IP Law Daily, PATENT—Fed. Cir.: Claims against T-Mobile, Nokia, Ericsson properly barred by patent exhaustion, (Feb 18, 2016)

By Greg Hammond, J.D.

Infringement claims against cell phone carrier T-Mobile and its vendors, Nokia and Ericsson, concerning four patents for cell phone infrastructure equipment were properly barred by the doctrine of patent exhaustion, the U.S. Court of Appeals for the Federal Circuit has held. The lower court’s order granting the defendants’ motion for summary judgment was therefore affirmed (High Point SARL v. T-Mobile USA, Inc., February 18, 2016, per curiam).

High Point SARL brought infringement claims against T-Mobile USA, Inc., Ericsson, Inc., and Nokia Solutions, and Networks US LLC concerning four patents that disclose methods for designing and implementing cellular telephone network infrastructure equipment used in receiving and transmitting of voice call traffic. T-Mobile allegedly bought the infringing networking equipment from at least three vendors: Nokia, Ericsson, Alcatel US Marketing, Inc., and Alcatel-Lucent USA, Inc. The district court determined that the original owners of the patents—AT&T and Lucent—authorized the vendors’ sales of equipment substantially embodying the patents-in-suit and concluded that the infringement claims were therefore barred by the doctrine of patent exhaustion. High Point appealed.

High Point claims that the sales of the accused infrastructure equipment were unauthorized because: (1) the media gateways (MGWs) sold by Alcatel to T-Mobile were not licensed products; (2) The Node Bs and radio network controllers (RNCs) T-Mobile purchased from Nokia Siemens Networks U.S. were not licensed products because the carrier division that Siemens divested in 2007 did not remain a “separately identifiable business”; and (3) LM Ericsson’s right to grant sublicenses expired in 2011 and it could therefore not convey a retroactive sublicense to Ericsson U.S. In addition, High Point argues that exhaustion does not apply due to the 1996 date of the parties’ cross-licensing agreement.

Alcatel sales. High Point alleged that the MGWs sold by Alcatel to T-Mobile were not licensed products because Alcatel was not in the business of selling MGWs in January 1996 and MGWs were not original Alcatel products. The appellate court did not find this argument convincing, however, because the cross-licensing agreement between AT&T and Alcatel was executed at a time of rapid technological evolution and the court did not believe the parties intended to protect only those products that had the “same features or functionality” as those sold in 1996. Rather, the provision in the cross-licensing agreement that identified protected products used “general, functional terms” to cover not just the particular components sold in 1996, but any products of the same type or “kind.”

Nokia sales. Arguments that Siemens could not sublicense Nokia Siemens Networks B.V. because it did not qualify as a “separately identifiable business” under the terms of the 1995 divestment rider were also rejected. The court determined that: (1) AT&T was a large and sophisticated conglomerate, and if it had intended to prohibit a Siemens divested division from entering into a joint venture relationship with a third-party entity, AT&T could have done so explicitly; (2) the circumstances surrounding the drafting of the 1995 divestment rider strongly suggest that it was intended to grant broad license protection to the parties’ future divested businesses; (3) to conclude that Siemens had no authority to sublicense Nokia Siemens Networks B.V. would be to eviscerate the provision in the 1995 divestment rider providing Siemens with explicit authority to sublicense any “portion” of its business it chose to divest; and (4) High Point provided no explanation as to why, from a business perspective, it would have mattered to AT&T whether the Siemens carrier division and the Nokia networks business were joined together in a single step rather than in multiple steps.

Ericsson sales. High Point also alleged that the sales of Node Bs, RNCs, and MGWs to T-Mobile by Ericsson U.S. were unauthorized because the sublicense that LM Ericsson granted to its subsidiary—Ericsson U.S.—was invalid since it was conveyed in January 2013 and the terms of the asserted patents expired in July 2011. The argument was not persuasive, however, because there was no provision in the 1996 cross-licensing agreement between Lucent and LM Ericsson imposing any timing constraint on when LM Ericsson could convey sublicenses to its subsidiaries. To the contrary, the court found that the agreement specifically provided that any sublicense LM Ericsson conveyed to a subsidiary could be made effective retroactively.

Substantial embodiment. Lastly, the appellate court agreed with the district court’s finding that licensed equipment substantially embodied all purportedly inventive elements in the asserted claims. It was undisputed that statistical multiplexing was well-known in the art at the time of the claimed inventions, according to the court, and there was nothing in the record to arguably suggest that unlicensed routers or interconnect equipment were used in the performance of any novel statistical multiplexing application.

The case is No. 2015-1235.

Attorneys: Martin J. Black (Dechert LLP) for High Point SARL. Asim Bhansali (Keker & Van Nest, LLP) for T-Mobile USA, Inc. William L. Mentlik (Lerner, David, Littenberg, Krumholz & Mentlik LLP) for Ericsson, Inc. Adam Conrad (King & Spalding LLP) for Nokia Solutions and Networks US LLC.

Companies: High Point SARL; T-Mobile USA, Inc.; Ericsson, Inc.; Nokia Solutions and Networks US LLC

Cases: Patent FedCirNews