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The Start of Something Big? Delaware Chancery Court Takes Up Merits of Dispute Over Standard-Essential Patent Licenses and FRANDFebruary 3, 2023
In a filing issued on January 31, 2023, that attracted little fanfare but could be a harbinger of cases to come, a chancery court in Delaware advanced Continental Automotive Systems’ case against Nokia, a standard-essential patentholder, past the pleading stage. In so doing, the court exercised personal and subject matter jurisdiction over a dispute that could ultimately result in Nokia having to offer Continental a global license to Nokia’s portfolio of standard-essential patents (“SEPs”).
In denying Nokia’s motion to dismiss, the court essentially concluded that what’s good for the goose is good for the gander. Nokia previously asked the chancery court to compel Qualcomm to offer Nokia a license on fair, reasonable, and non-discriminatory (“FRAND”) terms to Qualcomm’s portfolio of SEPs. With the shoe on the other foot, the court reasoned, Nokia’s warnings about the extraordinary scope of the proposed remedy carried little weight.
Continental seeks a FRAND license to Nokia’s SEP portfolio. In January of 2021, Continental sued Nokia and its U.S. affiliates in Delaware chancery court in an effort to obtain one. Nokia refused to offer a FRAND license to Continental, Continental contends, in violation of Nokia’s commitments to various standard-setting organizations (“SSOs”).
Continental filed its claim in Delaware chancery court after a federal district court in Texas dismissed Continental’s corresponding antitrust claims against Nokia and other participants in Avanci, a patent pool that aggregates SEPs and licenses them exclusively at the finished-product level. The Texas federal court declined to exercise supplemental jurisdiction over Continental’s FRAND-breach claims without passing on their merits. Now, those claims will go forward against Nokia in Delaware chancery court.
The implications of this dispute are significant. Two classes of willing licensees may benefit in particular: those to whom SEP holders refuse to license on the grounds that the SEP holders wish to exhaust their patents downstream (or at a different level in the distribution chain); and those who do not believe that SEP holders’ licensing terms comply with FRAND.
O’Melveny has long been at the forefront of disputes involving assertions and licensing of SEPs, the competitive implications of those disputes, and the ins and outs of negotiating FRAND licensing terms. We regularly counsel clients and provide thought leadership on these issues. Companies interested in understanding the legal implications of SEP assertions, licensing activity, FRAND obligations, or the antitrust agencies’ approach to SEP licensing should contact any of the key contacts below.
This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Ian Simmons, an O'Melveny partner licensed to practice law in the District of Columbia and Pennsylvania, and Brian P. Quinn, an O'Melveny counsel licensed to practice law in the District of Columbia and Virginia, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.
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