To Grant or Not to Grant: Injunctions in the World of Standard Essential Patents

9

In 2006, a case came up before the US Supreme Court which dealt with the issue of granting injunctions in relation to patents. This case did not fall in the antitrust domain but was more of an equity decision concerned with private remedies generally. [11] However, this judgment was in direct opposition with what was usually followed in the US: a general rule that courts will issue permanent injunctions against patent infringement absent exceptional circumstances. [12] The Court held in eBay case [13] that four traditional principles of equity must be looked into while deciding whether to grant injunctions or not. A plaintiff must demonstrate that: (i) it has suffered an irreparable injury; (ii) remedies available at law (monetary damages) are inadequate to compensate for the injury; (iii) a remedy is in equity is warranted; and (iv) the public interest would not be harmed by a permanent injunction. [14] It was highlighted upon by one of the judges, Justice Thomas that injunctions may not serve the public interest in all cases especially when the patented invention is a small component of the final product that is launched in the market and the threat of injunction is employed for undue leverage in negotiations. [15] This eBay test is used to evaluate injunction requests made by SEP holders as well.

10

Some commentators have argued that, after making a FRAND commitment, an SEP holder can no longer meet the eBay requirements for obtaining an injunction. Mark Lemley and Carl Shapiro have posited that, by making a FRAND commitment, an SEP holder has conceded that monetary damages would suffice to compensate the SEP holder for the infringement of its SEPs. [16] An analysis of decisions in cases in which an SEP holder has requested an injunction reveals that, in each case, the SEP holder failed to meet the necessary criteria to obtain an injunction. For example, in Apple Inc. v. Motorola, Inc. [17], the Federal Circuit found that Motorola was not entitled to an injunction because it had failed to show that Apple’s infringement of Motorola’s SEPs had caused Motorola irreparable harm or that monetary damages would inadequately compensate Motorola for that harm. Similarly, in Microsoft Corp. v. Motorola, Inc., Judge Robart denied Motorola’s request for an injunction against Microsoft’s products that used Motorola’s essential patents. [18]

11

However, an important question concerning the SEP holder’s right to seek an injunction is whether such a request could make the SEP holder liable under US antitrust law. Several plaintiffs have challenged SEP holders’ conduct under the section 2 of the Sherman Act. [19] For example, in Broadcom Corp. v. Qualcomm Inc. [20] , the plaintiff alleged that Qualcomm had monopolized the market for cellular telephone technology and components by, among other things, intentionally deceiving a private SSO. The US Court of Appeals for the Third Circuit found that the SEP holder’s allegedly deceptive behavior during the standardization process was anticompetitive conduct actionable under the provisions of section 2 of the Sherman Act. After this, multiple plaintiffs used allegation of deceptive behavior to challenge the SEP holder’s request for an injunction under the provisions of the act.

12

It is not just the Sherman Act but also the Federal Trade Commission (FTC) Act that has been invoked to try to make SEP holders liable for seeking injunctions under antitrust laws. Section 5 of the FTC Act [21] gives the US Federal Trade Commission authority to prohibit “unfair methods of competition” and “unfair or deceptive acts or practices”. However, the FTC alone can initiate an investigation of conduct that allegedly violates section 5 of the FTC Act and there can be no private action. The US Federal Trade Commission investigated the SEP holder’s request for an injunction under section 5 of the FTC Act in its 2013 investigation of Motorola Mobility. [22] The FTC alleged that Motorola Mobility, following its acquisition by Google, engaged in “unfair methods of competition and unfair acts or practices” when it sought injunctions against allegedly willing licensees of its SEPs for smart-phones and tablet computers. [23] The FTC charged Motorola Mobility with violating section 5 by engaging in unfair practices that harmed competition in the market for electronic devices and that were “likely to cause substantial injury to consumers”. Ultimately, the FTC settled its Motorola Mobility investigation with a consent agreement requiring Motorola to cease and desist from seeking injunctions against alleged infringers.

13

Both the US Department of Justice (DOJ) and the Federal Trade Commission took similar methods, citing worries about the competitive consequences of patent holders who had made FRAND pledges seeking injunctive relief to keep willing licensees out. However, this perspective has lately shifted. There is currently a developing schism between the two agencies regarding how the FRAND procedure should work. In December 2019, the Justice Department, the US Patent and Trademark Office, and the National Institute of Standards and Technology issued a formal policy statement [24] on remedies for SEPs. Injunctions for SEPs should be accessible on the same terms as for patents in general, according to the new declaration. It further maintains that antitrust rules do not apply to FRAND issues in general. This contradicts what has been widely accepted in the United States for many years. However, the on-going case of FTC v. Qualcomm, which has been closely followed and has garnered great public and media interest, could give a picture of how things will move on in the US. In this case, the DOJ has openly contested the FTC’s accusations that Qualcomm exploited its market dominance to force others to pay greater royalties than they intended, and that Qualcomm then used this additional cash to prevent others from successfully competing with Qualcomm. The interface between Patents Law and Antitrust Law can be seen from this case, which perhaps may decide the role of anti-trust in SEPs and related FRAND activities moving forward.

14

While the European Commission acknowledges that an injunction is a valid remedy, it has determined that where a patent owner has made a voluntary FRAND licencing promise and a licensee is prepared to engage into a FRAND licence agreement, seeking an injunction may constitute an abuse of a dominant position. This was held in the Motorola  [25] case and the Samsung  [26] case. The courts believed that the rights of the patent holder to enforce their intellectual property right, access the tribunals and freedom of trade needed to be balanced against the harms that will accrue due to the abuse of the dominant position of the SEP holder, which would be contrary to Article 102 TFEU. Thus, the European Union also recognizes that granting an injunctions as a relief would be inconsistent with FRAND terms. [27]

15

Further, in 2015 in the seminal case of  Huawei v. ZTE [28]  (Huawei) the European Court of Justice set the framework for the admissibility of FRAND defences in SEP infringement cases and clarified that in order for the SEP owner to obtain an injunction, (i) it must notify the alleged infringer of the infringement and designate the SEPs infringed as well as the manner in which they have been infringed; (ii) the alleged infringer must express its willingness to take a licence on FRAND terms; (iii) the SEP holder must provide a written licence offer on FRAND terms, specifying in particular the royalty and how it is to be calculated; (iv) the alleged infringer must provide appropriate security and be able to render an account of its acts of use in accordance with recognised commercial practises in the field and in good faith (and in particular without delay tactics) by accepting the SEP holder’s offer or making a counter-offer, and (v) the alleged infringer must provide appropriate security and be able to render an account of its acts of use in accordance with recognised commercial practises in the field.

16

If an SEP holder seeks an injunction without first following these steps, a court may permit the alleged infringer to raise the “FRAND defense”—that is, argue that a license for the SEP was not offered on FRAND terms.

17

In 2016, the Dutch technology company Philips began to bring litigations in Germany and the Netherlands to protect an SEP it owned covering mobile cellular communication systems. In Philips v. Archos [29] , a German regional court refused to grant an injunction, finding that Philips did not satisfy the Huawei principles and, thus, Archos had a FRAND defense. On the other hand, a district court in the Netherlands concluded in parallel proceedings that the SEP-implementer, Archos, proved unwilling to license Philips’ SEP on FRAND terms as required by Huawei. In 2019, the Court of Appeal of The Hague again gave guidance on the interpretation of the Court of Justice of the European Union (CJEU) decision in Huawei and the standards for assessing FRAND defences under Dutch law in Philips v. Wiko. [30] The Court awarded Philips an injunction against Wiko as it was held to be an ‘unwilling licensee’. The divergent national court opinions create confusion and it is important that there should be clarity amongst the members of the European Union as to how to approach this issue. The discussion around this is bound to evolve and develop in the coming years.

18

Unwired Planet v. Huawei [31] , one of the most significant standards-related patent matters heard by the UK courts recently, was decided by the UK Supreme Court. The Supreme Court ruled that the UK courts had the authority to decide on FRAND conditions for SEP worldwide licences, a ruling that is expected to solidify the UK’s position as the preferred location for SEP holders seeking to enforce their legal rights. The Supreme Court concluded that the Courts of England and Wales have jurisdiction and may use a power to prevent infringement of a UK SEP unless an implementer accepts a global licence on FRAND terms in a unanimous ruling delivered by Lord Hodge. The Supreme Court determined that courts have the authority to determine the conditions and fees for FRAND worldwide licences. The Supreme Court also ruled that a UK injunction is the proper response when a UK patent is violated as a result of the implementer’s refusal to accept a global licence, as doing so gives them “certainty that they can legally manufacture and sell products that comply with the standard on a worldwide basis,” in addition to access to the UK market.

19

The Supreme Court determined that Unwired Planet was not required to provide Huawei a licence on the same terms that it had previously granted Samsung under the European Telecommunication Standard Institute (ETSI) IPR policy. Non-discriminatory “provides focus and narrows the scope for argument about what might count as ‘fair’ or ‘reasonable’ for these purposes in a given context,” the Supreme Court said in explaining this decision, concluding that “fair”, “reasonable”, and “non-discriminatory” should not be seen as three separate obligations but rather as a single obligation. The Supreme Court further noted that a “most-favourable licence” word was missing from the ETSI IP rights policy (as was implied by the Huawei interpretation of non-discriminatory). ETSI has previously explored and rejected such a phrase. Because the circumstances of the CJEU case cited were different from those of the Unwired Planet v. Huawei case and Unwired Planet had demonstrated its willingness to grant a licence on terms deemed to be FRAND by the courts, the Supreme Court determined that Unwired Planet had not abused its dominant position in the market by starting legal proceedings before making a FRAND offer. Additionally, the Supreme Court ruled that it is not necessary to comply with Competition law in order to make a FRAND offer before seeking an injunction.

20

Because a worldwide licence may be obtained without the need for infringement procedures in many other jurisdictions, the Supreme Court’s ruling is expected to strengthen the UK’s position as the venue of choice for SEP holders looking to protect their rights. The judgement further improves the position of SEP holders and offers some guidance on how FRAND conditions may be determined, such as by taking into account the global rather than simply the national circumstances. The implementer may choose to accept the injunction and, if necessary, pay damages or refrain from operating in the UK market rather than complying with the court’s direction to enter into a worldwide licence. Since SEP holders are not required to match earlier bids, an implementer’s main decision may be whether to try to acquire a licence swiftly and at a fair price. It would be advantageous to let the courts decide on FRAND conditions if a SEP holder’s demands for a worldwide licence are irrational. Additionally, even if a SEP holder is not required by law to make a FRAND offer before starting legal action, if a SEP holder behaves unreasonably, Competition law defences may still be available. Other national courts are likely to decide that they have the authority to impose worldwide FRAND licence terms in a manner similar to those of the UK courts. In this case, it’s possible that SEP holders may engage in some forum shopping. When choosing a proper (EU) court in which to begin proceedings, any divergent interpretations of the CJEU decision in Huawei v. ZTE may also be taken into consideration. The appeal of simply accepting an injunction and paying damages or avoiding that national market may be diminished for implementers if other national courts follow the UK courts’ example and issue injunctions preventing infringement of national SEPs absent the entry of a defendant into a global licence.

21

In India too, the standard implementers can approach the Competition Commission of India (CCI) for remedies against abuse of dominant position and against anti-competitive agreements. However, most cases involving IPR issues have landed in the High Courts or the Supreme Court pursuant to a challenge to the jurisdiction of the Commission for adjudicating such matters.

22

In March 2013, after Ericsson failed to get mobile companies to discuss in good faith what Ericsson believed was a FRAND offer, it commenced the first of many SEP battles in India. Ericsson, as a member of the European Telecommunication Standard Institute (ETSI)—the European SSO for telecommunication industry—, had patents covering technology adopted as a part of a standard. [32] Ericsson wanted to enter into Ericsson’s global patent license agreement (GPLA) while insisting that the mobile companies sign a non-disclosure agreement (NDA). In light of this NDA, Ericsson refused to share the license rates meted out to other licensees. Micromax refused to sign this agreement which led Ericsson to file for an injunction in the Delhi High Court. [33] An injunction was granted to Ericsson, as the single judge held that prima facie case had been made out by the plaintiff. Further, interim arrangement for royalties were made by the Court, additionally with authorization of search and report of consignments imported by Micromax. Similarly, Delhi HC had granted an ex-parte injunctive relief in Vringo v. Xu Dejun [34] stating that the case satisfied the three conditions for grant of temporary injunction in favour of the plaintiff, i.e., existence of a prima facie case, balance of convenience and probability for suffering irreparable loss and injury. This was later vacated on multiple grounds, one of them being that ZTE Corporation (Xu Dejun was the CEO at that time) had been directed to furnish the bank guarantee of Rs. 5 crores in lieu of the same and all relevant accounts of the quantum of CDMA devices sold by them in India and the revenues resulting from them.

23

In the Micromax case, following the Delhi High Court order, both the parties approached the court stating that they would start negotiating on a FRAND licence agreement, the failure of which would lead to resorting to mediation. However, the mediation failed and Micromax approached the CCI on grounds that Ericsson was abusing its dominant position. [35] Similarly, Intex too approached the CCI against Ericsson on similar grounds. [36] The Commission assigned the director general to conduct investigation stating clearly that Ericsson was charging royalty not based on FRAND terms. CCI’s reasoning for the same was that Micromax in its complaint had stated that Ericsson was abusing its dominant position as the sole possessor of the essential patents by imposing exorbitant royalty rates. Further, these rates were based on the final product, i.e., the phone instead of the patents used.

24

Aggrieved by the CCI’s order, Ericsson approached the Delhi High Court for judicial review. [37] The questions raised in this landmark judgment were of high importance as it was the first time such questions on SEP licensing, FRAND terms and jurisdiction of CCI were raised. According to Ericsson’s argument before the Delhi High Court, the CCI lacks power to begin any case in connection to a claim of royalties by a patent holder, which is governed under the Indian Patents Act, 1970. [38] After a long-ranging discussion on the nature of remedies that are provided for in the Indian Patents Act, 1970 and the Competition Act, 2002, the Delhi High Court observed that, “if there are irreconcilable differences between the Patents Act and the Competition Act in so far as anti-abuse provisions are concerned, the Patents Act being a special Act shall prevail.” 

25

The Delhi High Court, on the other hand, found no irreconcilable discrepancies between the two acts since the remedies available under the Competition Act, 2002 for abuse of dominant position were fundamentally different from those available under the Indian Patents Act, 1970. The Delhi High Court (HC) also observed that it was apparent that the remedies under the two enactments were not mutually exclusive. Further, the Court held that Ericsson did stand in a dominant position and abused it, by citing Huawei and drawing similarities between Treaty on the Functioning of the European Union (TFEU) and the Competition Act. Thus, application of Competition Law is not barred in the Indian jurisdiction to IPR cases. From the injunction aspect we see that interim injunctions have been granted by the Delhi High Court in such cases but the court was ready to lift the injunction if the implementers deposited the (court determined) royalty payment with the court during the pendency of the litigation. Thus, in India, there’s a possibility that an SEP holder may be able to seek injunctions against implementers.

26

The High Court of Delhi handed down India’s first-ever SEP ruling in the joint (similar) cases of Koninklijke Philips v. Rajesh Bansal and Koninklijke Philips v. Bhagirathi Electronics  [39] in July 2018. The defendants in both cases were importers and assemblers of DVD players in India. Philips filed patent infringement lawsuits against both of them, accusing them of importing DVD player parts made using its proprietary technology and putting them together in India without a licence. The implementers maintained that because they got the parts from Philips approved licensees, they had not violated the patent. The Delhi High Court made a decision in Philips’ favour. The defendants’ failure to obtain a licence from Philips to use its SEP prima facie led to the finding of infringement, the court held, even though the defendants’ products complied with the standard. The court held that the defendants failed to prove that the components were imported from Philips’ authorised licensees. The defendants were unable to demonstrate that the appropriate licence fee Philips levied was not on FRAND terms. As a result, the court set the requested royalties charged by Philips. Although ground-breaking, this ruling was rather simple and solely concerned itself with domestic matters. There is another dispute on SEP and FRAND which involves an international jurisdiction issue.

27

An anti-enforcement injunction was given by the Delhi High Court in Interdigital Technology Corporation v. Xiaomi Corporation & Ors. [40] It was decided that when Indian jurisdiction is the sole venue qualified to hear the claim, a party cannot be prevented from pursuing their case before an Indian court. By affirming and making India’s first anti-enforcement injunction ordered in favour of a US technology pioneer, Interdigital, against the Chinese multinational Xiaomi Corporation, the Delhi High Court made legal history. The proceedings before the Wuhan Court involved alleged violation of six particular Indian patents, and the court noticed that the Wuhan Court had neglected to take this into account. The difference between an Anti-Suit injunction, an Anti-Anti-Suit injunction, and an Anti-Enforcement injunction was highlighted by the court. It was determined that the Indian injunction was in the character of an anti-enforcement injunction because the Wuhan anti-suit procedures had already come to a conclusion. The court also noted that any overlap between the proceedings in Wuhan and those in India is minimal, and that there was no justification for the Wuhan Court to have prohibited Interdigital from pursuing its claims for an injunction against Xiaomi in India unless the overlap was such that it rendered the Indian proceedings oppressive and vexatious.

28

Anti-enforcement suit settlements and various later reliefs have established new precedents. For Indian plaintiffs, this is a favourable and welcome development. The Delhi High Court has established new jurisprudential guidelines for the granting of an anti-suit or an anti-enforcement injunction with this ruling. Since there has never been a precedence in Indian law for this element, these principles will undoubtedly provide clarity in this area. The challenged ruling itself was oppressive and did not respect the jurisdiction of an Indian court to decide cases governed by Indian law, thus the court has specifically mentioned the restricted use of the concept of comity of courts. While deciding each case on its own merits, courts must strike a balance between the parties’ rights and the need for justice and equality. After this ruling, it is extremely possible that the parties involved in the litigation will start using anti-suit injunction grounds. Therefore, this decision will make a significant contribution to both Indian and global law.