I submitted comments to the US Department of Justice’s call for comments that we previously discussed here. Since they are rather long, I have decided to serialize them over a series of shorter posts. For those interested in reading my comments as a singular unit they are available on the DOJ’s website here.
4) In your experience, has the possibility of injunctive relief been a significant factor in negotiations over SEPs subject to a voluntary F/RAND commitment? If so, how often have you experienced this?
I have been heavily involved in the world of SEP licensing since 2007; first, when at Nokia (2007-2012) as part of the team managing some of their SEP key disputes, then as Chief Legal and IP Officer at Vringo (2012-2017) where I developed and managed all Vringo’s SEP activities, and now as president of Kidon IP (2017- to date) where I advise clients on SEP and FRAND issues and provide public commentary through my blog. While there was a time that the fear of an injunction may have in fact motivated potential SEP licensees, in my experience the possibility that a SEP owner may be able to enjoin an implementor with an SEP has rarely been an issue, let alone a significant issue in negotiating an SEP license. I believe that this is so because both SEP owners and licensees are very much aware that for the past decade, against a determined defendant, it is almost impossible for an SEP owner to acquire an enforceable injunction.
Please note that I do not include as part of “negotiations” the public posturing and chest thumping that often occurs in public SEP disputes prior to the parties meeting face-to-face (or virtually) to, in good faith, ascertain whether negotiations over a license is even feasible. These are not negotiations in any normal sense of the word, but either are preliminaries prior to any negotiation being able to occur or play acting for the benefit of third parties such as regulators. In fact, this play acting has been a major reason as to why SEP injunctions are so hard to obtain.
Because injunctions are so remote, once the parties to a SEP dispute have decided to meet and negotiate, in my experience, the discussion is either technical (e.g., the SEP owner’s assets are irrelevant or not as relevant as they think to the implementer) or financial (e.g., royalty rates, royalty bases, license scope, the impact a possible license on other licensees or potential licensors, etc.). I make these observations as someone who has overseen his employer receiving multiple SEP injunctions against an implementer in multiple jurisdictions around the world.
There is always a possibility that a party’s chest thumping or play acting will continue in parallel to (a typically confidential) true negotiation process. This chest thumping is “red meat” to motivate the chest thumper’s agents (e.g., lawyers, PR folks) or public shareholders, or to gain an advantage with regulators or sway the courts. But there is never any mistake among the parties in the true negotiations as to the significance of what is being said in the chest thumping: the “fear of an injunction” is a way to get courts and regulators to give implementers an advantage in their litigation positions, not a real business fear.
To be clear, this is a major problem.
Licensing SEPs is very hard. Attempting to license SEPs absent a genuine potential of an enforceable injunction is extremely hard. It is important to remember that while it is often assumed that a patent creates value for its owner by allowing its owner to exclusively make and use the patented invention, this assumption is demonstrably false. For example, there may be other patents owned by third parties that cover similar subject matter and can potentially block the patent owner from making, using or otherwise practicing the subject matter described in the patent (or, at least, make it prohibitively expensive to do so).
Instead, patents are simply a right to exclude others from making, using or otherwise practicing the subject matter described in the patent (e.g., a right to sue and receive an injunction and/or damages upon victory) but a patent does not confer a positive right to make, use or otherwise practice the invention described in the patent itself. Since the patent simply confers a right to exclude, the value of a patent to a potential licensee is tied to the fiscal cost to the licensee of that exclusion. Stated another way, a patent’s licensing value is virtually non-existent until such a time that the right to exclude would cause financial pain to the licensee. This is true even when licensing is conducted on the friendliest of terms. Simply, patent licenses from a licensee’s perspective are all about mitigating risk. Or put differently, a patent value is closely tied to its in terrorem value. If there is no risk to a licensee, the patent will be assigned no value by the licensee. When the complicated FRAND superstructure is added to any attempt to receive royalties on a patent, any risk to the licensee from the patent is mitigated even further. Indeed, as a result of the FRAND superstructure, as discussed throughout this response, even if a US trial court might award large damages in an SEP dispute, an implementer has multiple ways to appeal or collaterally attack the award. This stands in sharp contrast to how the law is evolving elsewhere.
Recent events neatly illustrate this point. Apple, the world’s first three trillion-dollar company has long complained about the allegedly unfair advantage and high damages awards that patent plaintiffs receive in the Eastern District of Texas. Apple was so committed to this position that they closed all stores in the Eastern District to be able to minimize the risk of being sued there. Yet, when faced with a global litigation with Ericsson over SEPs and non-SEPs, Apple proposed that the parties withdraw all litigation and let the courts of the Eastern District of Texas determine an appropriate FRAND royalty for Ericsson’s SEPs.
Why would Apple be willing to subject itself to the “hated” Eastern District and its large damages awards? While many excuses will likely be proffered, most likely Apple did this as a part of some “hail mary” play to avoid ITC and other injunctions thinking East Texas damages would be preferrable.
Historically (but in a recent development, no longer) courts and regulators around the world looked to the United States court for guidance on US competition and patent law issues. Indeed, the 2013 Statement seems to have been the apotheosis of the pro-implementer position that (no thanks to US influence) quickly became conventional, regulatory wisdom. As a result, the challenges SEP owners faced in licensing and achieving injunctions, when warranted became all that much harder.
To be fair and accurate, it is important to note, that as a general matter, it is well known that outside the United States there are precious few SEPs that have been found valid by the courts. That being said because of the change in regulatory climate with respect to SEPs, implementers became quite emboldened, such that even where there was a possibility of an injunction, that possibility rarely cause any significant damage to the implementer beyond additional counsel fees. This is because, SEP injunctions have been quite often, avoidable.
For example, in Germany it was often said that when a judge finds an SEP infringed there is no discretion not to award an injunction. Enforcement prior to resolution of any appeals, requires posting a bond, which is typically a function of “Litigation Value” assigned to the case when filed. While a judge might increase the “Litigation Value” as the case progresses, it is literally a textbook statement that “EUR 30 million is a maximum value and is a ceiling for the fees.” That said, in high profile SEP cases a judge apparently has the discretion to significantly increase the Litigation Value. For example, when Nokia received an injunction against Mercedes, the judge set the Litigation Value and the amount required for a bond at seven billion Euros. Most likely the amount was set that high because of Daimler was very good at chest thumping to courts already primed to be receptive to arguments about SEP owner abuse about how much damage an injunction would cause. It is no wonder that Nokia chose not to enforce the injunction.
Another way SEP injunctions are avoidable is that in most civil law countries (e.g., Germany) injunctions are not self-enforcing. Absent an infringing device that is easy to detect, if a plaintiff receives an order granting an injunction a defendant can claim a “zero accounting.” In other words, a defendant can claim that it does not sell any infringing product subject to the injunction – even when the Court previously found that products offered for sale in Germany infringed. The reasoning is that the defendant still contests the infringement (i.e., it is not a final judgment) and thus is entitled to claim no sales. In such a circumstance, a patent owner must then sue the defendant a second time to force the defendant to provide an oath to the effect that it does not sell infringing product. Yet, even if such an “affidavit suit” is won by the patent owner, it is effectively meaningless until such time as there is a final judgment in the underlying infringement case, where if infringement is finally found the defendant can be found in contempt. And then, this matters only if the attesting individual cares about being found in contempt by a foreign court and fined (or put in prison) if the judge so orders. However, in my experience, determined implementers will not put their people at risk and happily ignore multiple orders and sanction threats. It is only the possibility of case terminating sanctions (i.e., an injunction by another name) and massive damages that might put a defendant into a settling mood. Another way a licensee can avoid the bite of equitable relief is to simply obfuscate and under-report to the court its infringing sale – sometimes to the tune of hundreds of millions of dollars.
In other words, the lack of meaningful injunctions encouraged bad behavior by implementers, who continue to behave badly (and rack up SEP owner costs) until an SEP owner can finally find a court that will tire of the implementer’s games and presents the implementer with a meaningful threat.
But a single court’s threat is not always enough. Yet a further way an adjudged SEP infringer can avoid an injunction is to file multiple appeals (in some jurisdictions there is no limit on the numbers of appeals and collateral attacks, e.g., injunctions against enforcement of an injunction which can be filed) and while so doing seeking stays of enforcement pending resolution, which has the added incentive of forcing the SEP owner to spend significant funds to simply maintain any award. Additional techniques used include getting any injunction stayed pending a referral to a different court or regulator to examine competition law issues or the fad of ever-multiplying anti-anti-etc. suit injunctions.
Thus, for many years ultimately enforcing an injunction on SEPs is an almost impossible task.
Finally, it should be noted, that even where a SEP owner is lucky enough to be allowed to enforce the injunction it obtained and the injunction impacts the infringer (perhaps making it subject to liquidated damages for the infringers’ inability due to the injunction to deliver product to its suppliers) more often than not the infringer has reserved or insured against this possibility – and if the subject of the injunction is a Chinese company it also may have been insured by the Chinese State against any damages suffered from an injunction.
It is for this reason that the innovative approach first proffered by Judge Birss in the Unwired Planet line of cases is so significant. Here, finally, a court was willing – after determining that at least one asserted SEP is valid, infringed, and non-design-around-able – to determine a global, SEP portfolio license as between the parties and offer that license to the implementer as an alternative to an injunction on the infringed SEP.
Indeed, Apple was supposedly so spooked by the threatened injunction or global license, that it threatened to leave the UK -in a threat to holdup millions of UK users tied to its closed-garden. The courts in the UK, however, did not feel threatened by Apple hyperventilating about the unfairness of injunctions, and the case continues to proceed. Indeed, Apple ultimately backed down and will accept the court-imposed license. The ONLY reason I believe Apple stopped its usual opportunistic unwilling behavior in this one matter was because it was afraid of being injuncted.
(5) Are other challenges typically present in negotiating a SEP license? If so, what information should be provided or exchanged as a practical matter to make negotiation more efficient and transparent?
In negotiations there are four primary challenges facing SEP owners. First, it is extremely rare for an implementer to reach out to potential SEP licensors and commence licensing negotiations (to be clear, many implementers who already took a license do reach out to licensors to commence discussions about license renewals). Accordingly, a SEP owner needs to spend significant resources simply trying to figure out whether it is worth reaching out to possible implementers to discuss licensing. This is an information asymmetry problem that the Draft Proposal ignores.
Second, many implementers refuse to enter into a non-disclosure agreement, and instead engage in multi-year discussions about discussions over NDAs, addressing little or nothing of substance. This is a form of constructive unwillingness to take a license that should be mentioned.
Third, implementers rarely give SEP licensors information about sales of infringing products and/or revenues other than to say there is very little and the SEP owner would be better served by focusing their efforts elsewhere. Implementers may point SEP licensors to third party (expensive) sources of information and give some sense of those sources’ accuracy. Nevertheless, for SEP owners figuring out potential licensing models is extremely challenging. The proposed negotiation framework can facilitated such gamesmanship.
The fourth challenge is that by merely reaching out to potential licensees, SEP owners put themselves at grave risk of IPRs, nullity suits, declaratory judgment actions for non-infringement, suits for failure to abide by IPR policies (contract) and/or suits for violations of antitrust law, not to mention regulatory investigations, and personal harassment by fanboys. Unless an SEP owner is legally sophisticated and possesses sufficient funds to handle expensive litigations, they can easily find themselves stuck in meaningless discussions with prospective licensees that go nowhere for a very long time.
(6) Are small business owners and small inventors impacted by perceived licensing inefficiencies involving SEPs? If so, how can licensing be made more efficient and transparent for small businesses and small inventors that either own, or seek to license, SEPs?
Small businesses who try to license SEPs are impacted by licensing inefficiencies involving SEPs. The many regulatory hurdles to licensing of SEPs effectively prevent SMEs from playing in the SEP national league. This is exactly why large players such as big tech advocate (often through astroturfing organization like the ACT App(le) Association) for antitrust advocacy to get involved in SEP policy. It is a shame that antitrust agencies get played this way.
Trying to generate return on investment from any SEPs is extremely onerous and expensive. Accordingly, many smaller companies turn away from involvement in standardization efforts or chose to forego licensing revenue from their SEPs. A streamlined SEP licensing process and clear IPR rules that cannot be used as snares by implementers to rack up enforcement expenses for SEP owners would be most welcome.
It is also important to point out that many implementers are engaged in large scale astroturfing around this issue to generate support for the proposition that SEP licensing is disastrous to small business owners. It is not.
(7) Will the licensing considerations set forth in the draft revised Statement promote a useful framework for good-faith F/RAND licensing negotiations? In what ways could the framework be improved? How can any framework for good-faith negotiations, and this framework in particular, better support the intellectual property rights policies of standards-setting organizations?
See the answer to question (1) above. Additionally, it is important to stress, in agreement with the DOJ’s 2015 Business Review Letter to the IEEE, that “[i]t is unlikely that there is a one-size-fits-all approach for all SSOs, and, indeed, variation among SSOs’ patent policies could be beneficial to the overall standards-setting process.”
The proposed negotiation framework is mistaken because it is a one-size-fits-all exercise.
 Vringo changed its name to FORM Holdings in 2016 (see https://investors.xpresspa.com/news-releases/news-release-details/vringo-announces-2016-q1-earnings-and-name-change-form-holdings) and later that year, FORM Holdings acquired XpressSpa and changed its name to XpressSpa Group. https://xpresspagroup.com/portfolio/xpresspa/. By 2018 Vringo had divested most of its non-wellness-related assets.
 I query whether SEP injunctions were, in fact, a concern a decade ago, given how few were actually enforced, see, e.g., Microsoft Corp. v. Motorola Inc., 696 F.3d 872 (9th Cir. 2012) (affirming anti-suit injunction prohibiting Motorola from enforcing an injunction against Microsoft pending resolution of parallel FRAND litigation). On the other hand, I have witnessed how the real possibility of an injunction from a parallel litigation over non-SEPs can force parties to settlement. See e.g., Nokia wins German patent injunction against all HTC Android devices including the One series, Foss Patents (December 30, 2013) available at http://www.fosspatents.com/2013/12/nokia-wins-german-patent-injunction.html; HTC wins delay of two Nokia antenna patent suits in Germany: one case stayed, one trial adjourned, Foss Patents (Feb 22, 2013) (final paragraph discusses how likely injunction against the Apple App store with a Nokia non-SEP was a “key” contribution to the 2011 Apple/Nokia settlement) available at http://www.fosspatents.com/2013/02/htc-wins-delay-of-two-nokia-antenna.html.
 Many of these injunctions, including in Brazil, Germany, Holland, India, and Romania are discussed in David L Cohen, A Short History of Vringo’s Battle with ZTE, Kidon IP Blog (Aug 2, 2018) available at https://kidonip.com/news/a-short-history-of-vringos-battle-with-zte/. One these SEP injunctions was a preliminary injunction upheld by Brazil’s Superior Court of Justice in ZTE do Comércio, Serviços e Participações Ltda v. Vringo Infrastructure Inc., available here https://drive.google.com/file/d/0B8xYsG-VkgXNNVRXR0RJZzFTdkU/view?resourcekey=0-V0Mb7oiWiaEhvO9Tdx2diA and translation available at https://drive.google.com/file/d/0B8xYsG-VkgXNZGJ3c0R5a2JSbW8/view?resourcekey=0-0fQ_uwjGQO4Ukwzal4Oe4Q.
 For a discussion of some of the challenges in SEP licensing, and how implementers are trying to make it even harder, see David L. Cohen, A Compulsory “License to All” World: A Counterfactual Exercise, The Licensing Journal 13, Vol.41 no.1 (Jan 2021).
 Most prominently is the approach taken by the UK Supreme Court in Unwired Planet International Ltd & Anor v Huawei Technologies (UK) Co Ltd & Anor  UKSC 37 (26 August 2020).
 Apple becomes first U.S. company to reach $3 trillion market cap, Published Mon, Jan 3 20221:46 PM ESTUpdated Mon, Jan 3 20226:46 PM EST, available at https://www.cnbc.com/2022/01/03/apple-becomes-first-us-company-to-reach-3-trillion-market-cap.html
 Charlotte Henry, Apple to Close Stores in Texas’ Eastern District in Bid to Fight Off Patent Trolls, The MacObserver (Feb 22, 2019) available at https://www.macobserver.com/news/apple-stores-texas-eastern-district-patent-trolls/.
 Florian Mueller, Ericsson sues Apple in three German courts, the Netherlands, and Brazil over 5G and other patents (in addition to handful of U.S. cases), FOSS Patents (January 21, 2022), available at http://www.fosspatents.com/2022/01/ericsson-sues-apple-in-three-german.html.
 Joff Wild, We should fight it out with Ericsson in Texas, Apple tells the ITC, IAM 20 January 2022, available at https://www.iam-media.com/frand/apple-ericsson-edtx-itc
 Florian Mueller, Apple countersues Ericsson, seeks U.S. import ban against mobile base stations, and proposes that both parties withdraw all patent infringement actions, let Texas court set license fee, (Jan 20, 2022) available at http://www.fosspatents.com/2022/01/apple-countersues-ericsson-seeks-us.html
 I anticipate “cost savings” will be the primary argument Apple will proffer for consolidation in East Texas. If costs were truly the issue, as the Unwired Planet line of cases in UK illustrates, the British courts can quite quickly and, compared to the US, quite cheaply, find a global FRAND rate. However, the UK courts are also quite willing to issue injunctions should the parties not agree to the found rate – which likely made the UK a non-starter for Apple.
 See, e.g., Spencert Weber Waller, The United States as Antitrust Courtroom to the World: Jurisdiction and Standing Issues in Transational Litigation, Loyola Consumer Law View vol. 14, (2002).
 See, e.g., Breakingviews – Guest view: Europe beating U.S. in antitrust race, Reuters (Nov 26, 2019).
 Mark A. Lemley & Timothy Simcoe, How Essential are Standard-Essential Patents 104 Cornell L. Rev. 604, 627(2019) (finding SEP and non-SEP infringement rates to be similar in the reviewed cases but the SEP validity rate was 83.7% as opposed to 60.8% for non-SEPs).
 For example, while in the past few years in the UK there have been a handful of SEPs found valid, as recently as 2015, Vringo’s EP919 was the first telecom SEP found there to be valid, infringed and non-design-around-able. See Sixteenth Witness Statement of Ari Pekka Laakkonen, Vringo Infrastructure, Inc. v. ZTE (UK) Ltd. HC-20012-000076 (Nov. 13, 2015) available at https://www.scribd.com/document/349037075/2015-11-13-16th-Witness-Statement-of-Ari-Laakkonen-Signed. This accords with the findings of Peter Hess and Tilman Muller-Stoy in their study, Are Patents merely “Paper Tigers”?, that the overall invalidation rate for software and telecom patents (both SEP and non-SEP) in Germany is 88.11% available at https://www.bardehle.com/en/ip-news-knowledge/publication/detail/are-patents-merely-paper-tigers.
 I am ignoring any possible impact from the recent changes to German patent law, which are likely, in any event, to be minimal. See Mathieu Klos, German patent judges predict few changes to automatic injunction, Juve Patent (June 23, 2021) available at https://www.juve-patent.com/news-and-stories/legal-commentary/german-patent-judges-predict-few-changes-to-automatic-injunction/
 Alexander Harguth & Steven Carlson, Patents in Germany In Europe, Procurement, Enforcement and Defense An International Handbook, Second Edition, at 174 (Wolter Kluwer 2017).
 Mannheim Regional Court orders Germany-wide Mercedes sales ban over Nokia patent despite Nokia having violated EU competition law, Foss Patents (Aug 18, 2020) available at http://www.fosspatents.com/2020/08/mannheim-regional-court-orders-germany.html.
 Florian Mueller, After more than 12 years, HTC and Fortress’s IPCom settle standard-essential patent dispute over former Bosch and Hitachi patents, FOSS Patents blog, January 18, 2022(“In the merits proceeding [in SEP litigation in Germany], you can base your infringement theory on the specification of the standard. At the enforcement stage, you have to prove an actual infringement.”) available at http://www.fosspatents.com/2022/01/after-more-than-12-years-htc-and.html
 Something that is not always a guarantee, see, e.g. Vringo v. ZTE, 14-cv-4988 (SDNY) document 218.
 Alexander Harguth & Steven Carlson, Patents in Germany In Europe, Procurement, Enforcement and Defense An International Handbook, Second Edition, at 163 (Wolter Kluwer 2017).
 Vringo v. ZTE, 1:14-cv-4988, doc 218 (Aug 11, 2015) (reciting the multiple times ZTE ignored magistrate and court orders).
 Vringo v. ZTE, 1:14-cv-4988, doc 256 (9/8/2015).
 See, e.g., Vringo’s contempt motion against ZTE in India, where Vringo alleged that there was an eight to nine figure discrepancy in sales information provided by ZTE to the court and the information provided by ZTE’s customers to the court. https://www.scribd.com/document/549637428/2014-08-11-Contempt-Rejoinder-as-Filed
 Well over ten in Vringo’s litigation against ZTE in Romania, for example https://finance.yahoo.com/news/romanian-court-upholds-preliminary-injunction-124601546.html
 See, e.g., Lorenzo Battarino, Breaking News: Nokia v. Daimler referred to the CJEU, Italy Intellectual Property Blog (Nov 26, 2020) available at https://www.ipinitalia.com/cjeu/breaking-news-nokia-v-daimler-referred-to-the-cjeu-questions-raised-by-the-dusseldorf-regional-court-translated/.
 See, e.g., Anti-anti-anti-antisuit injunctions (no kidding) widely available now in Munich: InterDigital v. Xiaomi decision lays out criteria, Foss Patents (Mar 10, 2021) available at http://www.fosspatents.com/2021/03/anti-anti-anti-antisuit-injunctions-no.html.
 See Vringo v. ZTE, Case no. 29437/3/2015, Civil Decision No. 507A (Bucharest Court of Appeal 4th Civil Division Oct 28, 2015) available in translation at https://drive.google.com/file/d/0B8xYsG-VkgXNMEJKQUFCRURueTA/view?resourcekey=0-icMum8F6RNIibV_y1dEYmg
 At the time Vringo was made aware of many rumors to that effect as I noted here https://kidonip.com/news/a-short-history-of-vringos-battle-with-zte/. It is also likely that the Chinese state was willing to insure against SEP injunctions because the chance that it would have to in fact pay was quite low.
 After years (first raised here: https://www.scribd.com/document/348967387/Vringo-v-ZTE-UK-CMC-Transcript-05-06-13) of worrying about the Vringo problem. See Unwired Planet International Ltd v Huawei Technologies Co. Ltd & Anor  EWHC 711 (Pat) (05 April 2017) at ¶143.
 See a brief discussion here of the line of cases at BREAKING: UKSC upholds decision in Unwired Planet, confirms English courts have jurisdiction to set global FRAND rates (and much more), The IPKat Blog (Agu 26, 2020) available at https://ipkitten.blogspot.com/2020/08/breaking-uksc-upholds-decision-in.html.
 Joff Wild, Apple’s threat to leave UK market over SEP dispute should not be dismissed as a bluff, IAM 19 July 2021, available at https://www.iam-media.com/frandseps/optis-apple-willing-licensee-injunction-policy.
 Apple Threatens to Leave UK Market Due to $7 Billion Patent Dispute, MacRumors (July 12, 2021) available at https://www.macrumors.com/2021/07/12/apple-threatens-to-leave-uk-market/.
 Optis Puts Apple’s Feet to the UK Fire: Commit to FRAND or Be Snuffed Out, The National Law Review (Oct 4, 2021).
 Apple Backs Down: Commits to Take Global FRAND License to Avoid Exile from UK Market, The National Law Review (Nov 5, 2021) available at: https://www.natlawreview.com/article/apple-backs-down-commits-to-take-global-frand-license-to-avoid-exile-uk-market
 For a discussion of some of the many costs involved in licensing SEPs see David L Cohen, Licensing Standard-Essential Patents on FRAND Terms, presented at AIPLA Spring Meeting 2017, available at https://secureservercdn.net/22.214.171.124/an4.51b.myftpupload.com/wp-content/uploads/2017/07/Cohen_Paper.pdf.
 See for example the long history of Nokia’s attempts at licensing with ZTE, recited in Vringo’s response to ZTE’s DG Comp Complaint at ¶¶4.7 -4.17 available at https://www.scribd.com/document/348791248/Vringo-Response-to-ZTE-DGCOMP-Complaint.
 For a definition of fanboy see, e.g., the Urban Dictionary available at https://www.urbandictionary.com/define.php?term=Apple%20Fanboy .
 See, e.g., Florian Mueller, Not a class ACT: the so-called App Association is simply an Apple Association and does NOT represent app developers’ interests in fair distribution terms, FOSS Patents (Oct 1, 2021) available at http://www.fosspatents.com/2021/10/not-class-act-so-called-app-association.html