Stephen S. Korniczky skorniczky@sheppardmullin.com Anti-Suit Injunctions – Leveling the Playing Field When Seeking a FRAND License to Standard-Essential Patents

Technology Standards Standards are technical requirements that encourage: Cooperative innovation Product compatibility Price competition

Standard-Essential Patents Standard-Essential Patents (“SEPs”) Cover the standard: it is impossible to practice the standard without infringing The standard creates a demand for licensing Problems Royalty stacking: cost to license all SEPs? Hold-up: lack of choice may encourage SEP owners to demand higher royalties than their patents merit Solutions Obligation to declare patents covering standard Obligation to license essential patents on fair, reasonable, and non-discriminatory (“FRAND”) terms

Meaning of “Standard Essential” “Declared essential” does not mean “actually essential” “Essential” does not mean valid or enforceable Not all essential patents are of equal value Some SEPs are pioneering Some SEPs offer minor improvements Some SEPs offer the only working solution Some SEPs offer one of several working solutions

Meaning of “FRAND” What is “fair and reasonable”? Fact intensive and case specific Some courts use a modified version of the Georgia–Pacific factors to help determine what is fair and reasonable What is “non-discriminatory”? What royalty rates have been offered to competitors? Are those competitors similarly situated? How much transparency and access to information is required? E.g., most SEP licenses are confidential E.g., difficult to identify number and value of “actually essential” patents

TCL Files Declaratory Judgment Action in California Hold-up: Licensees under Tremendous Pressure to Accept Licensor’s Terms Ericsson offered TCL terms that TCL believed were non-FRAND Ericsson sued or countersued TCL in 7 other jurisdictions Ericsson lawsuit(s) SEPs Injunction Sought? Filed France (1) 3 Yes 2012 Brazil (4) 2 2012 & 2014 Russia (2) 1 UK (1) 2013 TCL Files Declaratory Judgment Action in California ALL No 2014 Argentina (1) Germany (2) E.D. Texas I (1) E.D. Texas II (1) 2015

Leveling the Playing Field: TCL Files Declaratory Judgment Action Asked court to determine FRAND terms and conditions for a worldwide license Alleged that Ericsson breached its contractual obligation with ETSI to license on FRAND terms TCL is a third-party beneficiary and willing licensee

TCL Needs to Level the Playing Field Eliminate Ericsson’s threatened and actual injunctions around the world Focus on the merits of the FRAND-license dispute and determine the FRAND terms and conditions Free up TCL’s monetary and human resources from fighting 14 different lawsuits

Leveling the Playing Field: Seeking an Anti-suit Injunction Ordinary test for injunctive relief considers: Likelihood of success on the merits Irreparable harm Balance of equities Public interest This is not the test for obtaining anti-suit injunctive relief

Leveling the Playing Field: 3-Part Test for Foreign Anti-suit Injunctions Are the parties and issues the same in the foreign action, and is the domestic action dispositive of the foreign action to be enjoined? Does the foreign litigation satisfy at least one of the following? It frustrates a policy of the enjoining forum (e.g., causing distracting and wasteful litigation); It is vexatious or oppressive; It threatens the issuing court’s jurisdiction over property; OR It invokes other equitable prejudices (e.g., undue expense and delay).

Leveling the Playing Field: 3-Part Test for Foreign Anti-suit Injunctions Would the injunction have a tolerable impact on comity? Courts consider: Effect on foreign relations; Whether the suit raises public international issues; Forum shopping concerns; and Whether the proposed injunction is narrowly tailored. See Microsoft Corp. v. Motorola, Inc., 696 F.3d 872, 875-887 (9th Cir. 2012).

Score! The Court Enjoins Ericsson Ericsson obtained injunctions in other jurisdictions, and refused to stay its worldwide litigation TCL agreed to abide by the court’s global determination of FRAND terms and conditions Injunctions are not necessary once TCL agrees to abide by the court’s FRAND terms and conditions Court’s order is directed to Ericsson—not foreign courts Problem: court refuses to enjoin Ericsson’s Texas action asserting five implementation patents

Score! TCL’s Fallback Position Knocks Out Implementation Patents After court refuses to enjoin Ericsson’s Texas action, TCL files 17 IPR petitions against Ericsson’s five implementation patents Patent Office must issue a decision on IPR petitions within 6 months Patent Office grants all 17 IPR petitions E.D. Texas grants motion to stay two weeks before trial

Score! California Court Orders Additional Transparency In discovery, Ericsson produced over 100 SEP licenses Unpacking licenses demonstrates whether discrimination exists TCL moves to compel critical information necessary to understand what are FRAND terms and conditions (i.e., are rates fair and reasonable) Ericsson ordered to provide a list of its “actually essential patents” Some are not “actually essential” Some are merely optional to the standard Some are invalid Some are minor improvements

Trial is scheduled for October 11, 2016 Stay Tuned Trial is scheduled for October 11, 2016

Questions?