On Thursday (June 21), Apple filed FRAND contract and antitrust claims against HTC for the abuse of patents that are allegedly essential to the 4G/LTE standard. Apple brought those claims as counterclaims in the investigation of HTC's second ITC complaint against Apple. Counterclaims cannot be adjudicated by the ITC. They have to be severed immediately and filed in federal court. Apple did so in a filing with the United States District Court for the Eastern District of Virginia. Here's the header section of that filing (click on the image to enlarge):
Last year, Apple also brought FRAND counterclaims against Motorola. In that case, the counterclaims were removed from the ITC to the Western District of Wisconsin, where the parties have just briefed their summary judgment motions.
Apple also counterclaimed against Samsung in their federal lawsuit in the Northern District of California. Apple's counterclaims largely withstood two motions to dismiss and will be a key topic at the trial scheduled for this summer.
Apple's FRAND counterclaims against HTC are structurally similar to those against Motorola and Samsung. Following a successful Apple motion to throw out five patents HTC borrowed from Google (a decision HTC has since appealed), only three patents -- the ones that HTC asserted before it added five patents from Google -- are at issue in the investigation. When I reported on that original complaint, I already noted that HTC claimed that two of those patents (U.S. Patent No. 7,672,219 and U.S. Patent No. 7,417,944) are essential to the 4G/LTE wireless communication standard. HTC had acquired those from a company named ADC Telecommunications.
Not only did HTC describe those patents as standard-essential in its original complaint last summer but on May 25, 2012 it also served responses to interrogatories from Apple and "for the first time specifically accused Apple of infringing the ADC patents based solely on the fact that Apple devices contain baseband chips that implement the LTE standard". Apple says that "[i]n light of the purported essentiality of the '219 and '944 patents, those patents should have been disclosed by HTC and ADC to the relevant standards setting organizations ('SSOs'), and commitments to license on fair, reasonable and nondiscriminatory terms ('FRAND') should have been made for their purported inclusion in standards and in evolving standards under development". But according to Apple, "[n]either HTC nor ADC has ever disclosed the existence of these patents to the relevant SSOs". Instead, Apple says, "HTC and ADC have conspired to conceal from the SSOs the existence of the ADC patents and have purposefully evaded any obligations to license under FRAND terms, a course of conduct HTC continues even as it participates in work on evolution of these same standards". Against this background, Apple asserts counterclaims of the following kind against HTC:
breach of contract based on standards-related misconduct;
fraud and conspiracy to commit fraud;
promissory estoppel;
conspiracy under § 1 of the Sherman Act (the cartel paragraph of U.S. federal antitrust law);
violation of § 2 of the Sherman Act (the monopoly abuse paragraph of U.S. federal antitrust law);
violation of 15 U.S.C. § 8 (illegal restraint of import trade); and
violation of Virginia state antitrust law.
This is a serious issue. There will probably be more cases in the future in which companies try to use 4G/LTE-essential patents as strategic weapons or for hold-up. Lawmakers, regulators and industry players are profoundly concerned over the rampant abuse of standard-essential patents (SEP). HTC has just become the third major Android device maker to be accused of SEP abuse.
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