Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: Arbitration ordered in wireless technologies patent licensing dispute, (Jan 21, 2016)

By Greg Hammond, J.D.

The arbitrability of a Taiwanese electronics company’s counterclaims—that a wireless technologies developer violated the Sherman Act, the Taiwan Fair Trade Act, and California’s Unfair Competition Law (UCL)—must be decided by an arbitrator, the federal district court in San Jose has ordered. In granting the developer’s motion to compel arbitration, the court determined that the developer’s assertion that the various counterclaims fall within the patent license agreement’s arbitration agreement was not wholly groundless (InterDigital Technology Corp. v. Pegatron Corp., January 20, 2016, Koh, L.).

Pegatron Corp.—a Taiwanese electronics company—filed suit in Taiwan, claiming that the royalty rates and terms of wireless technology developer InterDigital, Inc.’s patent license agreement violated the Taiwan Fair Trade Act. Conversely, InterDigital filed suit in the federal district court in San Jose, alleging that Pegatron’s filing of the Taiwan action was a breach of the license agreement. Pegatron responded with numerous counterclaims, alleging violations of the Sherman Act, Taiwan Fair Trade Act, and the UCL. InterDigital moved to compel arbitration and to stay the action.

The court first noted that by incorporating the American Arbitration Association rules in the patent license agreement, the parties clearly and unmistakably intended to delegate arbitrability to an arbitrator. Consequently, the court’s inquiry was limited to whether the assertion of arbitrability is “wholly groundless.”

Arbitrability of Sherman Act claims. Pegatron’s allegations that InterDigital violated the Sherman Act were premised upon InterDigital’s alleged failure to offer its standard essential patents to Pegatron on fair, reasonable, and non-discriminatory terms (FRAND terms), the court noted. In addition, the court determined that resolving Pegatron’s Sherman Act counterclaim would involve assessing whether InterDigital licensed its standard essential patents on FRAND terms in the patent license agreement. Consequently, because the Sherman Act counterclaim involved the patent license agreement, InterDigital’s argument that the counterclaim fell within the license agreement’s arbitration agreement was not wholly groundless, the court concluded.

Arbitrability of Taiwan Fair Trade Act counterclaims. Pegatron also claimed that InterDigital intentionally charged Pegatron an unreasonable royalty rate and imposed licensing conditions and royalties in a way that stifled and undermined fair competition in the relevant market. Resolving these counterclaims, according to the court, would therefore require assessing whether the patent license agreement provides Pegatron with FRAND license terms for InterDigital’s standard essential patents. Consequently, the Taiwan Fair Trade Act counterclaims involved the patent license agreement and InterDigital’s allegation that the counterclaims fell within the patent license agreement’s arbitration agreement was not wholly groundless, the court concluded.

Moreover, InterDigital’s assertion that Pegatron’s UCL counterclaim fell within the arbitration agreement was not wholly groundless, the court decided, because the UCL claim—like the other counterclaims—involved the patent license agreement. The motion to compel arbitration of Pegatron’s counterclaims and to stay proceedings on the counterclaims to permit an arbitrator to rule on the arbitrability of those issues was therefore granted.

The case is No. 15-CV-02584-LHK.

Attorneys: Lucy Yen (Wilson Sonsini Goodrich & Rosati) for InterDigital Technology Corp., IPR Licensing, Inc., and InterDigital Inc. Joshua H. Lerner (Durie Tangri LLP) for Pegatron Corp.

Companies: InterDigital Technology Corp.; IPR Licensing, Inc.; InterDigital Inc.; Pegatron Corp.

Cases: Antitrust CaliforniaNews