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The Balance of F/RAND

The remedies a court can impose on behalf of a standard-essential patent owner whose Essential Patents are infringed, and even the remedies an Essential Patents owner requests became an especially contentious question between 2013-2015.  During that time window, it seemed like courts and regulators were trying to severely limit the remedies available for Essential Patents infringement, and facilitate strategic infringement, also known as “efficient infringement”. Thankfully, a sense of balance seems to be returning to the policy landscape surrounding Essential Patents.  Proof of this return to balance can be seen in the approach to Essential Patent remedies of the December U.S. executive branch statement on this topic.

The European Commission became actively involved in F/RAND disputes a few years ago. (p114-115).

Unlike the European Commission which took a relatively neutral role, starting in 2011 with the FTC report, The   Evolving   IP Marketplace: Aligning Patent Notice and Remedies with  Competition, the US agencies, took more of an advocacy role.  This culminated in the 2013 DOJ-USPTO joint policy statement In 2013, the DOJ and USPTO seemingly concluded that an injunction or exclusion order may be “incompatible” with a FRAND commitment and “inconsistent with the public interest.” (p6) This compatibility issue was seen as an outgrown of concerns with potential “patent hold-up.” (p4) That said, the 2013 Statement noted that where a putative licensee “refuses to pay what has been determined to be a FRAND royalty [] or refuses to engage in a negotiation to determine F/RAND terms” an injunction may be warranted. (p7-8)

The 2013 Statement was issued while the ITC was reviewing an Initial Determination in Inv. No. 337-TA-794, an investigation that involved Apple’s alleged infringement of FRAND-assured Essential Patents relating to cellular standards. In that Investigation, the ITC found infringement of one patent and issued an exclusion order. The U.S. Trade Representative vetoed that exclusion order in a letter that discussed the 2013 DOJ/USPTO Statement and explained that he “strongly share[d]” the agencies’ concerns over potential Essential Patent misuse. The 2013 Statement was also issued against the backdrop of FTC consent decrees asserting that, in certain circumstances, an Essential Patent holder’s threat to attain injunctive relief on a F/RAND committed patent could comprise a violation of Section 5 of the FTC Act.

On December 7, 2018, the DOJ announced its withdrawal from the 2013 statement.   The DOJ was concerned that the 2013 Statement was being misinterpreted and wanted to reinstate a sense of balance to the remedies available to Essential Patent owners.  On December 19, 2019, the DOJ, the USPTO, and the National Institute of Standards and Technology (“NIST”) issued a joint “Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments” in which USPTO joined the withdrawal from the 2013 statement, and the agencies replaced it. The 2019 Statement clarifies that, regardless of whether a particular Essential Patents is the subject to F/RAND licensing commitments, whether injunctive relief is available to Essential Patent owners is governed by the same principles that govern non-Essential Patents.  Indeed, while “a patent owner’s F/RAND commitment is a relevant factor in determining appropriate remedies, [it] need not act as a bar to any particular remedy.”  p4.   In fact, all “remedies available under national law,” should be available “if the facts of a given case warrant them.” p4-5.  Pointing to Apple Inc. v. Motorola, Inc., 757 F.3d 1286, 1331 (Fed. Cir. 2014) and Ericsson v. D-Link Sys., Inc., 773 F.3d 1201, 1232 (Fed. Cir. 2014)  the Statement notes “there are no special rules limiting the remedies available for the infringement of any standards-Essential Patent, whether subject to a F/RAND commitment or not.” p4 n.10.

Importantly unlike the 2013 Statement, where the agencies where led by big tech’s siren call to focus on the phantom of patent holdup the 2019 Statement is open to both patent hold-up and opportunistic patent hold-out  – which unlike patent holdup, is an activity explicitly admitted by some of the biggest tech players. Indeed, holdout is considered a “‘fiduciary responsibility,’ at least for cash-rich firms that can afford to litigate without end.”

Interestingly, in a possible coincidence, the 2019 Statement was also issued in near proximity to an ITC Essential Patents exclusionary order.  On October 21, 2019, the ITC issued an Initial Determination finding infringement in Inv. No. 337-TA-1089, where Netlist accused certain SK Hynix products of infringing Netlist’s memory Essential Patents. The ITC’s Final Determination is now expected on April 7, 2020.   It will be interesting to see if the ITC issues and the USTR allows, an exclusion order given the new Statement.

When considering the odds of an Essential Patent injunction, it is worth noting two major differences between 2013 and 2020.  First, globally, there is now a regime allowing for Essential Patent injunctions in Europe with many courts considering and issuing injunctions (key ones summarized here) and Supreme Court of the United Kingdom set to issue an opinion that will address lower court rulings requiring a global Essential Patent license under threat of a UK injunction.  China (?!?) is now even allowing Essential Patent injunctions.   Second, and perhaps even more important, SK Hynix, a South Korean supplier of DRAM and memory chips, has nowhere near the cachet in power centers that Apple does.