In mid-December 2019, a policy statement was issued by the USPTO, NIST, and DOJ to clearly state injunctive relief (among other remedies) is available to holders of standard-essential patents (SEPs.) This is subject to a Fair, Reasonable, and Non-Discriminatory (“FRAND”) licensing commitment against companies infringing their SEPs.
Although the new policy statement allows injunctions to be enforced against companies infringing these SEP patents, even when the SEP are subject to a FRAND commitment, the statement did not define any bright-line rule for determining when such injunctions should be granted. Instead, the statement declares that the FRAND commitment made by the patent holder, the intellectual property policies set by the Standards Developing Organization (“SDO”), and the facts surrounding the licensing negotiations between the SEP holder and the potential or actual licensee may be relevant in determining whether an injunction should be granted. With a clear statement from the DOJ that injunctions may be granted to SEP holders, it remains to be seen whether the producers of products that utilize inventions disclosed in SEPs are more likely to enter into FRAND licenses that have more favorable terms for the patent holders.
What is a SEP?
SEPs are core pieces of intellectual property that form the backbone of a new technology or development. For example, the fifth generation technology standard for cellular networks, or 5G, is one such technology that implements SEPs. These technologies become standard across various types of devices (e.g. handsets) and communication systems (e.g., data processing). Multiple companies usually develop these standard technologies, and these technologies are supported by patents filed by these companies.
To create a standard, the companies creating these technologies effectively “donate” their SEP patents to the SDO in exchange for a FRAND license from the companies implementing the standard in their devices and communication systems. Since most of the companies that provide SDP patents to an SDO also create such devices and systems, the intention of this collaboration is for companies to produce devices complying with the standard without fear of defending against multiple patent infringement suits and the need to assert their own patents against infringers.
Problems with SEPs
Frequently, what constitutes FRAND license terms, is subjective and whether a license is fair, reasonable, or nondiscriminatory may be determined by the terms for similar licenses already in the marketplace. Such a determination can be difficult and fraught with disagreement for new technology not previously sold.
In 2013, a joint policy statement issued by the Department of Justice and the United States Patents Office attempted to encourage prompt negotiation of FRAND license terms by stating that owners of these standard-essential patents may not be able to enforce their patents with an injunction against a potential infringer of the SEPs.
The application of his 2013 statement, however, prevented SEP holders from effectively asserting their rights against companies unlawfully copying their IP. Although the 2013 policy said that the injunctions may not apply to standard essential patents, it was being utilized to effectuate that injunctions do not apply to standard essential patents. This has had the potential effect of the licensees and potential licensees not agreeing to reasonable terms, leading to patent holders not obtaining fair value for their SEPs. The hope is that with the update allowing injunctions, the terms of SEPs will be more favorable to the patent holder.
The whole reason for identifying SEPs is to ensure fair use of new technology in a controlled way. If a company cannot enforce the full rights granted to SEPs, there is minimal incentive for a company to share its IP. If companies fail to see value in the SEPs system, a series of proprietary products could be introduced in addition to even greater patent litigation than what is already seen today.
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How it Will Affect Existing Patents
The new policy update should help SEP holders obtain fairer terms in their FRAND licenses. SEP-holders are hoping that the International Trade Commission (“ITC”) will promptly issue rulings which state an injunction is applicable so that shipments of violating products to the United States are prevented from entering the United States at the border.
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A Recent Case
On April 9th, 2020, Lenovo and Motorola filed an anti-trust case against InterDigital for allegedly violating U.S. antitrust law and contractual FRAND commitments. The lawsuit states that the violations are related to its standard-setting participation and licensing practices related to 3G and 4G SEPs. This is the latest development in a much larger case.
According to the Essential Patent Blog, InterDigital “has engaged in a multi-pronged scheme, through a combination of agreements with its competitors and fraudulent promises, to unlawfully acquire, maintain, and exploit such market or hold-up power arising solely from the alleged essentiality of patents it contends have been incorporated into the Cellular Standards.”
The latest complaint alleges that InterDigital “agreed with others in the wireless telecommunication field to restrain competition through the adoption and propagation of the Cellular Standards” and that “[t]hrough agreement, the collective action of standard-setting, and the resulting standards.”
Essentially, the case is stating that by implementing cellular standards, the company is creating a monopoly and holding power over the holders of SEP technology for 3G and 4G. They are also charging excessive royalties for 3G and 4G innovations included in products that are not related to their SEPs, and showing favoritism to other market competitors. This violates FRAND licenses.
With the new injunction policy in place, it will be interesting to see how this plays out.
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