Argument Preview / Panel Activity

This week we are previewing oral arguments scheduled for next week at the Federal Circuit in three cases that attracted amicus briefs. Today we highlight Koninklijke Philips N.V. v. Thales USA, Inc., a patent case in which Thales appeals a district court’s denial of a motion for a preliminary injunction that sought to “prevent Philips from pursuing an . . . exclusion order against Thales.” Two amicus briefs were filed in support of Thales, one by the App Association and the other a joint brief by Continental Automotive Systems, Inc., U-Blox America, Inc., and American Honda Motor Co., Inc. This is our argument preview.

In its opening brief, Thales argues that, if the district court’s decision is allowed to stand, “the [European Telecommunications Standards Institute] [fair, reasonable and non-discriminatory] obligation will be rendered meaningless.” Moreover, it claims that the district court erred “in concluding that Thales was not likely to succeed on the merits” for four reasons. First, it argues the court erroneously disregarded Thales’ declaratory judgment counterclaim. Second, it says the district court made a “legal error” in analyzing Thales’ breach of contract claim because it re-interpreted the “plain and clear language” of the contract “rather than consider whether Philips met its obligation to perform its contractual duty in good faith” when it sought to exclude Thales from the market. Third, the court “abused its discretion” in disregarding Thales’ evidence demonstrating its “likely loss of market share and damage to customer relationships.” Fourth, the court “erroneously miscast Thales’ motion to enjoin Philips from pursuing its [International Trade Commission] action against Thales as effectively as a request to enjoin the ITC,” depriving itself of the authority to grant its motion.

In its response brief, Philips argues that the district court’s “denial of Thales’ preliminary injunction motion should be affirmed” for three reasons.

Philips first claims that the district court “did not abuse its discretion in finding that Thales failed to meet its burden with respect to both likelihood of success and irreparable harm.” It argues that, with respect to Thales’ claim that Philips breached its ETSI contractual obligation, Thales incorrectly categorizes itself as “a willing licensee.” Philips contends not only is Thales unlikely to succeed but also Thales “provides no authority for its (new) proposition that an ITC Investigation can be enjoined if the alleged infringer is likely to prevail on the merits in front of the ITC.” Additionally, Philips claims that Thales’ evidence of irreparable harm was not only insufficient, but also “conclusory and self-serving.” Moreover, Philips argues, Thales alleges only a possibility of harm, which is not sufficient to fulfill the requirement of “irreparable harm.” Regarding irreparable harm, Philips argues that none occurred because Thales “has had the full and fair opportunity to provide evidence and argument to the ITC as to why it believes it should not issue an exclusion order.” Additionally, Philips says, “the balance of hardships and public interest favor Philips.”

Second, in light of Thales’ assertion that “likelihood of success based its FRAND declaratory judgment counterclaim [is] the equivalent of a seeking an anti-suit injunction,” Philips argues that “the anti-suit injunction test also shows that the district court did not abuse its discretion in denying Thales’ motion.”

Third, Philips challenges Thales’ argument “that the district court incorrectly framed Thales’ motion as ‘effectively enjoining an ITC proceeding.’” Philips claims it is irrelevant how the motion is framed given that the district court “correctly analyzed the relevant factors.”

In its reply brief, Thales reasserts its argument that the district court made a legal error regarding Philips’ contractual FRAND commitments. Despite Philips’ claim that Thales is not a “willing licensee,” Thales maintains that a primary question on appeal is “whether Philips can pursue an ITC exclusion order on FRAND-encumbered patents (‘SEPs’) against Thales” while Thales was a “willing licensee that pledged to take a global license to Philip’s entire SEP portfolio” based “on terms determined by” a court of Philip’s choosing.

As mentioned, the case attracted two amicus briefs, both in support of Thales, the appellant.

In its amicus brief, the App Association argues that standardization “creates opportunities for companies to engage in anticompetitive patent ‘hold-up’ by demanding excessive patent royalties ‘after companies are locked into using a standard.’” Further, the brief claims Thales is likely to succeed on the merits of its claim for two reasons. First, it claims that Philips’ conduct is “contrary to its ‘irrevocable’ commitment to ETSI that it would be ‘prepared to grant irrevocable licenses’ on FRAND terms.” Second, it argues that an injunction is appropriate either “to prevent avoidable harm” or “to protect the court’s jurisdiction.”

Continental Automotive Systems, Inc., U-Blox America, Inc., and American Honda Motor Co., Inc. make three arguments in their amicus brief. First, they argue that litigation is frequently required in FRAND disputes and that parties must “meaningfully have the ability to adjudicate FRAND disputes in court.” Second, they argue that SEP owners’ use of patent injunctions or exclusion orders undermines the ability of a “willing licensee” such as Thales to adjudicate FRAND disputes. Third, they assert that “enjoining SEP owners from seeking patent injunctions protects the jurisdiction of district courts and the implementers’ FRAND rights.”

This case is set to be argued on Tuesday, June 7. We will report on developments.