RAND Obligations and Injunctive Relief

Entities that are parts of technology standard-setting organizations are typically required to promise, in some fashion, to license patents essential to any resultant standard on reasonable and nondiscriminatory terms. Once the standard has been promulgated, the standard essential patents (“SEP”s) may be asserted in litigation and the patent holder is expected to live up to reasonable and non-discriminatory (“RAND”) terms.

A thorny issue for courts and litigants in the context of those essential patents is the determination of what constitutes “reasonable and nondiscriminatory” terms for purposes of damages as well as the patent holder’s compliance with its RAND obligations.

The question then becomes what if an essential patent holder initiates Section 337 litigation in the United States International Trade Commission (ITC), where monetary damages are not available, and the remedy for patent infringement is an exclusion order barring the importation of products into the United States.

In Realtek Semiconductor Corp. v. LSI Corp., No. C-12-03451 (N.D. Cal. filed June 29, 2012), an SEP holder had initiated a Section 337 investigation (Inv. No. 337-TA-837) at the ITC based on alleged SEPs before offering a license to the respondent prior to filing the complaint. The respondent then brought suit for breach of contract, alleging that the SEP holder had breached its RAND obligations by pursuing an ITC remedy.

On a May 20, 2013, in an order granting summary judgment, the ALJ held that the failure to offer a license prior to initiating the -837 investigation constituted a breach of the patentee’s RAND obligations. Accordingly, he enjoined the patentee from “enforcing any exclusion order or other injunctive relief by the ITC” that might issue in connection with the allegedly essential patents at issue until the court had the opportunity to determine the scope of the patentee’s RAND obligations and its compliance therewith. This injunction could be interpreted as extending only to the SEP holder and its ability to enforce any exclusion order that might ultimately issue from the ITC.

The ITC recently addressed similar issues in Investigation No. 337-TA-794, one of the many battlefronts in the Apple Inc.-Samsung Electronics Co. Ltd. war. In the -794 Investigation, initiated by Samsung, Apple asserted that alleged Samsung RAND obligations prevented Samsung from obtaining an ITC remedy.

The ALJ in this case declined to adopt such arguments, but found that Apple had not violated Section 337 for other reasons. Based on careful review of the RAND obligations and the licensing negotiation history between the parties, the commission determined that it would issue an exclusion order barring the importation of certain Apple iPhone and iPad models notwithstanding the alleged Samsung RAND obligations.

In doing so, the commission rejected any suggestion that it lacks jurisdiction to conduct a Section 337 investigation merely because an asserted patent is allegedly encumbered by RAND obligations, holding that there is no per se rule preventing it from proceeding with an investigation when RAND obligations are implied.

The ITC also voiced concerns with so-called “reverse patent hold-up,” which occurs when “an implementer utilizes declared-essential technology without compensation to the patent owner under the guise that the patent owner’s offers to license were not fair or reasonable.” In such instances, the patent owner should not be deprived of an ITC remedy.

Nevertheless, the commission acknowledged that an ITC respondent may raise RAND-related affirmative defenses to alleged infringement and suggested that such defenses may be based on contractual theories, estoppel, laches or fraud. Such defenses must be proven by a preponderance of the evidence. And, the commission held, in the -794 investigation that Apple failed to satisfy its burden.

The ITC’s upcoming review of LSI Corp.’s initial determination in the -837 investigation will undoubtedly provide further insights as to the commission’s outlook on the hot-button issues of SEP holders seeking ITC remedy in the face of RAND obligations.