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SEPS AND CONFIDENTIALITY CLUBS: NO COMPATIBILITY WITH EACH OTHER

First posted on spicyip.com  on June 8, 2020 

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Image from here

Recently, there was a post on spicyip.com regarding merits of confidentiality clubs to standard essential patent (SEP) litigation. When I read it, my view was that the confidentiality clubs being applied to a defendant in a SEP litigation was highly problematic and the same was not suited for the defendant: the very basis for using confidentiality clubs to share information in SEP litigation was highly questionable and should be challenged by a defendant.

This post concludes that it is not in a defendant’s best interests to agree to a confidentiality club arrangement in SEP litigation and provides several reasons for the same.

Having observed and being part of multiple patent litigations in India and elsewhere, I view a patent infringement trial as an ordeal. Patent litigation anywhere across the globe is the domain of the right holder, and if I might add, of one with deep pockets.

It is easily observable in any patent litigation that there is a basic minimum economic qualification. Right at the outset of the lis between parties, one element that has nothing to do with competing claims, is introduced. This element is the financial strength: ability to endure trial. This element is extremely important. A generalization can be made that a conclusive decision after going through a full trial, including evidence, expert witnesses, etc. is possible only in the case where both parties are evenly matched or are economic equals. This might be seen currently in Europe where several big-ticket SEP litigations involving vehicles are underway and both parties are evenly placed (Readers may be interested to go through the summary of the ongoing litigation between patent owners and vehicle manufacturers such as Diamler etc.).

One can also observe from past cases, that if a smaller party decides to defend, he may win at law, but still lose business. If he capitulates and settles, he sacrifices his independence, his competitive position, and in all probability some part of his patent position as well. It is immaterial whether the bigger party has dubious patents/ vice versa. The results to the competitive system and the independent judicial system are the same.

It is essential to recognize that when a patent suit is decided, something more than the respective rights of the litigants is involved. A patent infringement suit is predominantly a problem in public interest – it is in the public interest that the patent system finds its justification – and a problem in the relation between economic law and technology. The rights of the litigants are embraced within the public interest at issue and dependent upon it for the exceptional character of the rights contested.

For a SEP litigation, it is even more lop-sided. 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.

The way I see it, confidentiality clubs are used as a sword by the right holder. And the defendant can’t even claim use of the same information as shield. Let me give some background to put things in perspective. In any confidentiality club, confidential information is sought to be confined to a limited set of people – some from the plaintiff/ some from the defendant. And, ostensibly the purpose is so that the defendant can make an informed commercial choice. That is almost never the case.

This is because of asymmetric information skew in favour of the plaintiff in SEP matters. What the plaintiff seeks to put under the cloak of confidentiality are the rates offered to third parties and the fact that those third parties adopted those rates. What is never disclosed are the circumstances under which that decision was taken by those third parties. Sometimes, even technical information such as claim charts mapping the patent to the relevant standard are also disclosed under this arrangement. This is extremely problematic and Prashant has written about it here.

The circumstances under which the supposedly similarly placed parties signed those agreements are not disclosed. It may very well be the case that these were signed under duress – the threat of an injunction to stop goods at customs. It is not possible now but surely it was possible up to three years ago. Or for that matter imposed in court – whether as a stop gap arrangement or having no choice, the defendant taking the license, having suffered not one but two reversals in court.

There are other questions such as: what if the agreement was signed after the injunction was issued? What agreements were shown to these parties? How many patents were there in the license at the time the agreement was signed? How many were sold off to a third party post licensing them to a party?

Suffice it to say that answers to these questions won’t be volunteered by the patent owner. These are obtained when the plaintiff is put under scrutiny, and that too in an environment that is not to its liking. One can see previous blog posts on Ericsson’s litigation with Micromax, Intex, Lava, iBall and others to see these issues raised.

Putting claim charts as confidential information in the confidentiality club is another aspect that is simply overreach. Mind you, the entire standard such as LTE is public and even the configuration is public information. Each party who is desirous of having its IP included in the standard agrees to its disclosure and there are several disclosures made regarding this particular IP. Once a standard is adopted, then the patent is automatically covered by a standard compliant device. Hiding claim charts and putting them in a confidentiality club is overkill because this is a public interest issue and can’t be brushed under the carpet simply by putting it in a confidentiality club.

Other manufacturers should be able to see what is happening and if possible be able to take out revocations/ or at least become part of the litigation once the process is initiated by the right holder by suing one party.

Now coming to confidentiality of the defendant’s information that is supposedly protected in a confidentiality club. This information by nature is public. It is easy to count the unit sales of the defendant and there are many ways and multiple databases from where the volume of sales can be deduced. First is IMEI (International Mobile Equipment Identification) series for a mobile, which is a 16 digit number and each series has a million units. This information is with customs and all mobile operators and is easy to determine which series are being used by each device provider. Trade journals, etc. are a resource that is also available to those inclined towards more specificity in terms of absolute numbers and margins.

The point here is that the defendant really has no information that can be protected under a confidentiality club.

So far, this discussion has focused on a single aspect of information that is sought to be protected. Now let us view the issue from another perspective.

This is the space where the SEP owner refuses to license component manufacturers and approaches the brand owner. This is obviously to extract more money from brand owners as the royalty base is much higher. The argument that it is easier to approach a single brand owner rather than multiple component manufacturers is plain bunk: there is only one component that adds communication capabilities to any device. And to say that it is easier to approach brand owners, to me, is going for the bigger target that can be squeezed ever harder. Obviously, this information is never forthcoming in a cozy confidentiality club where the rules are set by the right holder.

This strategy of reaching out to the end brand results is a great skew and distorts the entire market. This approach to the brand owner results in numerous inefficiencies as costs are passed on to the end-consumer. My view is that these inefficiencies will increase substantially in the context of 5G SEP licensing, given the plethora of standard compliant connected devices in 5G technology.

Coming back to the harm caused by a confidentiality club in SEP litigation: 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.


A CRITIQUE OF THE DECISION IN UNWIRED PLANET V. HUAWEI (UK HIGH COURT - 2017)

On April 5, 2017, the UK High Court of Justice (Patents), Mr. Justice Colin Birss issued a detailed opinion [Unwired Planet v. Huawei ([2017] EWHC 711 (Pat), 5 Apr. 2017] in a matter involving SEPs and FRAND.  The Unwired Planet v. Huawei (hereafter "Unwired") decision is extremely contentious and this posts covers only the issues that I believe need further consideration.

Disclaimer: I advise several clients in matters involving SEPs and FRAND.  These are my views only. Long post follows.

Background:  Unwired Planet (Unwired) have a worldwide patent portfolio which they bought from Telefonaktiebolaget LM Ericsson.  The portfolio includes patents which are declared essential to various telecommunications standards (2G / GSM, 3G  / UMTS or WCDMA, and 4G  / LTE).

Unwired’s business is licensing those patents to companies who make and sell telecommunications equipment such as mobile phones and infrastructure.  Shortly after the purchase from Ericsson LM, in March 2014, Unwired sued Huawei, Samsung and Google for infringement of six UK patents from their portfolio. Notably, this came quickly after the settlement of the litigation between Ericsson LM and Samsung.  It is not clear whether Unwired’s portfolio included some / any of the patents that were involved in the litigation with Samsung.

Unwired, claimed that five of its patents were SEPs.  And accordingly, Unwired contended their patents were infringed. The judge conducted separate trials on technical and non-technical / competition law and other issues.  The patents are: Trial A - patent EP (UK) 2 229 744 ;  Trial B - Divisionals EP (UK) 2 119 287 and EP (UK) 2 485 514;  Trial C - EP (UK) 1 230 818;  Trial D - EP (UK) 1 105 991; and  Trial E - EP (UK) 0 989 712 (this was a non-SEP).  Soon after trial started (April 2014), Unwired made an open offer to the Defendants to license its entire global portfolio (SEPs and non-SEPs).  As expected, the Defendants denied infringement / essentiality and contended the patents were invalid, and counterclaimed for revocation.

The Defendants stated that no licence was needed and contended that Unwired’s offer was not FRAND.  Huawei and Samsung raised additional defences and counterclaims based on breaches of competition law.  This involved both arguments about Art 101 of the Treaty on the Functioning of the European Union (TFEU) relating to the Master Sale Agreement (MSA) whereby Unwired acquired patents from Ericsson, and arguments about Art 102 TFEU concerning abuse of dominant position.

The allegation that the offer was not FRAND was pleaded as a breach of competition law.  These allegations were the subject of counterclaims against other companies in what was then the Unwired Planet group (the ninth and tenth defendants) as well as against Ericsson, who were joined as the eleventh party to the proceedings.

After the April 2014 offer, Unwired made another offer in July 2014.  That offer related only to Unwired’s SEPs.   The Defendants also stated this offer to be not FRAND.

Rates offered by Unwired in July 2014:

Rates | Percentage applied on Average selling price or revenue for infrastructure
4G / LTE patents | 0.2%
All other standards    including GSM / WCDMA / UMTS etc. | 0.1%
Offer capped at a $ or £ figure, if the royalty expressed as a share of ASP would be a higher sum.
The judge notes (in Para 6) that “the terms 2G, 3G and 4G are used to refer to different standards and sometimes GSM, UMTS (or WCDMA) and LTE respectively.  They are not the same but the distinction rarely matters.”

However, I disagree – the distinction is important as SEPs may be relevant to 2G and not to 3G or may be important for 2G / 3G / 4G.  It is hard to specify the value of each SEP to a standard but not impossible.  In Microsoft v. Motorola, or In Re: Innovatio, J. Robart and J. Holderman respectively, did exactly that - determine the value of the patents vis-a-vis the standards.

In para 7, the judge notes that in June 2015, Unwired made separate offers in terms of a global portfolio and a (higher) per patent rate for UK.  Huawei counter offered – its proposal was for a per-patent licence limited to the UK SEPs in suit.  The rates for all SEPs together were 0.034% for LTE, 0.015% for UMTS and zero for GSM.

Before trial started, Google settled as regards the SEPs.

By April 2016 three technical trials had been completed and the parties agreed to postpone any further technical trials indefinitely.  By that stage, Unwired had won two and lost one of the technical trials.  Two of Unwired Planet’s patents had been found to contain claims which were valid and were essential to the relevant standards while the other two patents were held invalid.

In 2016, Samsung settled with Unwired and Ericsson.  As a result of the settlement, proceedings against Samsung ended and, with the court’s leave, Samsung’s competition law counterclaim was discontinued.  Similarly, Huawei, discontinued significant parts of its counterclaim, including all their counterclaims against Ericsson and Unwired.

Because of the settlement by Huawei and Samsung, certain terms that Huawei and Samsung contended to be anti-competitive, were removed from the MSA.  One of these was a term that had a floor (lowest possible rate that could be offered) on the royalty rate which Unwired could offer.

On August 1, 2016 both sides made new offers:

Global Rates offered by Unwired in August 2016:

Rates | Percentage applied on Average selling price or revenue for infrastructure
4G / LTE patents | 0.13%
All other standards    including GSM / WCDMA / UMTS etc. | 0.065%
 

UK Only Rates offered by Unwired in August 2016:

Rates | Percentage applied on Average selling price or revenue for infrastructure
4G / LTE patents | Infrastructure: 0.42% | Mobile devices: 0.55%
All other standards    including GSM / WCDMA / UMTS etc. | Infrastructure 0.21%  | Mobile devices 0.28%.
 
Huawei rates offered in August 2016:  On a per-patent basis

Rates | Percentage applied on Average selling price or revenue for infrastructure
For 4G / LTE patents | Infrastructure:0.036% |Mobile devices: 0.040%
For UMTS patents | Infrastructure:0.015% |Mobile devices: 0.015%
For GSM patents | Infrastructure: 0 |Mobile devices: 0
 
However, in October 2016 Huawei made a new licensing proposal:  They amended their per-patent licensing offer to a license under the whole of Unwired’s UK SEP portfolio.  The UK portfolio rates were:

Huawei’s October 2016 offer: on whole of Unwired’s UK patent portfolio

Rates | Percentage applied on Average selling price or revenue for infrastructure
For 4G / LTE patents | Infrastructure:0.061% |Mobile devices: 0.059%
For UMTS patents | Infrastructure:0.046% |Mobile devices: 0.046%
For GSM single mode patents | Infrastructure: 0.045%|Mobile devices: 0.045%
 
The judge termed the August 2016 Unwired proposals and October 2016 Huawei proposals as “hard-edged non-discrimination proposals”.

Despite the efforts put by the judge to identify all areas at dispute in the settlement agreement, Huawei discussed only terms of a UK  portfolio license with Unwired and not terms of a global license.

Issues

  1. Huawei wanted a UK SEP portfolio license, but Unwired wanted a global portfolio license. This was a fundamental point of disagreement between the parties.
  2. Unwired wanted the court to declare Huawei as an unwilling licensee as they had won two of the technical trials on validity and essentiality, and Huawei had rejected both their offers. Also, Unwired preferred a global license as global licensees are FRAND with Unwired willing to abide by the courts decision on rates.  Hence court should grant an injunction.  Unwired further contented that if the court determined that Unwired is not entitled to a global license, then Unwired have offered a UK portfolio licence and will accept such a licence at a rate and on terms set by the court.
  3. Huawei, contended that Unwired’s 2014 offers were not FRAND., and that Unwired’s   commencement of this action was an abuse of their dominant position and contrary to the CJEU’s judgment in Huawei v ZTE (Case C-170/13).  Huawei, submitted that they had a complete defence to any claim for an injunction.  Per Huawei, a global licence would not be FRAND, and only a UK portfolio licence would be FRAND.  Huawei also agreed to accept any rate for the UK portfolio that the court would determine.
Decision

I focus on the aspect of global portfolio licensing, valuations of patents, and am extracting the only those conclusions from the decision that have a bearing on these issues.

(a) What licence scope is FRAND – UK or worldwide?

572.           I conclude that a worldwide licence would not be contrary to competition law.  Willing and reasonable parties would agree on a worldwide licence.   It is the FRAND licence for a portfolio like Unwired Planet’s and an implementer like Huawei.  Therefore, Unwired Planet are entitled to insist on it.  It follows that an insistence by Huawei on a licence with a UK only scope is not FRAND.

(c) Bundling / tying in SEPs and non-SEPS

  1. I have dealt with the law on bundling in the section above on the scope of the licence.  The outstanding issue relates to Unwired Planet’s 2014 offer which was for a licence under its whole portfolio, SEPs and non-SEPs.  Huawei say that to bundle the SEPs with non-SEPs was unlawful bundling or tying.  Huawei say the bundling of SEPs and non-SEPs poses two threats.  One is that one cannot tell in such a licence whether the SEP owner is complying with a FRAND commitment.  The other is that the practice can eliminate competition on the merits between non-SEP technologies.  I accept the second point, which is much stronger than the first.  I do not need to decide if the first point on its own is enough.  Licences can be drafted that way (cf Lenovo) but they do not have to be.
  2. In this context Unwired Planet also made the same points about a lack of detailed economic evidence as were made for multi-jurisdictional bundling but as before, that submission does not go far enough to mean that the issue does not need to be addressed.  In the context of SEPs and non-SEPs it does not need detailed economic analysis to infer that Huawei’s second point is a likely consequence of that bundling.
  3. Having heard the evidence in this case I am in no doubt that a patentee subject to a FRAND undertaking cannot insist on a licence which bundles SEPs and non-SEPs together.  But it does not follow from this that it is contrary to competition law to make a first offer which puts SEPs and non-SEPs together.  There is clear evidence that in some cases the parties agree to a licence which includes both SEPs and non-SEPs together.  The mere fact a licence includes both does not take it out of FRAND nor does it indicate that a patentee has used the market power given by the SEPs to secure a licence under the non-SEPs.  Everything will depend on the circumstances.
  4. Unwired Planet’s main submission is that in making the 2014 offer they made it clear that they were willing to discuss alternatives such as separating SEPs from non-SEPs.  The 2014 document is a series of what look like Powerpoint slides.  Page 2 has the rates on it and as footnote 1 states:
“This is an indivisible worldwide arrangement.  The royalty rates sought reflect a blend of the strength, technical diversity and size of the portfolio across the world.  It is not an offer for individual country or technology licenses.  However, Unwired Planet is willing to discuss any such arrangement upon request.”

  1. A discussion focussed on SEPs as opposed to non-SEPs is exactly the kind of thing a reasonable recipient of this offer would understand the offeror was willing to contemplate as a result of this text.  I reject Huawei’s case that Unwired Planet behaved in a manner contrary to Art 102 by making the April 2014 offer on the basis of SEPs and non-SEPs together. 

  2. Huawei immediately asked Unwired Planet to separate out the SEPs from the non-SEPs and Unwired Planet did so by July 2015. Those are not the actions of a party trying to use its market power given by patents essential to a standard to tie in a further licence under its non-SEP portfolio.  If Unwired Planet had insisted on putting the two together after that then the conclusion might well have been different.

  3. I reject the SEP/non-SEP bundling argument.

The judgment does not discuss the SSPPU approach on a principle level, which therefore remains an open question.

Digress:  Last year, the DIPP had issued a call for response to its questionnaire on SEPs and FRAND and had asked several important questions relating to SEPs, FRAND, jurisidiction of courts, competition authorities, etc.  Although the DIPP has not made public the responses even after an year, I am providing my own submissions made to the DIPP in my individual capacity.  [Download my submissions from here].  In these submissions, I had highlighted the various problems that occur in the domain.  Most of the issues highlighted here in the critique are covered in detail in my submissions to the DIPP.

Analysis of the judgment 

Portfolio based licensing is not compatible with a FRAND approach: I believe that the Unwired decision is flawed as it ignores the fundamental issue about portfolio licensing.  It is misplaced because it legitimizes portfolio based licensing.  In my view, this is a no-no.  A patent is a jurisdictional right, and differently judged.  For example, the US does not have Sections 3(k), 3(m), etc. but India has these sections.  Both US and India do not have the same set of claims at the time of the grant for the same application / claims.  It is possible that the US claim may be essential and not India or vice versa.

Taking a portfolio based approach to licensing, equates apples to oranges and the result is severely distorted.  A patent portfolio also includes patent applications and as such it is not even clear whether the patent will be issued or not.  This also distorts the result.  Finally, the patent owner for business reasons, or cost constraints may exclude a jurisdiction altogether for patent filing.

It does not stand to reason that the patent owner be rewarded in the jurisdiction where it does not have patents.  Another interesting question here is : On what basis can an entity sue another in a jurisdiction where it has limited set of patents.  The answer is a patent portfolio and a clear example is the Ericsson matters at the Delhi High Court.

Another issue is the value of the portfolio may be in patents that are older.  What happens to the value of the portfolio when the older patents expire?  Why should a patent owner get the same royalty for expired patents?  How is the value of the portfolio constant when uneven variables at both ends are at play.  See my post here on these issues.

The judgement legitimizes extracting royalty for patents have expired.  GSM patents have expired and as such no royalty is payable for them.  Taking a portfolio approach, legitimizes this illegal gain to the patent owner.

The judgement cites that Huawei is a sophisticated organization and well versed in technology and patenting. This is no reason to reject their claim re bundling.

A SEP Owner Is Not Entitled to A Higher Legal Pedestal:  The Unwired decision does exactly that - it gives the patent owner a higher legal pedestal than it is entitled to.  For example, the traditional burden of proof of validity and infringement is shifted to the defendant as being one of invalidity and non-infringement.  In Unwired, even though the judge decides that certain patents are not applicable, even then it holds that a portfolio wide rate is applicable.  Shouldn't the portfolio value be reduced appropriately - i.e. in Unwired two patents were found to be invalid / not infringed - not essential. Shouldn't this reflect on the value of the portfolio?

The five litigated patents are linked and readers can see their respective claims: I find it incredulous that despite having two of them knocked out, the judge still accepted the patent owner's assertions.  Further, the claims are system claims (distributed infringement scenario), i.e. are performed at the backend / base - station.  It is apparent that the role a handset / mobile device plays in each is different, and most of the actions are taken at the system end.  Hence, to club patents together as a portfolio does not make sense.

A Blind eye is turned towards privateering:  In this case, it was clear that Ericsson had sold part of its portfolio to Unwired.  Unwired surprisingly holds a simple formulaic approach at one end only: if one has a portfolio of 100 patents for which rate is x, and sells 25, then acquirer can claim only 25%x.   The equation is left unbalanced - how about reduction of the rates for the remaining 75% - they still remain x.

FRAND royalties.  It is extremely interesting to note that the judge holds that initial offers made by Unwired were not FRAND: “None of Unwired Planet’s offers (April 2014, June 2014, June 2015 or August 2016) were FRAND”.   Contrast this with comments that damages for past infringements “would be at the same rate as the appropriate FRAND rate.” 

Methodology of determining FRAND royalties“A FRAND rate can be determined by using comparable licences if they are available.”

  • Incorrect focus on Ericsson & Unwired Planet's license:  The judge focuses on Ericsson’s and Unwired Planet’s license agreements as comparators. This is not a true arms length license - Ericsson stood to gain from the licenses that Unwired Planet entered into even after it had sold part of its portfolio.  This severley limits the scope of comparable licenses.  Ericsson's licenses are known to be at the other end of the spectrum and limiting comparable licenses limits the scope to the far end.
  • It is incorrectly assumed that all SEPs are valuable, although the judgment leaves open the possibility to prove that some “keystone” patents are more valuable than others.  As discussed earlier, the nature of claim scope determines the key patents.   Hence to assign all SEPs as equal over simplifies the approach to the advantage of the patent owner.
  • It is not necessary to find all patents valid and infringed before setting a rate, although it is wise to allow adjustment of the royalty if a relatively substantial number of SEPs is found invalid or not infringed.  This ignores several studies cited that the more than 80% of patents claimed as essential end up either being invalid, not essential or both. At least some attempt should have been made to know the value of the patent to standard and other patents.  For example, there is variation in value of the five patents asserted in Unwired.   In this case, two patents were found to be invalid and not infringed.  Despite this - the judge plods on to hold portfolio based licensing as being FRAND.
The decision is very similar to the one issued in the Intex (Civil Suit) matter by the Delhi High Court.  However, that decision has since been stayed by a division bench of the Court.  Only time will tell what happens to the appeals filed by Huawei in UK.  In any case, the UK decision and its appeals are bound to be cited before the Delhi High Court in various courts.

SEP – FRAND LICENSING: EU ISSUES DECISIONS IN MOTOROLA, SAMSUNG CASES, ISSUES FAQS

First posted on spicyip.com on May 1, 2014

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The European Commission on April 29, 2014 issued two press releases in the competition law cases in investigations against Motorola Mobility and Samsung.  A very-very interesting list of FAQs have also been issued constituting in some sort – guidelines for licensing SEPs under FRAND terms.  I’ll spend some time on the guidelines as they have extremely important ramifications back here in India, but I would summarize the Motorola and Samsung decisions first.  After these decisions, the position of the EU is more-or-less, in line with the US position on SEP – FRAND licensing.

The Commission’s decisions were given by the chief competition authority, Joaquin Almunia, who noted that the ultimate harm of the smartphone patent wars was to the consumers.

Samsung  case: Samsung agreed that it would not seek injunctive relief in Europe on the basis of its SEPs against licensees who sign up to a patent license.  The FRAND terms under such a program would be either determined by Courts, or if both parties agree then through a arbitrator.   Under the program, Samsung would negotiate with prospective licensees for a period of 12 months before approaching courts, or if Samsung and the prospective licensee agree, take the negotiations to arbitration for final rate determination.

Motorola: The Commission found that seeking an injunction for a FRAND encumbered patent/s  was abuse of dominant position under EU rules particularly when Motorola itself had agreed to license its patents (i.e. a FRAND commitment precludes injunctions) on FRAND terms, and where a prospective was willing to enter into a license on FRAND terms (the only issue being the FRAND terms themselves).

The Commission found it Motorola’s behavior anti competitive, when under the garb of an injunction, Motorola sought to restrain Apple (or give up entirely) from challenging the validity, essentiality, or infringement of Motorola’s SEPs.

The Commission noted that: “Implementers of standards and ultimately consumers should not have to pay for invalid or non-infringed patents. Implementers should therefore be able to ascertain the validity of patents and contest alleged infringements.”

The FAQs: More like guidelines for other SEPs owner seeking to license on FRAND terms.

If one reads the FAQs, one gets the distinct impression that they were framed after the Motorola and Samsung decisions issued by the Commission.  There are several inputs in these FAQs that could have a significant impact here:

i. Injunctions and SEPs do not go hand-in-hand: It is anti-competitive (abuse of a dominant position) to use injunctions, when the SEP owner / licensor had already committed to license its SEPs on FRAND terms, and there is a willing licensee to enter into the license – but questions the FRAND terms.

ii. Are injunctions for SEP licensing banned as being anti-competitive: NO – Injunctions can be used against an unwilling licensee.

iii.  So who is a willing licensee: Someone who is willing to take a license – could even submit to a Courts jurisdiction, or if licensor willing – approach an arbitrator. Just because, a prospective licensee challenges the validity, essentiality and even infringement positions for SEPs (yes – there can be such a position), it does not mean that the licensee is unwilling.  The test is that that consumers should not have to pay for invalid, non-infringed and non-essential patents.

For example, in the US in Realtek v. LSI – it was held that an unwilling licensee is one who refuses to enter into a licensing arrangement with the SEP owner on rates that are determined by a Court.

iv. “Is a potential licensee who challenges validity, essentiality or infringement of SEPs unwilling? NO. Potential licensees of SEPs should remain free to challenge the validity, essentiality or infringement of SEPs. It is in the public interest that potentially invalid patents can be challenged in court and that companies, and ultimately consumers, are not obliged to pay for patents that are not infringed.

v. The Commission does not do a rate determination for FRAND licensing: Commission states that Courts and arbitrators are best placed to decide on the same.