Global Battlegrounds: An Examination of Standard Essential Patents at the UPC v the US ITC

In its short existence, the Unified Patent Court has proven to be a competent and efficient forum, attracting patent holders from a wide range of technology sectors. These attributes, along with the UPC’s broad jurisdiction and relatively low costs, have also attracted an increasing number of lawsuits brought by standard essential patent (SEP) holders.

However, as a relatively new venue, the UPC has a limited track record, particularly when it comes to SEP disputes. The UPC has in fact issued only three SEP decisions, all within the past five months.

Therefore, while the UPC has certainly become a forum to watch when it comes to SEP disputes, there is another forum that shares many of the same characteristics as the UPC that should not be forgotten. Indeed, the US International Trade Commission (ITC) offers an established platform, with a longer history of handling SEP-related investigations, which can provide greater clarity on how such cases are likely to be adjudicated.

This article provides an in depth look at the treatment of SEPs at the UPC and ITC. This article further highlights why SEP holders should consider both forums when looking to enforce their patents, and why implementers should stay informed on current developments of both forums.

The UPC’s treatment of SEPs and other considerations

UPC cases are decided relatively quickly, with the goal of resolving cases within 12 to 14 months. It is also generally less expensive to litigate at the UPC than at other European courts, such as local German courts. The UPC also has a “loser pays” system, requiring the losing party to pay some of the costs of the winner.

The UPC has two other important characteristics to consider: (1) its ability to offer injunctive relief; and (2) its limitations on discovery.

Unlike the general rules governing injunctions in US district courts, which have explicit factors to consider, UPC judges have more discretion on whether to grant injunctions. For instance, the UPC Agreement does not expressly require the court to find that a patent owner will suffer irreparable harm before it can grant an injunction.

Further, even if the court finds infringement, there is no automatic injunction like there is in other European courts. Rather, the UPC maintains discretion on whether to grant an injunction.

A first-instance injunction, when it is granted, may be provisionally enforced while an appeal is pending. To do so, the plaintiff must put up security to cover the amount of compensation for any damage incurred or likely to be incurred by the defendant if the injunction is enforced and subsequently revoked.

Looking next at what discovery is available at the UPC, a party may only obtain discovery on documents and things that are specifically identified to the court. This is more limited than the discovery available in the US, as parties will have to justify their discovery requests and will have to know specifically what evidence they are seeking.

In terms of expert witnesses, the UPC only allows expert testimony in limited circumstances, and generally only written expert testimony.

Because of these limitations on evidence and the use of experts, well-prepared parties can potentially work around these limitations by pursuing Section 1782 proceedings in the US. These proceedings offer parties an avenue to obtain sought-after discovery using the broader evidentiary rules in the US.

FRAND analysis and SEP holder behaviour before litigation

As discussed below, the UPC made clear in Panasonic and Netgear that it is possible to bring a fair reasonable and non-discriminatory (FRAND) defence at the UPC.

If an implementer brings such a defence, the UPC will likely use the Huawei v ZTE standard which analyses: (1) whether sufficient notification was given by the SEP holder of potential infringement; (2) whether the SEP implementer is a willing licensee; (3) whether the SEP holder offered a FRAND compliant offer; and (4) whether the SEP implementer made a FRAND compliant counteroffer.

SEP cases so far

At the time of this article, there have only been three SEP cases decided by the UPC: Phillips v Belkin, Panasonic v OPPO, and recently, Huawei v Netgear.

Phillips v Belkin was decided on September 13, 2024. Phillips accused Belkin of patent infringement related to the Qi wireless standard. Belkin did not present a FRAND defence in this case, presumably because the Qi wireless standard doesn’t have market dominance, and other charging technologies are available.

The case thus proceeded as a normal patent infringement case. It resulted in the first ever SEP injunction, as Phillips was able to prove infringement and convince the court that an injunction was warranted.

On November 22, 2024, the UPC decided Panasonic v OPPO, the first SEP case with a FRAND defence. In its decision, the UPC lower court declared itself competent to hear FRAND defences according to the Huawei v ZTE standard. Interestingly, Panasonic and OPPO attempted to settle the case prior to the final decision, but were unable to finalise the settlement before it was handed down.

The Court found OPPO to be infringing and that it had failed to present a valid FRAND defence. Looking at the application of Huawei v ZTE standard, the court focused on the parties’ behaviour before and during litigation. Specifically, the UPC was concerned with OPPO’s attempts to squash the UPC suit by filing a counter suit in the US, and OPPO’s attempts to avoid taking a licence. Notably, the UPC’s decision is contrary to the European Commission’s stance on FRAND defences – which is that courts should generally only look at the initial negotiations between parties – as the UPC looked at the overall conduct of the parties when making its decision.

The UPC’s treatment of FRAND defences was further refined on December 18, 2024, when the UPC handed down its decision in Huawei v Netgear. Here, the Court determined that Netgear had infringed Huawei’s patents and didn’t present a valid FRAND defence.

The court affirmed the application of the Huawei v ZTE standard for FRAND defences and further refined the standard, requiring less formal review of the SEP holder’s conduct and adding more strict requirements on implementers to be able to bring the defence.

Specifically, the court in Netgear spent more time discussing what a “FRAND-compliant counter-offer” looks like, holding that the SEP implementer should: (a) make a FRAND-compliant counteroffer without delay tactics; (b) provide adequate security to cover potential liabilities; and (c) disclose precise details regarding the implementer’s use of the SEP. Ultimately, the Court found that Netgear failed to provide any security to cover its potential liabilities and therefore was unable to advance a FRAND defence.

Unknowns of the UPC

Even with all of the recent decisions that have come down from the UPC, there are still many unknowns. As mentioned, the UPC is still in its early days, and thus will handle a host of issues for the first time in the months and years to come. Further, the SEP cases that have been decided have all come out of the German branch of the court. It will be interesting to see how other branches of the UPC handle SEP disputes.

The ITC’s treatment of SEPs and other considerations

Unlike the UPC the discovery available and evidence admitted at the ITC is broad. The ITC generally allows third-party discovery, depositions, broader use of expert witnesses at oral hearings, and other evidence that, at the UPC, would require motions to obtain.

Similar to the UPC, however, the ITC resolves disputes quickly, with investigations concluding within 16 to 18 months. The ITC also does not use the eBay standard for its exclusion orders (which requires a showing of irreparable harm).

Rather, the ITC follows Section 337 of the Tariff Act of 1930 and includes a requirement for the ITC to consider public interest factors before issuing an exclusion order.

For example, in 2022, the administrative law judge (ALJ) at the ITC found no violation in an investigation where Philips filed a complaint against Thales and other respondents. The commission noted that even if it were to find that Thales was in violation of Philips’s patent rights, its recommendation would be only to delay, and not deny, the exclusion order by 12 months because of public interest factors including COVID and Philips’ misconduct.

Other notable investigations include numbers 337-TA-1379 and 337-TA-1380, which involved SEPs relating to the H.264 standard.

The ALJ found that respondent Amazon had failed on all of its affirmative defences because it did not show that complainant Nokia had violated its FRAND obligations.

Amazon argued that Nokia’s negotiations with Amazon were in violation of its FRAND obligations because the terms were unreasonable and discriminatory. Amazon further pointed to how Nokia’s rates had no objective economic basis and were higher than rates offered by H.264 patent pools.

The ALJ found this unpersuasive. Though some of these could be indicators of a FRAND violation, they were not found to be dispositive. Because Amazon had failed to show that Nokia violated its FRAND obligations, the ALJ found in favour of Nokia and found Amazon to be in violation of Section 337.

However, just recently, the commission issued a decision in the 1380 investigation indicating that it intends to review several SEP/FRAND-related findings in the ALJ’s initial determination.

Therefore, for the first time in a long time, the commission will seemingly address fundamental issues relating to investigations involving SEPs, including whether a complainant should be precluded from seeking an exclusion order when the asserted patent is standard essential.

The commission’s decision to review these SEP/FRAND-related issues prompted the submission of strongly-worded public comments from companies and organisations on both sides of these issues. A final decision is due on May 14, 2025.

Takeaways

When facing an SEP dispute, SEP holders and implementers should consider both the UPC and the ITC, and the impact that bringing an SEP dispute to each forum could have on negotiations. Both forums have proven to be attractive for SEP holders, but both also provide mechanisms for implementers to defend themselves against improper conduct.

For SEP holders, the UPC is a fast and cost-effective option with its broad jurisdiction over a population similar to the US, and its willingness to issue multi-country injunctions. SEP holders should, however, remain mindful of the UPC’s newness, as the venue is still evolving after only a few cases.

The ITC, on the other hand, offers broad discovery and the possibility of powerful exclusion orders, with a favourable track record for SEP holders regarding FRAND issue. However, its more flexible discovery process can come with higher costs.

SEP holders should therefore consider filing in both forums and remain open to including both SEPs and non-SEPs in their actions. Doing so will provide a broader scope of potential enforcement while also mitigating potential FRAND defences. SEP holders should also consider engaging in good faith negotiations before filing suit in either forum.

For SEP implementers, taking proactive steps is crucial. Whether at the UPC or ITC, implementers should consider raising all FRAND defences early.

In UPC jurisdictions, implementers should consider filing nullity proceedings as early as possible and, if they are concerned about specific applications, submitting observations to the EPO during prosecution.

When facing an ITC investigation, implementers should consider filing inter partes review (IPR) proceedings as soon as possible. An IPR will not stay the ITC investigation, but it could interrupt an exclusion order from going into effect if the IPR is filed early enough.

Implementers should also consider framing their FRAND arguments around the established public interest factors and retaining a public interest expert. Finally, implementers may also want to consider using the FRAND defence to delay the issuance of an exclusion order. Such a delay could afford implementers more time to negotiate with SEP holders, to obtain a final decision in an IPR, or to finalise and enter into evidence potential redesigns.

In sum, SEP holders and implementers must be mindful of the treatment of SEPs both at the UPC and ITC, and both SEP holders and implementers must be prepared to deal with disputes in both forums.