Friday, February 22, 2013

Nokia, Huawei say InterDigital wants U.S. import ban to force them into worldwide license deal

InterDigital's use of standard-essential patents (SEPs) against Samsung, Nokia, Huawei and ZTE appears ever more problematic as the ITC investigation of its early-January complaint against Samsung, Nokia, Huawei and ZTE as well as the companion lawsuits in federal court in Delaware progress. Yesterday I reported on a couple of related InterDigital filings in Delaware according to which it does not consider Huawei and ZTE willing licensees because the Chinese companies allegedly refuse to make a licensing commitment with respect to patents that would later be found by a court of law to be invalid, not infringed, or not standard-essential. Today a variety of new documents, filed yesterday, showed up on the ITC's electronic document system, and it seems there's even more to be concerned about in connection with InterDigital's conduct.

Nokia and Huawei independently state in their public interest submissions that InterDigital insists they take a worldwide license and (which Nokia says explicitly and Huawei indicates) demands royalties even for those companies' sales in countries in which InterDigital doesn't even hold any standard-essential patents. I'll quote Nokia first:


Permitting InterDigital to obtain an exclusion order would further harm the public interest by condoning the misuse of InterDigital's declared-essential U.S. patent portfolio. As an initial matter, InterDigital is seeking to use its declared-essential U.S. patents, through a proceeding before a U.S. administrative agency, to pressure Nokia into signing a global license agreement under which Nokia would need to pay royalties to InterDigital for Nokia's global sales, including Nokia's sales in countries where InterDigital has no essential patents, and perhaps no patents at all [...] as well as to force Nokia to take a license and pay royalties to InterDigital for patents that are invalid or not practiced by Nokia."

Huawei's allegations corroborate Nokia's version of te story:

"Huawei remains ready and willing to pay the court-determined FRAND rate. InterDigital has made it clear it is far more interested in exploiting the hold-up power of the ITC process than complying with its FRAND obligations. Issuing an exclusion order applicable to Respondents' products that practice these SEPs would facilitate InterDigital's effort to bypass its FRAND commitments, and to leverage exclusionary relief in this proceeding into a worldwide license on non-FRAND terms."

The issues raised by Nokia and Huawei are serious if true, and I have no reason to doubt the veracity of what those companies represent to the ITC. Antitrust enforcers in different jurisdictions should ensure that SEP holders don't leverage patents in one major market into worldwide licenses resulting in royalty obligations that are clearly not FRAND. Worldwide license deals make a lot of commercial sense, but only if they result from negotiations, not if they are brought about by means of abusive sales and import bans.

Another docment filed in this ITC investigation (but the content of which is not publicly accessible yet) is a Samsung motion to terminate the investigation with respect to half a dozen patents. It appears that this is related to Samsung's previous communication to the ITC about InterDigital having purchased samples of unlawful imports at a time when Samsung still had a license to those patents.

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