Nokia says InterDigital must offer FRAND determination prior to seeking U.S. import ban

In the ITC investigation of InterDigital's January 2013 complaint against Samsung, Nokia, Huawei and ZTE, the envisioned FTC-Google consent order relating to standard-essential patents (SEPs) plays a key role in defendants' strategies, even though InterDigital claims it is "not a basis to adjudicate subsequent cases".

Different defendants are leveraging the FTC-Google settlement in different ways. While Huawei and ZTE, two Chinese rivals who are also suing each other, asked the United States District Court for the District of Delaware for FRAND determinations (rate-setting decisions) and are seeking a stay of the ITC investigation pending those parallel actions, Nokia expects InterDigital to follow the procedures laid out by the FTC for Google. The proposed consent order requires Google to send out letters to potential defendants well in advance of any request for sales or import bans in order to inform them of their entitlement to a license on FRAND terms and to propose a procedural path to a FRAND determination. If Google doesn't comply with those requirements, it can't pursue injunctive relief.

Nokia has to defend itself in this ITC investigation against only a single patent, U.S. Patent No, 7,941,151 on a "method and system for providing channel assignment information used to support uplink and downlink channels". InterDigital had already asserted the other patents-in-suit against Nokia in other complaints. The early-January complaint primarily targets Samsung, and secondarily Huawei and ZTE.

A public redacted version of Nokia's answer to InterDigital's ITC complaint finally became available today and, without mentioning the FTC or Google, Nokia's 11th affirmative defense (equitable and promissory estoppel) presupposes that InterDigital has to abide by the same rules, or at least by the same principles:

"30. InterDigital’s claims are barred in whole or in part based on equitable and/or promissory estoppel. InterDigital committed to grant licenses to the 151 Patent on FRAND terms and has violated that commitment by its failure to provide Nokia with a FRAND offer and to conclude a license on FRAND terms and conditions, and by instead attempting to exclude willing licensees such as Nokia from importing standard-compliant products into the U.S. without offering the ability to have FRAND license terms determined by a competent authority."

Nokia additionally points to its reliance on InterDigital's promises (a requirement for equitable estoppel) and InterDigital's obligations under the FRAND licensing commitment it made to the European Telecommunication Standards Institute (ETSI).

In its 12th affirmative defense (waiver) Nokia argues, as Judge Posner did in a famous Apple v. Motorola ruling, that "[i]n committing to grant irrevocable licenses to its declared-essential patents in exchange for FRAND compensation, InterDigital knowingly relinquished its right to injunctive relief against willing licensees". The term "willing licensees" is an obvious reference to the logic of the envisioned FTC-Google consent decree.

After several years of litigation with Nokia, which resulted only in partial agreements but not a comprehensive settlement, InterDigital would probably dispute Nokia's willingness to take a license. And Nokia's answer to InterDigital's ITC complaint doesn't specify inhowfar and under what circumstances Nokia would be willing to do so, but it appears that Nokia is interested in a FRAND determination by a competent authority (arbitrator or federal court). For now, however, Nokia primarily takes the position that InterDigital has to meet the obligations resulting from its FRAND commitment on the one hand and the expectations of U.S. antitrust regulators on the other hand.

While unrelated to the FTC-Google settlement, Nokia's 13th affirmative defense (inequitable conduct) is also interesting from a broader standardization perspective. According to Nokia's allegations two of the three InterDigital employees listed as inventors of the '151 patent "deliberately withheld printed publications demonstrating that the subject matter of one or more claims of the 151 Patent was invented earlier by other participants in the organization responsible for developing the LTE cellular standard". Nokia's filing shows tables that compare the asserted claims of the '151 patent to proposals made by Siemens and Motorola. Allegedly, "the decision to withhold the Motorola Proposal and the Siemens Proposal [from the patent examiner] was deliberate, and made with fraudulent intent". Nokia says the two inventors attended standardization working group meetings at which the allegedly-withheld proposals were made. And "[t]he inventors [accused of fraudulent conduct] disclosed several working group documents to the Examiner from other meetings attended by the inventors and occurring around the same time as the Motorola Proposal and the Siemens Proposal".

Nokia's position is that InterDigital's '151 patent is invalid and/or unenforceable. If Nokia is right, a FRAND determination with respect to this patent won't be needed, and InterDigital's reputation will be seriously damaged. InterDigital's story is that it contributes innovations to industry standards, but Nokia now says that at least in the case of the '151 patent InterDigital has merely patented what other participants in the same standard-setting process actually invented.

Since Nokia levels such serious accusations in the publicly-available part of its filing, I wonder how much worse the allegations in its 15th affirmative defense (entitled "unclean hands") may be. That part spans more than four pages, and its entire content has been redacted out.

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Google faces critical week in German courts: Google Play and Google Maps under patent fire

The more difficult it is for innovators to obtain timely patent infringement rulings and meaningful remedies in U.S. courts, the more popular and relevant certain German courts, especially the ones in Mannheim and Munich, become. In the second half of this week, two key Google services -- Google Maps and the Google Play app and content store -- are going to be at issue in German courtrooms:

• On Thursday, the Munich I Regional Court will hold a trial at which Google (the parent company) and its wholly-owned subsidiary Motorola Mobility have to defend themselves against Microsoft's assertion that Google Maps (with a particular focus on the Google Maps Android app) infringes EP0845124 on a "computer system for identifying local resources and method therefor".

  In a press release issued this morning the court, which ordered a handful of patent injunctions against Android-based devices in 2012 (three in Apple's favor and two over Microsoft patents), describes this trial as "the climax to date in the so-called smartphone wars" and mentions that Microsoft is seeking, among other remedies, an injunction against the operation of Google Maps "on, inter alia, smartphones".

  Microsoft originally sued only Motorola Mobility, but the micromanaged Google subsidiary, which is routinely represented by Google officials at German hearings and trials, denied knowledge of how Google's server farms integrate map image data and geographic search results. For lack of a German procedure comparable to U.S. discovery, the only efficient way for Microsoft to force Google to come clean was to target Google itself, which now requires it to explicitly deny the infringement contentions if it seeks to defend itself in Judge Dr. Matthias Zigann's court.

• In a totally unrelated case that also happens to target a core Google service offered on smartphones, Nokia is suing HTC in Mannheim over its distribution of the Google Play app and content store client, which allegedly infringes EP0812120 on a "method for using services offered by a telecommunication network, a telecommunication system and a terminal for it". Judge Andreas Voss ("Voß" in German) of the Mannheim Regional Court will announce a decision, which may or may not be a final ruling, on Friday.

  The outcome of this lawsuit cannot be predicted based on how the trial went. The Mannheim Regional Court was on the verge of adjudging Nokia's claims over this patent against Apple in June 2011, but a week before the scheduled ruling, Apple and Nokia settled. Observers felt that Nokia was likely to prevail over Apple on this one.

  Nokia is also suing ViewSonic over this patent.

  Google is a third-party intervenor in the Google Play actions.

Device makers bear the brunt of Android patent infringement lawsuits, but the Google Maps and Google Play cases are particularly important to Google because they target online services that licensed Android devicers must ship (Google would not allow them to rely on third-party app stores or mapping services) and that are absolutely key not only to the Android user experience but also to Google's revenue generation through online advertising and the sale of apps and content.

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HTC subsidiary claims Qualcomm's Snapdragon infringes one of its video processing patents

In addition to countersuing Nokia in two German venues over a power-saving patent, the Taiwanese wireless device maker is also striking back at its Finnish counterpart through a complaint its subsidiary S3 Graphics filed with the Mannheim Regional Court on July 18, 2012. The case number is 7 O 182/12, indicating that Judge Andreas Voss ("Voß" in German) is presiding over this case.

The patent-in-suit is EP0797181 on "hardware assist for YUV data format conversion to software MPEG decoder". This is the European equivalent of U.S. Patent No. 6,353,440. It was asserted against Apple through an October 14, 2011 amendment to S3 Graphics' second ITC complaint against Apple, which never came to judgment because of a settlement. Since the settlement with Apple, HTC's biggest patent worry is Nokia's ongoing enforcement campaign over more than 30 different patents.

What makes the German S3 Graphics v. Nokia lawsuit particularly interesting is the fact that the infringement allegation is (for the most part or even entirely) related to the video processing functionality of Qualcomm's multifunctional Snapdragon chip (official product website, Wikipedia entry), which is highly popular.

Both Nokia and S3 Graphics ("S3G") filed discovery requests with the United States District Court for the Southern District of California, in whose district Qualcomm is headquartered. S3G filed its request together with its parent company, HTC, whose German lawsuits against Nokia over a power-saving patent also involve Qualcomm chips (as well as Broadcom chips).

The HTC-S3G motion says the following:

"In its suit, S3G claims that certain Nokia smartphones infringe the '181 Patent. In particular, S3G claims that Lumia smartphones sold in Germany by Nokia GmbH infringe the Patent, due, among other things, to their inclusion of Qualcomm Snapdragon chipsets that, when used to process video data in the accused phones, infringe the '181 Patent."

"In general terms, these [discovery] requests seek documents relating to the video data processing functionality of the Qualcomm MSM8960, APQ8055, MSM8255, and MSM7227A chipsets, each of which are present in particular Lumia model smartphones that are accused of infringement. More specifically, the Applicants seek to identify the hardware that is involved in the conversion of video data from one format, the 'Planar YUV Format,' to another format, the 'Pixel Video Format.'"

S3G attached a declaration by its German counsel, Peter-Michael Weisse of the Wildanger firm. which describes the infringement contentions and the role of the Snapdragon chip in them as follows:

"4. The S3G Action concerns S3 Graphics' European Patent No. 0 797 181, entitled 'Hardware assist for YUV data format conversion to software MPEG decoder' ('the 181 Patent'). The invention disclosed in the 181 Patent relates to a display controller involved in the format conversion of video data. The display controller relieves the burden on a host CPU by decoding video data (referred to as YUV data) into displayable format.

[...]

6. In the S3G Action, smartphones in Nokia's Lumia series with Qualcomm Snapdragon chipsets are accused of infringing the 181 Patent because they include display controllers as described in paragraph 4 above. Accordingly, S3 Graphics seeks from Qualcomm technical documents relating to the capability of the display controller in specified Qualcomm Snapdragon chipsets to process video data, and the route (or 'pipeline') by which video data is conveyed in those chipsets. The documents sought are expected to further support S3 Graphics' case that the accused smartphones infringe the 181 Patent."

All claims of the asserted patent relate to display controllers. The claims also involve communication between a claimed display controller and the memory of a device over the data bus.

I'm not yet aware of a trial date in this case, but given the usual time lines of Mannheim patent infringement cases, it will probably be held in a matter of months.

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Microsoft, Google's Motorola complete briefing on implications of MPEG LA H.264 license agreement

More than three months after a FRAND trial was held in a Microsoft-Google contract case in the Western District of Washington, the rate-setting decision has not been made yet, due to the court's diligence on the one hand and Google's persistent efforts to evade its grant-back obligations under a license agreement with MPEG LA on the other hand. But it appears that briefing is complete now and Judge James Robart, the federal judge presiding over this litigation, now has all the facts in the file to determine a FRAND rate (a range and a specific number) for Motorola's standard-essential patents (SEPs). The rate-setting decision will pave the way for another trial: a breach-of-contract jury trial, at which the question is going to be whether Motorola's initial 2.25% royalty demand was blatantly unreasonable.

In order to discuss in greater detail the implications of a grant-back clause in the MPEG LA license Microsoft says entitles it to a reciprocal license from Google and its subsidiaries at the pool rate, which is a tiny fraction of the original royalty demand that corresponded to $4 billion in a conservative estimate, the court held a post-trial hearing on January 28 and requested three rounds of additional briefing:

• In time for the January 28 hearing the parties were requested to present "extrinsic evidence" relevant to the interpretation of the MPEG LA-Google license agreement (which has to be construed under New York law). Microsoft submitted a declaration by MPEG LA chief executive Larry Horn in support of its position on grant-back. Google's Motorola, which only had a declaration by its own lawyers on its side, could have figured that MPEG LA was going to be key here but didn't request the right to depose an MPEG LA official until a point at which this would have delayed the whole process. Therefore, the court denied a related motion.

  Microsoft additionally submitted a declaration that shows the addition of the word "Affiliates" to the grant-back clause.

• On February 14 the court requested further briefing on what Google's Motorola describes as an executed and enforceable H.264 license agreement in Germany while Microsoft argues that Google actually made a counteroffer which Microsoft rejects.

• On February 21 the court gave the parties until yesterday (Friday, March 1) to submit briefing on the implications of the mentioning of "Affiliates" in Section 3.1.7 on the royalty obligations of "Enterprise Licensees" in connection with a royalty cap for "Motorola's obligation to license its [SEPs] as an Affiliate of Google". The court asked the parties to comment, in particular, on its interpretation "that Licensee [i.e., Google] and its Affiliates [i.e., Motorola and its former subsidiary General Instrument] fall under the royalty cap prescribed therein only if the Affiliates are themselves licensee[s] under the AVC Patent Portfolio and are identified by the Licensee in writing to [MPEG LA]".

Now that the parties have briefed the court I'm going to explain their positions. Google has been arguing for some time that it doesn't have to honor the grant-back obligation (or at least not to the extent that the MPEG LA royalty caps would proportionately apply to the license fees Microsoft is going to pay) because it selected in 2012 (unlike in the past) an "Enterprise License", which (as I'll explain further below) is an option relating to some AVC/H.264 license offerings and potentially saving a group of affiliated companies money. This isn't Google's only argument against reciprocity, but it might be the last one the court needs resolved before the rate-setting decision comes down.

Google is trying to benefit from the fact that MPEG LA decided to write up a license agreement covering multiple fields of use for H.264 in one document. The confusion that Google is trying to create here could have been avoided in the first place if there had been separate (even if largely overlapping) license agreements for different types of use, but I can understand that MPEG LA, which has well over a thousand licensees for the AVC/H.264 pool alone (which isn't its only patent pool), preferred an all-in-one contract over two or more largely-duplicative separate agreements -- also because this was a way to ensure that a company wouldn't take a license covering one field of use but elect to infringe in other fields of use.

I'll show you the documents and then discuss the parts I consider relevant. You can click here to skip the documents and proceed to the discussion.

Documents

It was previously known that Google signed the same license agreement with MPEG LA as more than 1,100 other licensees. The actual document bearing a Google executive's signature -- signed in 2005 and renewed for another five-year term in 2011 -- was attached to MPEG LA chief executive Larry Horn's declaration:

Google's MPEG LA License of 2005 by

This is Google's (Motorola's) March 1, 2013 brief:

13-03-01 Motorola Letter Re. MPEG LA-Google License by

And here's Microsoft's March 1, 2013 brief:

13-03-01 Microsoft Letter Re. MPEG LA-Google License by

Discussion of relevant parts

There are two basic categories of MPEG LA H.264 licenses:

1. licenses that you need if you make technology products capable of encoding (for a consumer's own use or for transmission to a consumer) or decoding (by any consumer) video files in the H.264 format, and

2. licenses covering the distribution (especially, but not only, Internet broadcasting) of video files encoded in the H.264 format.

Either category has subcategories:

1. For the technology product licenses a distinction is made between the sale of such products ("AVC Products") to consumers and OEM distribution (for example, PCs running Windows, which comes with H.264 functionality). There's no difference here in terms of what the end user gets. It's just a commercial thing. As a result, Microsoft needs two licenses because it sells Windows directly as well as through OEM channels.

2. The distribution/broadcasting licenses include Title-by-Title AVC Video (note that AVC and H.264 are synonyms for purposes of this license agreement), Subscription AVC Video, Free Television AVC Video, and Internet Broadcast AVC Video Use. The names already indicate the scope of those licenses, but in connection with the grant-back obligation we can just lump all distribution/broadcasting licenses together.

The license agreement defines these fields of use, as well as numerous other terms, in Section 1, "Definitions" (pages 3-8 based on the page numbering of the agreement; pages 4-9 of the PDF document). The license grant clauses incorporate those definitions by reference. Those clauses are sections 2.1-2.7 (pages 8-9 based on the page numbering of the agreement; pages 9-10 of the PDF document). The order of those license grants does not reflect the two categories I discussed above. The tech product licenses are granted in sections 2.1 ("AVC Products") and 2.6 ("OEM Licensee"); the distribution/broadcasting licenses are granted in sections 2.2-2.5; and section 2.7 then offers licensees the option to choose for each calendar year a bundle called "Enterprise License", which represents the combination of any or all distribution/broadcasting licenses chosen (but, to be perfectly clear, does not involve any tech product licenses) and comes with the option to apply the annual royalty cap to a group of affiliated companies.

The royalties sections (3.1.1-3.1.7; pages 10-14 based on the page numbering of the agreement; pages 11-15 of the PDF document) have the same order as the license grant sections (2.1-2.7).

The Enterprise License clauses are 2.7 for the license grant and 3.1.7 for the royalties. This is how the Enterprise License royalties clause begins:

"Enterprise Licensees. Pursuant to Article 2.7 and notwithstanding anything to the contrary in Article 2.9 hereof, and in lieu of the royalties specified in Articles 3.1.2, 3.1.3, 3.1.4 and 3.1.5, a Licensee and its Affiliates which are licensees under the AVC Patent Portfolio License and are identified in writing to the Licensing Administrator by Licensee shall pay no more than the following total amounts in each Calendar Year for all such licenses for the combined Sales of Licensee and its Affiliates during such year:"

I'll now make it easier to understand by substituting section numbers with descriptions and defined terms with actual party names:

"Enterprise Licensees. Pursuant to [the Enterprise License grant section] and notwithstanding anything to the contrary in [a section related to the Enterprise License that disallows Google to sublicense its affiliates, but entitles its affiliates to licenses from MPEG LA if they request them], and in lieu of the royalties specified in [the distribution/broadcasting royalties sections], [Google] and its Affiliates which are licensees under the AVC Patent Portfolio License and are identified in writing to [MPEG LA] by [Google] shall pay no more than the following total amounts in each Calendar Year for all such licenses for the combined Sales of [Google] and its Affiliates during such year:"

The respect in which the Enterprise License terms are different from the tech product and individual distribution/broadcasting licenses is that the royalties section requires that a licensee identify in writing its affiliates which are also licensees, so as to ensure that the royalty cap is applied to the collective license fees paid by the whole group, as opposed to applying the cap to each company from the group.

Google says it exercised this potentially money-saving option in 2012 but didn't identify Motorola Mobility as an affiliate to benefit from the group-wide Enterprise License royalty cap, and on this basis argues that Motorola Mobility consequently doesn't have to grant Microsoft a license to its own H.264 SEPs, or at least doesn't have to do so on terms that include the royalty cap it doesn't benefit from.

The grant-back obligation in Section 8.3 clearly includes Affiliates (whether notified or not) and is meant to be "commensurate to the scope of the licenses which Licensee has selected [under the agreement]". Google now contends that the "scope" includes whether it includes a particular subsidiary (Motorola Mobility in this case) in its notifications relating to the Enterprise License ("selects to have its Affiliates licensed"). But Microsoft says that "the Agreement provides no ability for Google to make any such selection. It has some choice: it can use any or all of the different types of licenses the agreement covers (for example, it can elect to implement H.264 in products sold to consumers and/or OEMs). But it can't perform an end run around the grant-back obligation because the optional identification (with a view to the Enterprise License royalty cap) only relates to "its Affiliates which are licensees under the AVC Patent Portfolio License". Motorola doesn't have a license, so it wasn't and isn't eligible for notification. If it had taken or now took a license, then it would have its own grant-back obligation under an MPEG LA-Motorola agreement.

In light of that, Microsoft points out that it wouldn't make sense for the grant-back clause to include a licensee's "Affiliates" if this related to companies that have a grant-back obligation under their own agreements with MPEG LA.

Microsoft also points out that "Google has taken three separate and distinct types of license offered by MPEG LA": the AVC Products license, the OEM Licensee license, and the Enterprise License (a bundle of all distribution/broadcasting licenses). YouTube needs a broadcasting license, while Google's distribution of the Android and Chrome operating systems (directly and, especially, through OEM partners) falls under the AVC Products and OEM Licensee terms. Microsoft argues that "the Enterprise License and its royalty terms are irrelevant to the issues [in this FRAND rate-setting case]" because "Microsoft is not a video content provider and therefore does not need, and has not taken, an Enterprise License from MPEG LA". Therefore, "Microsoft is not seeking any grant-back rights for such a license in this litigation". It just wants a grant-back with respect to the tech product licenses. Simply put, what Google pays for the distribution of Android and Chrome OS (Google in this context including its subsidiaries such as Motorola Mobility without any need for notification) is what Microsoft is willing to pay, proportionally based on the number of H.264 SEPs, for Google's (Motorola's) H.264 SEPs in connection with Windows and the XBox. This is unrelated to video streaming.

While the H.264 FRAND ball is now in the court's court, Microsoft and Google (the parent company as well as its Motorola Mobility subsidiary) are going to meet at the Munich I Regional Court on Thursday for a (non-standard-essential) patent trial relating to Google Maps.

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Judge strikes $450 million from $1 billion damages award in Apple v. Samsung: second trial needed

Judge Lucy Koh, the federal judge presiding over two Apple v. Samsung cases in the Northern District of California, has just entered an order striking (or, more precisely, vacating) $450,514,650 ($450 million) from a $1,049,343,540 ($1.05 billion) damages award determined by a jury in August 2012. The $450 million amount corresponds to 14 Samsung products, with respect to which a new damages trial must be held because the court cannot make the adjustments it deems necessary for legal reasons: the jury set only one damages figure per product, but half a dozen different intellectual property rights were found infringed, resulting in a lack of clarity as to what portion of a per-product damages figure is attributable to a given intellectual property right. Samsung's lawyers had reverse-engineered the jury's approach to damages with respect to almost all products, but only to a degree of granularity that enabled the court to identify some legal error on the part of the jury and not to one that would have enabled the court to calculate new damages figures itself. The court recommends to hold the second damages trial only after the appellate proceedings.

Part of the reason why a new damages determination is needed is that Judge Koh disagreed with the notice date concerning certain patents-in-suit. The jury based its award on the notice date provided by Apple, which Judge Koh now believes was too early because only one of the patents, the rubber-banding patent, had actually been listed in a presentation Apple gave to Samsung in 2010.

Whenever it will ultimately be held, the second damages trial over the 14 products with respect to which the jury award has been vacated (Galaxy Prevail, Gem, Indulge, Infuse 4G, Galaxy SII AT&T, Captivate, Continuum, Droid Charge, Epic 4G, Exhibit 4G, Galaxy Tab, Nexus S 4G, Replenish, and Transform) could result in a figure that is lower or higher than (or, theoretically but unlikely, identical to) the one reached by the jury in August. There will have to be a new jury.

Apple had also asked for supplemental damages covering the period from trial to final judgment and for prejudgment interest. The court can determine supplemental damages based on sales figure during the relevant period but "finds that it would be appropriate to delay the consideration of evidence of actual post-verdict sales until after the completion of the appeals in this case". With respect to prejudgment interest, the parties advocated different interest rates. Apple proposed the prime rate; Samsung's counterproposal was the lower 52-week Treasury bill rate, which as of yesterday amounted to only 0.16%. The court sided with Samsung on this rate. It will calculate prejudgment interest after the final damages amount has been determined.

Apple's preference had been for the jury verdict to be upheld, but for the event that the court was going to disaggregate and modify it, Apple had asked for a conditional judgment as a matter of law (JMOL) increasing the damages award for different reasons. Apple requested a conditional enhancement of up to $155 million. The court denied that request.

Based on today's order, Apple is entitled to the sum of

• $598,908,892 ($598.9 million) (the part of the jury's damages award that stands),

• whatever a new jury is going to determine as the appropriate damages figure with respect to the 14 Samsung products listed further above,

• prejudgment interest at the 52-week Treasury bill rate, and

• supplemental damages (for the period between the verdict and the final judgment) based on actual sales figures.

That sum could be less than $1 billion, but it could also be more.

Apple could try to immediately collect the $598.9 million that the judge didn't adjust, but it's unlikely that it will physically receive any money before the final resolution of this dispute.

In mid-December Judge Koh had denied Apple a permanent injunction against infringing Samsung products. Apple appealed that decision. It has already filed its opening brief (a couple of weeks ahead of the deadline) in that appeal. Now that Judge Koh has also ruled on damages, both Apple and Samsung are going to appeal any remaining rulings unfavorable to either party, including the judge's holdings with respect to willful infringement and her decision not to modify the jury's liability findings with a few minor exceptions.

Based on the court's final damages ruling and its denial of a permanent injunction Apple could now request post-judgment royalties. However, Judge Koh would presumably also prefer to address this matter only after the appeal.

If you're interested in the details of the order, here's the document:

13-03-01 Apple v Samsung Final Order on Damages by

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December trial scheduled in InterDigital's latest ITC case against Samsung, Nokia, Huawei, ZTE

Administrative Law Judge Robert K. Rogers, Jr. yesterday set the procedural schedule for InterDigital's latest ITC case against Samsung, Nokia, Huawei and ZTE. The order entered the public electronic record today.

The evidentiary hearing (trial) will start on December 16, 2013. Judge Rogers plans to make his initial determination on or before February 4, 2014. The final ruling (most likely following a review by the Commission, the six-member decision-making body of the U.S. trade agency) will be due four months later, i.e., June 4, 2014. Should the ITC order an import ban, it will be subject to a Presidential review, which takes 60 days. An import ban could then take effect in August 2014, but given various developments in case law and the regulatory arena it's doubtful whether InterDigital's attempt to block the entry of non-licensed products into the U.S. market was the right strategy. InterDigital may at some point fid that it's more appropriate to sue for monetary compensation in federal court.

The scheduling order does not make reference to the FRAND licensing issues raised by all four defendants. Two of them, Nokia and Huawei, said in recently-filed statements on the public interest that InterDigital is pursuing a U.S. import ban against them in order to force them into worldwide license agreements, with royalty obligations even relating to countries in which InterDigital doesn't hold any standard-essential patents (SEPs) -- and possibly no patents at all.

A week ago, Huawei and ZTE brought a motion to stay the investigation pending a FRAND determination in federal court. Last week Samsung also asked for termination with respect to patents to which it was licensed at the time InterDigital purchased devices it claimed proved unlawful imports.

Judge Rogers's scheduling order cannot be interpreting as a negative assessment of the chances of those motions. The schedule had to be set at this point, and it can be modified anytime. Judge Rogers can form an opinion on these motions after full briefing. The next step is for InterDigital to respond. It will obviously oppose these motions.

Simultaneously with the ITC complaint InterDigital filed federal companion lawsuits against all four defendants in the District of Delaware, where Huawei and ZTE initiated a FRAND determination action through counterclaims. In my previous post I published InterDigital's opposition brief to Huawei and ZTE's motions to expedite the requested FRAND determination in Delaware. In that pleading InterDigital claimed that the proposed FTC-Google settlement concerning SEP assertions "is not a basis to adjudicate subsequent cases".

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InterDigital says FTC-Google settlement 'is not a basis to adjudicate subsequent cases'

InterDigital yesterday responded to motions by Huawei and ZTE to expedite the adjudication of their FRAND licensing counterclaims against the non-practicing entity in litigation pending in the District of Delaware. The Chinese telecommunications hardware makers hope that the proceedings in federal court can dispose of an ongoing ITC investigation, which they would like to be stayed pending the federal lawsuit.

In a pleading in support of its own motion for an extension of time to respond to those counterclaims (which was granted this week against Huawei and ZTE's opposition), InterDigital had already commented on the motion to expedite. Yesterday's filing states InterDigital's opposition in more detail. InterDigital's latest round of lawsuits is particularly interesting in light of the envisioned FTC-Google settlement, on which more than two dozen entities submitted comments (see this recent "trilogy" of blog posts on particularly interesting submissions: 1, 2, 3). In my analysis of InterDigital's expected opposition to Huawei and ZTE's motion I'll focus on the parts of InterDigital's pleading that are most directly related to the FTC-Google consent order.

This is the filing (this post continues below the document):

13-02-28 InterDigital Opposition to Huawei-ZTE Motions to Expedite by

InterDigital accurately notes that "Huawei and ZTE [...] rely primarily on a proposed settlement agreement between Google/Motorola and the Federal Trade Commission as authority for the proposition that a patent holder may only seek injunctive relief after litigation to set a FRAND rate is complete". That's the way it is.

While Qualcomm's submission to the FTC recognized that the antitrust authority wants the Google deal to serve as a generally applicable model, InterDigital tries to downplay its significance in the Delaware-based court:

"Putting aside that the Google/Motorola situation is inapposite in a number of ways, Huawei and ZTE are simply wrong in their characterizations of the Google/Motorola settlement. An administrative consent decree is not law. It is an agreement between third parties who have no relationship to this action, and is not precedent binding on this (or any other) Court. That Google/Motorola may have chosen to agree with the FTC to undertake certain obligations is not a basis to adjudicate subsequent cases. In the consent agreement, Google/Motorola expressly denied liability, and denied the allegations of the FTC's complaint, which have never been tested in a court of law. [...] Consent decrees are not legal determinations, and have no precedential weight even in the context where they arose (FTC administrative proceedings under Section 5 of the FTC Act), much less in the very different context of this action."

InterDigital's portrayal of the situation is not inaccurate at all. It is just incomplete. Non-precedential decisions and agreements can be quite influential, even if only in a persuasive (and not binding) form. U.S. courts are definitely going to give serious consideration to the FTC-Google settlement and are not going to grant injunctions over standard-essential patents against willing licensees. While InterDigital is right that the (envisioned) FTC-Google settlement does not entitle Huawei and ZTE to expedited proceedings, I believe the two hardware makers will ultimately be fine with any procedural course of action that results in a FRAND rate determination. They just don't want an injunction to take effect before the licensing issues have been resolved.

In light of that objective (license before injunction), the procedural challenge that Huawei and ZTE face and try to tackle with their motions (asking the ITC for a stay and the Delaware-based court for expedited FRAND adjudication, knowing that they'll be fine if only one of the motions succeeds) is related to timing. Computer programmers call this a "race condition". It's when a program may crash (or enter an endless loop) because one part of the program only works properly if another one has been completed. In this case, the FRAND rate-setting part would fail if an injunction entered into force before a license agreement has been brought about because the commercial implications of a sales or import ban would require the affected companies to settle on the terms of the patentee, who would be "the dictator of the royalties" in that scenario.

Well-written computer programs don't have race conditions. They are designed in a way that everything is performed in the right order and that a step B requiring the prior completion of step A won't be executed prematurely. In that regard, Huawei and ZTE's motion to stay the ITC investigation makes a whole lot of sense. Trying to speed up the proceedings in federal court is worth trying, but even if it worked in this case, it wouldn't work in other cases.

Another problem in the race condition context is that there are two other companies defending themselves in parallel cases brought by InterDigital in federal court and in the same ITC investigation: Nokia and Samsung. While Huawei and ZTE are aligned with respect to FRAND licensing issues, it's unclear how Samsung and Nokia wish to proceed. InterDigital is obviously trying to take advantage of the fact that different defendants favor different approaches to FRAND, knowing that the ITC and the Delaware-based federal court would always find it more efficient to have all these claims and cases on the same schedule.

There's just one more issue raised by InterDigital's filing that I'm going to highlight here. InterDigital points to what happened in the Apple v. Motorola case in the Western District of Wisconsin, where a trial was canceled at the last minute because of Apple conditioning its acceptance of the royalty the court would have determined on rates of $1 or less per iPhone. InterDigital argues that even if Huawei and ZTE declare themselves bound by the results of a FRAND rate determination (which is a requirement of the proposed FTC-Google consent order), they could play opportunistic games later on:

"In reality [...] nothing prevents Huawei and ZTE from later changing their position if events in the other pending actions make it expedient for them to do so, just like the alleged infringers in [certain] other cases. As the counterclaimants, Huawei and ZTE can always modify the relief they seek or even withdraw their claims entirely -- once they have accomplished their goal of delaying the adjudication of the patent infringement claims, as they seek to do via this motion, and via their motion to stay the parallel ITC investigation. the hard-won experience of other courts in this situation vividly illustrates that parties seeking a 'FRAND rate' can and will change their positions on what they want adjudicated and the extent to which they are willing to actually pay the determined FRAND compensation."

The way I understand the proposed FTC-Google consent order, an implementer who withdraws a FRAND determination claim (or modifies its position to the effect that the FRAND determination no longer meets the criteria laid out by the FTC) would immediately be considered an unwilling licensee, and the patent holder could then seek an injunction (unless there are other valid defenses). I doubt that there's a way someone bringing a FRAND determination action (or counterclaim) can be precluded beforehand from a future withdrawal, but such conduct would go to the analysis of the party's willingness to take a license. As long as someone declares himself really and truly bound by the court-determined rate and doesn't withdraw a complaint or (counter)claim, he's a willing licensee.

InterDigital is concerned that someone could delay resolution and avail himself of the procedural options outlined in the proposed FTC-Google consent decree today but reconsider tomorrow. But nothing would prevent InterDigital from only suing for damages in federal court. The FTC-Google deal only has a bearing on the pursuit of injunctive relief, including requests for ITC import bans. InterDigital shouldn't speculate about whether Huawei and ZTE might one day withdraw their FRAND determination counterclaims. It should instead withdraw its own requests for SEP-based injunctive relief.

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