gil ohana - standards and patent pools

Standards and Patent Pools: 2007 andBeyond

LEI 25th Annual CLE ConferenceVail, ColoradoJanuary 9, 2008

Gil OhanaWilmer Cutler Pickering Hale and Dorr LLPPalo Alto, CA+1 650 858 [email protected]

What We’ll Discuss

• 2007: Year in Review

– Cases

– Antitrust Policy

• 2008 and Beyond

• Best Practices for Standards Development

Ohana, LEI Conference, Jan. 9, 2008,

2007: Year in Review

Cases


• Qualcomm v. Broadcom

• TruePosition v. Andrew

• MPEG-LA v. Alcatel Lucent

• Golden Bridge v. Nokia

• Broadcom v. Qualcomm


Qualcomm v. Broadcom*/


*/ Qualcomm Inc. v. Broadcom Corp., No. 05-CV-1958B (S.D. Cal., March 21, 2007).Wilmer Hale represents Broadcom.

• Qualcomm sues Broadcom for infringing two video compression patents

• Judge rules patents “reasonably may be essential”to implement H.264 video streaming standard

• Broadcom asserts waiver as affirmative defense– Defense based on Qualcomm’s failure to disclose

patents to JVT working group


Qualcomm v. Broadcom


• JVT patent disclosure form imposes on participants broad obligation to disclose patents “associated with” or “affecting the work of” JVT

• Judge rules that Qualcomm participated in JVT, but failed to disclose patents

• Jury advises, and Judge decides, that Qualcomm waived right to enforce patents based on failure to disclose.


TruePosition v. Andrew Corp.*/


*/ True Position, Inc. v. Andrew Corp., 507 F.Supp.2d 447 (D. Del. 2007).

• TruePosition holds patents on technology for locating cell phone user based on triangulation between multiple base stations

• Andrew makes cell towers and related infrastructure

• TruePosition sues Andrew for patent infringement


TruePosition v. Andrew Corp.


• Andrew asserts affirmative defenses and counterclaims based on TruePosition’s conduct at ETSI, leading standards body for cellular technology based on GSM standard

– Fraud– Unfair Competition (California Bus. & Prof. Code

§ 17200 et seq.)– Equitable and promissory estoppel– Implied license




• On motion for summary judgment, Judge rules common law and unfair competition claims are not preempted by Federal patent law

– Allegation goes to bad faith conduct in the marketplace, not before PTO

– Preemption decision consistent with other rulings in Delaware (e.g., Nokia v. Qualcomm) and elsewhere (Samsung v. Ericsson (E.D. Tex.))




• Andrew argues that TruePosition failed to disclose essential patent as required by ETSI rules. TruePosition responds that it could not know whether or not non-infringing alternatives existed

– Judge rejects TruePosition argument as inconsistent with its claim for lost profits, which is premised on absence of non-infringing alternatives

– TruePosition “cannot have its cake and eat it too.”


MPEG-LA v. Alcatel-Lucent*/


*/ MPEG-LA LLC v. Alcatel Lucent, Delaware Chancery Court ((New Castle County), filed October 29, 2007)

• MPEG-LA manages patent pool formed to hold patents essential to implement MPEG family of video compression standards

• Alcatel and Lucent both hold essential patents

• Alcatel joins pool, Lucent does not

• Alcatel acquires Lucent


MPEG-LA v. Alcatel-Lucent


• According to complaint:

– MPEG patent pool contributors agree to place after-acquired patents into pool

– To avoid effect of this provision, shortly before Alcatel’s purchase of Lucent closes, Lucent puts its essential patents into a trust

• MPEG-LA sues to require Alcatel to comply with commitment it made to MPEG-LA to contribute after-acquired patents to pool.


Golden Bridge v. Nokia*/


*/ Golden Bridge Technology, Inc. v. Nokia Inc., No. 6:06-CV-163 (E.D. Tex., Sept. 11, 2007)

• Golden Bridge Technology (GBT) developed and patented a new technology (CPCH) for cell phones

• GBT joined 3GPP, developer of WCDMA 3rd Generation cellular standard

• CPCH first included as an optional feature of the standard, then removed

• GBT alleges that removal of CPCH caused by conspiracy of companies seeking to avoid licensing GBT patents


Golden Bridge v. Nokia


• Ruling on motion to dismiss, Judge rules that facts Golden Bridge alleged could be per se violation of Sherman Act– Group boycott would “always or almost always tend

to restrict competition and decrease output”– Exclusion from standard means exclusion from

market

• Decision on motion to dismiss causes concern in standards development community– Suggests that any decision to exclude particular

technology from standard can be basis for antitrust liability


Golden Bridge v. Nokia


• On summary judgment, Judge rules:– No factual evidence of agreement between 3GPP

participants to remove CPCH– Decision to remove CPCH made using open,

transparent, consensus-based processes

• But, Judge refuses to revisit earlier application of per se liability standard– Motion to dismiss decision may be used by

“losers” in standards development process to argue that “winners” conspired to reject their technology


Broadcom v. Qualcomm*/


*/ Broadcom Corp. v. Qualcomm, Inc., 501 F.3d 297 (3d. Cir. 2007). Wilmer Hale represents Broadcom.

• Facts:– Qualcomm claims to own patents essential to

implement 3G wireless standard (UMTS)– Under ETSI rules, Qualcomm committed to

license patents on fair, reasonable, and non-discriminatory (FRAND) terms

• Dispute:– Broadcom alleges that Qualcomm

monopolized technology markets for UMTS by falsely promising to license its putatively essential patents on FRAND terms


Broadcom v. Qualcomm


• District Court Opinion: Ruling on Qualcomm’s motion to dismiss, rejects antitrust claim– Resolving claim in Broadcom’s favor would impose

on Qualcomm a duty to deal with its competitors– Any time a standard includes patented technology,

patentee enjoys monopoly power, and accepting Broadcom’s argument would expose any owner of essential patents to antitrust liability

– Broadcom’s “inducement” argument may give rise to liability under other legal theories, but inducement did not create Qualcomm’s monopoly power




• Third Circuit Reverses– Inclusion of patent in standard can lead to “hold

up” by patentee, permitting patentee “to extract supracompetitive royalties from the industry participants”

– Courts and antitrust agencies share “growing awareness of the risks associated with deceptive conduct in the private standard-setting process”

– FRAND commitment “is a factor—and an important factor—that the [SDO] will consider in evaluating the suitability of a given proprietary technology vis-à-vis competing alternatives.”




“We hold that (1) in a consensus-oriented private standard-setting environment, (2) a patent holder’s intentionally false promise to license essential technology on FRAND terms, (3) coupled with an [SDO]’s reliance on that promise when including the technology in a standard, and (4) the patent holder’s subsequent breach of that promise, is actionable anticompetitive conduct.”


Antitrust Policy


• SDOs respond to concern with “hold-up” bydeveloping new rules that permit, encourage, or requireparticipants disclose specific licensing terms “ex ante,” during standards development

– Effort to avoid the indeterminate nature of RAND and disputes about what terms are reasonable

• In two business review letters, Antitrust Division ofJustice Department assesses legality of rules that permitor require ex ante disclosure of licensing terms


Antitrust Policy


• VITA Letter (October 2006) and IEEE Letter (May 2007)*/ recognize danger of hold-up after standard issues

• Antitrust Division will not take enforcement action against SDOs that adopt rules that permit (IEEE)or require (VITA) unilateral ex ante disclosure of licensing terms

• Letters take no position on “collective negotiation”of royalties between patentee and multiple licensees in standards development process

*/ Letter, Thomas Barnett to Robert Skitol, available at http://www.usdoj.gov/atr/public/busreview/219380.pdf;Letter, Thomas Barnett to Michael Lindsay, available at ttp://www.usdoj.gov/atr/public/busreview/222978.pdf.

http://www.usdoj.gov/atr/public/busreview/219380.pdf


Antitrust Policy


• April 2007 Joint DOJ/FTC IP report*/:

– Joint ex ante negotiation may bring significant benefitsin avoiding hold up after standard is adopted, and willbe evaluated under rule of reason.

– Joint negotiation may raise antitrust concernswhen there are no viable alternatives to a particularpatented technology.■ Open question: Is not going forward with a standard (or

choosing to exclude feature enabled by patented technology) itself an “alternative technology”?

*/ Antitrust Enforcement and Intellectual Property Rights: Promoting Innovation and Competition, available

at http://www.usdoj.gov/atr/public/hearings/ip/222655.pdf.

http://www.usdoj.gov/atr/public/hearings/ip/222655.pdf

http://www.usdoj.gov/atr/public/hearings/ip/222655.pdf

2008 and Beyond

Events


• DC Circuit hears Rambus’*/ appeal of Federal Trade Commission decision that Rambus’ alleged failure to disclose essential patents violated antitrust law

– Whether “shared expectations” of participants can be looked at to supplement terms of ambiguous IPR policy.

• Federal Circuit decision in CSIRO v. Buffalo – Some amicus briefs encourage Federal Circuit to

address application of eBay v. MercExchange standard for injunctive relief when patentee has committed to license patents through participation in standards development

*/ WilmerHale represents Rambus.

2008 and Beyond

Predictions


• More cases: – Standards-based defenses and counterclaims

have proven successful when asserted in infringement cases

– With increasing importance of standards, patents that may be essential to implement standards become more valuable

• Emerging theories – Delayed disclosure of essential patents– Compliance with non-discrimination

requirements– Reasonableness of non-royalty terms – “Stacking” of multiple RAND royalties charged

at different levels of distribution

Best Practices

Patent Disclosure Issues


• Periodic company inventory of standards participation

– Which SDOs?– What are IP policies?– Do we have processes in place to comply with

disclosure obligations?– Have we agreed to default licensing obligations

that implicate competitively significant patents?■ Particularly important for companies that participate

regularly in consortia, special interest groups, and other less formal SDOs where default licensing is common

Best Practices

Patent Disclosure Issues


• Standards Diligence for Acquisitions

– Has target been active in standards development?

– Has target complied with disclosure obligations?

– Are target’s patents subject to licensing commitments given through participation in standard-setting?

– Has target transferred patents to evade disclosure or licensing obligations?

Best Practices

Training for Participants


• Both “defensive” and “offensive”

– Familiarize participants with IPR policies of SDOs in which they participate and process for making patent disclosures■ Role of participants in standards disclosure versus

company IP lawyers in disclosure process

– Antitrust training to avoid group boycott issues

– Detecting and responding to risk of patent ambush■ When is it appropriate to ask another participant about

its patent position and licensing intentions?■ What can I do with the information once I receive it?

Standards and Patent Pools: 2007 and Beyond

Questions?

Gil OhanaWilmer Cutler Pickering Hale and DorrPalo Alto, CA+1 650 858 [email protected]

Standards and Patent Pools: 2007 and Beyond

For copy of presentation and all materials cited, please send e-mail to:

[email protected]

gil ohana - standards and patent pools

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