Case 1:20-cv-00493-UNA Document 1 Filed 04/09/20 Page 1 of 42 PageID #: 1
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
`
`C.A. No. ___________________
`
`) ) ) ) ) ) ) ) ) ) ) ) ) )
`
`
`
`LENOVO (UNITED STATES) INC. and
`MOTOROLA MOBILITY LLC,
`
`
`Plaintiffs,
`
`
`
`v.
`
`
`INTERDIGITAL TECHNOLOGY
`CORPORATION, IPR LICENSING, INC.,
`INTERDIGITAL COMMUNICATIONS,
`INC., INTERDIGITAL HOLDINGS, INC.,
`and INTERDIGITAL, INC.,
`
`
`Defendants.
`
`
`
`COMPLAINT
`
`Plaintiffs Lenovo (United States) Inc. (“Lenovo”) and Motorola Mobility LLC
`
`(“Motorola”) (collectively “Plaintiffs”) allege the following facts and claims against Defendants
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`InterDigital Technology Corporation, IPR Licensing, Inc., InterDigital Communications, Inc.,
`
`InterDigital Holdings, Inc., InterDigital Patents Holdings, Inc., and InterDigital Inc. (collectively,
`
`“IDC” or “Defendants”).
`
`INTRODUCTION
`
`1.
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`Plaintiffs are among the leading providers of wireless devices—including
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`tablets, laptops, and mobile phones—within the United States, which are sold under the Lenovo
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`and Motorola brands. To make and market these wireless devices, Plaintiffs rely on technology
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`required to be used under the industry-wide third generation (“3G”) and/or fourth generation
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`(“4G”) cellular standards (collectively, “the Cellular Standards”). The Cellular Standards,
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`developed through the Third Generation Partnership Project (“3GPP”) and adopted and
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`promulgated by 3GPP member organizations, such as the European Telecommunications
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`Standards Institute (“ETSI”), face no meaningful competition and have been implemented by the
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`overwhelming majority of the telecommunications industry. To be commercially viable, cellular
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`wireless devices must comply with the Cellular Standards.
`
`2.
`
`Once technology is standardized in ubiquitous standards like the Cellular
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`Standards, implementers become “locked in” to that technology; every entity that seeks to
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`produce standard-compliant products or otherwise compete in the market covered by the
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`ubiquitous standard must employ the standardized technology. To the extent standardized
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`technology is covered by any valid patents, such patents are also “locked in” and will be
`
`practiced by parties that implement the functionality of those patents in order to practice the
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`standard and produce commercially viable products. Such patents are often referred to as
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`standard essential patents (“SEPs” generally and “Cellular SEPs” if in relation to the Cellular
`
`Standards).
`
`3.
`
`These lock-in effects give SEP owners the power potentially to exclude
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`companies from practicing the standard and to raise the cost of practicing the standards by
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`charging supra-competitive royalties that exceed the value of the patented technology
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`independent of its incorporation into the standard. This phenomenon is often referred to as
`
`“hold-up.”
`
`4.
`
`IDC has engaged in a multi-pronged scheme, through a combination of
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`agreements with its competitors and fraudulent promises, to unlawfully acquire, maintain, and
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`exploit such market or hold-up power arising solely from the alleged essentiality of patents it
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`contends have been incorporated into the Cellular Standards. IDC’s scheme has harmed, and
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`continues to threaten further harm to, (a) competition in the market for wireless devices
`
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`compliant with the Cellular Standards, (b) Plaintiffs and other makers of such devices, and
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`(c) consumers.
`
`5.
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`As a threshold step in its scheme, IDC agreed with others in the wireless
`
`telecommunication field to restrain competition through the adoption and propagation of the
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`Cellular Standards. IDC, its competitors, and other members of 3GPP together hold
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`overwhelming market power in the wireless telecommunication market broadly, which
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`encompasses at least wireless telecom technology, wireless telecom devices, and wireless
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`telecom services. Through agreement, the collective action of standard-setting, and the resulting
`
`standards, IDC and its competitors have conferred significant market power on each holder of a
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`SEP for the Cellular Standards, including IDC itself. By disregarding or circumventing the
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`safeguards intended to ensure that all technology needed to practice these standards will be made
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`available to all implementers of the Cellular Standards on equivalent terms that effectively
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`neutralize any hold-up ability arising from the inclusion of patented technology within the
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`Cellular Standards, IDC has unreasonably restrained competition and unlawfully monopolized
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`the “Relevant Technology Markets” (defined below) and has harmed competition in the wireless
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`telecommunication market generally.
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`6.
`
`By agreeing with competitors and others to restrain trade in competing
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`technologies, IDC has secured market power in the Relevant Technology Markets as a holder of
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`a portfolio of an unknown number of patents that are essential to the Cellular Standards and IDC
`
`has obtained the power to control prices in the Relevant Technology Markets. IDC has wielded
`
`that power to extract monopoly rents from implementers of the Cellular Standards through many
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`means, including the threat of injunctions that would exclude implementers from the entire
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`wireless telecommunication market. IDC’s ability to exercise hold up in the Relevant
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`Technology Markets by wielding those purported SEPs in licensing efforts and litigation arises
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`from its collective action with its competitors, not from the original patenting of the technology
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`at issue.
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`7.
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`In furtherance of its anticompetitive efforts, IDC also has made false or
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`ineffective promises that it would license any essential technology on “fair, reasonable, and non-
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`discriminatory” or “FRAND” terms. IDC’s promises thereby induced its competitors and other
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`members of the standard-setting organizations (“SSOs”) to incorporate IDC’s technology into
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`the Cellular Standards.
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`8.
`
`SSOs, like ETSI, require SEP owners to make commitments to license
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`their SEPs to potential implementers of the standards on FRAND terms in an attempt to mitigate
`
`the dangers of hold-up inherent in collective standard-setting activities, which by their nature
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`restrict the technological alternatives that are available in the market. Such FRAND
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`commitments must effectively neutralize any hold-up ability arising from the inclusion of
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`patented technology within the Cellular Standards.
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`9.
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`In connection with its participation in standard-setting through its
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`membership in ETSI and 3GPP, IDC has submitted IPR Declarations under ETSI’s Intellectual
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`Property Rights (“IPR”) Policy that commit IDC to license any of its SEPs related to the Cellular
`
`Standards on FRAND terms to all potential implementers, including Plaintiffs. ETSI and 3GPP
`
`relied upon these FRAND licensing commitments when they purportedly incorporated the
`
`technology allegedly claimed in patents now owned or controlled by IDC into the Cellular
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`Standards, but IDC did not regard these commitments as meaningfully restraining the terms it
`
`could seek for licenses to its alleged SEPs.
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`10.
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`IDC compounded the deceptive nature of its IPR Declarations by
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`declaring thousands of its patents as essential to the Cellular Standards without regard to whether
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`those patents are actually—or reasonably may become—essential, thereby creating a thicket of
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`alleged SEPs intended to raise the costs and complexity, as a practical matter, for potential
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`licensees to assess fully those claims of essentiality. In doing so, IDC tilts negotiations
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`improperly in its favor through a massive and disproportionate imposition of transaction costs
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`upon implementers of the Cellular Standards that seek to license Cellular SEPs on FRAND terms.
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`IDC, thereby, has obtained the power to extract supra-FRAND terms and conditions from
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`implementers that are based not on the value of any SEPs that IDC may hold, but rather on
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`transaction costs imposed by the asserted size of its SEP portfolio and the threat of unending,
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`serial litigation and potential exclusion. IDC thus uses its artificially inflated portfolio of
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`declared SEPs—which in prior disputes has been shown to include many valueless and non-
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`essential patents—to impose added costs on implementers, all to the harm of competition within
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`the market for cellular technology.
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`11.
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`Finally, IDC has perpetuated its anticompetitive scheme through an on-
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`going and conscious disregard of both its FRAND licensing obligations and its overarching
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`obligation not to exploit the hold-up power that it obtained only through the agreements it has
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`entered with its competitors to restrain technological competition, which IDC has demonstrated
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`in licensing negotiations with Plaintiffs and others. This pattern of conduct not only breaches
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`IDC’s FRAND licensing obligations, but it renders unlawful the agreements it has made with its
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`competitors in the standard-setting process to restrict the technology available to consumers and
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`IDC’s acquisition of a monopoly position in the Relevant Technology Markets.
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`12.
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`Flowing from its pattern of conspiracy, deceit and disregard of its binding
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`obligations, IDC now claims to have thousands of (alleged) Cellular SEPs, which IDC has
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`exploited unlawfully against Plaintiffs and others by:
`
`a)
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`Refusing to license its patents on FRAND terms, and characterizing its
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`FRAND licensing obligations in past proceedings as essentially
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`meaningless;
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`b)
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`Demanding excessive and unreasonable royalties from Plaintiffs and
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`others by, among other things, seeking to appropriate the value of
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`innovations included in Plaintiffs’ products that are unrelated to IDC’s
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`alleged SEPs;
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`c)
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`Discriminating in its licensing demands against Plaintiffs and others
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`based upon, inter alia, their smaller size relative to larger industry
`
`participants, thereby raising barriers to market entry and expansion and
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`inhibiting competition among the makers of devices that implement
`
`the Cellular Standards;
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`d)
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`Without regard to IDC’s patent coverage (or lack thereof) in particular
`
`countries or regions around the world, tying access to its U.S. patents
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`to the requirement that Plaintiffs and others pay royalties on world-
`
`wide sales;
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`e)
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`Hiding its discriminatory licensing practices by tying access to its
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`SEPs—and to proposed terms for licenses to those SEPs—to
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`prospective
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`licensees’ agreement
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`to enter
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`into non-disclosure
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`agreements, and refusing to disclose the terms and conditions IDC has
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`previously provided to Plaintiffs’ competitors to license the same
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`alleged SEPs; and
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`f)
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`Dividing its portfolio among different entities in an effort to “double-
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`dip” in collecting royalties from implementers of the Cellular
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`Standards.
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`13.
`
`Plaintiffs have endured the effects of IDC’s conduct. Despite Plaintiffs’
`
`offers to pay tens of millions of dollars and other potential consideration, IDC has refused to date
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`to agree to license Plaintiffs to IDC’s alleged Cellular SEPs on FRAND terms and conditions.
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`Instead, IDC continues to insist that Plaintiffs pay royalties at unreasonable and discriminatory
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`levels far in excess of those at which IDC has licensed Plaintiffs’ key competitors, including
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`Apple and Samsung, without regard to the actual value of IDC’s allegedly essential technology.
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`14.
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`By at least the above-described acts, practices, and conduct, IDC has
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`entered into a contract, combination, or conspiracy that has restrained trade unreasonably and has
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`monopolized each of the Relevant Technology Markets.
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`15.
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`IDC’s actions have
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`injured competition by excluding alternative
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`technologies and imposing unjustified costs on Plaintiffs and other companies that are consumers
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`of the technologies. Absent IDC’s conduct, Plaintiffs would have been able to obtain access to
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`necessary technology in the Relevant Technology Markets on FRAND terms.
`
`16.
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`In addition, IDC’s actions described above have breached the FRAND
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`licensing commitments it entered into with ETSI, as to which Plaintiffs and other implementers
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`of the Cellular Standards are third party beneficiaries. IDC’s breach of these obligations has
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`injured Plaintiffs and others who have been unable to obtain licenses to IDC’s Cellular SEPs on
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`FRAND terms and conditions, and also renders unlawful the agreements IDC has made with
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`others within the ETSI and 3GPP standard-setting process.
`
`17.
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`Plaintiffs thus bring this action for injunctive relief and costs under
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`Section 16 of the Clayton Act, 15 U.S.C. § 26, and the common law to address IDC’s breach of
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`its FRAND licensing commitments and IDC’s violation of the U.S. antitrust laws via its on-
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`going abuse of the standard-setting process and the patents that it claims are essential to the
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`Cellular Standards. Plaintiffs are willing licensees and seek a license to the alleged SEPs owned
`
`or controlled by IDC on FRAND terms and conditions. Accordingly, Plaintiffs seek to enjoin
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`further unlawful behavior by IDC, as well as a declaration of their rights and injunctive relief
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`sufficient to cure IDC’s unlawful behavior and enable Plaintiffs to secure a license to the alleged
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`U.S. SEPs owned or controlled by IDC on FRAND terms and conditions.
`
`A.
`
`Lenovo and Motorola
`
`THE PARTIES
`
`18.
`
`Plaintiff Lenovo (United States) Inc. (“Lenovo US”) is a corporation
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`organized under the laws of the State of Delaware, with its principal place of business at 8001
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`Development Dr., Morrisville, NC 27560. Lenovo US develops and markets a broad portfolio of
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`personal computers, wireless devices, and smart devices capable of incorporating the Cellular
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`Standards worldwide. Lenovo US’s business relies upon compliance with applicable Cellular
`
`Standards.
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`19.
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`Plaintiff Motorola Mobility LLC (“Motorola”) is an affiliate of Lenovo
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`US. Motorola is a corporation organized under the laws of the State of Delaware, with its
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`principal place of business at 222 W. Merchandise Mart Plaza, Chicago, IL 60654. In 2014,
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`Plaintiffs’ ultimate parent, Lenovo Group Limited, acquired Motorola. Motorola designed and
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`produced the first commercial cellular device—the Dyntac 800XX— in 1983. Today, Motorola
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`also develops and markets a portfolio of personal wireless devices capable of incorporating the
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`Cellular Standards worldwide. Motorola’s business relies upon compliance with applicable
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`Cellular Standards.
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`B.
`
`IDC
`
`20.
`
`Upon information and belief, Defendant InterDigital, Inc. (“IDI”) is a
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`company organized and existing under the laws of Delaware, with a place of business at 200
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`Bellevue Parkway, Suite 300, Wilmington, DE 19809.
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`21.
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`Upon
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`information and belief, Defendant
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`InterDigital Technology
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`Corporation (“InterDigital Technology”) is a company organized and existing under the laws of
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`Delaware, with a place of business at 200 Bellevue Parkway, Suite 300, Wilmington, DE 19809.
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`22.
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`Upon information and belief, Defendant IPR Licensing, Inc. (“IPR
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`Licensing”) is a company organized and existing under the laws of Delaware, with a place of
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`business at 200 Bellevue Parkway, Suite 300, Wilmington, DE 19809.
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`23.
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`Upon information and belief, Defendant InterDigital Communications, Inc.
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`(“InterDigital Communications”) is a company organized and existing under the laws of
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`Delaware, with a place of business at 200 Bellevue Parkway, Suite 300, Wilmington, DE 19809.
`
`24.
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`Upon information and belief, Defendant InterDigital Holdings, Inc.
`
`(“InterDigital Holdings”) is a company organized and existing under the laws of Delaware, with
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`a place of business at 200 Bellevue Parkway, Suite 300, Wilmington, DE 19809.
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`25.
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`Upon information and belief, Defendant InterDigital Patent Holdings, Inc.
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`(“InterDigital Patent Holdings”) is a company organized and existing under the laws of Delaware,
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`with a place of business at 200 Bellevue Parkway, Suite 300, Wilmington, DE 19809.
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`26.
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`Upon information and belief, InterDigital Communications, InterDigital
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`Technology, InterDigital Holdings, InterDigital Patent Holdings, and IPR Licensing are wholly-
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`owned direct or indirect subsidiaries of IDI. IDI, InterDigital Communications, InterDigital
`
`Technology, InterDigital Holdings, InterDigital Patent Holdings, and IPR Licensing act as a
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`common, unified economic enterprise. Upon information and belief, IDI has dictated and
`
`controlled the actions of InterDigital Communications, InterDigital Technology, InterDigital
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`Holdings, InterDigital Patent Holdings, and IPR Licensing as described herein.
`
`27.
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`Upon information and belief, IDC derives its revenue almost exclusively
`
`from its patent licensing business. IDC claims to hold in excess of 30,000 patents and patent
`
`applications worldwide, and it claims to hold thousands of patents essential to one of more of the
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`Cellular Standards.
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`JURISDICTION AND VENUE
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`28.
`
`Plaintiffs bring this action for breach of contract and violation of the
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`antitrust laws seeking injunctive relief, declaratory relief, costs of suit, and reasonable attorneys’
`
`fees pursuant to, inter alia, Sections 1 and 2 of the Sherman Act and Section 16 of the Clayton
`
`Act, 15 U.S.C. §§ 1, 2, 26. Accordingly, this Court has jurisdiction to hear this case pursuant to
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`28 U.S.C. §§ 1331, 1337, and Section 16 of the Clayton Act, 15 U.S.C. § 26.
`
`29.
`
`To the extent any of Plaintiffs’ claims are deemed to arise under state law,
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`this Court has subject matter jurisdiction over those claims pursuant to 28 U.S.C. § 1367,
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`because such claims arise from the same factual nucleus as Plaintiffs’ federal law claims.
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`30.
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`This Court has personal jurisdiction over the Defendants pursuant to at
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`least 15 U.S.C. § 22, and because each of the Defendants are incorporated in the State of
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`Delaware. Upon information and belief, each of the Defendants has conducted and continues to
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`conduct business within the United States and this District such that they have purposefully
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`availed themselves of the privileges of conducting activities in the United States and this District,
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`and each has purposefully directed specific activities to the United States as a whole and to this
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`District.
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`31.
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`Venue is proper under Section 12 of the Clayton Act, 15 U.S.C. § 22 and
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`pursuant to 28 U.S.C. § 1391(b). Each of the Defendants is found, transacts business, and
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`resides in this District.
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`FACTUAL ALLEGATIONS
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`32.
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`Plaintiffs bring this action because of IDC’s unlawful conduct in the
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`standard-setting process and in licensing and enforcing patents that it has alleged to be essential
`
`to the Cellular Standards, including its breach of its commitments to license those patents on
`
`FRAND terms and conditions.
`
`Wireless Telecommunication Standard Setting Organizations and Relevant Standards
`
`33.
`
`Today’s cellular communications depend on widely distributed networks
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`that implement the Cellular Standards. These standards promote availability and interoperability
`
`of standardized products regardless of geographic boundary. Cellular Standards have evolved
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`over generations, beginning with the “first generation”—or “1G”—standards developed in the
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`1980s. See In re Qualcomm Antitrust Litig., 292 F. Supp. 3d 948, 955 (N.D. Cal. 2017). Second,
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`third, and fourth generation standards followed.
`
`34.
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`SSOs are industry groups that have emerged to develop and manage the
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`Cellular Standards. SSO participants engage in the selection and development of industry
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`technical standards, such as the Cellular Standards, which provide important benefits by
`
`resolving interoperability problems. One of the primary SSOs in the cellular communications
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`area is ETSI. From the outset, however, ETSI and other SSOs have been warned that where the
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`participants or the resulting standard manifest a dominant market position, the exercise of the
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`market power derived from the standard must be constrained—particularly as it pertains to the
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`granting of licenses to patents incorporated into the standard. See, e.g., Ex. 1 (EU
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`Communication: Intellectual Property Rights and Standardization), §§ 5.1.6, 5.1.7, 1992.
`
`35.
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`As work began on the 3G Cellular Standards, collaborations of SSOs
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`formed to ensure global standardization. One such collaboration is 3GPP. As 4G technology
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`emerged, 3GPP also developed the 4G LTE family of standards. Another collaboration, the
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`Third Generation Partnership Project 2 (“3GPP2”), focused its 3G standardization efforts on the
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`CDMA2000 standard.
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`36.
`
`Individual member SSOs of 3GPP and 3GPP2 are known as
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`Organizational Partners. An Organizational Partner approves the 3GPP or 3GPP2 scope and
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`transposes 3GPP or 3GPP2 technical specifications into the Organizational Partner’s own
`
`standards. ETSI is an Organizational Partner of 3GPP.
`
`37.
`
`The history of standardization in wireless telecommunication is important.
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`Prior to the adoption of 2G standards, 1G cellular connectivity offered relatively basic
`
`functionality, supporting just a few analog signals (as opposed to the digital signals used today).
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`In the late 1980s, the cellular industry began moving towards 2G and developed a number of
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`different standards, including the Global System for Mobile communications (“GSM”) and Code
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`Division Multiple Access (“CDMA”). Ultimately GSM, and enhancements thereto, and CDMA
`
`became the primary standards in 2G cellular communications. The two 2G standards were not
`
`interoperable; thus, a device configured for one network would not operate on the other. Device
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`companies and networks competed to provide the best technology and to attract the most
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`customers.
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`38.
`
`In the late 1990s, companies competing in the cellular industry pushed
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`towards 3G, seeking higher transmission speeds, ability to support more users, and improved
`
`reliability. The leading 3G standards families were CDMA2000 and the Universal Terrestrial
`
`Radio Access (“UTRA”), which operated in various modes around the world, including
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`Wideband CDMA (“WCDMA”) and TD-SCDMA. The WCDMA standard was also known as
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`Universal Mobile Telecommunications System (“UMTS”), with High Speed Packet Access
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`(“HSPA”), which utilized at least two protocols: High Speed Downlink Packet Access
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`(“HSDPA”) and High Speed Uplink Packet Access (“HSUPA”). Once again, the two main 3G
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`standards were not interoperable, and thus a device configured for a CDMA2000 network would
`
`not function on a UMTS network. And, again, device companies and networks competed to
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`provide the best technology and to attract the most customers.
`
`39.
`
`In the late 2000s, the cellular industry came together for 4G to develop a
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`single standard: Evolved UTRA (“E-UTRA”), more commonly referred to as Long Term
`
`Evolution (“LTE”). LTE was adopted almost universally as the 4G Cellular Standard.
`
`Voluntary Industry Standards Require FRAND Commitments
`
`40.
`
`Industry-wide standards present significant anticompetitive risks that
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`potentially impose excessive and unfair costs on users of the standards, and even hinder broad
`
`implementation of the standards. SSO members have a self-serving, competitive incentive to
`
`convince the SSO to incorporate their technology within the standard. SSO members also often
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`own or hold patents covering the technologies adopted by the standards, creating the potential for
`
`opportunistic behavior whereby the owners of SEPs attempt to capture not only the value of the
`
`patented technology on its own, but also the value of standardization itself. Such opportunistic
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`behavior could involve refusing to license certain implementers of the standards, or demanding
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`supra-FRAND royalties that are disproportionate to the value of the SEPs at issue.
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`41.
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`To prevent the owner of an SEP from blocking or otherwise inhibiting
`
`implementation of a given standard, the SEP owner must surrender the market power created by
`
`the standardization process. Relevant cellular SSOs maintain IPR policies that impose such
`
`duties on SEP holders. Such policies require and/or strongly encourage each member that
`
`participates in the standard-development process to disclose on a timely, bona fide basis, all
`
`intellectual property rights they are aware of and believe may be essential to a proposed standard.
`
`See, e.g., Ex. 2 (ETSI IPR Policy), § 4.1.
`
`42.
`
`Cellular-enabled devices, including those manufactured by Plaintiffs, must
`
`comply with the Cellular Standards developed and promulgated by ETSI and 3GPP. Virtually
`
`the entire telecommunications industry, including firms that directly compete with each other,
`
`participates in 3GPP and ETSI. The Cellular Standards are developed through a consensus-
`
`driven process. As such, the members of 3GPP and ETSI agree upon which technologies will be
`
`available to consumers and which technologies will be excluded. Cellular devices that do not
`
`conform to the adopted standards will not work with network infrastructure equipment that does
`
`conform, and vice versa. Cellular devices that do not use the technologies specified in the
`
`standard thus have little, if any, market value, regardless of technical merit.
`
`43.
`
`Once the members of 3GPP and ETSI select a technology for a particular
`
`function in a Cellular Standard, that technology generally becomes widely employed, while
`
`alternative technologies that could have performed that function (or alternative functions) are
`
`effectively excluded. The Cellular Standards therefore erect a substantial barrier to innovation in
`
`alternate technologies. Cellular device makers are “locked-in” to the standard-specified
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`technology, regardless of its short or long term merits, and are limited in their ability to innovate
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`or use alternative technologies.
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`44.
`
`The Cellular Standards are voluminous sets of requirements and protocols.
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`Much of each standard is built on the technology of prior generations of standards and is in the
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`public domain, not covered by any non-expired patents. Some of the technologies included in
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`the standards, however, may be covered by patents. If the standard specifies the use of a
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`particular technology that is covered by patents, then devices that are in compliance with the
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`standard necessarily infringe those SEPs.
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`45.
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`Because users may become “locked
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`in”
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`to use of functionality
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`incorporated into the standard through investment in products and services that support the
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`standard, the owners of SEPs may demand and obtain exorbitant royalties for the use of its
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`patents, potentially far in excess of the value, if any, of its specific patented technology
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`independent of the value of the standard as a whole. If unwilling to accede to a patent holder’s
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`excessive license demands, device makers may face the risk of being foreclosed from using any
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`part of the standard, including the unpatented and public domain technologies. This threat of
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`foreclosure, if left unchecked, puts manufacturers’ investments in developing standard-compliant
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`products at risk and inhibits innovation in complementary technologies and new market entry.
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`46.
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`Patent hold-up using SEPs harms competition, impedes implementation of
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`standards, and imperils any consumer benefits that might otherwise flow from widespread
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`adoption of the standard. This conduct further imperils the customer benefits that flow from
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`innovation and competition among ancillary technologies in devices that use the Cellular
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`Standards for commodity, fungible functions. The requirement that SEPs be licensed on
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`FRAND terms is imposed to curb this potential for anticompetitive abuse and the results that
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`would flow therefrom.
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`47.
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`The anticompetitive effects of hold-up are magnified in the context of the
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`Cellular Standards, where thousands of alleged SEPs are held by many different patent holders.
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`The cumulative royalty burden required to satisfy all SEP holders is referred to as the “royalty
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`stack.” To avoid the anticompetitive consequences of aggregate royalty stack becoming
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`prohibitively expensive, a SEP holder is limited to the incremental value of its SEPs. Likewise,
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`because the total royalty for use of the Cellular Standards must be reasonable, the demands of
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`any individual SEP owner must be assessed in light of the total number of SEPs included in the
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`standard.
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`48.
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`ETSI’s IPR Policy seeks to protect against members’ abuse of the
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`monopoly power that SEPs provide, and should be construed consistent with promoting that goal.
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`49.
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`The ETSI IPR Policy requires members to disclose on a timely, bona fide
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`basis all intellectual property rights that they believe may be essential to a proposed ETSI
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`standard. In particular, Clause 4.1 of the current ETSI IPR Policy, which is materially the same
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`as earlier versions, provides that: “each [ETSI] MEMBER shall use its reasonable endeavours,
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`in particular during the development of a STANDARD or TECHNICAL SPECIFICATION
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`where it participates, to inform ETSI of ESSENTIAL IPRs in a timely fashion.” This obligation
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`extends to members’ affiliates as well.
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`50.
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`The ETSI IPR Policy further mandates an irrevocable FRAND licensing
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`commitment by the owner of potential SEPs. Clause 6.1 of the ETSI IPR Policy states: “When
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`an ESSENTIAL IPR relating to a particular STANDARD or TECHNICAL SPECIFICATION is
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`brought to the attention of ETSI, the Director-General of ETSI shall immediately request the
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`Case 1:20-cv-00493-UNA Document 1 Filed 04/09/20 Page 17 of 42 PageID #: 17
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`owner to give within three months an irrevocable undertaking in writing that it is prepared to
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`grant irrevocable licenses on fair, reasonable and non-discriminatory (‘FRAND’) terms and
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`conditions ….” Clause 6.1 lists “MANUFACTURE, including the right to make or have made
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`customized components and sub-systems
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`to
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`the
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`licensee’s own design for use
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`in
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`MANUFACTURE” as among the uses for which SEP holders must make mandatory FRAND
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`licensing commitments. And, FRAND commitments, pursuant to Clause 6 of the ETSI IPR
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`Policy, “shall be interpreted as encumbrances that bind all successors-in-interest” to the declared
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`SEPs.
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`51.
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`The FRAND obligations embodied in ETSI’s IPR policy and/or otherwise
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`applicable to IDC’s Cellular SEPs: (a) limit royalties to the value that the SEP(s) had prior to
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`inclusion in the ETSI standard and in light of other patented and unpatented technology essential
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`to the use of the Cellular Standard; (b) prohibit charging royalties that are higher based solely
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`upon the covered technology being written into the Cellular Standard or that capture the value of
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`the Cellular Standard itself; and (c) require that consistent royalties and terms be made available
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`to competing licensees.
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`52.
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`During the critical period that precedes adoption of a particular technology
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`into a Cellular Standard, the cost of the technologies under consideration are taken into account
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`by ETSI members in deciding whether any particular technology will be written into the standard.
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`Costs include any royalties that may need to be paid for use of the technologies to be
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`standardized.
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`53.
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`If an ETSI participant is unwilling to comm