Standards, Patents, and Antitrust: Year in Review

Transcription

1 Standards, Patents, and Antitrust: Year in Review Practising Law Institute 11 th Annual Patent Law Institute San Francisco, California April 27, 2017 Gil Ohana, Senior Director, Antitrust and Competition */ Cisco Systems, Inc. */ Affiliation provided for identification purposes only. Views presented are personal to presenter and may not be attributed to presenter s employer.

2 What a Year it Was. US litigation International litigation and developments Future developments

3 US litigation: Apple v. Acacia, et al. Industry background: operating companies that own SEPs for wireless standards (LTE, Wi-Fi) sell patents to patent assertion entities Sellers often retain participation interests, such as right to portion of royalties PAEs receive Sellers may retain right to influence activities of PAEs PAEs can assert without fear of counterclaims and business friction that litigation between operating companies could create Does F/RAND mean something different to PAE than to operating company? Points to uncertainty regarding what F/RAND means

4 US litigation: Apple v. Acacia, et al. Apple v. Acacia, et al. (Page 9 of Complaint)

5 US litigation: Apple v. Acacia, et al. Apple s legal theory: Nokia committed to license patents claimed to be essential to implement wireless standards on F/RAND terms Transfers to PAEs and subsequent PAE assertions are a scheme to evade F/RAND obligation, attaining monopoly power that F/RAND commitment is intended to constrain Higher licensing and litigation costs imposed by diffusion of SEPs previously owned by Nokia to multiple PAEs Economic basis: double marginalization Cournot (1838) PAE business model evades constraints on licensing behavior to which operating companies are subject

6 US litigation: FTC v. Qualcomm Industry background: Qualcomm leading supplier of baseband processors, chip in cell phone that provides radio-frequency functionality to connect with cell tower Qualcomm also leading owner and licensor of patents claimed to be essential to cellular standards implemented in baseband processor FTC case focuses on Qualcomm s dual roles as SEP licensor and developer and seller of baseband processors

7 US litigation: FTC v. Qualcomm De facto non-assert SEP license Baseband processors De facto non-assert: effort to avoid exhaustion, retain ability to seek royalties from handset vendors that purchase Non-Qualcomm basebands

8 US litigation: FTC v. Qualcomm De facto non-assert SEP license Processors De facto non-assert: effort to avoid exhaustion, retain ability to seek royalties from handset vendors that purchase Non-Qualcomm basebands

9 US litigation: FTC v. Qualcomm FTC s Theories: Qualcomm maintains monopoly in baseband processor market by refusing to sell chips to customers unless they also take license to SEPs Handset vendors avoid Qualcomm competitors because they will need to buy chips and pay Qualcomm to license SEPs for cellular standards Handset vendors won t challenge Qualcomm patents because of concern with losing access to Qualcomm baseband processors Qualcomm refuses to license SEPs to baseband processor competitors despite having made FRAND commitment to license any implementer of standard Qualcomm enters into exclusive dealing agreement with Apple, leading customer, for supply of baseband processors in return for discount on royalties charged to Apple contract manufacturers FTC sues under Section 5 of FTC Act, which prohibits unfair or deceptive means of competition

10 US litigation: Apple v. Qualcomm In the wake of FTC case against Qualcomm, Apple also sues Qualcomm, seeking: Damages for alleged breach of rebate agreement Declarations of invalidity or a FRAND royalty determination for numerous patents Monopolization claim: Qualcomm prevents competition in baseband processor market by refusing to license SEPs to processor competitors Patent exhaustion: Apple seeks declaration that Qualcomm cannot seek royalties for patents substantially embodied (Quanta) in baseband processors it sells to Apple contract manufacturers

11 International Developments Korea Fair Trade Commission, Japan Fair Trade Commission, and Taiwan Fair Trade Commission all investigate Qualcomm KFTC decision: Some overlap with US FTC lawsuit: refusal to license SEPs to baseband processor competitors in violation of FRAND commitment no license no chips policy of tying chip supply to SEP license agreement KFTC also raises issues that FTC complaint does not address: Requirement that Qualcomm licensees grant back licenses to SEPs they own, which Qualcomm then licenses to its licensees ( patent umbrella ) Contrary to US treatment of non-exclusive patent grantbacks as presumptively pro-competitive (1996 / 2017 IP licensing guidelines, 5.6)

12 International Developments Ericsson v. Competition Commission of India Arises out of investigation of Ericsson by India s national competition authority Investigation focuses on Ericsson s use of injunctions or threats of injunctions in licensing negotiations with Indian handset vendors Intex and Micromax Ericsson argues that CCI does not have power to investigate patent enforcement as breach of competition law Delhi High Court disagrees. Pursuing injunctions for infringement of SEPs could constitute abuse of dominance High Court expresses no view as to whether Ericsson s conduct does, in fact, constitute abuse of dominance

13 The year ahead FTC v. Qualcomm: uncertain whether FTC will continue case Acting FTC Chair Maureen Ohlhausen dissented from decision to file case in last days of Obama Administration European Union, JFTC, and TFTC investigations of Qualcomm Apple v. Acacia unlikely to be last case challenging disaggregation of SEP portfolios as antitrust violation or unfair business practice

14 Questions?