All eyes on the ITC as decision looms on case that could open the door to SEP injunctions in the US

All eyes on the ITC as decision looms on case that could open the door to SEP injunctions in the US

You just don’t get injunctions in cases relating to standard essential patents in the US, do you? Absolutely not, in almost all circumstances. However, during a presentation at last week’s IPBC Asia in Tokyo, Vinson & Elkins partner John Fuisz drew delegates’ attention to a recent initial determination in an ITC case that might lead to that changing. In the Matter of Certain Magnetic Data Storage Tapes and Cartridges Containing Same involving Japanese companies Sony and Fujifilm – has opened the door to the possibility, in some circumstances, of SEP owners being able to use the commission as a forum through which to obtain injunctive relief. A decision on whether to review the initial determination will be made on 8th December.

I asked John to provide a brief overview of what the case is all about and what is at stake. As he says below, depending on what is decided on 8th December, we could be looking at a US game-changer here.       

Standard essential patent (SEP) owners, as well as holdouts, will want to pay very close attention to the US International Trade Commission’s review of the Initial Determination (ID) In the Matter of Certain Magnetic Data Storage Tapes and Cartridges Containing Same (ITC Inv No 337-TA-1012). The decision on review has been postponed twice and is now scheduled for 8th December 2017.

Courts and agencies in the US have traditionally refused to grant injunctive relief in cases involving SEPs. This has led to a rise in SEP holdouts. Running contrary to this trend, in the 1st September Initial Determination and Recommended Remedy in Investigation No 337-TA-1012, ALJ Shaw recommended a limited exclusion order (LEO) for a patent the respondent Sony alleged was subject to reasonable and non-discriminatory (RAND) terms. How the Commission addresses the issue could make the ITC the preferred venue for RAND and SEP patent enforcement. 

In prior investigations, the patent holder offered a licence prior to filing suit and, thus, the issue was whether the offer was reasonable. In the instant Investigation, Sony alleged that complainant Fujifilm “never offered the respondent, Sony, any license” to the SEPs prior to suit (Sony Public Interest Submission at 3). The problem for Sony was that this failure to offer a licence is not a defence at the ITC.

ALJ Shaw addressed the SEP issue by first analysing essentiality. The ALJ found that it was the respondent Sony’s burden to show by a preponderance of the evidence that the asserted claims are essential to the standard. In analysing essentiality, the ALJ took the position that the standard had to require all elements of the asserted claims (ID at 127-128 & 206). Because the respondent failed to show essentiality, the affirmative defence of breach of the non-discriminatory licensing clause by refusing to licence and breach of forum selection clauses did not apply (ID at 364).

But the decision went beyond a mere disagreement on essentiality. The ALJ agreed with the staff position that “Sony has not shown that breach of contract is a defense to patent infringement” (ID at 366-7 and FN 109). More importantly, the ID held that whether or not complainant Fujifilm breached its SEP contract, and should therefore be enjoined from prosecuting the ITC investigation, is an issue for the appropriate district court to decide (ID at 369). It is not an issue for the ITC. Thus, just as the ITC does not issue stays for IPR proceedings, the ITC will not stay or preclude imposing a limited exclusion order because of an alleged breach of SEP obligations. Rather, holdouts will be forced to seek court intervention to enjoin a complainant from enforcing the alleged SEP.

The SEP issue is contained in Sony’s petition for review and is also raised in the context of public interest. The Commission’s 8th December 2017 decision on review is a potential game changer for SEP holders, as well as holdouts who have attempted to benefit from the relatively few enforcement options that SEP holders have.

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