Standard Essential Patents: The Last and Best Way to Obtain Injunctive Relief in the U.S. is at the International Trade Commission - May 30, 2019 ...
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Standard Essential Patents: The Last and Best Way to Obtain Injunctive Relief in the U.S. is at the International Trade Commission May 30, 2019 © 2019 Winston & Strawn LLP
Today’s Webinar Presenters
Steve Anzalone Paul Goulet
Partner Partner
Washington, D.C. Washington, D.C.
1 202-282-5305 +1 202-282-5331
sanzalone@winston.com pgoulet@winston.com
© 2019 Winston & Strawn LLP
Introduction to SEP/FRAND Issues
Issues in Alleging Patent is Essential
• Rules of Standard Development Organizations (e.g., ETSI, IEEE)
• Require members to inform SDO of patents that may be or may become essential to a
standard in timely fashion
• Require members to submit declaration stating whether prepared to grant licenses on
terms that are fair, reasonable, and nondiscriminatory, i.e., FRAND
• Do not define what FRAND is
• Indicate not appropriate to discuss IPR or commercial issues in technical committees
© 2019 Winston & Strawn LLP 4
Defining & Determining Essentiality
• Determined claim-by-claim, not for entire patent
• Based on Definition used by SSO for that Standard
• May be limited to claims that are directed to REQUIRED portion of standard
• May include claims that are directed to OPTIONAL portion of standard
• Essentiality as a Practical Matter:
• Claim is technically essential to standard if not possible to make products that comply
with standard without practicing claim
© 2019 Winston & Strawn LLP 5Defining & Determining Essentiality
• ETSI Intellectual Property Rights Policy (Rules of Procedure, 5 April 2017)
• “ESSENTIAL” . . . means that it is not possible on technical (but not commercial) grounds,
taking into account normal technical practice and the state of the art generally available
at the time of standardization, to make, sell, lease, otherwise dispose of, repair, use or
operate EQUIPMENT or METHODS which comply with a STANDARD without infringing
that IPR
• Distinction made between Technical and Commercial feasibility
© 2019 Winston & Strawn LLP 6Defining & Determining Essentiality
• IEEE Standards Association (13 June 2017)
• What is an Essential Patent Claim?
• An Essential Patent Claim means any Patent Claim . . . the use of which was necessary to
implement either a mandatory or optional portion of a normative clause of the IEEE Standard
when, at the time of the IEEE Standard’s approval, there was no commercially and technically
feasible non-infringing alternative implementation method for such mandatory or optional
portion of the normative clause. An Essential Patent Claim does not include any Patent Claim that
was essential only for Enabling Technology . . . .
• “Enabling Technology” is not Essential to Standard:
• Necessary to make or use a product that complies with standard but not explicitly required or
expressly set forth in standard (e.g., semiconductor fabrication technology, operating system
functionality)
• No Distinction made between Technical and Commercial feasibility
© 2019 Winston & Strawn LLP 7Issues in Alleging Patent Is Essential
• Who bears burden if implementer alleges breach of FRAND commitment?
• Implementer bears burden because “like an affirmative defense”
• In re Innovatio IP Ventures, LLC Patent Litigation: “The alternative would be to assume in patent
litigation that every potentially standard-essential claim is subject to RAND until the patent owner
demonstrates otherwise, a rule that would be overly burdensome for patent owners.”
• Investigation No. 337-TA-868 (June 13, 2014): Implementer has to prove
because patents declared essential may not turn out to be so
• Investigation No. 337-TA-794 (July 5, 2013): Commission finds respondent’s
burden to prove RAND defense precludes finding a violation
© 2019 Winston & Strawn LLP 8Changing Landscape for SEP Injunctions Evolution of Case Law Evolution in Government Positions
Evolution on Injunctions
• Supreme Court rejected CAFC’s general rule of entering permanent
injunctions of patents found valid & infringed
• May 15, 2006 decision in eBay Inc. v. MercExchange, L.L.C
• CAFC had “articulated a ‘general rule,’ unique to patent disputes, ‘that a permanent
injunction will issue once infringement and validity have been adjudged’”
• “This Court has consistently rejected invitations to replace traditional equitable
considerations with a rule that an injunction automatically follows”
© 2019 Winston & Strawn LLP 10eBay Factors Not Applicable in ITC
• Does 4-factor test from eBay apply to ITC remedial orders?
• Rejected by ITC, which issues exclusion orders as general rule
• Spansion v. ITC, 629 F.3d 1331 (Fed. Cir. 2010)
• “Spansion argues that the public interest inquiry in this context is similar to the traditional
test for injunctive relief that district courts apply under eBay”
• “By statute, the Commission is required to issue an exclusion order upon the finding of a
Section 337 violation absent a finding that the effects of one of the statutorily-
enumerated public interest factors counsel otherwise”
• “Given the different statutory underpinnings for relief before the Commission in Section
337 actions and before the district courts in suits for patent infringement, this court holds
that eBay does not apply to Commission remedy determinations under Section 337”
© 2019 Winston & Strawn LLP 11District Courts Disfavor Injunctions
• No per se rule, but difficult to prove irreparable harm if FRAND commitment
• Apple v. Motorola, 757 F.3d 1286 (Fed. Cir. Apr. 25, 2014)
• “To the extent that the district court applied a per se rule that injunctions are unavailable
for SEPs, it erred. While Motorola’s FRAND commitments are certainly criteria relevant to
its entitlement to an injunction, we see no reason to create, as some amici urge, a
separate rule or analytical framework for addressing injunctions for FRAND-committed
patents”
• “Motorola’s FRAND commitments . . . 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. . . .
Consequently, we affirm the district court’s grant of summary judgment that Motorola is
not entitled to an injunction . . . .”
© 2019 Winston & Strawn LLP 12ITC & ALJ’s Have Never Declined to Issue
Exclusion Order Due to SEP/FRAND
• SEP issues have been raised in a dozen cases, such as Investigation Nos.
337-TA-474, 501, 613, 669, 745, 752, 794, 837, 868, 871, 953, 1012, 1023
• 474 Investigation: Misuse found by ALJ on multiple grounds by ITC on basis
of tying SEP & non-SEP patents; rejected on appeal & remand
• U.S. Philips v. ITC, 424 F.3d 1179 (Fed. Cir. 2005) (Orange Book standard for
recordable or rewritable CD’s):
• “It is entirely rational for a patentee who has a patent that is essential to particular
technology, as well as other patents that are not essential, to charge what the market will
bear for the essential patent and to offer the others for free”
© 2019 Winston & Strawn LLP 13337-TA-745, Motorola v. Apple (3GPP/UMTS)
• ALJ ID in Apr. 2012, Recommended Remedy in May 2012
• ALJ Pender rejects unclean hands defense based on alleged failure to
timely disclose: “cannot find” that Motorola had “a plan to act in bad faith;”
“lack of any proof than any act of Motorola actually caused any hard (to
anyone)”
• Apple counterclaims (contract, equitable estoppel, antitrust) removed to
W.D. Wisc.; cannot premise any claims solely on filing of ITC complaint
under Noerr-Pennnington doctrine, 886 F.Supp.2d 1061 (2012):
• “The problem for Apple is that its allegations and arguments make clear that its antitrust
claim is necessarily based on Motorola's patent litigation”
• FTC submission on public interest in June 2012; Google/Motorola
settlement & consent order with FTC announced Jan. 3, 2013
© 2019 Winston & Strawn LLP 14337-TA-752, Motorola v. Microsoft (IEEE/ITU)
• 802.11 & H.264 standards, ALJ ID in Apr. 2012
• ALJ Shaw finds no case in which section 337 remedy was foreclosed due to
existence of RAND obligations
• ALJ Shaw rejects equitable estoppel defense because “no evidence that
Microsoft relied on any statement by Motorola to embark on, or to continue
in, any course of conduct”
• FTC submission on public interest in June 2012; Google/Motorola
settlement & consent order with FTC announced Jan. 3, 2013
© 2019 Winston & Strawn LLP 15337-TA-837, LSI v. Realtek (IEEE)
• ALJ ID in July 2013 & ITC Decision in March 2014 taking no position on
RAND/equitable defenses because no infringement
• ALJ Shaw finds “failure of the parties to agree to terms for the licensing of
the asserted SEPs cannot be attributed to Complainants;” “no indication”
that ITC treats RAND as contractual obligations “that must be satisfied
before relief may be sought at the Commission;” no patent misuse; no
equitable or contractual estoppel
• Realtek obtained preliminary injunction in N.D. Cal. against LSI “enforcing
any exclusion order” in ITC, but only if ITC granted an exclusion order. 946
F.Supp.2d 998 (May 20, 2013). LSI “breached by seeking injunctive relief
against Realtek before offering Realtek a license”
• No appeal possible because injunction never went into effect
© 2019 Winston & Strawn LLP 16337-TA-794, Samsung v. Apple (ETSI)
• ITC decision June 2013
• “The Commission and its ALJs have never adopted Apple’s theory that a FRAND
undertaking per se precludes a determination of violation”
• “To the extent that Apple relies on a contract defense, Apple has not identified the basic
elements to prove a contract: the parties, the offer, the acceptance, the consideration,
and definite terms”
• “In light of the negotiations above, Apple has not proved a failure by Samsung to
negotiate in good faith”
• Exclusion based on FRAND patent not contrary to public interest:
• “Absent empirical evidence of actual harm to consumers or innovation, what remains are
policy arguments that the risk of hold-up occurring is sufficiently great to warrant denying
an exclusion order to Samsung in this investigation. The Commission is not a policy-
making body and is not empowered to make that decision”
© 2019 Winston & Strawn LLP 17337-TA-794, Samsung v. Apple (ETSI)
• Presidential disapproval of exclusion order:
• Trade Representative letter of Aug. 3, 2013
• Trade Representative relies on “important Policy Statement” issued by DOJ
and PTO on Jan. 8, 2013:
• DOJ/PTO Policy Statement indicates potential harms can result from SEP owners “gaining
undue leverage and engaging in ‘patent hold-up’”
• Commission in future cases should examine public interest issues and develop factual
record on “presence or absence of patent hold-up or reverse hold-up”
© 2019 Winston & Strawn LLP 18337-TA-501, Amkor v. Carsem (JEDEC)
• Original ID in Nov. 2004, case not resolved by CAFC & ITC until April 2014
• Carsem did not satisfy burden to prove JEDEC standards can only be
complied with by using Amkor’s ‘277 patent
• No equitable or legal estoppel because no showing Amkor breached a duty
to disclose patents to SDO or engaged in misleading communications
• No hold-up:
• “Despite an overture from Amkor, it was Carsem that evidenced no interest in pursuing a
licensing arrangement with respect to the ‘277 patent. . . . [T]he facts suggest a case of
hold-out by the potential licensee rather than one of hold-up by the patent holder.”
Comm’n Opinion, Remand Proceeding, at 49 n. 26 (April 2014)
© 2019 Winston & Strawn LLP 19337-TA-868, InterDigital v. Nokia & ZTE
• 3G/4G LTE (ETSI) standards, ALJ ID in June 2014 finds no infringement
• ITC decision in Aug. 2014 takes no position on FRAND due to no
infringement finding & pending CAFC appeal on related patents
• FRAND defenses expressly rejected by Judge Essex in ID:
• no violation by patentee of any contractual obligations under ETSI, & no evidence
respondents met obligations that ETSI places on them
• respondents engaged in holdup by making accused products before taking license
• “Letters of the DOJ/USPTO and FTC do not assist or enlighten”
• “While there may be a hypothetical risk of holdup, we have evidence that it is not a threat
in this case, or in this industry” (includes quotes from Telecommunications Industry
Association June 14, 2011 letter to FTC about “patent hold-up”)
© 2019 Winston & Strawn LLP 20337-TA-613, InterDigital v. Nokia & Microsoft
• ETSI standards, ALJ ID on remand in March 2015
• Commission decision in Sept. 2015 on issue preclusion (claim construction)
• FRAND defenses based on public interest rejected by Judge Essex:
• “There is no evidence presented in this case that patent hold-up is a problem in the
telecommunication industry”
• “There is now even more reason to give little weight to the concerns voiced by the FTC
and DOJ/PTO in these letters”
• Quotes TIA letter and Microsoft June 14, 2011 letter to FTC (“The notion that patent hold-
up is a substantial problem that should be addressed by government action seems to
stem from a largely theoretical analysis of the situation”)
• No evidence patentee engaged in holdup, or did not negotiate in good faith
• Evidence supports a finding that respondent engaged in holdout
© 2019 Winston & Strawn LLP 21337-TA-613, InterDigital v. Nokia & Microsoft
• FTC Chair Ramirez submits “my own” views on public interest:
• “I urge the ITC, as part of its public interest analysis, to require the SEP holder to prove
that the respondent is unwilling or unable to enter into a FRAND license before issuing
an exclusion order.”
• FTC Commissioners Ohlhausen & Wright disagree & submit reply:
• “The ITC should not begin its analysis by initially imposing upon the SEP holder the
burden of proving that the accused infringer is unwilling or unable to take a license on
FRAND terms. This approach presumes patent holdup is frequent and results in
significant negative consequences for competition and innovation.”
• “There is no empirical evidence to support the theory that patent holdup is a common
problem in real world markets.”
© 2019 Winston & Strawn LLP 22Government SEP Positions—Ambush
• FTC became involved in SEP cases based on allegations of (deliberate) non-
disclosure of patents to SDO and “ambush” of implementers
• Dell in 1995 (VL bus) for unfair competition based on SDO IPR disclosure policy; no claim
of market power, deception, or promoting standard by Dell; case settled with agreement
not to enforce, one FTC Commissioner dissented against strict liability
• Unocal in 2001-05 for monopolization due to Unocal promoting reformulated gas
technology & later asserting patents after adopted by California agency; case settled with
agreement not to enforce in 2005 when Chevron sought to acquire Unocal
• Rambus in 2002-09 for monopolization due to Rambus “deceptive” conduct in
participating & later withdrawing from JEDEC during adoption of DDR SDRAM standard;
Rambus v. FTC, 522 F.3d 456 (Fed. Cir. 2008) found FTC failed to show exclusionary
conduct or harm to competition because JEDEC may have standardized same technology
if Rambus had disclosed patents
© 2019 Winston & Strawn LLP 23Government SEP Positions—FRAND
• FTC cases based on “hold-up” of implementers locked into a standard
• Robert Bosch in 2012-13 during its acquisition of SPX based on SPX seeking injunctive
relief on SAE essential patents subject to FRAND when defendants were “willing
licensees”; case settled with royalty-free license to SPX a/c patents (whether essential or
not); one FTC Commissioner dissented as not unfair competition & protected by Noerr-
Pennington
• Google/Motorola in 2012-13 for unfair competition based on Motorola seeking injunction
on patents subject to FRAND; case settled along with two FTC cases against Google ad
and search operations with Motorola agreement not to seek injunctions on SEP patents;
one FTC Commissioner dissented
© 2019 Winston & Strawn LLP 24Agency Positions on ITC Exclusion Orders
• FTC (or Commissioners) submitted public interest statements in ITC 745,
752, and 613 SEP cases in 2012 and 2015 concerning hold-up
• FTC Commissioner Ramirez testified before Senate on July 11, 2012:
• “A royalty negotiation that occurs under threat of an injunction or an exclusion order may
be weighted heavily in favor of the patent holder in a way that is in tension with the RAND
commitment”
• DOJ/PTO Policy Statement (Jan. 8, 2013) relied on in U.S. Trade
Representative letter (Aug. 3, 2013):
• Patentee may “gain market power and potentially take advantage of it by engaging in
patent hold-up;” “decision maker could conclude that the holder of a FRAND-
encumbered, standards-essential patent had attempted to use an exclusion order to
pressure an implementer of a standard to accept more onerous licensing terms . . . . Such
an order may harm competition and consumers by degrading one of the tools SDOs
employ to mitigate the threat of such opportunistic actions . . . .”
© 2019 Winston & Strawn LLP 25Evolution in Agency SEP Positions
• Dissents in 2012-13 FTC FRAND cases; contrary statements to ITC in 2015
concerning patent hold-up
• Qualcomm complaint by FTC on Jan. 17, 2017 based on “Qualcomm’s Dominance in
Baseband Processor Supply” for CDMA/LTE standards
• DOJ & FTC of this administration have different priorities/positions
• FTC Chairman Simons remarks of Sept. 25, 2018 imply different
perspectives on FRAND & hold-up:
• “Breach of a FRAND commitment, standing alone, is not sufficient to support a Sherman Act
case, and the same is true even for a fraudulent promise to abide by a FRAND commitment”
• “Whether hold-up or hold-out is more likely to occur in the real world is not something we are
focused on”
© 2019 Winston & Strawn LLP 26DOJ Position on FRAND & Injunctions
• Assistant Attorney General Delrahim—shift on FRAND & injunctions:
• Withdrew from DOJ/PTO Statement on Dec. 7, 2018: “A FRAND commitment
does not and should not create a compulsory licensing scheme”
• Nov. 10, 2017: “We don’t have the tools to know what the competitive royalty rate is—
we’re not price regulators, after all—and if we inject antitrust law where it does not
belong, it can actually subvert the competitive process and do serious harm to American
consumers and to innovation itself”
• Mar. 16, 2018: “If a patent holder effectively loses its right to an injunction whenever a
licensing dispute arises, or is deterred from seeking an injunction due to the prospect of
treble damages, an implementer can freely infringe, knowing that the most he or she will
eventually have to pay is a reasonable royalty rate”
© 2019 Winston & Strawn LLP 27Current Outlook for SEP Enforcement Treatment of Implementer Claims & Defenses
Claims/Defenses in Response to SEP
• Breach of Contract
• Commitment may be “agreement to agree”; FRAND is undefined
• 337-TA-1023, Netlist v. SK Hynix, JEDEC, ID & RD of Nov. 14, 2017
underlying contract “lacks sufficient clarity to enforce its terms”
• Obligation to negotiate in good faith is “two-way street”
• Declaratory Judgment Action
• Ask court to determine FRAND rate; court has discretion whether to grant
• If implementer has not agreed to accept rate, “unlikely to ‘serve a useful purpose’”
• Apple v. Motorola, W.D. Wisc. (Nov. 2012) (ceiling to “use for negotiating purposes”)
• Interdigital v. ZTE, D. Del. (May 2014) (“only purpose of this would be to alter the current
negotiating power between the parties”)
© 2019 Winston & Strawn LLP 29Claims/Defenses in Response to SEP
• Antitrust/Patent Misuse
• AAG Delrahim, March 2018: “hold-up is fundamentally not an antitrust problem, and
therefore antitrust law should not be used as a tool to police FRAND commitments”
• 337-TA-871, Adaptix v. Ericsson (ETSI), July 2013 (“no explanation how Adaptix broadened
the physical or temporal scope of the patent”)
• FTC Section 5(b):
• Challenge “unfair or deceptive act” or “unfair methods of competition”
• Not a defense or claim by private party
• Enforced by FTC instituting administrative adjudication
• Most cases based on SDO member’s failure to disclose SEP patents
© 2019 Winston & Strawn LLP 30Claims/Defenses in Response to SEP
• Equitable estoppel
• Requires false/misleading conduct; reliance by, & prejudice to, implementer
• Stronger defense if deliberate failure to disclose SEP patents
• Difficult to prove reliance by SDO or implementer; 337-TA-752,
Motorola v. Microsoft, ALJ ID in Apr. 2012
• Implied License; Waiver
• 337-TA-1023, Netlist v. SK Hynix, ID & RD of Nov. 14, 2017: IPR policy of SDO provides
“only an option to license essential patents, not an implied license to them”
• Waiver requires “intentionally relinquished or abandoned” a “known right”
• Core Wireless v. Apple (Fed. Cir. Aug. 2018): implied waiver due to failure to timely
disclose in violation of ETSI policy; remanded to find if Nokia “inequitably benefited”
from failure to disclose or if conduct “sufficiently egregious”
© 2019 Winston & Strawn LLP 31SEP/FRAND claims/defenses in ITC
• 337-TA-953, Ericsson v. Apple, ETSI standards, settled Dec. 2015
• Judge Lord issues Order on July 15, 2015 striking certain defenses pled in
response to ITC Complaint as inappropriate
• Estoppel/waiver “based on contractual or quasi-contractual obligations” is
not a defense
• “Does not defeat Ericsson’s claim of a violation of section 337”
• “Alleged breach of these rights is an independent, affirmative claim for relief against Ericsson.
This is a counterclaim . . . [I]t must be removed to district court . . . .”
• Public interest arguments not a “defense”
• May persuade ITC to modify remedial order, but findings on violation “would be unaffected”
• “There is a clear procedure for the consideration of public interest factors, separate from the
determination on violation”
© 2019 Winston & Strawn LLP 32Practical Guidance for
Obtaining Injunctive Relief
at the ITC
© 2019 Winston & Strawn LLPThere is no authority for the argument
Critical First Step
that a patent holder must make an initial
offer for a specific and reasonable • Offer a license to your adversary before filing
royalty rate. Wireless Communications ITC complaint
Devices, Comm’n Op. at 60. Indeed, the
limited precedent on the issue appears • Identify and chart asserted patents
to indicate that an initial offer need not • Avoids problem that arose in Realtek Semiconductor
be the terms of a final FRAND license v. LSI, 946 F. Supp. 2nd 998 (N.D. Cal 2013); and
because SSOs intend the final license to
be accomplished through negotiation.
• Allows patent holder to frame the negotiation story
Id. (citing Microsoft v. Motorola, 864 F. • Initial offer need not be RAND
Supp. 2d 1023, 1038 (W.D. Wash. 2012)
• 337-TA-837, LSI v. Realtek, Initial Determination
(because SSOs contemplated that
(Shaw, July 18, 2013)
RAND terms be determined through
negotiation “it logically does not follow • Subsequent discussions must be in good
that initial offers must be on RAND faith
terms”))
© 2019 Winston & Strawn LLP 34The ITC Complaint-Disclose
SDO Declaration
• Give Commission full opportunity to
understand FRAND allegations may be an
issue
• Encourage delegation of public interest fact
finding to ALJ
• Allows development of full record
• Avoids later delay on public interest analysis
• Avoids USTR issue with development of
record
© 2019 Winston & Strawn LLP 35The ITC Complaint – Essentiality
• Do you concede that they are in fact essential?
• Burden is on respondent to establish that asserted patents are essential:
The declaration is not proof the patents are standard
essential...As respondents have presented no proof that the
patents are standard essential, they have failed to prove
they are standard essential, and that they are entitled to
claim the rights available under ETSI FRAND policy.
337-TA-613, Interdigital v. Nokia, Remand ID (Essex, April 27, 2015)
© 2019 Winston & Strawn LLP 36The ITC Complaint – Threading the Needle
• Base infringement allegations on operation of accused products-not
compliance with a standard:
If the accused products comply with JEDEC standards,
then a standard essential patent would necessarily be
infringed by those products. The converse is not
necessarily true; a patent infringed by a JEDEC compliant
products may not be essential to a standard.
337-TA-1023, Netlist v. SK Hynix, Initial Determination (Bullock, Nov. 14, 2107).
© 2019 Winston & Strawn LLP 37The ITC Complaint-FRAND
Compliance Disclosures
Show your good faith actions
“[S]atisfaction of the obligation flowing from
a RAND declaration is not measured by one
specific offer, ‘be it an initial offer or an offer
during a back-and-forth negotiation.’…The
offers that Apple criticizes do not necessarily
demonstrate that Samsung has violated its
FRAND obligations by failing to negotiate in
good faith”
337-TA-794, Samsung v. Apple, Commission Opinion (July 5, 2013)
© 2019 Winston & Strawn LLP 38Respondents Response
• Respondents raise a series of allegations related FRAND undertaking:
• Breach of Contract
• Patent Misuse
• Waiver
• Equitable estoppel
• Implied License and Exhaustion
• FRAND undertaking precludes injunctive relief
© 2019 Winston & Strawn LLP 39No Per Se Limitation on Remedy
The ITC is a “creature of statute, and must find authority for
its actions in its enabling statute.”…Section 337(b) requires
the Commission to investigate any alleged violation base
don a complaint under oath….If a violation is found, section
337 gives the Commission authority to exclude articles that
infringe valid and enforceable U.S. patents….The statute
makes no distinction between patents that have or have
not been declared to be essential to a standard
337-TA-794, Samsung v. Apple, Commission Opinion (July 5, 2013)
But are the FRAND allegations public policy
matters or affirmative defenses?
© 2019 Winston & Strawn LLP 40Public Interest?
• “Apple argues that it holds implied or quasi-contractual rights to license
Ericsson’s patents on FRAND terms, and the alleged breach of these rights
is an independent, affirmative claim for relief against Ericsson. This is a
counterclaim... It must be removed to district court pursuant to Commission
Rule 210.14(e)”
• Public policy matters should be considered only in the public interest phase
of the investigation
337-TA-953, Ericsson v. Apple, Order 15 (Lord, July 15, 2015) (emphasis added)
© 2019 Winston & Strawn LLP 41Affirmative Defense?
• 337-TA-1012, Fujifilm v. Sony. Initial Determination (Shaw, Oct. 2, 2017)
• Breach of Nondiscriminatory licensing clause—not a defense (but found no breach)
• Breach of forum selection clause—not a defense
• Patent Misuse (failure to offer a FRAND license)--is a defense (rejected because no
breach and no impermissible broadening of patent grant)
• Waiver—is a defense (no evidence that Complainant relinquished its patent rights)
• Implied License and Exhaustion—is a defense (SDO agreement only gives third party an
option to license not an implied license, and there was no authorized sale of a product)
© 2019 Winston & Strawn LLP 42Complainant Should Push for Public Interest
• Move to strike affirmative defenses based on FRAND allegations
• Push FRAND allegations into the public interest phase of investigation
None of the parties explicitly connect their RAND arguments
to the statutory public interest factors, i.e., the public health
and welfare, competitive conditions in the United States
economy, the production of like or directly competitive
articles in the United States, and United States consumers.
337-TA-1023, Netlist v. SK Hynix, Initial and Recommended Determinations (Bullock, Nov. 14, 2017)
© 2019 Winston & Strawn LLP 43A More Difficult Standard?
When, as in this investigation, the parties have a full and fair opportunity to litigate
these three SEP-related issues, the respondent fails to prove a FRAND-based
affirmative defense, and the Commission finds a violation of section 337,
Commissioner Aranoff believes that the Commission should not consider the same
issues a second time, in the context of its public interest inquiry….Would the parties
have an incentive to waive arguments or withhold evidence at the violation stage so
as to raise them under a less exacting standard in the remedy phase?
337-TA-501, Amkor v. Carsem, Remand Proceeding, Commission Opinion
(additional comments of Commissioner Aranoff) (April 20, 2014).
Respondent must meet affirmative defense proofs and tie
allegations to one of the four statutory public interest factors
© 2019 Winston & Strawn LLP 44Standard Compliant Devices and the Public
Interest
• Type of product that is necessary for public health and welfare?
• Needed for critical scientific research (nuclear fuel rods)
• Critical hospital equipment (burn beds)
• National energy concerns (fuel efficient crankpin grinders)
• First responder equipment (smartphones used by first responders)
• Ability of authorized suppliers to meet demand solves problem
© 2019 Winston & Strawn LLP 45Standard Compliant Devices and the Public
Interest-Recent Cases
• 337-TA-1023, Netlist v. SK Hynix, Initial and Recommended Determinations
(Bullock, Nov. 14, 2017):
• Competitive conditions
• 6-12 month delay in exclusion where Respondent supplied 1/3 of JEDEC
compliant devices
• Delay allows market supply to achieve “equilibrium”
• Production of Like or Directly Competitive Articles
• No evidence that production would be effected
• Effect on U.S. Consumers
• Overlaps with competitive conditions
© 2019 Winston & Strawn LLP 46Public Interest – Recent Cases
• 337-TA-1065, Qualcomm v. Apple, Initial and Recommended Determinations
(Pender, Sep. 28, 2018) (not involving SEPs)
• Bases for denial of relief must be tied to one of 4 statutory factors
• Examine not just accused devices but components thereof
• Exclusion would create monopoly in premium baseband processor chip
market
• Monopoly results in:
• Harm to each of the 4 factors (less innovation, higher prices, lower quality)
• Harm to national security (remove a US player from 5G development)
© 2019 Winston & Strawn LLP 47Public Interest – Recent Cases
• 337-TA-1093, Qualcomm v. Apple, Recommended Determination
(McNamara, April 16, 2019) (not involving SEPs)
• Examined not just accused devices but components thereof
• Monopsony also causes harm to competitive conditions
• Only speculation that exclusion would create monopoly, thus
speculation that any of the harms to the four factors would follow
• Protection of IP rights outweighs speculation
• 4 month carve out for testing of 5G products eliminates any speculative
harm
© 2019 Winston & Strawn LLP 48Questions?
Thank You
Steve Anzalone Paul Goulet
Partner Partner
Washington, D.C. Washington, D.C.
1 202-282-5305 +1 202-282-5331
sanzalone@winston.com pgoulet@winston.com
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