In a series of fast-moving and interrelated developments
involving courts and competition authorities in many regions and
countries, holders of patents deemed "essential" to
industry standards are finding their ability to obtain injunctive
relief for infringement of those patents under challenge.
Traditionally, in most significant jurisdictions around the world,
the plaintiff in a patent infringement action can seek an
injunction preventing the accused infringer from continuing to
practice the inventions claimed in the patent, as well as monetary
damages in the form of lost profits or a reasonable royalty.
Recently, however, some litigants, commentators, and others have
expressed the view that when an asserted patent is a
standards-essential patent ("SEP") encumbered with a
fair, reasonable, and non-discriminatory ("FRAND")
licensing commitment, the patent holder should be prevented from
obtaining injunctive relief. Otherwise, these proponents argue, the
patent holder can use the threat of an injunction to extract
unfairly high royalties and impede implementation of the standard.
On the other hand, certain patent-holders and others have responded
that a blanket rule barring injunctive relief for FRAND-encumbered
SEPs fails to take into account the fact-specific nature of FRAND
commitments, fundamentally alters the dynamic of negotiating the
specific details of a FRAND license, and erodes the commercial
value of these SEPs. There are no easy answers, and courts in the
United States and many foreign jurisdictions are currently
grappling with these issues as hotly contested disputes involving
FRAND-encumbered SEPs percolate through the judicial and regulatory
systems around the world.
In the United States, federal district courts have the discretion
to grant injunctions to stop patent infringement when the balance
of traditional equitable factors, including a consideration of the
public interest, weighs in favor of granting injunctive relief.
Recently, two federal district courts applied these factors to deny
injunctive relief to holders of FRAND-encumbered SEPs. One of these
cases is now on appeal at the United States Court of Appeals for
the Federal Circuit ("the Federal Circuit"). Meanwhile,
the Federal Trade Commission ("FTC"), the Antitrust
Division of the Department of Justice ("DOJ"), and the
U.S. Patent and Trademark Office ("USPTO") have all urged
the International Trade Commission ("ITC"), an
administrative agency tasked with adjudicating patent disputes to
stop the importation of infringing products to the detriment of
domestic industry, to utilize its mandatory "public interest
factor" analysis to take into account the potential impact on
competition and consumers before allowing an SEP holder to obtain
an injunction-like "exclusion order."
While courts in some other countries apply a discretionary
standard similar to that applicable in U.S. federal district courts
that permits denial of an injunction based on the public interest,
in other jurisdictions the issuance of an injunction is (almost)
automatic once infringement is proven. There may, however, still be
the possibility of some sort of FRAND-based defense in most
jurisdictions, either as a defense to liability or as a basis to
limit relief to monetary damages and a royalty, but the
availability and scope of a FRAND-based defense are likely to vary
depending in considerable part on the degree of discretion a court
has in granting or denying injunctive relief.
Specifically, courts in Germany, the Netherlands, Japan, and China
have recently considered the issue. The conditions for the
availability of a FRAND-based defense vary widely among these four
jurisdictions. For example, in Germany, statutory provisions permit
all patent holders, including a SEP holder, to apply for an
injunction. If infringement is proven, German courts issue an
injunction as a matter of law; they have virtually no discretion on
whether to grant an injunction. If the asserted patent is a
FRAND-encumbered SEP, however, a German court may invoke a narrow
limitation on the issuance of injunctions in exceptional cases
based on principles of antitrust law, provided that the infringer
actually pays reasonable royalties. Dutch courts also acknowledge
that injunctions can be granted in cases involving SEPs, but one
court has rejected an application for injunctive relief in the
context of a FRAND commitment as an abuse of law and a breach of
precontractual good faith. An advisory decision in China, by
contrast, suggests that a much broader FRAND-based defense may be
available if a patentee participates in the standard-setting
process or otherwise agrees that the patented technology may be
incorporated into a standard and subsequently files suit seeking
injunctive relief for infringement of the patent. This advisory
opinion suggests that, if applicable, the defense may be a complete
defense to liability for infringement, and, in all events, the
royalty rate for the use of FRAND-encumbered SEPs should be very
low. In Japan, a report of a recent decision by a Japanese court
indicates that a FRAND defense may also be asserted there.
Separately, some parties have argued that seeking injunctive
relief when an accused infringer is willing to license a
FRAND-encumbered SEP would violate applicable antitrust and/or
competition laws. Two recent enforcement actions by the FTC, a pair
of court decisions in China, and ongoing investigations by the
Commission of the European Union raise the prospect of antitrust
and competition law enforcement in this area. Such enforcement
under antitrust and competition laws threatens to remove the issue
from the realm of patent law because, even if courts were to
determine that injunctive relief is available as a matter of patent
law, the owner of FRAND-encumbered SEPs might risk a finding that
it had violated applicable antitrust or competition laws by
pursuing such relief. This White Paper reviews these recent
developments and analyzes the current situation with respect to the
availability of injunctive relief for FRAND-encumbered patents in
key jurisdictions around the world.
Click here to view the full White Paper.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.