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Texas Court Declares Licensing Offer Based on End Device Is FRAND, Diverges from California Court in Qualcomm

Standard-essential patent holders and implementers may face uncertainty regarding licensing practices following a May 23 Texas court ruling. In the ruling, a Texas federal judge reached a conclusion different from a recent California court decision—FTC v. Qualcomm—on the question of whether an SEP holder must base its royalty rates on the “smallest salable patent-practicing unit” in order to comply with a fair, reasonable and non-discriminatory royalty commitment. Access the full article.

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Federal Judge Finds Qualcomm Violated the FTC Act Through Monopolistic and Exclusionary Conduct

On May 21, a California federal judge ruled in favor of the Federal Trade Commission (FTC) in its suit against Qualcomm in a much-anticipated decision, concluding that Qualcomm violated the FTC Act by maintaining its monopoly position as a modem chip supplier through a number of exclusionary practices, including refusing to license standard essential patents (SEPs) on fair, reasonable and non-discriminatory (FRAND) terms. Qualcomm likely will appeal the decision to the US Court of Appeals for the Ninth Circuit, but in the meantime, the court’s sweeping decision is likely to affect the course of dealing between SEP-holders and licensees. The decision is likely to substantially affect the ways in which SEP-holders take their technology and associated components that they manufacture to market. Access the full article.

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Federal Jury Finds that Ericsson’s Licensing Offer to HTC is FRAND

On February 15, a Texas federal jury found that Ericsson did not breach its obligation to offer HTC licenses to its standard-essential patents (SEPs) on fair, reasonable and non-discriminatory (FRAND) terms. The verdict ended a nearly two-year dispute as to whether FRAND obligations preclude a licensing offer based on end products rather than components. Ericsson succeeded in convincing the jury that its FRAND commitment does not require it to base royalty rates for its SEPs on the value of smartphone chips rather than the phones themselves. The jury verdict suggests that other SEP holders may be able to successfully argue that basing royalty rates on end products rather than components does not violate their FRAND obligations. Ericsson holds patents that the parties agreed are essential to the 2G, 3G, 4G and WLAN wireless communication standards, and made a commitment to several standard setting organizations to license those SEPs on FRAND terms. HTC makes...

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District Court: IPR Policy Does Not Automatically Require License Fees Based on Components

The US District Court for the Eastern District of Texas ruled that for the purposes of honoring a fair, reasonable and non-discriminatory (FRAND) commitment, a pool member is not required to base royalties for its standard essential patents (SEPs) on the value of components. HTC America Inc. et al. v. Ericsson Inc., Case No. 6:18-cv-00243-JRG (E.D. Tex. Jan. 7, 2019) (Gilstrap, J). According to the court, Ericsson’s commitment to the European Telecommunications Standards Institute (ETSI) does not specify whether it must use the value of components or end-user devices to calculate royalty rates. Thus, there is no ETSI prescribed methodology for calculating the license fee under the FRAND commitment. Ericsson holds patents that are essential to the 2G, 3G, 4G and WLAN wireless communication standards and made a commitment to ETSI to license those SEPs on FRAND terms. HTC makes smartphones that implement Ericsson’s SEPs and alleged that Ericsson is overcharging...

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EU: Merger case cleared following offer of FRAND technology license

On 20 April 2016, the European Commission (Commission) cleared, under its merger control rules, the acquisition of Equens and PaySquare by Worldline subject to, amongst others, a commitment to license technology to any customer interested, at Fair, Reasonable and Non-Discriminatory (FRAND) conditions. Worldline is a French provider of payment services and terminals, financial processing and software licensing and e-transactions services. Equens offers a number of services across the value chain of both payments processing and cards processing services. Its fully-owned subsidiary, PaySquare, provides merchant acquiring services.  This transaction combines two large payment systems operators, active across the full value chain in both payment processing and card processing services. The EU antitrust regulator was concerned that the acquisition would have raised certain issues with respect to, in particular, merchant acquiring services in Germany.  The...

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Microsoft Antitrust Suit Against InterDigital Stands, Judge Says

On April 13, 2016, the US District Court for the District of Delaware denied InterDigital’s motion to dismiss an antitrust suit filed by Microsoft (Microsoft Mobile, Inc. v. InterDigital, Inc., Case No. 15-cv-723-RGA).  In the suit, Microsoft alleged that InterDigital engaged in an unlawful scheme to acquire and exploit monopoly power over standard essential patents (SEPs) required for 3G and 4G cellular devices.  Specifically, Microsoft asserted that InterDigital falsely promised to license its 3G and 4G SEPs on Fair, Reasonable, and Non-Discriminatory (FRAND) terms in order to ensure its SEPs were included in standards set by the European Telecommunications Standards Institute (ETSI).  According to the complaint, InterDigital failed to live up to its commitment to FRAND licensing terms, and instead acquired monopoly power in the 3G and 4G cellular technology markets and used that power to demand supra-competitive royalties, “double-dip” royalty demands, and...

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Commitment Issues: Federal Jury Awards Damages for Breach of FRAND Obligation

by Stefan M. Meisner and Daniel Powers In the long-running patent dispute between Microsoft and Motorola, a U.S. District Court jury in Seattle found that Motorola breached its commitment to license certain standard-essential patents on fair, reasonable and non-discriminatory (FRAND or RAND) terms.  The jury awarded Microsoft damages of approximately $14.5 million. The litigation has witnessed numerous legal firsts.  In May, the district court became the first U.S. court to set FRAND royalty rates and ranges for standard-essential patents.  The dispute between Microsoft and Motorola centered on patents that covered wireless and video technology used in the Xbox game console.  Motorola sought a royalty calculated as a percentage of the net selling price of the product.  Microsoft claimed this method would have required it to pay approximately $4 billion per year and argued that royalties should instead be modeled on much lower rates charged by related patent...

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U.S. International Trade Commission Grants Injunctive Relief on Standard Essential Patent

by William Diaz and Lincoln Mayer The U.S. International Trade Commission has issued an exclusion order barring importation of certain older model Apple products for infringing a Samsung patent. The case is significant because the infringed patent was standard essential and encumbered by a commitment to license on fair, reasonable and non-discriminatory terms. Patent holders and potential defendants should carefully monitor further developments regarding the availability of injunctive relief for infringement of standard essential patents. To read the full article, click here.

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Western District of Washington Sets FRAND Royalty Rates and Range for SEPs

by Nick Grimmer and Stefan Meisner Last week in Microsoft v. Motorola, the U.S. District Court Western District of Washington became the first U.S. court to set fair, reasonable, and non-discriminatory (FRAND or RAND) royalty rates and range for standard-essential patents (SEPs).  See Findings of Fact and Conclusions of Law, Microsoft v. Motorola, 2:10-cv-01823-JLR (W.D. Wash. Apr. 25, 2013). The suit stems from Microsoft’s allegation that Motorola’s offers to license certain Wi-Fi and video compression SEPs was too high and therefore violated Motorola’s contractual RAND commitments.   This issue is arising with greater frequency in antitrust/IP matters when patent licensing is involved with licensors who are standards setting organizations as well. Microsoft v. Motorola is important because it is the first thoroughly reasoned decision by a U.S. federal district court that developed a framework for courts to assess FRAND terms...

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Proposed Remedies in the Midst of the Patent Wars: EU and US Antitrust Watchdogs Push to Strengthen FRAND in Standard Setting

by David Henry, Wilko van Weert and Philipp Werner Chief Economists from the US Federal Trade Commission, the US Department of Justice and the EU Directorate General for Competition, have agreed on a set of four, non-binding suggestions that should—if followed by standard-setting organizations - increase the level of protection afforded to consumers and promote innovation. To read the full article, click here.

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