Thursday, April 7, 2022

Ericsson says Apple 'walk[ed] back its agreement to accept Ericsson's [5G patent licensing] offer if it is confirmed as FRAND' by Texas court

If both Ericsson and Apple are sincere in this regard, the United States District Court for the Eastern District of Texas--whose Chief Judge Rodney Gilstrap decided on the structure of the dispute and the schedule two weeks ago--may become the center of gravity of their patent dispute. While no single court anywhere in the world is going to set a license fee for non-standard-essential patents, it would put the parties much closer to an agreement if the terms on which Apple licenses Ericsson's SEPs (up to 5G) were set. It's hard to imagine they couldn't then easily agree on the rest. A complete agreement on SEPs and non-SEPs would result in the dismissal of roughly three dozen lawsuits in at least half a dozen countries.

That's a big If, though. Not with respect to Ericsson, which says that $5 per device (with Apple probably having missed out on the opportunity to get a $1 per-unit early-signing bonus) is a fair, reasonable, and non-discriminatory (FRAND) rate. The Swedish company undoubtedly wants to conclude a license agreement as soon as that one--a rate it publicized a while ago--has been blessed by the Texas court. What's unclear here is Apple's agenda.

Actually, Ericsson's lawyers are not in doubt about what Apple is up to. Here's what they told the Texas court in a filing made yesterday:

"Anxious to avoid the consequences of rejecting Ericsson’s FRAND offer and infringing Ericsson’s patents, Apple asked various courts worldwide to stay or dismiss Ericsson’s patent infringement cases by pointing to this litigation and representing that Apple’s agreement to be 'bound' effectively mooted the other cases. [...] Apple’s strategy has become apparent. Apple wants to tell courts around the world that it is 'bound' by this [Texas] case in an attempt to avoid the consequences of its infringement and rejection of Ericsson’s FRAND offer, but despite Apple’s contrary representations, Apple appears unwilling to actually be 'bound' to perform under Ericsson’s offer if Ericsson’s offer complies with FRAND—as will be determined by this case."

The current situation is similar to the one in January when Apple proposed to have everything (at least everything related to SEPs) resolved in Texas--until Ericsson asked Apple to make a legally binding commitment to that. But this time around, Apple may not be able to avoid coming clean one way or the other.

At a mid-March hearing, Apple made it sound like they would accept a global SEP portfolio rate to be set by the Texas court as the resolution of the SEP part of the dispute. In jurisdictions like the UK and Germany, the courts just enjoin an implementer unless it takes a global license. In the U.S., courts don't rule on foreign patents unless both parties really want them to. That's why Judge Gilstrap specifically asked:

"Is it either party's request of the Court that this Court set an appropriate FRAND rate for non-U.S. patents as a part of either as stand-alone patents or as a part of a portfolio?"

WilmerHale's Joseph "Joe" Mueller, one of Apple's absolutely favorite litigators, appeared to make an unequivocal commitment to making the Texas case the one to resolve them all (apart from non-SEPs, of course):

JOE MUELLER (FOR APPLE): "It is, Your Honor. And to be clear, this is an issue where consent of the parties is, we believe, necessary. And we understand that Ericsson has consented to Your Honor and this Court setting global FRAND rates; and on that basis, Your Honor, we think the efficient adjudication of the parties' global dispute would be to do exactly that.

What we're doing in our case before Your Honor is saying if Ericsson was genuine and sincere in what they said was the most efficient way to try to adjudicate these types of disputes, let's do it. Let's do it here. We're ready to go. We're ready to engage on the merits in a very expeditious fashion.

"So the short answer is yes, we're prepared to do it, and we are prepared to do it on basis that Ericsson in the past has said exactly the same thing."

Given that parties are always bound by a court ruling, but not necessarily to the effect that a license agreement falls into place, Alston & Bird's Theodore "Ted" Stevenson (who scored a major FRAND win for Ericsson as lead counsel against HTC) followed up on this. He wanted to ensure that Apple wasn't just OK with the Texas court making a determination, but that this would really have the net effect of a new license agreement on the terms Ericsson is seeking to have declared FRAND. Joe Mueller made it even clearer that Apple wants the Texas court to determine the rate, and that his client would enter into a license agreement on that basis:

JOE MUELLER (FOR APPLE): "I'll try to be as clear as I possibly can be on this point because it is crucial. Mr. Stevenson is right that we have said--and I actually was alluding to this in the remarks with which I began--that there's no legal contractual requirement on prospective licensees to take a FRAND license. If they don't do it, they proceed at their own risk with respect to infringement claims.

"But notwithstanding the fact that Apple is not legally required to engage in portfolio rate setting and can't be forced to do it, we're choosing to do it before Your Honor and to be bound by it. So as an election by Apple to resolve this dispute, we are here; we are here to do global rate setting in a binding fashion where Apple will be bound.

"So we're trying to make it as clear as we possibly can that we are not under any definition of the term 'unwilling licensee', a party that would fall in that category. We are here; we are ready to go."

But according to Ericsson, Apple sent a letter nine days later (March 25) "retraining from its position" at the scheduling conference. Ericsson says that the letter--which hasn't been made publicly accessible--"propose[d] a radically different set of terms from the terms of Ericsson’s offer—disregarding the framework that had been discussed at the hearing." Ericsson criticizes those terms as "legally defective and not capable of resolution in a breach of FRAND case," but above all, Ericsson faults Apple for "miss[ing the point that it is Ericsson’s [$5 per device] offer to Apple [as opposed to the new proposal made by Apple that Ericsson takes issue with] that is the basis of this case and will be tested for FRAND compliance." (emphasis in original)

So, what is Apple really willing to be "bound" by in the end? Ericsson made a filing yesterday to ask the court to require Apple to come clean (this post continues below the document):

22-04-06 EDTX376 Ericsson M... by Florian Mueller

The apparent disagreement may relate to whether the Texas decision should be binary.

Ericsson didn't ask the court to set a rate anywhere from 1 cent to 5 dollars per device. If Ericsson had wanted to do that, it could also have gone to the UK. Instead, Ericsson wanted to do exactly the same as in the HTC case: to have its own position blessed as FRAND.

That's a logical position to take. Ericsson doesn't just view $5 per unit as an opening offer or an extreme position for litigation purposes (I can't help but think of Apple's $40 per device damages claim--over just a handful of software patents--in the 2014 Samsung trial). Instead, Ericsson believes that the outcome of the case is going to be that it's in its right to demand $5 per device.

By contrast, Count IV of Apple's counterclaims (originally Count IV of Apple's FRAND countersuit, but the FRAND parts of that countersuit got consolidated into Ericsson's FRAND case as compulsory counterclaims) seeks a "declaration of FRAND royalties for Ericsson's global cellular SEP portfolio." In its answer to Apple's counterclaims, also filed yesterday, Ericsson denies Apple's allegations other than the fact that it has made a FRAND commitment to ETSI--and "denies that Apple is entitled to any relief in this action, as requested or otherwise."

It could be that Ericsson is talking about a binary decision and Apple is talking about rate-setting that could result in any number. Here's a passage from what Ted Stevenson said at the mid-March hearing:

"And so what we believe is that if Apple is willing -- we've made an offer. We made an offer on October 2nd, a financial offer, and followed up with a fully integrated contract on November 4th. If Apple is saying in this case that if that is found by the Court or the jury to be FRAND, that they'll enter into that contract and abide by it, then yes, we will agree to be bound. And I think that's what they intended with that, and I think that would be the outcome of the case. But what's important are the terms and conditions, not just the rate."

Apple may already shed some light on this in a response to Ericsson's motion. In the meantime, I doubt that any court anywhere in the world will stay its cases because of the Texas action, in which it isn't even clear yet what the parties really accept to be bound by or to.

I also have an Apple filing to share--its answer to Ericsson's first amended complaint (this post continues below the document):

22-04-06 EDTX376 Apple answ... by Florian Mueller

That filing contains a detailed history of licensing negotiations from Apple's perspective. IT also says the following about the patent infringement cases Ericsson has brought since the expiration of the previous license agreement:

"Starting January 17, 2021, Ericsson has filed at least thirty-four additional actions against Apple in U.S. District Court, the International Trade Commission ('ITC'), and five other countries, seeking to enjoin Apple or exclude its products in order to coerce Apple into accepting non-FRAND royalties: two actions in the Western District of Texas, three investigations in the ITC, six actions in the Netherlands, five actions in Belgium, two actions in Brazil (one against Apple and one against a reseller of Apple products, Allied Tecnologia SA), fourteen actions in Germany, and at least two actions in Colombia."

Clearly, the ITC and Germany are the enforcement hotspots here. Each of the 14 German cases relates to one patent (or if more than one, then certainly from the same patent family). The three ITC complaints involve a total of a dozen patents, though it's common to drop patents during the course of ITC investigations to streamline the process, enabling the agency to keep its ambitious timelines.

The Colombian filings haven't previously been announced or disclosed. It's probably the first high-profile dispute in which a patent holder goes there, though litigants are trying out more and more venues. Nokia is a good example: its disputes with OPPO and Vivo involve filings in places like Indonesia (and Russia, but with Nokia having stopped selling any products there, it may also want to withdraw its patent cases).

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