Everyone wants to own standard essential patents (SEPs) because of the perception that they can bring high licensing fees and most competitors are using the patents. On the other hand, SEP owners may be contractually bound to offer their patents on FRAND terms — fair, reasonable, and non- discriminatory terms — which might be less than the expected high licensing fees thought to be available.
Another hurdle encountered by SEP owners is that injunctive relief against infringers may be difficult to obtain — when the counter argument is that the owner has already acknowledged that FRAND fees are adequate compensation.
In Apple v. Motorola (April 2014), Motorola owned a standard essential patent. The district court denied an injunction, explaining that since Motorola had agreed to license the patent on FRAND terms to anyone, Motorola "implicitly acknowledged that a royalty is adequate compensation for a license to use that patent."
The Federal Circuit began by stating that there is "no per se rule that injunctions are unavailable to SEPs." Moreover, there is no different rule or analysis for determining entitlement to an injunction for SEPs.
Instead, the eBay analysis applies which requires the patent owner to prove: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.
Interestingly, the Federal Circuit then explained that a SEP owner having a contractual obligation to offer the patent on FRAND terms "may have difficulty establishing irreparable harm." Still, according to the Federal Circuit, a SEP owner may be entitled to an injunction "where an infringer unilaterally refuses a FRAND royalty or unreasonably delays negotiations to the same effect."
Weighing against the SEP owner, there is the public interest in "ensuring that SEPs are not overvalued." Where the SEP owner has entered into "many licensing agreements", that will "strongly suggest that money damages are adequate to fully compensate" the SEP owner. Further, "adding one more user" of the SEP patent may not create irreparable harm.
PRACTICE POINTER: While there is no rule that automatically prevents a SEP owner with FRAND obligations to obtain injunctive relief, the typical facts seem to weigh against obtaining injunctive relief. The "exceptions" seem to be limited, such as when the alleged infringer delays negotiations for a license.
© Michael A. Shimokaji, 2014 The contents of this article represent the opinions of the author and not those of the author's law firm or clients.