Dennis Crouch
The Federal Circuit has vacated the E.D.N.C. Judge Boyle’s denial of an anti-suit injunction in a major FRAND licensing dispute between Ericsson and Lenovo. Telefonaktiebolaget LM Ericsson v. Lenovo (United States), Inc., No. 24-1515 (Fed. Cir. Oct. 24, 2024). The decision provides important guidance on when U.S. courts should issue anti-suit injunctions to prevent SEP holders from enforcing foreign injunctions while FRAND obligations are being adjudicated domestically. Importantly, the Federal Circuit adopted the Ninth Circuit test from Microsoft Corp. v. Motorola, Inc., 696 F.3d 872 (9th Cir. 2012), and added some further refinement making anti-suit injunctions easier to obtain.
Background: The Standard Essential Patent Dance
The dispute centers on Ericsson’s 5G standard-essential patents (SEPs). Like many SEP holders, Ericsson committed to license these patents on fair, reasonable, and non-discriminatory (FRAND) terms through declarations to ETSI, the European telecommunications standards body. These FRAND commitments are designed to prevent “patent holdup” – where SEP holders leverage their essential patents to extract heightened royalties after the standard is widely adopted. See TCL Commc’n Tech. Holdings v. Telefonaktiebolaget LM Ericsson, 943 F.3d 1360 (Fed. Cir. 2019).
In October 2023, Ericsson offered to license its 5G SEPs to Lenovo for “1% of net sales, with a $4 per-unit cap.” The same day, Ericsson filed suit seeking declarations that its offer complied with FRAND obligations and alleging infringement of four U.S. patents. Lenovo counterclaimed for breach of FRAND commitments and requested a judicial determination of FRAND terms for a global cross-license. As you might guess, Lenovo argued that the offer was well outside that required by the FRAND commitment.
An important feature of the FRAND analysis is that an SEP holder can typically seek injunctive relief only after satisfying the good-faith-negotiating obligation. The court explains that one way to satisfy this obligation “is by making an offer at a rate that is actually FRAND.” The U.S. case is set to determine whether Ericsson’s offer fits within the FRAND requirements.
To be clear – at least in the US – Ericsson is not compelled to commit to FRAND licensing. But, the commitment helps the company shift standard toward one that uses the patents. And, without Ericsson’s commitment, the SSO would have made every attempt to ensure that the standard did not require use of Ericsson’s patents.
The Global Chess Match
While the U.S. case was pending, Ericsson began a campaign seeking injunctions in foreign jurisdictions against Lenovo’s patent infringement. In November 2023, Ericsson obtained ex parte injunctions in Brazil and Colombia barring sales of Lenovo’s 5G products. These injunctions were based on foreign counterparts to the same SEPs at issue in the U.S. case.
In response, Lenovo moved for an “anti-suit injunction” (or perhaps “anti enforcement injunction”) in North Carolina to prevent Ericsson from enforcing those foreign injunctions — arguing that Ericsson had failed to satisfy the negotiation obligation. The district court denied the motion, finding that the U.S. case would not be “dispositive” of the foreign actions because it would not “necessarily result in a global cross-license.”
The Federal Circuit’s Analysis
The Federal Circuit, applying Fourth Circuit law, reviewed the denial for abuse of discretion. However, the Fourth Circuit has not definitively adopted either the “conservative” or “liberal” approach to anti-suit injunctions. For guidance, the court turned to the Ninth Circuit decision in Microsoft v. Motorola, which the Federal Circuit found “nearly identical” factually.
In that case, Microsoft had sued Motorola alleging breach of contract based on Motorola’s RAND commitments to standard setting organizations. While that U.S. case was pending, Motorola filed a separate German patent infringement action seeking to enjoin Microsoft from selling allegedly infringing products in Germany. Microsoft moved for an anti-suit injunction to block enforcement of any German injunction. The Ninth Circuit affirmed the district court’s grant of the anti-suit injunction, establishing a three-part framework:
- Whether the parties and issues are the same in both the foreign and U.S. cases and whether the U.S. case would be dispositive of the foreign action;
- Whether the foreign litigation would frustrate domestic policies, be vexatious, threaten the court’s jurisdiction, or prejudice other equitable considerations; and
- Whether the impact on international comity would be tolerable.
The Ninth Circuit found these requirements met because Motorola’s RAND commitments created an enforceable contract that Microsoft could enforce as a third-party beneficiary, and that contract “arguably” included “a guarantee that the patent-holder will not take steps to keep would-be users from using the patented material, such as seeking an injunction.” Notably, the injunction was narrowly tailored – it only prevented enforcement of injunctive relief, not the pursuit of damages or other remedies in Germany.
Back in Ericsson v. Lenovo:
During oral argument, Ericsson’s counsel emphasized that Microsoft was “not binding on the Fourth Circuit, the district court here, or this court.” The panel appeared to acknowledge this reality but found Microsoft‘s reasoning compelling.
Looking then to the particulars of the test, the Federal Circuit found the district court legally erred at step one by misunderstanding what makes an action “dispositive.” The court explained that an action can be dispositive even if it only resolves the propriety of injunctive relief rather than the entire foreign proceeding. Thus, the district court had gone too far by concluding the U.S. case would only be dispositive of the foreign cases if it would result in a global license. Instead, the dispositive question to be resolved is “whether Ericsson has complied with its good-faith-negotiating obligation” under its FRAND commitments. If Ericsson breached that obligation, it would have “no right to seek injunctions against Lenovo on SEPs while the case is pending.”
The case now returns to the district court to complete the anti-suit injunction analysis. The Federal Circuit strongly suggested that the remaining factors favor an injunction, noting that all four traditional factors are present and any impact on comity would be “tolerable” given the narrow scope and private contractual nature of the dispute.