A Blog About Intellectual Property Litigation and the District of Delaware

A different kind of Sherman
A different kind of Sherman Sherman Tank at Clervaux Castle, Luxembourg, R Boed, CC BY 2.0

This week, Chief Judge Stark ruled on a motion to dismiss a FRAND-related antitrust claim brought by Lenovo against InterDigital relating to 3G/4G phone standards.

According to the Court, InterDigital contracted with the European Telecommunications Standards Institute (ETSI) to license its patents at FRAND rates, and its patents were incorporated into the 3G/4G standards. The ETSI requires patentees to license their patents at FRAND rates to avoid anti-trust concerns.

Lenovo's antitrust claims allege that InterDigital, by demanding higher-than-FRAND rates, has obtained an unlawful monopoly power over the 3G/4G standards. Lenovo also alleges that InterDigital defrauded ETSI during the standards development process:

Lenovo allege[s] . . . that InterDigital lied to ETSI in order to have its [standards essential patents] incorporated into the 3G and 4G LTE standards, allowing InterDigital to obtain and exploit market power and demand unlawful and artificially high [license] rates.

One of Lenovo's Antitrust Claims Survives

The Court granted the motion to dismiss Lenovo's first antitrust claim, under Section 1 of the Sherman Act, because that Section requires an agreement in furtherance of a common scheme. The Court held that Lenovo had failed to allege such an agreement.

Interestingly, however, the Court allowed Lenovo's Section 2 claim to proceed. Section 2 requires only that a patent holder falsely promise to license its patents on FRAND terms, that the standard-setting organization relies on that promise, and that the patent holder fail to do so. The Court found that Lenovo had alleged Interdigital did exactly that.

Chief Judge Stark rejected InterDigital's argument that a willingness to arbitrate or litigate to set a FRAND rate is sufficient to defeat the antitrust claim.

This Case Has Already Generated Some Interest

In response to Lenovo's complaint and the motion to dismiss, the United States filed a statement of interest in the case, arguing that that a Section 1 violation cannot by supported by "purely unilateral conduct"—exactly as the Court found.

The United States also asserted that a Section 2 violation requires deceit in the standards-development process, which must be pled with particularity. The Court actually agreed, but held that Lenovo had done so.

The case also saw an amicus brief from ACT | The App Association in support of Lenovo's position, arguing that the Court should not permit InterDigital to use arbitration or foreign litigation to set FRAND rates without an actual determination of invalidity or infringement. The Court didn't comment on the amicus brief.

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