Thursday, January 20, 2022

Apple countersues Ericsson, seeks U.S. import ban against mobile base stations, and proposes that both parties withdraw all patent infringement actions, let Texas court set license fee

The flurry of Ericsson-Apple filings with the United States International Trade Commission (USITC, or just ITC), a U.S. trade agency with the quasi-judicial power to U.S. import bans, continued yesterday. For information on Ericsson's three compaints against Apple, may I refer you to my most recent post on the dispute, which contains a hierarchical overview of the seven U.S. cases I had previously discovered (one FRAND action by either party, two federal lawsuits by Ericsson, and three ITC complaints by Erisson).

As I wrote, it was a given that Apple would countersue, though the wide discrepancy in the parties' exposure to patent assertions makes it unlikely that Apple can gain decisive leverage that way. And indeed, Apple has now also brought a request for a U.S. import ban against Ericsson's mobile infrastructure products, asserting three mmWave-related patents (from two families) in the following ITC complaint (this post continues below the document):

22-01-19 Apple v. Ericsson ... by Florian Mueller

The title of the complaint (which was filed by Fish & Richardson) is In the Matter of Certain Cellular Base Station Communication Equipment, Components Thereof, and Products Containing Same (complaint no. 337-TA-3599). These are the asserted patents, two of which are from the same family and all three of which are related to millimeter wave (mmWave) technology:

  1. U.S. Patent No. 9,882,282 on "wireless charging and communications systems with dual-frequency patch antennas"

  2. U.S. Patent No. 10,263,340 (same title, same family as '282 patent)

  3. U.S. Patent No. 9,667,290 on an "electronic device with millimeter wave antennas"

Apple has not previously asserted these patents in litigation. Since the days of "thermonuclear war" on Android, Apple has been purely defensive. Presumably Apple will also bring or has already brought a companion complaint against Ericsson in federal court, but I haven't found one on PACER yet. Also, I would expect Apple to countersue in some of the foreign jurisdictions (particularly in Europe) in which Ericsson has already filed infringement actions.

Let's take a look now at the following passage from Apple's ITC complaint against Ericsson:

"[Ericsson] recently filed a series of lawsuits and legal actions around the world, despite the pending Apple Inc. v. Telefonaktiebolaget LM Ericsson, No. 2:21-cv-00460-JRG (E.D. Tex. Dec. 17, 2021) matter that provides a global resolution of the parties’ dispute, which Apple was under the impression that Ericsson accepted. [Ericsson's] actions in the United States and around the world demonstrate that they do not want a Court setting fair, reasonable, and non-discriminatory ('FRAND') terms for their patents. By way of such actions, [the Ericsson entities] are improperly using their purported standard essential patents ('SEPs') and non-standard essential patents ('NEPs') as ammunition through injunctions to coerce Apple to take an unfair, unreasonable, and discriminatory license to their purported SEPs. To the extent [the Ericsson entities] are willing to withdraw all of their lawsuits and legal actions, Apple is willing to do the same. However, if [the Ericsson entities] are not willing to agree to having the Texas court determine the FRAND terms for a cross license, Apple is forced to respond to Respondents’ infringement of Apple’s patents." (emphasis added)

This shows that Apple does not expect to gain much leverage from a tit-for-tat in courts around the globe. There are two logical flaws here:

  1. At the most, the parties could withdraw all of their SEP assertions in favor of a FRAND determination by a court (or through alternative dispute resolution, typically arbitration)--but not their non-SEP cases. That is because non-SEPs are not subject to FRAND licensing obligations. Apple itself asserted lots of non-SEPs against Android device maker during the aforementioned thermonuclear war and was not only seeking but occasionally also obtained injunctions in the U.S. and Germany. Apple insisted that it had the right to pursue and enforce injunctive relief over non-SEPs. The value of non-SEPs is established--unless parties voluntarily agree on the terms or on a valuation mechanism they submit to an arbitration panel--by enforcing those patents and seeing who gains how much leverage. Practically, it's a question of the cost of having to comply with injunctions (be it by means of a workaround, which costs money and may make products less attractive to purchasers, or by discontinuing the sale of particular products in particular markets).

    Ericsson is entitled to a FRAND rate for its SEPs plus whatever value, FRAND or not, its non-SEPs prove to have when they get asserted (of course, with some adjustment for Ericsson being licensed to Apple's patents, where again SEPs are subject to FRAND and non-SEPs are worth whatever they are worth in commercial terms).

  2. Apple describes its own Texas action as the best form of dispute resolution and says it "was under the impression that Ericsson accepted." However, Ericssopn had previously brought its own Texas case, which Apple now wants dismissed. If Apple wants a FRAND determination in that district, a far more constructive alternative to a motion to dismiss would have been to counterclaim in the action Ericsson had already brought. In light of that, I think it's fair (and more accurate than Apple's ITC complaint) to say that the parties not only disagree on commercial terms but also on the procedural path, and so far Apple has not convinced me through its conduct that it is not simply engaging in hold-out (or "reverse hold-up" as Ericsson put it in one of its complaints).

Nevertheless, it is interesting--if not astounding--that Apple would like the global rate to be set in the Eastern District of Texas:

At first sight it looks like Apple is prepared to jump into the Eastern District of Texas frying pan to avoid the overseas injunction fire.

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