An Eastern District of Texas jury has returned a verdict of infringement for G+ Communications LLC in litigation against Samsung, finding that the defendant infringed two wireless networking patents, but not a third, through the provision of smartphones and tablets with 5G connectivity. The verdict included a damages award totaling $67.5M as a running royalty. The jury also determined that the noninfringed patent was also “well-understood, routine, and conventional”, potentially teeing up a posttrial ruling of ineligibility under Alice. Additionally, the jury concluded that neither party had breached their FRAND (fair, reasonable, and nondiscriminatory) licensing obligations with respect to negotiations over the asserted patents, each declared essential to the 5G standard. District Judge Rodney Gilstrap had addressed multiple FRAND issues in rulings leading up to and during the trial—most recently, interpreting French law, in part, as establishing that while the FRAND commitment is irrevocable, it may also be suspended due to the conduct of either the patent owner or the implementer.

As RPX has previously reported, G+ received a portfolio of 15 US wireless communications patents from ZTE in September 2021, along with foreign counterparts in Asia, Europe, and elsewhere. On March 13, 2022, G+ sued Samsung (2:22-cv-00078) over five of those former ZTE patents, characterizing its portfolio as declared essential to the 5G standard and accusing Samsung of infringement through the provision of various 5G-capable devices. At issue throughout the litigation has been the nature of the parties’ respective FRAND obligations and the extent to which those parties have respectively complied with them: Among other claims lobbed between the parties on this issue, G+ asserted in its complaint that Samsung had not complied by virtue of its alleged failure to discuss a license in good faith, negotiate, or otherwise respond to offers, as a result of which G+ contended that Samsung had “frustrated performance and therefore waived its right to demand FRAND compliance from Plaintiff”. Samsung, for its part, counterclaimed that G+ had breached its own FRAND obligations, including by failing to negotiate a FRAND license in good faith and by further failing to do so prior to filing suit. In September 2022, Judge Gilstrap denied G+’s Rule 12(b)(6) motion to dismiss that counterclaim, soon after which the plaintiff asserted counterclaims-in-reply alleging breach of contract and unjust enrichment stemming from Samsung’s supposed lack of FRAND compliance.

By the time that the case appeared to be approaching a trial then scheduled for December 11, the list of remaining issues dwindled as the parties filed notices of narrowing that each listed the summary judgment motions that they wanted the court to resolve before trial: dueling motions on patent eligibility and G+’s request for a judgment in its favor on Samsung’s FRAND counterclaim, in relevant part. The court subsequently ordered the parties to withdraw all other pending motions not included in their respective narrowing lists, stating that those cited would be decided at the pretrial conference. At that hearing, which took place on November 30 and December 1, the court ruled on the parties’ 101 motions, among those decided. While no order detailing the court’s conclusions and analysis has issued on that issue, the presence of a related factual question on the verdict form indicates that the court opted not to resolve the eligibility issue without the benefit of jury factfinding. On November 30, the first day of the pretrial conference, Samsung filed an opposed motion to continue the trial due to a scheduling conflict involving its lead counsel; the court granted that motion the following day. Judge Gilstrap granted that motion and set jury selection for January 19, with trial to start on January 22. He subsequently denied another Samsung motion to continue that cited a conflict involving its witnesses.

Also addressed during the pretrial conference was G+’s motion for summary judgment on Samsung’s breach of FRAND theory. While the court denied the motion, it also ordered a fresh round of briefing on the issue. Samsung’s focused, at least in part, on whether alleged “FRAND misconduct” of ZTE, the source of the patents here in suit, can be imputed to the plaintiff—the defendant seeking to introduce related evidence at trial, including material concerning the timeline of ZTE’s negotiations with Samsung, “ZTE’s knowing and purposeful failure to include the Asserted Patents in Samsung’s license and its concealment of its transfer to G[+]”, ZTE’s grant of a license to Samsung’s competitor Apple around that time, ZTE’s sale of the asserted patents to G+, and ZTE’s retention of a 20% interest in those patents. G+ contended that by introducing this evidence, Samsung sought to “throw a skunk in the jury box”.

On January 8, the court held that French law, which follows “the privity rule” (here, breach by the prior owner of a “good or right” does not bind a subsequent owner, absent agreement to the contrary), applies to the contract giving rise to the FRAND obligation; and that Samsung provided insufficient evidence under French law that G+ could be considered the alter ego of ZTE, sufficient to sidestep the privity rule. Judge Gilstrap also ruled that Samsung failed to adequately disclose this imputation theory during the conduct of the litigation, thereby waiving it. However, Judge Gilstrap ruled that “the facts identified by Samsung are relevant and probative as part of Samsung’s defense to G+’s charge of willful infringement” because “[i]f Samsung reasonably believed that it was receiving a license to the Patents-in-Suit as part of the July 9, 2021 license from ZTE, only to later be surprised that G+ is asking for a license to the same patents, such could counter, to some degree, G+’s charge of willfulness”. That same day, G+ withdrew its willfulness allegations, even as Samsung filed a “motion for determination on French law”.

Judge Gilstrap issued a ruling on that motion, which sought such a determination on two points of law, on January 22. The court first addressed Samsung’s request that the court confirm that under French law, “a litigant is entitled to damages covering all its losses caused by the SEP holder’s bad faith, including litigation costs for defending oneself against a suit brought by the other party in violation of its duty to act in good faith”. Judge Gilstrap rejected G+’s counterarguments as “tangential points” that do not rebut Samsung’s proposed statement of law. However, Judge Gilstrap opted to broaden Samsung’s proposed statement of law to encompass the “possibility of bad faith of a standard-implementer”, observing that “the duty of good faith is reciprocal” and thus finding that French law requires as follows:

In a negotiation for a license to a patent where the patent has been contributed to an adopted standard (which patent is known as a standard essential patent), if either negotiating party (being either the patent holder or the implementer of the adopted standard) fails to negotiate in good faith and thereby prevents a license from being granted on fair reasonable and non-discriminatory terms, then the party who fails to act in good faith is liable to the other party for any reasonable damages which arise from such breach, including but not limited to attorney’s fees and the cost of litigation.

Samsung also sought a determination that “French law does not allow a SEP declarant to unilaterally discharge (and thus avoid) its irrevocable FRAND obligations, including its duty to negotiate in good faith and its obligation to license declared patents on FRAND terms”—essentially arguing, as characterized by Judge Gilstrap, that “the commitment of a patent to [the European Telecommunications Standards Institute (ETSI)]”, the French standard-setting organization to which the relevant FRAND declarations were made, “is irrevocable”.

Judge Gilstrap disagreed with certain key aspects of that characterization, finding—contrary to Samsung’s argument—“that the obligation to negotiate toward a FRAND license in good faith may be temporarily suspended”. Additionally, Judge Gilstrap held that this obligation to negotiate in good faith is also reciprocal, and that when either party fails to fulfill that obligation, the other’s is suspended. Judge Gilstrap further determined that “[i]t is both practical and logical that the obligations of a party acting in good faith be suspended when a counterparty to a negotiation for a FRAND license is acting in bad faith” (emphasis added) until such behavior ceases—observing that “[s]uch a suspension can counter the effects of holding up and holding out”. As a result, he instead issued the following determination under French law in response to Samsung’s second request:

Where a patent is contributed to an adopted standard established by a standard setting organization, such contribution contractually burdens the patent to thereafter be licensed on fair, reasonable, and non-discriminatory terms. This is known as the FRAND obligation. This obligation is irrevocable, and thereafter runs with the patent. However, if in negotiating for a license to a patent burdened by a FRAND obligation either the patent holder or the implementer of the adopted standard fails to act in good faith and thereby prevents a license from being granted, the other party’s obligation to continue negotiations is suspended. This does not remove the burden of the FRAND obligation from the patent, but avoids obliging a party acting in good faith to continue negotiating with a party who fails to do so. If the bad faith actor ceases its bad faith and begins acting in good faith, the good faith negotiations must also resume.

The jury then issued a verdict on January 26, the sixth day of trial, finding that Samsung had infringed claims 1 and 2 of the 8,761,776 patent and claim 20 of the 10,736,130 patent, but not claim 10 of the 10,594,443 patent (G+ having narrowed the list of claims and patents to be tried in a January 17, 2023 notice to the court).

In addition, the jury determined that Samsung had shown that claim 10 from the ‘443 patent is “well-understood, routine, and conventional”. As noted above, this determination relates to patent eligibility under the Supreme Court’s Alice decision—in particular, to the second step of that analysis, which considers whether the challenged claims contain an inventive step sufficient to save them. Courts have found that “well-understood, routine, and conventional” subject matter lacks such an inventive concept. While the public docket does not reflect how Judge Gilstrap ruled on the first step of Alice, which contemplates whether the claims are directed to an abstract idea, the fact that the jury was tasked with determining a factual element underpinning step two suggests that he has either found them to be directed to such an abstract idea, or that he was reserving judgment on that point until the verdict came down. No ruling on patent eligibility has yet issued, though (if past is prologue) Judge Gilstrap may fold such a determination into his final judgment order. The jury also found that Samsung had not shown any of the tried claims to be “invalid as anticipated, obvious, and/or lacking adequate written description”.

As also mentioned above, the jury awarded a total of $67.5M in damages—$45M for the ’776 patent and $22.5M for the ’130 patent—as a running royalty for past sales, rather than as a lump sum for past and future sales. The jury also found that neither party had breached their FRAND obligations: specifically, that G+ had not done so by failing to offer a license that was FRAND, and that neither party had done so by failing to act in good faith during negotiations. As a result of that determination, the jury did not reach the question asking it how much in additional damages to award for any such breach.

The case’s public docket does not reflect how the jury was ultimately instructed on FRAND issues, but an updated set of proposed jury instructions filed on the trial’s fourth day (January 24) provides some potential insight as to which issues were at play. That proposal indicates that the parties disagreed over whether language describing the burden of proof for damages resulting from a breach of the FRAND commitment should refer to neither party (as argued by G+) or to a potential breach by G+ (as argued by Samsung); and over how the jury should be instructed on the requirements for a showing of infringement through compliance with a standard (Samsung in part seeking to clarify, over G+’s objection, that such a theory requires a showing that a patent covers every possible implementation of a standard). The parties also disagreed as to certain language pertaining to the standard for determining a reasonable royalty, including whether the jury should be instructed on the need to exclude the value of unpatented features for purposes of apportionment (as argued by Samsung) or whether such language would be redundant in light of language describing how damages should be based on the value of patented features (as G+ countered). On January 21, the court issued a ruling apparently dealing with the potential exclusion of testimony regarding the licensing negotiations between Samsung and ZTE, though no redacted public version has yet been docketed.

For more on the recent history of this case, see “G+ Dubs Imputation of ‘FRAND Misconduct’ as ‘Trying to Throw a Skunk in the Jury Box’” (January 2024).