InterDigital Can’t Dial Up A Win Against Microsoft Phones
Aug. 31, 2015 (Mimesis Law) — When you are a patent licensing company and lose a patent case, the market reaction can be swift and punishing. A look at the after-hours chart for InterDigital, after the company received a negative ruling in a long-running patent dispute in the International Trade Commission (ITC), proves the point yet again. When it comes to patent cases, the ITC is an interesting venue, with specialized rules that make litigating before the Commission a challenge for litigants, their counsel, and experts. Importantly, ITC cases are not litigated with money damages in mind, as the only remedy in an ITC patent action is either a limited or general exclusion order for infringing products being imported into the United States. Securing such an order, however, creates a tremendous amount of leverage for patent owners, since the economic impact of reduced or no importation of products can equal or even exceed the cost of paying a reasonable royalty to the patent owner — the typical remedy in a District Court case. Accordingly, the ITC is a venue of choice for savvy patent owners, including sophisticated licensing outfits like InterDigital, since the threat of, or securing, an exclusion order can lead to juicy settlements.
But first you have to win, and with respect to this eight-year long case, InterDigital has struck out pending an appeal. The case was started while Nokia was still importing phones, and Microsoft inherited the dispute when it took over Nokia’s handset business. IDCC contends that it has important patents covering 3 and 4G wireless technology, and has been a prolific filer of lawsuits seeking to secure royalties from phone manufacturers and importers. In this case, the ITC found that the Nokia handsets do not infringe IDCC’s patents, even as Microsoft has been marginalized as a bit player in the smartphone space. IDCC will need to appeal that infringement filing if it hopes to get anything out of Microsoft for these patents.
Some observers were interested to see if the ITC would take a position on the question of whether IDCC was offering to license these patents under FRAND terms (as previously discussed in connection with our Notes on Qualcomm, the holders of standard-essential patents are supposed to offer licenses to their patents under fair, reasonable and non-discriminatory terms,) but the ITC punted on the issue. Either way, this case is yet another example of the challenges that even sophisticated patent owners have in convincing the small subset of companies in a position to pay material settlement amounts to actually take licenses. When your customers are not buying what you are selling, you need to somehow force their hand. For patent owners like IDCC, that means winning cases. Easier said than done nowadays, but there is no choice but to keep trying.
Disclosures and Disclaimers:
Nothing in this material is intended to constitute legal or investment advice of any kind, nor is any of this material based on any non-public information of any kind. In addition to my work at Markman Advisors, I am also a name partner at a NYC-based intellectual property litigation boutique firm, Kroub Silbersher & Kolmykov PLLC (www.kskiplaw.com). Markman Advisors is affiliated with a Houston-based investment management firm, Perdix Capital Management, which may have existing or potential positions relating to situations discussed in this material. Markman Advisors also provides consulting services to buy-side investors, including hedge funds and family offices, that may also have or enter into positions relating to situations discussed in this material. Questions or comments can be directed to me at firstname.lastname@example.org. All suggestions are welcome.