Technology & Law

The law follows the technology...



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A couple of days ago, InterDigital filed two patent infringement law suits against Xiaomi at the Delhi High Court (DHC) for infringement of its standard essential patents (SEPs).

The matters are CS(Comm) 295/2020 and 296/2020 for infringement of its patents related to cellular and H.265/HEVC – (video compression) technologies. These are IN262910; IN295912 ; IN298719;  IN313036; & IN320182  for the cellular patents and IN242248 / IN299448 & IN308108 for the video compression patents.

InterDigital is seeking injunctive relief apart from compensatory / punitive damages for infringement of its asserted patents, unless Xiaomi elects to take a license on terms determined to be FRAND by the court.

The current InterDigital suit is one of the latest ones to be filed before the DHC – last year, Nokia had filed law suits against Lenovo and a company called Fractus had filed law suits against Vivo Mobile and Xiaomi for infringement of their SEPs.

In my view, a lot of patent owners would start to use DHC as the go to forum to litigate their SEPs given Ericsson’s success in the Micromax, Lava, Intex, iBall, Gionee matters. This is especially true when companies cannot litigate in China. Or for that matter bring any action. InterDigital had at one point (in 2013) refused to meet Chinese competition authorities fearing that its officials would be arrested. See the Reuters coverage on this issue here.

Given this kind of reception to patent claims in China, it is anybody’s guess why companies prefer to bring actions against Chinese companies outside China.  As one can see, all the Defendants are Chinese entities, and are being sued here in the DHC. The current political environment also is a changed circumstance from earlier times.  For example, in an earlier case, the argument that royalty for China could be seen in China (obtained legally in China) would be okay, but now Indian courts will be asked about global rates / setting a FRAND portfolio rates.

One thing that is different from the earlier SEP litigation that we have covered on this blog, presumably because defendants were Indian entities, is that now patent law-suits are filed in multiple jurisdictions against the same defendants using jurisdiction specific patents.  For example, Fractus had filed a law suit against Xiaomi in the Netherlands early this year but failed to get any kind of expected traction it had hoped (see Juve Patent coverage here).  Similarly, Sisvel (an entity to whom Nokia had sold some of its patents) had also filed a law suit against Xiaomi mid-last year (see Juve Patent coverage here).

Readers know my view against both portfolio licenses and global licenses: a portfolio license / global FRAND rate license hides the inefficiencies inherent. For example, why the assumption that all patents are equal in scope, etc. Then there is the issue about license on the end product or only the component.

For H.264/HEVC patents, what is the relationship with say Bluetooth, or RAM or marketing costs, of the mobile phone? Similarly, for 2G/3G/4G – what is the relationship with RAM / screen / marketing costs etc. It is these questions that will have to be answered by the Court while deciding the issues and license rate demanded.

It is worth repeating the fact that any SEP litigation is necessarily an exercise in the determination of public rights.  It is public interest that suffers when one has to pay extortionary costs to a SEP owner. These costs are not just higher royalties, but payment for expired patents that are bundled into a patent license, irrelevant patents, and non-essential patents.  This is because in SEP litigation, it is not general competition in the market. Rather, it is competition for the market. The more entrenched a standard is, the more power a SEP owner has. Those that give examples of multiple businesses operating in the same market (where SEPs are implicated) mistake the presence of multiple players as a healthy sign. However, they are not comparing the right market and make multiple logical fallacies: mistake cause for effect, confuse between apples and oranges, etc. Just because there are 10 handset brands does not mean it is a healthy market. If one looks closely, all 10 brands are based on the same standard and all 10 have to approach the SEP owner for a license. There is no competition here as the market is already locked in into a particular standard. Just think, what other cellular standard are any of your phonebook contacts using today? Hint: They all use some form of LTE (Long Term Evolution)/ 4G technology as it is popularly known. You don’t even buy a phone because it is LTE compliant: you buy it because of other reasons, such as price etc.

Other jurisdictions

A few other major cases involving SEPs that either have been settled or decision is pending are as follows:

In April this year – Unwired Planet (a company owned by PanOptis – that also purchased patents from Ericsson) settled its patent litigation with Huawei in Germany and the United States. The UK action before the UK Supreme Court is still pending (see UK Supreme Court site). The impact the judgement has remains to be seen as even after Brexit, the UK remains subject to EU law and remains part of the EU customs union during the transition, but is no longer part of the EU’s political bodies or institutions.

It is now apparent that the CJEU case of Huawei v. ZTE, C-170/13, did not give much clarity to SEP disputes and as a result there are differing opinions among member states even within the EU.  The example is the differing opinions by UK, EU and Dutch courts. Very briefly, the Huawei v. ZTE had ruled that parties must negotiate in good faith, the use of an injunction against a willing licensee was an abuse of dominant position under Article 102 of the TFEU. There are strict obligations that a licensor that has to adhere to including offering a FRAND rate – to the would be licensee, before it can ask for an injunction.

The Hauwei v. ZTE decision leaves out the determination of what is FRAND etc. and which is why the divergence of opinions in almost polar opposites by different courts.

First posted on on 05.08.2020