Standard essential patents are critical to high tech industries but have been the subject of limited consideration in Australia in connection with allegations of patent infringement and validity. A case in the Federal Court now progressing to trial has brought these matters into sharp focus.
Standard essential patents are patents for inventions that are incorporated into one or more industry standards. As a result, any person or organisation must use the patented invention in order to comply with the standard. This means the patentee of a standard essential patent is able to collect royalty fees – even from competitors – resulting from use of the standard. The patentee could, in the alternative, decide not to license their patent rights or charge high licence fees which could lock out competition.
Fair, reasonable and non-discriminatory
Standard-making bodies may, however, have policies which require members to make licences available in respect of standard essential patents on fair, reasonable and non-discriminatory (FRAND) terms. The standard-making body may, in the absence of a FRAND commitment, refuse to incorporate a patented invention into a standard, or suspend relevant parts of a standard.
Standard essential patents have been referred to in Australian courts including the now settled Apple v Samsung proceedings, where Apple alleged among other things that Samsung breached various provisions of the Competition and Consumer Act 2010 (Cth) by failing to license its standard essential patents to Apple on FRAND terms. With the settlement of the proceedings, those issues were not determined and there remains no Australian precedent on the topic. Standard essential patents have however been raised again in the Motorola Solutions Inc v Hytera Communications Corporation Ltd proceedings currently before the Federal Court.
Motorola v Hytera allegations
Motorola’s claim includes allegations of patent infringement by Hytera, a manufacturer of radio transceivers and systems.
In its defence, Hytera alleges that two of those patents are essential to particular European Telecommunications Standards Institute (ETSI) digital mobile radio (DMR) standards, in that compliance with the standards cannot be achieved without carrying out the alleged acts of infringement.
Also, the patents relied upon by Motorola are not identified as standard essential patents by the relevant standards. The ETSI policy however includes a clause requiring that its members use reasonable endeavours to inform the ETSI of all essential patents.
Hytera further alleges that Motorola is a member of the ETSI, participated in the development of the relevant ETSI standards, did not disclose as “essential” two of the patents relied on by Motorola in these proceedings and that Motorola is bound by its agreement with the ETSI - and the ETSI policy - to bring those patents to the ETSI’s attention and make an undertaking to licence those patents under FRAND terms.
Therefore, if Hytera did infringe those patents, it argues that the only relief that should be awarded is a fee on a notional licence basis reflecting FRAND terms.
Essential patents and FRAND terms in Australia?
For those involved in technical industry standards, this is an important case to follow and may shed light on relevant considerations, including for example, when a patent might be regarded as essential, the role of standard-making bodies in connection with patents, and the applicability of FRAND terms in Australia.
The matter is currently listed for trial commencing on 22 July 2019.