Monday, March 4, 2013

Nokia says InterDigital must offer FRAND determination prior to seeking U.S. import ban

In the ITC investigation of InterDigital's January 2013 complaint against Samsung, Nokia, Huawei and ZTE, the envisioned FTC-Google consent order relating to standard-essential patents (SEPs) plays a key role in defendants' strategies, even though InterDigital claims it is "not a basis to adjudicate subsequent cases".

Different defendants are leveraging the FTC-Google settlement in different ways. While Huawei and ZTE, two Chinese rivals who are also suing each other, asked the United States District Court for the District of Delaware for FRAND determinations (rate-setting decisions) and are seeking a stay of the ITC investigation pending those parallel actions, Nokia expects InterDigital to follow the procedures laid out by the FTC for Google. The proposed consent order requires Google to send out letters to potential defendants well in advance of any request for sales or import bans in order to inform them of their entitlement to a license on FRAND terms and to propose a procedural path to a FRAND determination. If Google doesn't comply with those requirements, it can't pursue injunctive relief.

Nokia has to defend itself in this ITC investigation against only a single patent, U.S. Patent No, 7,941,151 on a "method and system for providing channel assignment information used to support uplink and downlink channels". InterDigital had already asserted the other patents-in-suit against Nokia in other complaints. The early-January complaint primarily targets Samsung, and secondarily Huawei and ZTE.

A public redacted version of Nokia's answer to InterDigital's ITC complaint finally became available today and, without mentioning the FTC or Google, Nokia's 11th affirmative defense (equitable and promissory estoppel) presupposes that InterDigital has to abide by the same rules, or at least by the same principles:

"30. InterDigital’s claims are barred in whole or in part based on equitable and/or promissory estoppel. InterDigital committed to grant licenses to the 151 Patent on FRAND terms and has violated that commitment by its failure to provide Nokia with a FRAND offer and to conclude a license on FRAND terms and conditions, and by instead attempting to exclude willing licensees such as Nokia from importing standard-compliant products into the U.S. without offering the ability to have FRAND license terms determined by a competent authority."

Nokia additionally points to its reliance on InterDigital's promises (a requirement for equitable estoppel) and InterDigital's obligations under the FRAND licensing commitment it made to the European Telecommunication Standards Institute (ETSI).

In its 12th affirmative defense (waiver) Nokia argues, as Judge Posner did in a famous Apple v. Motorola ruling, that "[i]n committing to grant irrevocable licenses to its declared-essential patents in exchange for FRAND compensation, InterDigital knowingly relinquished its right to injunctive relief against willing licensees". The term "willing licensees" is an obvious reference to the logic of the envisioned FTC-Google consent decree.

After several years of litigation with Nokia, which resulted only in partial agreements but not a comprehensive settlement, InterDigital would probably dispute Nokia's willingness to take a license. And Nokia's answer to InterDigital's ITC complaint doesn't specify inhowfar and under what circumstances Nokia would be willing to do so, but it appears that Nokia is interested in a FRAND determination by a competent authority (arbitrator or federal court). For now, however, Nokia primarily takes the position that InterDigital has to meet the obligations resulting from its FRAND commitment on the one hand and the expectations of U.S. antitrust regulators on the other hand.

While unrelated to the FTC-Google settlement, Nokia's 13th affirmative defense (inequitable conduct) is also interesting from a broader standardization perspective. According to Nokia's allegations two of the three InterDigital employees listed as inventors of the '151 patent "deliberately withheld printed publications demonstrating that the subject matter of one or more claims of the 151 Patent was invented earlier by other participants in the organization responsible for developing the LTE cellular standard". Nokia's filing shows tables that compare the asserted claims of the '151 patent to proposals made by Siemens and Motorola. Allegedly, "the decision to withhold the Motorola Proposal and the Siemens Proposal [from the patent examiner] was deliberate, and made with fraudulent intent". Nokia says the two inventors attended standardization working group meetings at which the allegedly-withheld proposals were made. And "[t]he inventors [accused of fraudulent conduct] disclosed several working group documents to the Examiner from other meetings attended by the inventors and occurring around the same time as the Motorola Proposal and the Siemens Proposal".

Nokia's position is that InterDigital's '151 patent is invalid and/or unenforceable. If Nokia is right, a FRAND determination with respect to this patent won't be needed, and InterDigital's reputation will be seriously damaged. InterDigital's story is that it contributes innovations to industry standards, but Nokia now says that at least in the case of the '151 patent InterDigital has merely patented what other participants in the same standard-setting process actually invented.

Since Nokia levels such serious accusations in the publicly-available part of its filing, I wonder how much worse the allegations in its 15th affirmative defense (entitled "unclean hands") may be. That part spans more than four pages, and its entire content has been redacted out.

If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents and Google+.

Share with other professionals via LinkedIn: