Wednesday, May 8, 2013

Ericsson allowed to pursue hard-to-prove claim of inequitable conduct against Samsung at ITC trial

The week before Christmas Samsung brought an ITC complaint against Ericsson as the first part of its retaliation for Ericsson's previous patent assertions. There has since been some further escalation in this dispute.

In its February 2013 response to Samsung's ITC complaint, Ericsson asserted (as usual) multiple affirmative defenses, one of which is inequitable conduct by Samsung and its patent attorneys during the examination of the relevant patents-in-suit. Ericsson alleges that some of the named inventors of various Samsung patents had participated in standard-setting discussions where they saw technical documents that constitute relevant and eligible prior art but weren't disclosed to the patent office in connection with the patent applications. The withholding of prior art an inventor is aware of can constitute inequitable conduct. This is, however, hard to prove, and I wish to clarify that I will give Samsung the benefit of the doubt until it's proven guilty. I've previously said in other contexts that I don't agree with some of the ways in which Samsung asserts standard-essential patents (SEPs), but I don't believe Samsung has been engaging for many years in abusive conduct relating to standards and standard-setting.

Still, inequitable conduct of the alleged kind is an important issue because participants in standard-setting shouldn't simply file patents on what they see in the relevant discussions, or on modified concepts that don't represent significant technological progress over what others have already created and presented.

Inequitable conduct is hard to prove. I've seen statistics according to which such defenses succeed, on average, in only one of 250 cases. Not only is this defense difficult to prevail on but it's also subject to a heightened pleading standard in U.S. federal court, where allegations of fraudulent behavior must be laid out with greater particularity than other defenses.

In early April Samsung sought to benefit from a high pleading standard and brought a motion to strike Ericsson's inequitable conduct defense. In late April Administrative Law Judge (ALJ) E. James Gildea denied Samsung's motion. A public redacted version of his order became available yesterday (after the parties had the chance to request redactions).

Judge Gildea notes in his order that "inequitable conduct defenses may only rarely be successful on the merits" (clarifying immediately in a footnote that he "takes no position at this time with respect to the inequitable conduct defenses asserted in this Investigation"). But "it is up to the parties to determine where they would prefer to focus their time and effort". In other words, if Ericsson wants to try what is statistically a long shot, it's free to do so -- it simply has to know whether this is an exceptional case in which this kind of defense can succeed.

Judge Gildea's order takes note of the heightened pleading standard in federal court and of how other ALJs at the ITC have held defendants to a rather high standard, but he decided the way he deems appropriate. This means some clarification of the standard is needed, and maybe Samsung will ask the Commission, the six-member decision-making body at the top of the U.S. trade agency, to review Judge Gildea's ruling. It's a denial "without prejudice to Samsung's ability to raise the issue in another manner after discovery on the issue has moved forward".

The role of standardization documents (technical proposals etc.) in patent examination is increasingly important. Some patent offices appear to make certain efforts to cooperate more closely with standard-setting organizations, or at least they are giving consideration to this possibility. Recently a Samsung SEP case against Apple in Mannheim, Germany, was stayed because of doubts that the patent-in-suit was valid, and a standardization-related document was the key prior art reference at the trial, at which the presiding judge indicated he'd like patent offices to pay closer attention to standard-setting documents when examining patent applications related to cellular standards.

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