December is going to an exceptionally important month for the Ericsson v. Apple dispute, with a FRAND trial in the Eastern District of Texas starting on the 5th, and a FRAND hearing to be held by the Munich I Regional Court on December the 21st--seven years and one day after the parties' settlement of their prior dispute.
In preparation of the FRAND trial in Marshall, Texas, a pretrial conference is taking place. Day 1 was yesterday (November 21). Judge Rodney Gilstrap, who is presently also the Chief Judge of the United States District Court for the Eastern District of Texas, ruled right from the bench on various pretrial motions. Judge Gilstrap denied all of Apple's motions for summary judgment, but granted two of Ericsson's:
Motion for Summary Judgment on Apple’s Counterclaim Count I (Breach of the 2015 License Agreement)
Apple first argued about a year ago that Ericsson breached the prior license agreement by bringing its FRAND action in the Eastern District of Texas in October 2021. But the prior license agreement merely precluded patent infringement lawsuits until mid-January 2022. Ericsson's FRAND case was about the parties' conduct in negotiations of a new license agreement. Apple even wanted Ericsson's case dismissed early on (and effectively superseded by a case Apple itself brought in December 2021)--but that didn't happen.
Given that Judge Gilstrap never bought Apple's breach-of-contract argument, it comes as no surprise that Ericsson's related motion for summary judgment succeeded. Apple would obviously like to argue to a jury that Ericsson acted unfaithfully by asking the Texas court for clarification on FRAND (as opposed to suing Apple over patents to which it had a license at the time, which Ericsson didn't do), but won't be allowed to do so.
Ericsson’s Motion Under Fed. R. Civ. P. 44.1 for Determination of Foreign Law That the ETSI IPR Policy’s FRAND Contract Does Not Require Granting a License or Other Rights to Implementation Patents
This motion was granted "with instructions as set forth in the record"--a record to which I don't have access at the moment. Also, the motions and the parties' related briefs are still sealed. But the headlines are reasonably informative. Here, it is clear that Apple wanted to try the same thing in district court that it has been trying in the ITC, which is to accuse Ericsson of asserting non-standard-essential patents (non-SEPs) in parallel actions, allegedly for the purpose of extracting supra-FRAND royalties from Apple. Apple wants to turn the antitrust concept of tying on its head. The law is clear and simple: you can assert SEPs and seek a FRAND royalty; and you can assert non-SEPs and do whatever you want except under extremely rare circumstances (such as a compulsory license of the kind it is sometimes sought in the pharmaceutical industry).
Of course, whenever parties agree on license agreements, they typically converge on one royalty rate that covers all SEPs and non-SEPs, though I have seen exceptions, such as Nokia asserting dozens of non-SEPs against HTC about a decado ago because HTC had taken only a SEP license and refused to pay for the use of Nokia's non-SEPs. The Nokia-HTC situation was an exception that proves the rule, and in any event, the common practice of comprehensive portfolio licenses (SEPs plus non-SEPs) doesn't constitute a legal obligation. ETSI's IPR policy is just not concerned with what parties do with their non-SEPs; simply put, that is none of ETSI's business.
And that is, apparently, what Judge Gilstrap has found, though I'd like to know the more specific instructions.
There is an Ericsson motion that I actually thought would also succeed: Motion for Summary Judgment on Apple’s Counterclaim Count IV (Declaration of FRAND Terms for Ericsson’s Global Cellular SEP Portfolio). I'm a bit surprised that the court denied it, given that U.S. courts so far have declined to make such portfolio rate-setting decisions unless both parties ask for it (and even when parties requested rulings involving foreign patents, U.S. judges have sometimes exercised their discretion to deny such requests). The real question in the case is whether Ericsson's original licensing offer to Apple ($5 per iPhone, or $4 if Apple had signed up early, which it didn't) was in line with Ericsson's FRAND licensing obligations.
There are good reasons to conclude that Ericsson's original position was FRAND. The same Texas court found that a royalty demand of up to $4 per HTC phone--and even the most expensive HTC phone is cheap compared to an iPhone--was OK for a 4G license; now we're talking about Apple's far more expensive products, and we're in the 5G era. If the jury now found that Apple should pay less to Ericsson (in absolute terms, or even just relative to its high prices) for a 5G license than the same court found HTC should pay for a 4G license (which, again, was affirmed by the United States Court of Appeals for the Fifth Circuit), that wouldn't make sense. There is no point in looking for some new royalty rate somewhere between Apple's and Ericsson's positions. If Ericsson's initial offer is found to be FRAND, that should be the end of the story.
The pretrial conference will continue today. Here are the minutes of yesterday's part:
Minutes for Pretrial Conference - Day 1 - Held Before U.S. District Judge Rodney Gilstrap
