Judge Issues Opinion in Lenovo, Motorola Antitrust Suit Against InterDigital Over Purported FRAND Failure

On Wednesday, Judge Leonard P. Stark of the District of Delaware issued a memorandum opinion regarding InterDigital’s motion to dismiss Lenovo and Motorola Mobility’s (collectively, Lenovo) antitrust lawsuit against it for failure to state a claim and lack of jurisdiction. 

InterDigital asked the court to “require Lenovo to plead its antitrust counts (as well as a breach of contract count, which is not the subject of the pending motion) as compulsory counterclaims in a patent infringement suit InterDigital is pressing in this Court.” Judge Stark granted in part and denied in part InterDigital’s motion.

Lenovo sued InterDigital in April claiming InterDigital’s patents are preventing Lenovo from satisfying industry-wide cellular standards because InterDigital purportedly refused to license its patents despite the plaintiffs’ offers to pay tens of millions of dollars. These patents are reportedly essential for 3G and 4G wireless standards, under fair, reasonable, and non-discriminatory (FRAND) licensing obligations. As a result, the plaintiffs asserted antitrust claims against InterDigital.

The court noted that to plead antitrust standing, “a plaintiff must allege an injury that antitrust law seeks to prevent.” Judge Stark asserted that Lenovo met this requirement. “Lenovo’s allegations that it will be forced out of the cellular market or forced to pay higher-than-FRAND royalties are sufficient to state an injury caused by InterDigital taking action prohibited by the antitrust laws. That is, the injuries Lenovo claims it is suffering could not have occurred unless InterDigital has committed some type of antitrust law violation.” Moreover, the judge said that Lenovo alleged InterDigital “is already injuring it by presently demanding supra-FRAND royalties and depriving Lenovo of access to cellular technology, all because Lenovo will not satisfy InterDigital’s demands.” 

The court found, however, that Lenovo failed to “plausibly allege an agreement in furtherance of a common scheme.” In particular, Judge Stark claimed that while Lenovo “tries to allege concerted action between InterDigital and ETSI and/or between InterDigital and other ETSI members, (it) has failed to do so. Lenovo does not point to an agreement between members of ETSI or any scheme resulting from such an agreement.” 

The court explained that a purported unilateral breach of FRAND is not sufficient to allege actionable claims under Section 1 of the Sherman Act. Consequently, the court concluded that Lenovo has not adequately alleged a Sherman Act Section 1 claim and granted InterDigital’s motion to dismiss this claim.

However, the court found that Lenovo adequately alleged a Sherman Act Section 2 claim. Specifically, Judge Starks found that Lenovo’s claim follows those in Broadcom and adequately stated a Section 2 claim because the patent holder’s “intentionally false promise” to license the technology, along with Lenovo’s “reliance on that promise when including the technology in a standard” and a breach of that promise by InterDigital constitutes anti-competitive conduct. 

The court found that Lenovo alleged what Broadcom requires, specifically “that InterDigital lied to ETSI about its commitment to FRAND licensing in order to obtain the benefit of SEP status for its patent portfolio, thereby unlawfully obtaining market power which InterDigital now seeks to exploit for its own gain.” Thus, the court proclaimed that these allegations are sufficient for a Section 2 claim and therefore denied InterDigital’s motion to dismiss these claims.

The court also stated that this action is a compulsory counterclaim “to InterDigital’s first-filed patent infringement action against Lenovo, which is … also pending in this District.” The court stated that Lenovo’s breach of contract claim in this instant action and InterDigital’s declaratory judgment that it did not breach the same contract in the patent action are “logically related,” although the scope is different. 

The court added that Lenovo’s Section 2 claim is a compulsory counterclaim “because it arises out of the same facts and occurrences as the patent infringement claims filed by InterDigital in the earlier action.” Moreover, the opinion noted, “findings in the patent infringement action as to whether Lenovo infringes InterDigital’s asserted patents could impact issues raised in Lenovo’s action here.” The court stated that since both actions “are logically related() and have evidentiary overlap…Lenovo’s claims must be pled as compulsory counterclaims in InterDigital’s patent infringement action.” As a result, the court added that it will order the two cases to be consolidated.

Lenovo and Motorola are represented by Morris, Nichols, Arsht & Tunnell LLP.

InterDigital is represented by Smith, Katzenstein & Jenkins LLP and Wilson Sonsini Goodrich & Rosati.