Compliance with 3G Standards ‘Prima Facie’ Evidence of Infringement

A recent procedural decision of the Federal Court of Australia (Vringo Infrastructure Inc v ZTE (Australia) Pty Ltd (No 4) [2015] FCA 177) has revealed new details of the case against Chinese telecoms equipment manufacturer ZTE by Vringo Infrastructure, Inc.

Vringo is a US-based non-practising entity (NPE) which commenced patent infringement proceedings against the Australian subsidiary of the Chinese company ZTE Corporation back in June 2013.  Although Vringo has been called a ‘patent troll’ by some media outlets (e.g. smartcompany.com.au and itwire.com), I have previously disputed that description in the case of this litigation by Vringo.

In the most recent development, the Federal Court has granted an application by Vringo allowing it to have the Chinese parent company joined to the proceedings in Australia.  I believe that Vringo’s motivation for this latest move is because it wishes to obtain further technical details regarding the ZTE products it is alleging to infringe its patents.  By adding the Chinese company – which manufactures the products – as a respondent, Vringo will be able to ask the court to order discovery by ZTE Corporation of the information Vringo needs in order to prove infringement.

Other interesting details to emerge from the recent decision are:

1. that the accused products include a USB device used to access a 4G cellular mobile data network supplied by ZTE to Telstra;
2. the accused products further include an item of network equipment identified as the ZXWN MSCS Mobile Switching Center Server; and
3. the Vringo patents are said to be essential to implementation of standardised mobile data networking features including HSPA+ in 3G networks, and the Radio Link Protocol (RPL) which is a feature of 2G networks that was carried over into 3G.

The decision is also interesting in showing the relatively low bar set for establishing a prima facie case of infringement at an early stage of patent proceedings, i.e. prior to the availability of detailed evidence.  Vringo was able to meet its burden by relying upon analysis prepared by a patent attorney (i.e. without the evidence of an established technical expert), and based only upon a comparison between the patent claims and the technical standards documents (i.e. without reference to the operation of the actual products said to infringe the patents).

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Tags: Australia, Licensing, Patent litigation, Patent pools, Trolls, Vringo, ZTE

The Right – Or Not – to Terminate a Patent Licence

The Australian Patents Act 1990 contains a provision, in section 145, permitting the termination of a patent licence, by either party, following expiration of a licensed patent.

The existence of this provision may well raise questions for some people.  For example, why would there be an need to terminate a licence after a patent has expired – would the licence not have also expired as a result?  Well, maybe not.  There is nothing to stop parties from entering into contracts with terms that continue beyond the expiry date of a patent. 

Which then raises the question of ‘freedom of contract’, i.e. if someone has signed a licence agreement in good faith, knowing its terms, why should they be granted a statutory right to nullify that agreement?

Last week, this question was addressed in a decision of Justice Flick in the Federal Court of Australia: MPEG LA, L.L.C. v Regency Media Pty Ltd [2014] FCA 180, at [15]

That object and purpose, at least in part, is to prevent the holder of a patent from taking potentially unfair advantage of the statutory monopoly conferred by a patent after it has expired. Like s 144, s 145 is aimed at anti-competitive conduct. A licensee wishing to use a patent may have no commercial option other than to enter into an agreement with a patent holder to pay royalties whilst the patent remained in force and for a period of time thereafter.

The issue in last week’s decision was, more specifically, whether or not s 145 permits a party to terminate a licence covering multiple patents when some, but not all, of those patents have expired.  The court ruled that it does not.

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Tags: Licensing, Patent law, Patent pools

A ‘Patent Troll’ Down-Under? Why Vringo Has Sued ZTE Australia

“It is a truth universally acknowledged, that a patent troll in possession of a good portfolio must be in want of a victim.”

– Jane Austen, Pride and Prejudice and Patent Trolls

I am on the record, on this blog and elsewhere, as being of the opinion that Australia is not a jurisdiction in which the ‘patent troll’ business model can work effectively.  I have expressed the view, in particular, that the US litigation system, and related patent laws, make that country an almost uniquely happy hunting ground for patent trolls.

So, you might expect that I would have been surprised to learn that US-based non-practising entity (NPE) Vringo Infrastructure Inc has commenced patent infringement proceedings in the Federal Court of Australia against the local subsidiary of Chinese telecommunications equipment manufacturer ZTE Corporation.

I confess I was a little surprised, until I remembered who Vringo is, and where I had seen the company’s name before, and realised that this lawsuit is not typical ‘troll’ activity, but is more likely part of a global patent licensing strategy conducted at least partly for the benefit of the very much practising entity, Nokia.

As I shall explain further, I do not consider Vringo to be a patent troll – at least not when it comes to the patents at issue in the dispute with ZTE.  However, I have to acknowledge that a number of online media outlets have used the ‘t-word’ in relation to Vringo, e.g. smartcompany.com.au and itwire.com (and again, here).

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Tags: Australia, Licensing, Patent litigation, Patent pools, Smartphone wars, Trolls

Patent Pools – Some Not-So-Frequently Answered Questions

In our previous article, Fragmented Patent Pools Will Not End Smartphone ‘Wars’, we wrote about two separate initiatives intended to make patent licences more easily available, and affordable, for companies wishing to implement standard mobile communications technology.

These initiatives are known as ‘patent pools’.  This is not a new concept, and the notion of companies ‘banding together’ to share access to patented technologies, sometimes with anticompetitive effects, has existed for well over a century.

However, the contemporary structure of patent pools, generally intended to facilitate access to patents required to implement an industry standard or some other widely-desired technology, is a relatively recent development.  Modern pool operators are mindful of the anticompetitive potential of patent pools, and are careful to establish legal structures and agreements which do not fall foul of competition or antitrust laws and regulators.

Patent pool arrangements began to gain official sanction from competition regulators back in the 1990s.  In 1995, the US Department of Justice (DoJ) and the Federal Trade Commission (FTC) issued the Antitrust Guidelines for the Licensing of Intellectual Property (PDF, 230 kB), which highlighted the potential pro-competitive benefits of pools.  On 26 June 1997, the DoJ Antitrust Division issued a Business Review Letter in response to a request by the MPEG LA group, which was proposing to establish a pool to license patents essential to the implementation of the MPEG-2 digital video coding standards, which were in the process of being widely adopted for a range of commercial applications, including DVD-video, digital video transmission and broadcast, and digital video recording and storage.

The DoJ gave its stamp of approval to the proposed MPEG LA pool arrangements, and these have become a template for subsequent patent pools seeking to avoid violating antitrust and unfair competition laws.

While the idea of pooling patents seems simple, there are a number of subtleties that are perhaps not so readily appreciated.  With this in mind, we ask and answer a few basic questions about modern patent pooling arrangements.

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Tags: Licensing, Patent pools

Fragmented Patent Pools Will Not End Smartphone ‘Wars’

Depending on where you are in the (developed) world, the next generation of mobile communications networks is either already with you, or on its way.  Colloquially known as ‘4G’, it is more accurately termed ‘LTE-Advanced’, an upgrade from the Long Term Evolution (LTE), or ‘3G’ technology which is now widespread.  LTE-A is an improvement in every respect over 3G – higher peak data rates, greater spectral efficiency, reduced latency and increased throughput.

And, of course, there are more patents than ever before covering networks and devices capable of communicating using the full range of available standards.

Considering that the holders of patents covering the previous generation technologies seem unable, or unwilling, to resolve their existing disputes over access and licensing terms for access to standards-essential patents (SEPs), it may be difficult to imagine how there could ever be peace as the number of such patents – and associated patent holders – only seems to be increasing.

The creation of ‘patent pools’ – collections of SEPs owned by multiple proprietors, and made available as a block via a single licence agreement – may therefore be seen as an encouraging sign.  Two such pools have recently been established covering subsets of the LTE SEPs.  And while we would like to think that this is the beginning of a more peaceful coexistence among competitors in the mobile communications space, a closer look at the LTE patent landscape suggests that there is a long way to go before these pools will represent a realistic option for achieving a truce in the industry.

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Tags: FRAND, Licensing, Patent pools, Smartphone wars