The Federal Circuit’s Antisuit Injunction Decision in Ericsson v. Lenovo has Broader Implications for Global SEP Litigation

I previously wrote about the Federal Circuit’s FRAND international injunction decision in Ericsson v. Lenovo, but also invited Prof. Jorge Contreras to provide his insight.  Contreras is one of the world’s leading experts on FRAND litigation and standards-essential patent licensing.  His analysis of the Federal Circuit’s decision in Ericsson particularly highlights the court’s new limits on injunctive relief for FRAND violators and suggests renewed U.S. court engagement in global rate-setting disputes. — Dennis Crouch

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Guest Post by Professor Jorge L. Contreras

On October 24, 2024, the Court of Appeals for the Federal Circuit (No. 24-1515, 2024 U.S. App. LEXIS 26863) cleared the way for Lenovo to seek an antisuit injunction against Ericsson in the parties’ global FRAND litigation. In doing so, it established important precedent for cases involving standards-essential patents.

Background

The case stems from the dispute between Ericsson and Lenovo over licenses to their respective portfolios of patents essential to the 5G wireless telecommunications standards (standards-essential patents or SEPs). Under the applicable rules of the European Telecommunications Standards Institute (ETSI), each of the parties committed to grant licenses under its SEPs to manufacturers of standardized products on terms that are fair, reasonable and nondiscriminatory (FRAND). As the parties, after years of negotiation, were unable to agree on the FRAND royalties for a cross-license of these SEPs, they each initiated litigation in various jurisdictions including the United Kingdom, Brazil, Colombia, the US International Trade Commission and the U.S. District Court for the Eastern District of North Carolina (EDNC). In the EDNC, each party accused the other of infringing its 5G SEPs and breaching its contractual FRAND obligations to ETSI.

In late 2023, Ericsson obtained injunctions against Lenovo’s sale of 5G-enabled phones in Brazil and Colombia. In response, Lenovo petitioned the EDNC for an antisuit injunction (ASI) (technically, a temporary restraining order), which would have barred Ericsson from enforcing its Brazilian and Colombian injunctions against Lenovo until the resolution of the FRAND dispute in the U.S. court. In February 2024, the EDNC denied Lenovo’s motion for an ASI (No. 5:23-CV-00569-BO, 2024 U.S. Dist. LEXIS 26060, 2024 WL 645319).  Lenovo appealed to the Federal Circuit, which reversed and remanded.

Antisuit Injunctions in SEP Cases

Antisuit injunctions are longstanding procedural devices that are intended to avoid duplicative litigation across jurisdictions.  Typically, if the same parties are litigating the same issues in multiple jurisdictions, one of them may petition to enjoin the other from pursuing parallel litigation until the issues are resolved in the first jurisdiction, provided that such a resolution will dispose of the issues elsewhere and will not be prejudicial or disrupt international comity (explained in greater detail in 25 BU J. Sci. & Tech. L. 251 (2019)).

Given the global markets addressed by popular interoperability standards (e.g., 3G/4G/5G, Wi-Fi, H.264/265/266, etc.), and the multijurisdictional litigation that often arises in SEP disputes, requests for ASIs are not uncommon in global SEP litigation. The first SEP-related ASI was issued by a U.S. district court in Microsoft v. Motorola, 871 F. Supp. 2d 1089 (W.D. Wash. 2012), aff’d, 696 F.3d 872 (9th Cir.), and prohibited Motorola, the SEP holder, from enforcing an injunction issued by a German court against Microsoft. Since then, U.S. courts have issued ASIs in several other SEP cases, as have courts in China and the UK (for a table of SEP-related ASIs granted and denied through 2021, see 11 NYU J. Intell. Prop.& Entertainment L. 171, 180 (2021)).

The Federal Circuit’s “Dispositiveness” Test

In denying Lenovo’s request for an ASI, the EDNC reasoned that a determination in the U.S. of whether Ericsson breached its contractual FRAND obligations to ETSI would not resolve the local patent disputes in Brazil and Colombia (which must be decided under local patent law).  The Federal Circuit reversed, holding that the EDNC misconstrued prevailing U.S. precedent, reiterated in Microsoft, for issuing an ASI. Under that test, the first prong of the ASI analysis depends on whether or not resolution of the matter in the U.S. court will be “dispositive” of the parallel foreign cases.

While the Federal Circuit acknowledged that the contractual matter before the EDNC would not resolve the patent infringement claims pending in Brazil or Colombia, a U.S. determination that Ericsson had breached its FRAND obligations would indicate that Ericsson was not permitted to seek an injunction in those countries. Thus, the Federal Circuit reasoned that “the ‘dispositive’ requirement can be met even though a foreign antisuit injunction would resolve only a foreign injunction (and not the entire foreign proceeding)” [*21]. As such, the Federal Circuit remanded the case to the EDNC to proceed with the remainder of the ASI analysis. Professor Dennis Crouch offers a detailed analysis of the Federal Circuit’s decision in this recent post.

Broader Implications

At one level, the Federal Circuit’s decision in Ericsson v. Lenovo clarifies the scope of the “dispositive” element of the test for granting an ASI. Yet it has potential implications in SEP cases beyond the issuance of ASIs that may prove to be of even greater significance.

Breach of FRAND as a Bar to Injunctive Relief

The Federal Circuit first considered injunctions in SEP cases in Apple v. Motorola, 757 F.3d 1286 (Fed. Cir. 2014). In that case, the Federal Circuit reversed a lower court decision (869 F. Supp. 2d 901 (N.D. Ill., 2012)), which seemingly established a per se rule that injunctions are unavailable for SEPs. The court held that such a per se rule would be inconsistent with the Supreme Court’s four-factor framework for permanent injunctive relief established by eBay v. MercExchange, 547 U.S. 388 (2006), and that district courts should apply the eBay factors in assessing the imposition of permanent injunctive relief even in SEP cases [757 F.3d at 1332]. In conducting such an analysis, the court acknowledged that “[a] patentee  subject  to  FRAND  commitments may have difficulty establishing irreparable harm” necessary to obtain injunctive relief under the eBay test. Yet the Federal Circuit in Apple did not further elaborate on the circumstances under which an SEP holder’s conduct might preclude its entitlement to injunctive relief.

In Ericsson v. Lenovo, the Federal Circuit explicitly recognizes that a SEP holder’s breach of its contractual FRAND commitment precludes it from seeking injunctive relief, stating that “a party that has made an ETSI FRAND commitment must have complied with the commitment’s obligation to negotiate in good faith over a license to its SEPs before it pursues injunctive relief based on those SEPs.” [*24]. This ruling clarifies that an SEP holder’s compliance with its FRAND commitments is a prerequisite for seeking injunctive relief even before a court applies the eBay factors to determine whether a SEP holder that has legitimately requested it is entitled to that relief.

In essence, the court’s ruling in Ericsson v. Lenovo is a logical converse to prior cases in which courts and agencies have viewed an SEP holder’s attempt to seek injunctive relief before offering a FRAND license to be a violation of the FRAND commitment or a form of anticompetitive conduct. See, e.g., Realtek v. LSI, 946 F. Supp. 2d 998, 1008 (N.D. Cal. 2013) (SEP holders “breached their contractual obligations . . . by seeking injunctive relief against [the implementer] before offering [it] a license”) and In re. Robert Bosch GmbH (FTC Apr. 23, 2013) (U.S.) (charging SEP holder with violation of Section 5 of the FTC Act for seeking injunctive relief prior to negotiating FRAND license); In re. Motorola Mobility LLC and Google Inc. (FTC July 23, 2013) (same).

Impact on Global Rate Setting

As noted above, the EDNC held that Ericsson’s breach of its FRAND commitment would not necessarily be dispositive of the parties’ Brazilian and Colombian injunction cases. But even the EDNC, and Ericsson itself, believed that the EDNC’s imposition of a global cross-license on the parties would dispose of the foreign actions [*15]. Ericsson, in fact, requested the EDNC to set a FRAND rate for such a global cross-license if it were found to be in breach of its FRAND obligation [*6].

This positioning by Ericsson is somewhat inconsistent with the positions that it took in its 2020 litigation with Samsung. In that case (discussed at length in 71 Am. U. L. Rev. 1537, 1539-42, 1585-87 (2022)), a Chinese court entered an ASI prohibiting Ericsson from enforcing its SEPs against Samsung until the Chinese court completed its adjudication, including the determination of global FRAND licensing terms. Ericsson brought an action in the U.S. District Court for the Eastern District of Texas (EDTX) seeking to prevent Samsung from enforcing the Chinese ASI. The EDTX granted Ericsson’s motion, holding that “[a]llowing Samsung to enjoin Ericsson from asking this Court to adjudicate legally cognizable claims under United States law would frustrate this Court’s compelling interest in ensuring that litigation within its legitimate jurisdiction proceed in this forum.” Ericsson v. Samsung, 2021 U.S. Dist. LEXIS 4392, 2021 WL 89980 (Jan. 11, 2021). Thus, in the Samsung litigation (which settled while on appeal to the Federal Circuit), Ericsson opposed the determination of a global FRAND rate and license by a Chinese court, while in its current litigation against Lenovo, Ericsson asked the EDNC to establish just such a rate (if it were found to have violated its FRAND obligation), and even held up such global rate-setting as a reason that could support the entry of an ASI against the enforcement of its Brazilian and Colombian injunctions.

It will be interesting to watch what happens in Ericsson v. Lenovo once proceedings resume at the EDNC. To date, U.S. courts have not established global FRAND royalty rates unless both parties have consented to their doing so (and in cases such as Ericsson v. Samsung, at least the EDTX has indicated a general aversion to global rate-setting). It is not entirely clear from the record whether Ericsson and Lenovo have both consented to global rate-setting by the EDNC, or for which patents, and whether the EDNC will ultimately undertake this significant effort. If it does, then the U.S. courts may re-enter the global race to judgment that the UK and Chinese courts have recently dominated (on the global FRAND ‘race to the bottom’ and ‘race to the courthouse’, see 25 BU J. Sci. & Tech. L. 251 (2019)).

Conclusion

The Federal Circuit’s October 2024 decision in Ericsson v. Lenovo is significant in several respects. First, it lowers the bar for obtaining an ASI in U.S. SEP cases, establishing not only that a court’s imposition of a global FRAND license will dispose of parallel foreign litigation, but that foreign litigation will be disposed of by a finding that a SEP holder has violated its FRAND commitment. Second, it expressly establishes, for the first time in the U.S., that a SEP holder’s breach of its contractual FRAND commitment will preclude it from seeking injunctive relief anywhere in the world.  Finally, it signals new interest in the U.S. for global FRAND rate-setting – a practice that had, until now, shifted to the UK and China.

[Disclosures: The author declares no conflicts of interest regarding the subject of this article. The author, together with other International Intellectual Property Law Professors, submitted an amicus curiae brief in support of neither party in Ericsson v. Samsung. The author has appeared as an expert witness on behalf of Lenovo in unrelated UK SEP litigation that did not involve Ericsson.]