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Injunctions, Standard Essential Patents and F/RAND

March 14, 2013

Europe

The Courts. Courts in Europe have taken differing positions on the availability of injunctive relief for infringement of F/RAND-encumbered SEPs. German courts have not interpreted the F/RAND commitment to create a contract enforceable by third parties or to foreclose injunctive relief, and at least one German court has held that only an "obvious" antitrust violation could provide a basis for denying an injunction.

In contrast, in IPCom v. Nokia, the U.K. High Court held that it would be "extraordinary" to grant "any injunction at all" for infringement of an SEP subject to a F/RAND commitment.⁷ In a March 2012 decision, a district court in The Hague, applying French contract and Dutch antitrust law, dismissed claims for injunctive relief for infringement of F/RAND-encumbered SEPs. It stated that such claims constituted "an abuse of authority and breach of pre-contractual good faith" because they "put[] improper pressure on Apple to…agree with license terms and conditions that are not FRAND."⁸ The Dutch court refrained from deciding whether Samsung's claims were an "abuse of a dominant position" in violation of Dutch law.

The European Commission (EC). In January 2012, the EC opened a formal investigation against Samsung to assess whether Samsung had "used certain of its standard-essential patent rights to distort competition in European mobile device markets," "abusively[] and in contravention of a commitment" to an SSO, by seeking injunctive relief in member courts for infringement of its SEPs. In December 2012, the EC preliminarily concluded that Samsung had abused a dominant position. If the EC issues a final decision against Samsung, it may impose a fine of up to 10 percent of Samsung's annual worldwide turnover. In April 2012, the EC opened a similar investigation against Motorola.

Implications

Availability of an Injunction. The developments described above indicate that obtaining an injunction to prohibit infringement of an SEP subject to a F/RAND commitment may be unlikely. An injunction is more likely if the accused infringer is not subject to the jurisdiction of a U.S. court, uses the patented technology outside the scope of the F/RAND commitment, refuses to accept a license, or is unwilling to pay the royalty determined by arbitration or a court. Injunctive relief likely remains available in Germany, although enforcement of such an injunction may itself be enjoined in the United States, at least in the Ninth Circuit.

Process for Determining a F/RAND Royalty. The FTC set out a plausible process in Google that includes negotiations, an initial offer by the patentee, a response by the potential licensee, strict deadlines, and the use of a court or arbitration to determine the F/RAND royalty rate where the parties cannot agree.

Several courts and agencies have opined, albeit in dicta, regarding the appropriate standard. Judge Posner noted that a court should determine "what the cost to the licensee would have been of obtaining, just before the patented invention was declared essential to compliance with the industry standard, a license for the functions performed by the patent."⁹ Similarly, the EC has suggested that a court should "compare the licensing fees charged…in a competitive environment before the industry has been locked into the standard" with those charged after lock-in.¹⁰ Alternatively, the court may consider the objective centrality and essentiality to the standard at issue of the relevant patent portfolio, or the royalty rates charged for the same patents in other comparable standards.

Defenses to Section 5 or Other Competition Claims. The owner of an SEP will want to consider whether asserting a claim for an injunctive relief is worth the risk of antitrust scrutiny. However:

First, a "stand-alone" Section 5 claim may not be available where the FTC has not defined the principles that might limit what constitutes a violation. Uncertainty remains as how to determine when a licensee is unwilling to enter a license, whether the patent owner must have market power, whether the patent owner waived the right to seek an injunction, and what constitutes a F/RAND royalty. In response to its request for comments on the Google consent order, the FTC received a number of requests to set clearer standards in this area.

Second, liability may be prohibited by the Noerr doctrine, which is based on the First Amendment right to petition the government. Under Noerr, the federal antitrust laws cannot regulate private individuals from seeking anticompetitive action from the government, even if the individual intends to restrain trade as a result of the government action. In Apple v. Motorola Mobility,¹¹ the court applied Noerr in dismissing federal and state unfair competition claims.

Stephen J. Elliott is a special counsel in the intellectual property litigation group at Sullivan & Cromwell. He is a contributing author to "Pharmaceutical and Biotech Patent Law" (PLI 2008) and the "Patent Litigation Strategies Handbook" (ABA 2012 Supp.). He can be reached at elliotts@sullcrom.com.