Wednesday, January 12, 2022

InterDigital, Lenovo (Motorola Mobility) readying for FRAND trial: one patent valid and infringed, one invalid, shortcut injunction denied for now

We're very close now to the InterDigital v. Lenovo FRAND trial in London, so I'd like to provide a quick update to my July post on this dispute, InterDigital's hole-in-one in UK court build tremendous pressure on Lenovo (Motorola Mobility) to take global cellular SEP license pursuant to Unwired Planet. InterDigital prevailed on the merits with respect to EP2485558 on a "method and apparatus for providing and utilizing a non-contention based channel in a wireless communication system" because Judge Hacon deemed it valid and essential to the 4G (LTE) cellular communications standard.

Apparently the pressure I was talking about has not yet resulted in a settlement, though it may still happen on the eve of the trial (a juncture at which license agreements often fall into place).

Two things have happened since InterDigital's first win (apart from InterDigital having started litigation against OPPO):

  1. On January 6, Justice Mellor held that EP3355537 on a "Mac multiplexing and tfc selection procedure for enhanced uplink" is invalid under his claim construction. The judge also threw in a dictum according to which he identified a typical squeeze: if he were to adopt InterDigital's espoused claim construction, which is narrower than his, he'd consider EP'537 valid but neither essential nor actually infringed.

    This (obviously appealable) outcome does not prevent this month's FRAND trial from going forward, as a patentee needs to win only one technical trial to be entitled to a global portfolio rate-setting decision and related injunction.

    The decision--unless and until overturned--does complicate InterDigital's enforcement of this patent in Germany. There is no strict res iudicata impact, but the UK decision will up the ante for InterDigital in German courts, which under the country's bifurcation system do not entertain a full invalidity defense but instead merely determine whether to stay the infringement proceedings pending a parallel invalidation action they consider highly likely to succeed. It's just a summary assessment of the probabilities of different outcomes, and in that regard, UK cases bear a lot of weight with German judges (who respect their UK colleagues, and some of the judges from both jurisdictions regularly meet--or at least they did so before the pandemic). That's why some parties even brought declaratory judgment actions in the UK just to use the decisions as persuasive authority in parallel German proceedings.

    In order to dissuade a German court from staying a case in this situation, InterDigital would have to either make a showing of clear legal error (a tall order) or, which is much more realistic, persuade the German court of a different claim construction. In the latter case, a defendant would obviously point the German court to the dictum according to which the UK court didn't consider the patent essential to the HSUPA standard under a narrower construction. Psychologically, that would help the defendant, but nowhere near as much as an invalidity finding: the German court would perform its own essentiality analysis--and by virtue of not being the appeals court for the London decision, the German court does not have to justify why it disagrees.

    So even if for whatever reason the UK decision on the merits did not get overturned, EP'537 wouldn't be dead in Germany--but, let's put it that way, it would be a noteworthy achievement on the part of InterDigital's German counsel to obtain a favorable outcome based on InterDigital's preferred claim construction, and amazing if they prevailed on Justice Mellor's broader one. Let's face it: it hurts to be squeezed.

  2. Last month, Judge Hacon denied without prejudice InterDigital's injunction request following its EP'558 win. I would describe InterDigital's position as follows: Lenovo had forfeited its rights under InterDigital's FRAND pledge by not committing to take a license on whatever terms are in fact FRAND (as Justice Birss put it in Unwired). In other words, InterDigital was looking for a shortcut and trying to get leverage over Lenovo without even having to conduct the FRAND trial. This here is what Lenovo said in a court filing (emphasis in original):

    "… Lenovo is prepared to commit to a licence on FRAND terms. It is and has for a long time been prepared to commit to a licence settled by the United States court incorporating a determination by the Chinese court. It is indeed prepared to commit to a licence settled by this Court, so long as a mechanism is provided for ensuring that the determination of the United States and Chinese courts in the existing proceedings are given effect.

    "What it should not be forced to do is to commit, in advance of [the FRAND] trial, to take a licence settled by this court alone which either does not or may not give effect to the decisions of either IDC's home court (the US) or its home court (China), and which on IDC's case would in fact settle and put an end to those foreign proceedings …"

    Judge Hacon summarized Lenovo's stance as follows:

    "Plainly, Lenovo are not prepared now to give an unqualified commitment to take a licence on the terms to be settled by this court following the FRAND trial in January. Lenovo say that they are prepared to commit to a licence settled by a court in the United States, but this is subject to the proviso that there is some determination by the Chinese courts of matters forming part of the licence. Without knowing the form and extent of such determination by Chinese courts which Lenovo would require, whether this could be agreed with InterDigital and/or sanctioned by a court in the United States, I must assume that the commitment is just as qualified."

    The question was then one of French law: whether Lenovo as a third-party beneficiary had not acted in good faith and therefore lost its FRAND rights under the ETSI pledge, which must be interpreted in accordance woith French law. Lenovo's "match winner" expert witness in this context was French law professor Philippe Stoffel-Munck, who by the way also spoke at my 2019 Brussels conference.

    The English court does not rule out that InterDigital will obtain an injunction (that's why I wrote "without prejudice" further above), and noted that "this is a matter which can only be decided after cross-examination of the experts and full argument" (which this month's FRAND trial is about).

This raises the question of what a German court would have decided in a comparable situation. The way the two jurisdictions deal with FRAND is not 100% comparable because German courts don't hold FRAND trials after which they enter conditional injunctions: they decide based on the parties' conduct whether an injunction is warranted. Effectively, however, it also comes down to "take a (global) license on FRAND terms or you'll be (locally) enjoined."

Looking at paragraph 59 of the UK ruling, Lenovo would probably have been considered an unwilling licensee in Munich:

"I was informed that on the working day before the application Lenovo brought proceedings in China to settle a global licence, but from the year 2024." (emphases added)

In InterDigital v. Xiaomi (anti-antisuit injunction), the Munich court explained that if you try to interfere with the enforcement of German patents (obviously including the German parts of European patents) through such actions in other jurisdictions, you're at risk of being deemed an unwilling licensee--and, as a result, may be enjoined once you lose an infringement action, without the court even spending much time looking at the patentee's licensing offer. All of that on top of being slapped with an anti-antisuit injunction, of course. So under the same circumstances, it would already be game over for Lenovo in Munich (probably also Mannheim, and even Dusseldorf).

I'm not going to attend the London trial (I haven't been there in many years), but with InterDigital being a major SEP holder and reasonably active SEP enforcer, there will be a strong interest in those proceedings on the part of people who are based there. I can't promise that I'll be able to comment on that FRAND trial, but I might depending on what exactly happens there, and how I manage to find out.

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