Context: Recently, some interesting documents have surfaced in the United States International Trade Commission (USITC, or just ITC) part of the Ericsson-Lenovo patent dispute. In one ITC investigations involving multimedia patents, the ITC Staff (more formally known as the Office of Unfair Import Investigations) took the view that HEVC patents, which are subject to an International Telecommunication Union (ITU) licensing pledge, are not FRAND-encumbered the way ETSI-pledged cellular standard-essential patents (SEPs) are (previous December 1, 2024 ip fray article).
What’s new: A public redacted version of the full 106-page initial determination by Administrative Law Judge (ALJ) Cameron Elliot in an investigation of an Ericsson non-SEP complaint against Ericsson has become available. While ALJ Elliot did not find a violation of valid patents (which the Commission, the top echelon of the U.S. trade agency, could view differently) (November 16, 2024 ip fray article), it doesn’t bode well for Lenovo with a view to the wider (multi-jurisdictional) dispute that its license-based defense failed. ALJ Elliot does not consider Lenovo’s more recent Motorola-branded smartphones and other wireless devices covered by a 2011 license agreement. Motorola Mobility was a spinoff from an iconic U.S. company, got acquired by Google (which mostly just wanted its SEPs) and then sold on to Lenovo about a decade ago.
Direct impact: It is ultimately for the Commission to decide, but ALJ Elliot’s reasoning appears to make sense and it is hard to imagine that Ericsson would have sued Lenovo over duly licensed products.
Wider ramifications: It now appears less likely that any other judge will agree with Lenovo, and the injunctions that came down in Latin America (December 24, 2023 ip fray article) were also an indication of Lenovo probably not having a leg to stand on with respect to its claim to already have a license in place.
ALJ Elliot is a judge of the rather frank and outspoken kind. He doesn’t hide his annoyance at being inundated with pointless arguments. Here, he chides both parties for having “spill[ed] a great deal of largely immaterial ink on this issue,” by which he means the question of whether a GlobaL Patent License Agreement (GPLA) signed between Ericsson and Motorola Mobility in 2011 (even before Google bought the company, and years before it was passed on to Lenovo) covers the Motorola wireless devices at issue in this ITC investigation (no. 337-TA-1376).
The decision quotes “[t]he most pertinent passage” (para. 2.4A) in full (you won’t miss much if you stop reading after the highlighted passage):
The license grants provided in Sections 2.1, 2.3 and 2.4 above apply only to Licensed Wireless Mobile Device Products, Licensed Network Products and Licensed IDEN Products in the FIELD of Motorola Mobility as of the Effective Date hereof and commercially reasonable updates or extensions of such Licensed products [emphasis added by ip fray] For the purpose of this Section 2.4A, the term “FIELD” means the practice of the Licensed Patents in any field or fields in which Motorola Mobility operates or could reasonably be expected to operate as of the Effective Date. For the avoidance of doubt, in the event of an acquisition of Motorola Mobility by an acquiring party, none of the rights under this Agreement shall apply either to: i) products produced, developed or under development prior to such acquisition by such acquiring party, or by any Affiliates of such acquiring arty (hereinafter “Acquirer”); ii) natural evolutions of such previously produced, devleoped or under development products of such Acquirer tht are not commercially reasonable updates or extensions of such Motorola Mobility’s Licensed Products; or, iii) products developed or produced by any such Acquirer subsequent to such acquisition, provided that this limitation on products developed by such Acquirer subsequent to such acquisition shall not restrict the offer or sale of Motorola Mobility’s Licensed Products or extensions of Motorola Mobility’s Licensed Products. Motorola Mobility or its Acquirer shall have the burden of proving that disputed products are Motorola Mobility’s Licensed Products and not excluded from the rights under this Agreement as provided in sub-sections i), ii) or iii) of the previous sentence.
The decision notes that the license grant of Section 2.1 referenced in Section 2.4A allows Motorola Mobility to “import” and “sell” the relevant products, and there is no dispute that the patents asserted in the ITC investigation would fall under it. The dispute is all about whether the products accused in the investigation (“Accused Products”) are licensed.
What ALJ Elliot sees (and appears to be common sense) is that the words “as of the Effective Date hereof” can only be reasonably interpreted as qualifying what constitutes “Licensed Mobile Device Products” (as opposed to a wide-ranging “FIELD”). For instance, you can update products, but you can’t update a “FIELD.”
Therefore, ALJ Elliott assumes that whatever products were on the market as of the Effective Date (which was in January 2011) are covered. And, of course, certain updates and extensions, within reason.
The 17 Motorola phones Ericsson is targeting in that ITC investigation, however, were “all introduced no earlier than 2020”: nine years after the Ericsson-Motorola license agreement. Everyone with smartphone patent licensing experience knows that this is an extremely long period. Five-year and seven-year contract terms (and even three-year terms in some cases) are far more common than ten-year terms, and if Lenovo’s expansive interpretation was right, they could still try to raise a license-based defense in decades to come.
Apart from the passage of time making it appear utterly unreasonable that the 2011 agreement would still apply, Lenovo simply couldn’t present evidence of such an expansive meaning that would have convinced ALJ Elliot. According to the ruling, Lenovo offered “criticisms of Ericsson’s countervailing evidence” rather than evidence underpinning its own position.
Unfortunately for Lenovo, Ericsson’s “countervailing evidence is compelling” in ALJ Elliot’s opinion. For example, most of the Accused Products are members of the “Moto G” product family, “which did not even exist until 2013” (two years after the license agreement in question). The remaining ones are even a lot newer (from 2020 and 2023).
Such an expansive application of the 2011 license agreement is not commercially reasonable in ALJ Elliot’s view, and one can hardly blame him for having reached that conclusion. He nevertheless goes on to address two of Lenovo’s related arguments:
- Lenovo argued that the 2011 GPLA is governed by UK law and “a UK court could reject a proposed license interpretation where, as with Ericsson’s purported view, it would result in a commercially non-sensical outcome.” But ALJ Elliot notes that “under English law the ‘objective meaning’ of the language of the License is controlling,” and that one is clear.
- As a fallback to convincing the ITC to adopt that view of the license, Lenovo at least wanted to stall and therefore asked the ITC to wait until a UK decision in this dispute would come down. That, however, cannot be reconciled with the USITC’s “statutory duty to resolve its investigations expeditiously,” ALJ Elliot notes.
The fact that Lenovo’s Motorola license-based defense was found lacking and wanting is not good for its credibility, particularly not in a FRAND context. For the avoidance of doubt, this particular investigation is about non-SEPs, but there is a parallel ITC investigation over cellular SEPs and there is another over multimedia patents against which Lenovo raised a FRAND defense the ITC Staff rejects (previous December 1, 2024 ip fray article). And there are cases in Brazil, Colombia and other jurisdictions.
If ALJ Elliot is right (which is intuitively true), Lenovo can’t argue that its Motorola phones had been licensed all the time. But that means Lenovo has been unlicensed to Ericsson’s SEPs on a much greater scale than it has so far admitted. Of course, not having a license for a long period can be either side’s fault, but it doesn’t look good that Lenovo raised what may have been an utterly unresaonable defense. In a UK dispute with InterDigital it also turned out that back-royalties for an extremely long period were due, which the England & Wales Court of Appeal affirmed. And in the two ITC investigations involving SEPs, the ITC Staff found Ericsson to have discharged its related FRAND licensing duties while in one of those cases Lenovo’s conduct was not considered FRAND-compliant (September 18, 2024 ip fray article).
At some point it would really make sense for this dispute to be settled. That may also be in Lenovo’s interest as some of what comes out, as a result of court documents being made public, may be interpreted by judges around the world as hold-out. That could adversely affect Lenovo even in disputes with third parties, not for legal but for psychological reasons.
For the avoidance of doubt, implementers can also make the mistake of not defending themselves vigorously enough when they should. But Lenovo has taken some extreme positions now in the dispute with Ericsson and attempted long shots like the request for an interim-license declaration in the UK. Lenovo was lucky with a Federal Circuit panel that made a controversial decision (which still doesn’t mean that Lenovo is close to a U.S. antisuit injunction as there are other grounds on which the district court can deny).