Within approximately 48 hours, Huawei and ZTE have been denied a stay of the ITC investigation of InterDigital's latest complaint as well as expedited FRAND determinations in federal court. This means that, unless there are unforeseeable delays in the ITC investigation and/or an intervention by the antitrust regulators at the FTC, the ITC will have to decide on a potential exclusion order before the United States District Court for the District of Delaware sets a FRAND rate in order to bring about a standard-essential patent (SEP) license agreement between InterDigital and each of the two leading Chinese telecommunications hardware makers.
This is the two-page order Judge Andrews entered today (this post continues below the document):
Huawei and ZTE had filed a joint reply brief in support of their motions on Monday. Three days later, the motion has been turned down. It's not an exaggeration to say that Judge Andrews gave the two companies short shrift, not only because of how quickly he refused to resolve the FRAND rate part of the case ahead of patent infringement and validity issues but also in light of how he explained the reasoning behind his decision. While I think this outcome is unfortunate from a FRAND point of view, I've said in previous posts on this subject that Huawei and ZTE's strategy to rush the Delaware-based federal court to a FRAND decision was somewhat ambitious and wouldn't have solved the broader SEP injunction problem even if it had worked out for these particular defendants. Judge Richard G. Andrews focused on the cases before him rather than the greater FRAND picture and felt that "determination of the FRAND rate would at most resolve a tiny sliver of this case". He declined to engage in a race with the ITC:
"It does not seem to me like a very practicable idea to try to race to a partial judgment here so that each defendant will be in a better position in the ITC litigation."
That's consistent with what I've been saying all along. But where I disagree with the judge is that Huawei and ZTE appear "to ask that [Judge Andrews] enjoin the ITC (although it is couched in the form of enjoining [InterDigital] from presenting arguments to the ITC)". I think Huawei and ZTE legitimately want the FRAND licensing issues resolved in federal court. It's just problematic to tell one court to pre-empt another forum.
Now we clearly have a situation that calls into question the usefulness of the FTC's approach to SEP injunction issues in the Google-Motorola case. Huawei and ZTE did precisely what defendants against Google's SEP assertions would be required to do under the envisioned deal. But the ITC is prepared to press on with its investigation, which means that the two Chinese companies have to negotiate with InterDigital at the threat of an injunction, a circumstance likely to result in non-FRAND rates, and the federal court, for reasons that I can understand, won't make its FRAND determinations in the near term.
Considering the ITC's complicated and cumbersome approach to the FRAND issues in the Samsung-Apple dispute, I don't think the problem of SEP abuse can be solved in the United States unless there's a way for defendants to prevent or at least stop an ITC investigation pending a FRAND determination action.
Meanwhile InterDigital is stepping up its enforcement activities. Yesterday it filed a motion with the ITC to assert multiple claims from an additional patent (a continuation patent of a previously-asserted one) against all four respondents in its ITC investigation (Samsung, Nokia, Huawei and ZTE) and has already amended its federal complaints against Samsung and Nokia accordingly.
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