Context: Standard-essential patents (SEPs) raise issues at the intersection of intellectual property and competition law (and/or, depending on the jurisdiction, contract law).
The purpose of this article is to just take a brief look at two ways (there may be even more) in which SEP-specific rules influence policy and case law relating to non-SEPs in outlier cases.
Some critics of the status quo of SEP enforcement argue that SEPs are litigated particularly frequently and/or that there’s an above-average percentage of bad actors among SEP holders. ip fray is, at least at this point, unconvinced of those claims. Relative to the high number of SEP licenses that are granted without any litigation, enforcement is not widespread. Most patents that one finds in patent registers are never litigated, but the vast majority of them are also never actually licensed because their commercial value is zero or negligible (“junk patents” as well as legitimate inventions that just don’t matter in economic terms).
There is an objective problem if a jurisdiction’s SEP case law is so one-sided that, during a given period, it’s effectively always just one side that will prevail (May 20, 2024 ip fray article). It’s a difficult balancing act.
Just like computer games have for a long time been a driver of innovation because of the high demands they place on computer hardware (graphics processing units originally designed to power computer games are now the key enabler of AI applications), SEP policy and jurisprudence is the “cutting edge” of patent law and policy.
The purpose of this article is just to highlight two examples of cross-pollination.
Anti-antisuit injunctions in non-SEP cases
When reviewing a preprint version of the upcoming book FRAND – German Case Law and Global Perspectives (edited by Professor Peter Georg Picht, Professor Thomas Cotter and Erik Habich), ip fray became aware of an anti-antisuit injunction (AASI) that came down in Munich last year.
The July 20, 2023 judgment by the Munich I Regional Court, by which the court affirmed a prior ex parte preliminary injunction (comparable to the conversion of a U.S. temporary restraining order into a PI), was published (in German). In that case involving two pharmaceutical companies, NanoString tried to foil 10x Genomics’ enforcement of one or two upcoming German patent injunctions by seeking an antisuit injunction in the District of Delaware, where the parties had been litigating for some time and some material surfaced that NanoString thought was a game changer that would result in a finding of non-infringement. NanoString argued that 10x Genomics had delayed disclosure of that material in the U.S. discovery process, and claimed later that the U.S. district court had also held so in a memorandum opinion.
What NanoString sought then was a time-limited (90 days) enforcement prohibition. But neither the fact that the patent-in-suit was not a SEP nor the time limit (which the U.S. court could always have extended by further order) dissuaded the Munich I Regional Court from applying the same AASI principles as in SEP cases. The German court focused on the interference, unlawful from the German perspective, with the patentee’s right to enforce, and furthermore referenced the concept of self-defense.
After the ex parte PI was granted, 10x Genomics’ lawyers from Bardehle Pagenberg issued a press release discussing that decision (in English).
Subsidies can give rise to FRAND-like licensing obligation
ip fray has reviewed a forthcoming GRUR Patent article (citation: GRUR Patent 2024, 190) by Noerr partner Professor Sebastian Wuendisch (“Wündisch” in German) on the potential applicability of FRAND case law (potentially even Huawei v. ZTE) to patents and other intellectual property rights obtained through research projects that receive a certain type and level of public funding.
In order to protect fair competition in its Single Market, the European Union regulates the extent to which state aid may be granted to companies. In that context, certain limits apply to the percentage of a project that is funded through subsidies. Important Projects of Common European Interest (IPCEI) (European Commission webpage) benefit from more permissive rules. In an oversimplified way, one could say that governments may fund another 15% or even 25% of the costs of an IPCEI.
In order to enable this and to lay out certain rules, the European Commission amended a regulation last year (EUR-LEX webpage). In order to qualify for a higher level of public funding, a company has different options, such as open-sourcing everything. One such option is defined as follows:
“the beneficiary commits to, on a timely basis, make available licences for research results of aided research and development projects, which are protected by intellectual property rights, at a market price and on non-exclusive and non-discriminatory basis for use by interested parties in the [European Economic Area, which is the EU plus three more countries].”
The term “market price” in conjunction with access on a “non-discriminatory basis” is the next best thing to FRAND. It would be difficult to make a distinction in practice that would have the effect of a price being deemed a non-discriminatory market price but not FRAND, or the other way round.
Professor Wuendisch discussses in his upcoming article what practical implications this may have for enforcement. There is the question of how a third-party beneficiary who might get sued over a (heavily subsidized) patent could find out about the availability of a license on non-discriminatory market terms, short of scenarios in which companies commit to declare in the patent register their willingness to extend a license. A search in registers of subsidized research projects is labor-intensive. Assuming that the defendant is aware of it, the key question is then how the availability of such a license can be used as an affirmative defense to a claim for injunctive relief. Would Huawei v. ZTE‘s “FRAND dance” be applied analogously? It’s at least conceivable that courts would turn to SEP case law for a starting point. The question of whether a licensing obligation attaches itself to the IPR would probably come up at some point as well.
It is difficult to predict how relevant the FRAND-like licensing obligation under the EU’s IPCEI rules will be in commercial practice. There may not be a single patent case over the course of the next few decades in which it matters. But there is a trend in the EU toward ever more subsidies, also in such fields as greentech, where there is a potential for patent enforcement actions that could at some point raise IPCEI-related questions.
Even if FRAND-like obligations under IPCEI itself turned out to be more of an academic question, the two examples in this article are probably not going to remain the only situations in which patent cases involving non-SEP raise issues that are all too familiar from the SEP context.