District Court Holds That FRAND Commitment Does Not Require Licensing at Chip Level: E.D. Texas Holding Is Contrary to Recent N.D. California Decision

Sullivan & Cromwell LLP - January 10, 2019
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On January 7, 2019, in HTC Corp. v. Telefonaktiebolaget LM Ericsson, Judge Rodney Gilstrap of the U.S. District Court for the Eastern District of Texas held, “as a matter of French law,” that the FRAND commitment embodied in the ETSI (a standard-setting organization) intellectual property rights policy does not require a FRAND license to be based on the “smallest salable patent practicing unit” (“SSPPU”) of HTC cell phones. In reaching this conclusion, Judge Gilstrap relied on the express terms of the ETSI policy, as well as evidence regarding prevailing industry practice “to base FRAND licenses on the end-user device and not on the SSPPU.” Judge Gilstrap’s decision is contrary to a decision of the Northern District of California regarding other standard-setting organizations’ rights policies, which was the subject of our memo to clients dated November 8, 2018.