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  • Marta Beckwith

Answers to First Pop Quiz

Here are the answers to the quiz. The first set of cases was the dispute between Microsoft and Motorola, the second the IPCom litigation with Lenovo and the third the Conversant/Huawei dispute. The jurisdictions and why they are outliers are as follows.


Jurisdiction 1 – the United States.


Patent damages in the United States, including for SEPs, usually are much higher than anywhere else in the world. The US is also a very large market for consumer based standardized products. US companies are very active in developing telecommunications (and other) standards and consequently many FRAND committed SEP portfolios have significant numbers of US-issued SEPs. This makes the US an attractive place to file for SEP Holders – large sales, large damages.


On the other hand, many large implementers are based in the United States or, as above, have comparatively large sales and significant subsidiaries in the United States. This means they are familiar with US laws and comfortable with at least some of its courts. The United States also allows for declaratory judgements to be filed by implementers seeking a determination of their rights under a SEP holder’s FRAND commitment, almost never issues injunctions to non-practicing entities or for FRAND committed patents and will, sometimes, issue anti-suit injunctions to prevent other jurisdictions from issuing injunctions for FRAND committed SEPs.


All of this means that the United States has historically been the primary jurisdiction for patent infringement lawsuits – both those filed by implementers seeking a declaratory judgement and those filed by SEP holders seeking a FRAND rate on their (usually extensive) US SEPs. However, it is now much harder to get a case to remain in the Eastern District of Texas (a jurisdiction that tends to have juries that are (or are perceived to be) biased against large companies, to favor patent holders and to award large damages). Thus, in recent years, the United States has fallen somewhat out of favor with large SEP holders because of that lack of an injunction and because many patent infringement lawsuits often end up in jurisdictions (such as the Northern District of California) that are perceived to be less patent holder friendly.


In answer to the question, the United States is an outlier because (a) its FRAND rates tend to be much higher than elsewhere in the world and (b) it has juries, not judges, decide patent damages (although whether FRAND rates are a decision for the judge or the jury is still up in the air under US law) which can lead to significant inconsistencies depending on where a case is venued internally within the United States.


Jurisdiction 2 – Germany.


Germany is an outlier because, as a general rule, it issues injunctions for infringement of FRAND committed SEPs without weighing (a) the FRAND commitment and whether and in what circumstances the FRAND commitment negates the right to seek an injunction; (b) the balance of equities and harms to the parties from such an injunction; or (c) whether granting an injunction on a FRAND committed SEP is in in the public interest.


Germany is also typically where implementers who sell in the EU have their largest sales volume and where SEP holders have their largest volume of European SEPs. It is thus easy for SEP holders to file in Germany (more patents to choose from and the SEP holder only needs one finding of infringement to get an injunction against all German sales of an entire product line) and more painful to the implementer when the (nearly) inevitable injunction issues (more sales that are enjoined so more pressure on the implementer to settle). This makes Germany the most used European court in FRAND disputes and one of the most often filed in location by SEP holders. Implementers however try to avoid Germany if at all possible and German cases are the cases for which implementers most often seek anti-suit injunctions.


Jurisdiction 3 – the United Kingdom (actually, the courts of England and Wales, Scotland is not having any part of this).


Historically, neither SEP holders nor implementers favored filing in the UK. Very few large companies are headquartered in the UK and most large implementers have (comparatively) small sales in the UK. Very few UK based companies participate in developing telecommunications standards and most SEP holders have limited UK SEPs in their portfolios.


However, a few years ago, the UK decided it had the authority to grant world-wide FRAND licenses no matter how limited the UK’s connection was to the dispute (and in every single case to date regarding a world-wide FRAND license it has been very limited). Also, the UK courts have been willing to issue anti-anti suit injunctions to prevent other courts (even those with significantly more connection to the dispute) from stopping the UK court from making a global FRAND determination or from issuing an anti-suit injunction in a FRAND licensing dispute.


The UK gold rush is on: large non-UK based SEP licensors with only a handful of UK SEPs in their portfolios have rushed to file cases in the UK seeking world-wide FRAND determinations against non-UK based implementers even those with comparatively small sales in the UK.[1] Implementers, however, have sought to avoid the UK courts as much as possible.


Jurisdiction 4 – France.


To say it plainly, even though France is the home of ETSI and French law governs the ETSI FRAND commitment, almost no one favors filing in France. The rules and legal system are arcane, implementers’ sales typically are small and SEP holders’ portfolios mostly devoid (often entirely) of French SEPs. The IPCom case was an outlier for filing in France.


Jurisdiction 5 – China.


Now on to China which is an emerging jurisdiction for FRAND disputes. Several years ago, Chinese courts began following the UK’s lead and determined that they have authority to issue worldwide FRAND licenses. They also issued anti-suit injunctions in several cases preventing other courts from making (or the SEP holder from seeking) FRAND determinations and/or injunctions in related matters. More on this in an upcoming post which will discuss the European Union’s complaint against China in the World Trade Organization and why China is an outlier (given the decisions issued by Jurisdictions 1 - 4, it clearly is not for the reasons stated in the EU’s first written submission).


So if you are interested, here are the three sets of cases reprised.


Lawsuit 1: Microsoft v. Motorola (original case filed in the US in 2010; German case filed in 2011)


After licensing negotiations failed, Microsoft filed a lawsuit in the United States District Court for the Western District of Washington against Motorola seeking a determination of its rights, and Motorola’s obligations, under Motorola’s RAND commitments (the standards were 802.11 and H.264, an MPEG compression standard). At the time, both Motorola and Microsoft were practicing entities headquartered in the United States. Microsoft filed the lawsuit in its home jurisdiction: it is incorporated in Washington state and is headquartered in the district in which it filed the lawsuit.


Motorola responded by filing a lawsuit against Microsoft in Germany seeking an injunction against Microsoft for infringement of Motorola’s German SEPs and other patents. While both Motorola and Microsoft had subsidiaries and sales in Germany, neither company has any special connection to Germany and Motorola’s SEP portfolio was primarily filled with non-German SEPs (although obviously it had some SEPs in Germany).


Microsoft in turn asked the US court for an anti-suit injunction to stop Motorola from pursuing an injunction in Germany. The court in the United States granted the request for an anti-suit injunction based on multiple findings. First, even though the parties were not exactly the same in each case, the parties were functionally the same because each case involved related entities. The Court also found that the issues were generally the same in both cases because, at the heart of both lawsuits, was the question of the rights and obligations of the parties under the FRAND commitment. Third, the court was concerned about inconsistent judgements because the injunction issue was before it, it was likely to find that an injunction was not a suitable remedy for FRAND committed patents and the German court was likely to grant an injunction. The court also discussed the issues of forum shopping and found that by filing the case in Germany, Motorola’s “actions have frustrated this court's ability to adjudicate issues properly before it. Without the issuance of an anti-suit injunction, the integrity of the action before this court will be lessened.”


Lawsuit 2: IPCom v. Lenovo


After licensing negotiations failed, Lenovo filed a lawsuit in the United States against IPCom seeking a determination of its rights, and IPCom’s obligations, under IPCom’s FRAND commitment. Although Lenovo is a Chinese company, it has a significant presence (through its 2005 acquisition of IBM’s computer business and its 2014 acquisition of Motorola Mobility’s smartphone business) and significant sales in the United States. IPCom is a German based non-practicing entity that is in the business of licensing patents.


IPCom responded by filing a lawsuit against Lenovo in the United Kingdom seeking an injunction against Lenovo for infringement of IPCom’s FRAND committed United Kingdom SEPs. Lenovo asked the US court for an anti-suit injunction to stop IPCom from pursuing an injunction in the UK. IPCom raced to file an additional suit in France and asked the courts in both the UK and France for an anti-anti suit injunction preventing Lenovo from pursuing its anti-suit injunction in United States.


Before the US court has the opportunity to rule on the original anti-suit injunction request, the courts in both the UK and France issue anti-anti suit injunctions preventing Lenovo from pursuing its anti-suit injunction in United States. France specifically requires Lenovo to withdraw its United States request for an anti-suit injunction as it relates to France.


Case 3: Huawei v. Conversant


After licensing negotiations failed, Conversant filed a lawsuit in the UK against Huawei seeking to have the UK court issue a world-wide FRAND determination. Conversant claims to be a Plano, Texas based company. But it does not really maintain any operations in Plano and instead “based” itself there in order to seek venue in Texas in its US litigations. Conversant’s parent company, MOSAID, is a Canadian company. Huawei is a Chinese company with limited sales in the UK.


Huawei in turn filed an action in China (where it is based and has the majority of its sales) seeking a FRAND determination on Conversant’s Chinese SEPs. Conversant responded by filing an additional suit in Germany seeking an injunction against Huawei sales in Germany based on its German SEPs which the German court ultimately granted. Huawei in turn sought and obtained an anti-suit injunction from the Chinese court preventing Conversant from enforcing its German injunction. Despite a jurisdictional challenge to the UK court’s authority, the UK court eventually decided it had authority to issue a world-wide FRAND determination in the matter.


[1] I would hazard a guess that this gold rush may shortly come to an end after the judgement handed down in Optis v. Apple ([2023] EWHC 1095 (Ch)). While Optis won a number of the initial decisions, after reportedly seeking billions of dollars from Apple in licensing fees, it can’t be happy with the amount awarded. I would imagine that the takeaway for SEP holders is that the UK is not an outlier in FRAND rates and may ultimately issue low dollar decisions. I expect many SEP holders will go back to the usual combination of Germany (for the injunction) and the US (for the high $s) unless, of course, they end up hauled into court in China.


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