v. TP-Link Technologies Co., Ltd., TP-Link Corporation Limited, TP-Link International Ltd., Case No: 2:21-CV-00430-JRG-RSP (E.D. Texas, July 28, 2023). As we previously wrote, the Eastern District of Texas granted summary judgment with respect to the defendants’ counterclaim that the plaintiff breached licensing related obligations owed to the Institute of Electrical and Electronics Engineers (IEEE) by not communicating with the defendants prior to suing for infringement. Confusingly, though, Judge Payne wrote that “…Atlas Global has not violated its contractual requirements” because “Atlas Global’s obligation is to grant – rather than offer – licenses on FRAND terms”. But Atlas Global didn’t grant licenses either. As we noted in our article at the time, “[a] better solution, in our humble opinion, would have been to find that the language of the LOA refers to licenses, not releases of past acts of infringement.”
The Atlas Global case also featured an interlocutory decision regarding pre-suit knowledge of Atlas Global’s patents for indirect infringement purposes (see REPORT AND RECOMMENDATION, Atlas Global Technologies LLC, v. TP-Link Technologies Co., Ltd., TP-Link Corporation Limited, TP-Link International Ltd., Case No: 2:21-CV-00430-JRG-RSP (E.D. Texas, August 4, 2023). The narrow issue was whether a reference made to “Standard Essential Patents (SEP) in Wi-Fi 6” in letters sent to the defendants could suffice. On this point Judge Roy S. Payne ruled as follows:
“A party need not show that it identified specific patent numbers or make [sic] specific accusations of infringement in pre-suit materials to establish a claim of pre-suit indirect infringement, particularly when there is evidence that the Asserted Patents necessarily cover products that comply with the standard. … A jury could reasonably find that Defendants had actual knowledge of the Asserted Patents and the infringement, or were willfully blind of the patents and their infringement in that Defendants’ subjectively believed Atlas Global owned an SEP portfolio on the 802.11ax standard and took actions to avoid learning of the patents contained within that portfolio or their infringement.”
G+ Communications v. Samsung
The case of G+ Communications, LLC v. Samsung Electronics Co., Samsung Electronics America, Inc., Case No: 2:22-CV-00078-JRG (E.D. Texas) also featured an interesting interlocutory decision, this time regarding potential licensee obligations. Specifically, Samsung unsuccessfully sought to dismiss the following counts raised in the plaintiff’s first amended complaint which the MEMORANDUM OPINION AND ORDER summarized as follows:
“In Count I, G+ alleges that Samsung had a duty to take a license from G+ at a FRAND rate under ETSI’s IPR policy, that Samsung breached its obligation by failing to agree to any rate for such a license, and that Samsung damaged G+ as a result. …
In Count II, G+ alleges that Samsung had a duty to negotiate for a FRAND license in good faith due to
Samsung’s FRAND obligations, that Samsung breached this duty by failing to accept G+’s offer and by failing to make a counteroffer, and that such conduct harmed G+. …
In Count V, G+ claims that Samsung was unjustly enriched by failing to agree to a FRAND license as offered by G+, and G+ was damaged as a result.”
With respect to Counts I and II, Judge Rodney Gilstrap denied Samsung’s motion finding G+ raised facially plausible claims by not only pleading a contract between itself and ETSI, but also one between Samsung and ETSI, the latter of which G+ claimed to be a third-party beneficiary. Samsung’s motion regarding Count V was also denied. Regarding Samsung’s argument that the Patent Act preempts “any attempt to obtain a patent-like royalty for the making, using, or selling of a product” Judge Gilstrap held that “[t]he Patent Act as cited allows compensation for infringement itself, not for holdout conduct… Since these allegations of harm differ from those recoverable under the Patent Act, the unjust enrichment claim is not preempted.”
Philips v. Thales
Like the G+ Communication case, Philips N.V. v. Thales Dis MS United States LLC, Civil Action No: 20-1709-CFC (Delaware) also featured a motion to dismiss the patent owner’s FRAND-licensing related claims including, among others, abuse of process, unfair competition, and unjust enrichment. As explained in the Memorandum Opinion of August 31, 2023, Philips’ claims “relate in part to a lawsuit that Thales S.A. has filed in France”, which lawsuit saw the French court grant a seizure order pursuant to which French authorities executed a civil raid on Philips’ French offices without notice. According to Philips, the seizure order was obtained via “secret and ex parte filings” that included “‘false’ and misleading representations.”
Regarding the abuse of process claim, Chief Judge Connolly found there was no common nucleus of operative fact and, as such, “[e]xercising jurisdiction over the abuse of process claim would thus expand this action’s scope beyond narrower questions of patent infringement and FRAND licensing terms to broader inquiries into French law and representations made before a foreign government”. Accordingly, Judge Connolly declined to exercise supplemental jurisdiction adding that, as a matter of comity, he would not have exercised such jurisdiction even if there were a common nucleus of operative fact.
Subject matter jurisdiction was, however, found to exist with respect to Philips’ unfair competition claim pursuant to 28 U.S.C. § 1338(b). Regarding relevant relatedness factors, Judge Connolly wrote as follows:
“In this case, the alleged facts that underpin Philips’ unfair competition claim are closely related to the alleged facts the give rise to Philips’ patent infringement and FRAND licensing declaratory judgment claims. Although Count XI refers to the French action, Philips spills more ink here, alleging that Defendants “fail[ed] to negotiate in good faith for a cellular SEP portfolio license and improperly interfere[ed] with Philips’ prospective licensing of its SEP portfolio.”… Unlike the abuse of process claim, the unfair competition claim’s polestar is Defendants’ overall negotiation practices, both before and after the French action commenced.” …
Judge Connolly further exercised jurisdiction over Philips’ unjust enrichment claim, rejecting Thales’ argument that the claim was preempted by federal patent law because “[t]he only unjust enrichment identified in the second amended complaint is the alleged patent infringement”:
“But as Philips notes, its unjust enrichment count ’is premised on the fact that ‘Thales retained the benefit of Philips’ compliance with ETSI’s IPR policy by engaging in ‘hold out’ tactics.’” … As a result of that compliance, Thales was able to “delay and avoid accepting Philips’ FRAND offers while seizing the unfair value and advantage of using the technology on a world-wide basis while not accepting Philips[‘] FRAND offers.’ … Thales thus ‘illicitly usurped unjust benefit in negotiation of the license by refusing to negotiate in good faith, by delaying, or by making demands in the negotiation that it knew Philips could not meet.’”
Or as we like to say, Thales wanted to have its FRAND cake and eat it too. Worse yet, Thales wished to use profits generated from infringement to fight against the need for a license, a practice unfairly disadvantaging patent owners (as we wrote about here: see the section titled “What is Reasonable?).
Continental v. Nokia
A seemingly never-ending saga we first wrote about in our 2021 summary, and again in 2022, is the ongoing fight between Continental and Nokia. Not long after the dismissal of Continental’s antitrust suit against Avanci, Nokia and others in 2021, and the Texas federal court’s refusal to exercise supplemental jurisdiction over its contract related claims, Continental sued Nokia in the Court of Chancery of the State of Delaware for, among other things, Nokia allegedly breaching FRAND licensing related obligations by failing to offer Continental a FRAND license (see Continental Automotive Systems Inc. v. Nokia Corp. C.A. No. 2021-0066-NAC (Delaware Chancery Court)). Continental also sought declarations regarding FRAND terms, including “that FRAND terms must be consistent with apportionment principles.” In a Memorandum Opinion dated January 31, 2023, the Delaware Court ruled against Nokia’s attempts to dismiss these claims finding, among other things, that Continental had standing to sue given it had sufficiently plead an injury-in-fact based on its “unsuccessful attempts to obtain FRAND licenses”. Further the court rejected Nokia’s argument that Continental’s requests for declaratory judgments merely sought “an option for a license” and were, therefore, advisory in nature. Regarding this latter argument Vice Chancellor Cook said that “Continentals’ requests for declaratory relief would resolve disputes and prevent Nokia from demanding non-FRAND terms.” An apparently significant factor was that Continental “has submitted a sworn declaration committing to accept the terms of any license adjudicated by this Court.”
Continental also claimed a right to licenses based on a “Subscriber Equipment and Infrastructure Equipment License Agreement… with Qualcomm pursuant to which Nokia allegedly agree to license certain SEPs to certain Qualcomm customers”. Nokia’s motion to dismiss these claims was granted in part and denied in part.
Part II
In Part II of our year end summary, we will look at two FRAND/RAND licensing related antitrust disputes that were dismissed in 2023, as well as recent activity on the government policy front.
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