On May 2nd, InterDigital won an important court decision in Germany in our dispute with Lenovo over fair and reasonable compensation for our patented innovation.
The case is a clear validation of the quality of our innovation and of our behavior through many years of negotiations. It is also a strong rebuke of Lenovo’s years of delay tactics and abuse of the FRAND negotiation process.
The first instance decision from the Munich Regional Court found our 4G/5G patent-in-suit to be infringed and ruled that Lenovo should face a sales ban in Germany over all 4G and 5G-enabled devices. It also found that InterDigital always acted consistently with its FRAND commitment and that Lenovo failed to act in a FRAND compliant manner.
Using language that has become all-too familiar for SEP-owning innovators around the behavior of recalcitrant licensees, the court is particularly critical of Lenovo’s behavior.
As the court writes: Lenovo shows that “they are not interested in finding a solution that is fair to both sides. Rather, their behavior shows that even in situations in which, from an economic point of view, an agreement is obvious, they continue to negotiate in order to strengthen their own position by further delaying an agreement.”
The court is clear that Lenovo’s behavior constitutes a “hold-out tactic” which is “not in line with the legal system.”
The court also rejects Lenovo’s argument that they made a FRAND offer for a forward-looking 5G license by offering a royalty determined by the UK’s High Court last year, based on a 4G agreement from 2017. In contrast to Lenovo’s actions, the court casts InterDigital’s negotiation behavior in a far more positive light observing that we are, “interested in a final solution to the disputes that existed between the parties for many years.”
I welcome this reasoning from the court and agree that Lenovo’s actions clearly contravene their FRAND negotiation obligations and exhibit the behavior of an unwilling licensee. Courts have repeatedly explained that the FRAND obligation is a two-way street and applies to the behavior of both SEP owners and prospective licensees. It is not a one-way framework that only innovators have to abide by.
For regulators and other stakeholders, this is yet another court decision that deserves careful reading for its analysis of how implementers are able to abuse the FRAND licensing framework. Lenovo’s recent activity in the UK, in an attempt to obstruct the German action, makes clear that the UK is a jurisdiction Lenovo is using to seek anti-suit like protection so it can continue its global sales pending protracted and expensive litigation, causing their counterparties to incur massive expenditures of time, money and other resources. Lenovo prefers continued litigation to spending time at the negotiation table.
In speaking with industry participants that have experience dealing with Lenovo, the perception is clear. Lenovo - a large and powerful implementer who benefits from standards-based innovation made available by technology developers such as Ericsson and InterDigital - is not seeking to abide by its FRAND obligations or to find resolutions which would be fair and reasonable for both parties. Instead, Lenovo seeks to systematically drive down the value of innovation in an effort to conclude deals beneficial for Lenovo only. The tool Lenovo uses is its vast financial resources, outweighing those of most innovators, which enable exhausting and protracted litigation without any real intention of fair resolution.
Our preference at InterDigital is always to reach agreements through amicable bilateral negotiations with all of our customers. In our most recent quarterly earnings, we revealed that we had signed seven new agreements in the first quarter, headlined by our new agreement with Samsung for digital TVs and display monitors. None of these agreements required any litigation. In contrast to our experience with Lenovo, these counterparties engaged in negotiation with an intention to find a resolution, whereas Lenovo states publicly, that they “look forward to the next phase of the litigation.”
It is clear from the more than 15 years of negotiation and from the Munich court’s reasoning, that Lenovo falls into that band of implementers who choose delay and obfuscation instead of paying a reasonable royalty for patented technologies that millions of Lenovo devices infringe every day.
I welcome the Munich decision and applaud the judges for seeing through Lenovo´s narrative of “seeking transparency” in FRAND licensing for what it really is: hold-out. However, simple point scoring in national courts has never been my ultimate goal and I take no pleasure in it. As InterDigital’s Chief Licensing Officer, my focus is instead always on building the relationships which provide for long-term agreements that fairly value our extensive portfolio of wireless, video, and AI technologies. I would hope to see Lenovo change its posture and to move, finally, to an appropriate settlement. The “bleeding” must end so that both companies can reinvest the significant sums of money being spent on continued global litigation into foundational research that will benefit consumers and industry worldwide.