No Harm, No Foul, And No Standing For Would-Be SEP Implementer: 5th Circuit Changes Narrative On Patent "Hold Up"

• Published date: 07 March 2022
• Subject Matter: Anti-trust/Competition Law, Intellectual Property, Antitrust, EU Competition , Licensing & Syndication, Patent
• Law Firm: Mintz
• Author: Daniel B. Weinger, Michael T. Renaud, Bruce D. Sokler and James J. Thomson

The Fifth Circuit recently ratified the right of holders of standard essential patents ("SEP") to choose where in the supply chain to license SEPs and dealt a blow to the "hold up" narrative advanced by some implementers. In Cont'l Auto. Sys., Inc. v. Avanci, L.L.C., the Fifth Circuit found that a willing licensee of SEPs, who was refused a license, did not have Article III standing to sue for antitrust violations because it suffered no injury in fact. Here, the Fifth Circuit found that the implementer already benefited from the ability of original equipment manufacturers ("OEMs") to obtain the necessary license. In doing so, the Fifth Circuit held that SEP holders had satisfied their obligation to offer the patents on fair, reasonable, and non-discriminatory ("F/RAND") terms by licensing them to the downstream OEMs. This decision creates broad implications for SEP licensing negotiations and changes the axiom that any willing licensee implementer must be offered a license on F/RAND terms. Additionally, this decision also shows that the U.S. courts are continuing a trend of favorable decisions to SEP owners.

Background

Continental Automotive Systems, Inc. ("Continental"), an auto-parts supplier, sought a license to SEPs essential to the 2G, 3G, and 4G cellular standards from Avanci, a technology licensing company, along with several SEP owners, including Nokia, Optis, and Sharp. Perhaps best known for its tires in the United States, Continental also provides end-to-end solutions for networked mobility in cars. When Avanci denied Continental a license, Continental brought suit claiming violations of federal antitrust law and attendant state law.

a. Standard Essential Patents

SEPs are patents that are declared essential to a particular standard. A standard is a technology, or document, that is defined by a body or Standard Setting Organization ("SSO") in a standard-setting process. The goal of standards is to create technologies that are interoperable and easily adopted across platforms. In the consumer context, widespread adoption of standards ensures that devices from myriad suppliers are compatible and function in concert. Bluetooth, Wi-Fi, and 5G cellular are commonly known standards. Bluetooth, for example, creates a standard where headphones purchased from one supplier and a smartphone purchased from another are able to connect wirelessly with little effort on the part of the consumer.

There is vast body of ever-changing law concerning SEPs, but a...