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«Case 1:13-cv-00008-RGA Document 17 Filed 02/11/13 Page 1 of 26 PageID #: 227 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE ...»

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Case 1:13-cv-00008-RGA Document 17 Filed 02/11/13 Page 1 of 26 PageID #: 227

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF DELAWARE

INTERDIGITAL COMMUNICATIONS, )

INC., a Delaware corporation, )

INTERDIGITAL TECHNOLOGY )

CORPORATION, a Delaware corporation, ) IPR LICENSING, INC., a Delaware ) corporation, and INTERDIGITAL ) HOLDINGS, INC., a Delaware corporation, ) ) Plaintiffs/Counterclaim-Defendants, ) ) v. ) C.A. No. 13-08-RGA ) HUAWEI TECHNOLOGIES CO., LTD., a ) JURY TRIAL DEMANDED Chinese corporation, FUTUREWEI ) TECHNOLOGIES, INC. D/B/A/ HUAWEI ) TECHNOLOGIES (USA), a Texas ) corporation, and HUAWEI DEVICE USA, ) INC., a Texas corporation, ) ) Defendants/Counterclaim-Plaintiffs. )

DEFENDANTS’ OPENING BRIEF IN SUPPORT OF MOTION FOR EXPEDITED

DISCOVERY AND EXPEDITED TRIAL ON FRAND COUNTERCLAIMS

-Of Counsel- YOUNG CONAWAY STARGATT & TAYLOR, LLP Stanley Young Martin S. Lessner (No. 3109) Robert T. Haslam Adam W. Poff (No. 3990) COVINGTON & BURLING LLP Monté T. Squire (No. 4764) 333 Twin Dolphin Drive Rodney Square Redwood Shores, CA 94065 1000 N. King Street (650) 632-4700 Wilmington, DE 19801 (302) 571-6600 David W. Haller mlessner@ycst.com COVINGTON & BURLING LLP apoff@ycst.com 620 Eighth Avenue jhiggins@ycst.com New York, New York 10018 (212) 841-1057 Attorneys for Huawei Technologies Co., Ltd., Futurewei Technologies, Inc., and Huawei Winslow Taub Device USA, Inc.

COVINGTON & BURLING LLP

One Front Street San Francisco, CA 94111 DATED: February 11, 2013 Case 1:13-cv-00008-RGA Document 17 Filed 02/11/13 Page 2 of 26 PageID #: 228

TABLE OF CONTENTS

Table of Authorities

I. INTRODUCTION

II. NATURE AND STAGE OF PROCEEDINGS

III. SUMMARY OF ARGUMENT

IV. STATEMENT OF FACTS

A. The Parallel ITC Proceeding

B. IDC’s Obligation to License “Declared-Essential” Patents on FRAND Terms

C. The Asserted Declared-Essential Patents

D. Huawei’s Counterclaims

E. Pre-Litigation License Negotiations

V. ARGUMENT

–  –  –

B. Huawei Will Suffer Improper Prejudice in Defending the ITC Proceedings and Facing Exclusion Orders Unless The Court Rules on Huawei’s FRAND Counterclaims.

–  –  –

C. Establishing a FRAND Rate Will Also Dispose of This Litigation and Other Related Actions.

D. An Expedited Schedule Will Not Unfairly Prejudice IDC.

VI. RELIEF SOUGHT

VII. CONCLUSION

–  –  –

Advanced Micro Devices, Inc. v. S3 Graphics Co., Ltd., No. 11-956-LPS, 2011 WL 5402667 (D. Del. Nov. 8, 2011)

Amado v. Microsoft Corp., 517 F.3d 1353 (Fed. Cir. 2008)

Apple, Inc. v. Motorola, Inc., 869 F. Supp. 2d 901 (N.D. Ill. 2012)

Bio-Tech Gen. Corp. v. Genentech, Inc., 80 F.3d 1553 (Fed. Cir. 1996)

Carborundum Co. v. Molten Med. Equip. Innovations, Inc., 72 F.3d 872 (Fed. Cir. 1995)

Certain Elec. Devices, Including Wireless Commc’n Devices, Portable Music and Data Processing Devices, and Tablet Computers, Inv. No. 337-TA-794, 2012 ITC LEXIS 2296 (Sept. 14, 2012)

Cordis Corp. v. Boston Scientific Corp., No. 03-027-SLR, 2009 WL 3160270 (D. Del. Sept. 30, 2009)

Kos Pharms. Inc. v. Andrx Corp., 369 F.3d 700 (3d Cir. 2004)

Matsushita Elec. Indus. Co., Ltd. v. Cinram Int’l, Inc., 299 F. Supp. 2d 370 (D. Del. 2004)

Microsoft Corp. v. Motorola, Inc., 696 F.3d 872 (9th Cir. 2012)

Microsoft Corp. v. Motorola, Inc., 854 F. Supp. 2d 993 (W.D. Wash. 2012)

Microsoft Corp. v. Motorola, Inc., No. C10-1823JLR, 2012 U.S. Dist. LEXIS 170587 (W.D. Wash. Nov. 30, 2012).................11 STATUTES 19 U.S.C. § 1337(c)

19 U.S.C. § 1337(d),(f)

–  –  –

I. INTRODUCTION Defendants Huawei Technologies Co., Ltd., Futurewei Technologies, Inc. and Huawei Device USA, Inc. (collectively “Huawei”) request that this Court set an expedited schedule for discovery and trial as to the obligation of plaintiffs InterDigital Communications, LLC, InterDigital Technology Corporation, IPR Licensing, Inc., and InterDigital Holdings, Inc.

(collectively, “IDC”) to license the asserted patents on fair reasonable and non-discriminatory (“FRAND”) terms. IDC is required to do so because it has declared that the asserted patents may be “essential” to certain third- and fourth-generation cellular communication standards. In particular, Huawei seeks a determination of a FRAND rate so that the rate can be paid, which would resolve this and related actions in this Court and in the International Trade Commission.

Since the last time the parties appeared before the Court on this issue, a consensus is rapidly emerging among regulatory bodies and the federal courts that, when there is a dispute as to the FRAND rate for declared-essential patents, the accused infringer must be given the opportunity to accept a FRAND rate determined by a court or arbitrator, and that opportunity must be given before the patentholder can seek injunctive relief. IDC has ignored these recent decisions in pursuit of leverage to force a non-FRAND license rate on Huawei: IDC is seeking injunctive relief in the International Trade Commission (ITC), on the same patents asserted in this litigation, without first allowing Huawei the ability to have a FRAND rate determined and then to accept the result of that determination.





The ITC lacks the jurisdiction even to declare a FRAND rate. In addition, the ITC investigative staff has taken the position that, in ruling on FRAND-related affirmative defenses, the ITC need only consider whether the offers made in pre-litigation licensing discussions were “outrageously” high. Thus the ITC will not provide any relief in the form of a FRAND license offer. Only this Court, which has the authority to adjudicate Huawei’s counterclaims and Case 1:13-cv-00008-RGA Document 17 Filed 02/11/13 Page 5 of 26 PageID #: 231 provide declaratory relief, can give Huawei the opportunity to have a FRAND rate adjudicated for InterDigital’s declared-essential U.S. patents and then to accept a license on FRAND terms, prior to being subjected to an injunction based on purported infringement. Once that rate is set in this case, Huawei will pay it, obviating any need for further proceedings, in any forum, about infringement, validity and other issues relating to those patents.

IDC is well aware of the inability of the ITC to provide the relief to which Huawei is entitled, and is hoping to press the investigation forward on a schedule that denies Huawei that opportunity. In a recent letter to the ITC, IDC has argued that the ITC investigation should proceed without regard for the FRAND counterclaims in this action because “the district court has to date taken no action on Huawei’s just-filed counterclaims,” and because IDC does not expect a ruling from this Court until “years [in the future], especially if appeals are taken.” IDC’s determined effort to slow down a FRAND determination in this lawsuit while forging ahead in the ITC injunctive proceeding is precisely the kind of hold-up that the FTC, the DOJ, and the courts have condemned.

Huawei seeks through this motion to establish a schedule for this case that provides a FRAND determination in sufficient time to have an effect on the ongoing ITC investigations.

Huawei is also planning to move the ITC to stay the most recently filed investigation, and reserves the right to seek in this Court an injunction halting the ITC proceedings should it become necessary to do so.

In addition, an adjudication of a FRAND rate will dispose of the remaining claims in this action and the prior action before this Court. Huawei will accept and pay the judicially determined FRAND rate for IDC’s portfolio of U.S. patents declared essential to cellular Case 1:13-cv-00008-RGA Document 17 Filed 02/11/13 Page 6 of 26 PageID #: 232 standards. Once a license with FRAND terms is consummated, there will no longer be any case or controversy regarding the patents asserted in this lawsuit and the prior lawsuit.

Finally, Huawei is seeking expedited discovery and trial on the FRAND issues without prejudice to IDC’s ultimate ability to proceed with litigating its liability claims in this Court should it become necessary to do so. Rather, Huawei believes that judicial economy will be best served by having the FRAND-related discovery, hearing and ruling bifurcated and scheduled in advance of liability discovery and trial in this case.

II. NATURE AND STAGE OF PROCEEDINGS

This lawsuit was filed on January 2, 2013. IDC alleges that Huawei infringes U.S. Patent Nos. 7,190,966, 7,286,847 and 7,941,151 (the “asserted patents”). (D.I.#1) On January 24, 2013 Huawei filed an answer and asserted counterclaims, including a claim for relief in the form of a declaration of the FRAND royalty for IDC’s United States patents that have been declared essential to 3G and LTE 4G cellular standards. (D.I. #8) IDC has yet to respond to Huawei’s counterclaims.

IDC moved for a 30-day extension to respond to Huawei’s counterclaims on February 1, 2013. (D.I. #14) Huawei opposed the motion for extension due to the need for prompt adjudication of the FRAND-related counterclaims described in this motion, and because IDC has long been aware of nearly identical claims and defenses in related litigation involving Huawei.

(D.I. #15)

III. SUMMARY OF ARGUMENT

1. District Courts are “afforded broad discretion to control and manage their dockets, including the authority to decide the order in which they hear and decide issues pending before them.” Cordis Corp. v. Boston Scientific Corp., No. 03-027-SLR, 2009 WL 3160270, at *2 (D.

Del. Sept. 30, 2009) (citing Amado v. Microsoft Corp., 517 F.3d 1353, 1358 (Fed. Cir. 2008)).

Case 1:13-cv-00008-RGA Document 17 Filed 02/11/13 Page 7 of 26 PageID #: 233

2. Courts have used this discretion to expedite discovery and trial during the pendency of a parallel ITC proceeding. Advanced Micro Devices, Inc. v. S3 Graphics Co., Ltd., No. 11-956-LPS 2011 WL 5402667, at *2 (D. Del. Nov. 8, 2011) (expediting trial on patent ownership issue).

3. More specifically, it is proper to hold a “mini-trial” on FRAND issues prior to adjudication of patent infringement and invalidity, and to stay the imposition of injunctive relief during the process of determining a FRAND rate. Microsoft Corp. v. Motorola, Inc., 854 F.

Supp. 2d 993, 1002-03 (W.D. Wash. 2012) (setting expedited summary judgment schedule on FRAND issues and, thereafter, a mini-trial to dispose of all remaining FRAND issues). See also Matsushita Elec. Indus. Co., Ltd. v. Cinram Int’l, Inc., 299 F. Supp. 2d 370, 372 (D. Del. 2004) (bifurcating antitrust counterclaims from patent claims and phasing early antitrust discovery and early motions for summary judgment).

4. Expedited proceedings on the FRAND counterclaims are necessary here. Unless this Court rules on the FRAND counterclaims expeditiously, and certainly before liability is adjudicated in the ITC proceedings between the parties, Huawei will face the threat of injunctive relief in the form of an ITC exclusion order without having had the opportunity to accept an offer at a judicially determined FRAND rate—which would be inconsistent with IDC’s FRAND obligations and would present exactly the anticompetitive scenario that federal regulators are so concerned about. Even now, prior to any final determination in the ITC proceedings, the ongoing and irreparable harm being inflicted by the threat of an injunction warrants a rapid resolution of the FRAND issue by this Court.

–  –  –

the ITC has no jurisdiction to rule on Huawei’s contractual and equitable counterclaims nor on Case 1:13-cv-00008-RGA Document 17 Filed 02/11/13 Page 8 of 26 PageID #: 234 its request for declaratory relief. To avoid the irreparable harm to Huawei being caused by the threat of an ITC exclusion order, adjudication of the FRAND rate should take place as soon as possible.

IV. STATEMENT OF FACTS

–  –  –

On the same day that IDC filed its patent-infringement complaint in this action, it also filed a complaint in the ITC alleging that Huawei infringes the same three patents. Certain Wireless Devices with 3G and/or 4G Capabilities and Components Thereof, Inv. No. 337-TAJan. 2, 2013) [hereinafter “the parallel ITC proceeding”]. The administrative law judge in the ITC has set February 4, 2014 as the date he will issue his Initial Determination, and June 4, 2014 as the “target date” for completion of the investigation, including Commission review. Id.

Order 4 (Feb. 6, 2013). 1 B. IDC’s Obligation to License “Declared-Essential” Patents on FRAND Terms During the period when it filed the applications leading to the asserted patents, IDC participated in several Standard Setting Organizations (“SSO”), including the European Telecommunications Standards Institute (“ETSI”) and the 3rd Generation Partnership Project (“3GPP”). See Taub Decl., Ex. 1 (September 14, 2009 declaration to ETSI that the ’966 and As the Court is no doubt aware, this lawsuit and the parallel ITC proceeding are only the most recent in a series of disputes between Huawei and IDC. There is also separate ongoing litigation in this Court and the ITC, and there was an action in the Delaware Chancery Court. See Case No. 1:11-cv-00654-RGA (stayed litigation in this Court); Certain Wireless Devices with 3G Capabilities and Components Thereof, Inv. No. 337-TA-800 (ongoing ITC investigation);



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