By Scott Graham, from The Recorder

SAN FRANCISCO — Ericsson and Apple Inc. will have to hash out their LTE licensing dispute—or part of it, at least—in the Northern District of California.

U.S. District Judge James Donato refused Monday to throw out Apple’s declaratory judgment action over seven of Ericsson’s LTE standard-essential patents, despite Ericsson’s argument that they’re just a drop in the bucket of its mammoth LTE portfolio.

“There exists no legal basis upon which Apple may be compelled to take a license for Ericsson’s patents on a portfolio-wide basis,” the judge wrote.

Apple Inc. and Ericsson Inc. are former business partners in the Rockstar patent consortium that did battle with Google until settling last fall. Apple’s iPhones and iPads have employed 2G, 3G and now 4G/LTE technology, of which Ericsson is a leading developer. The company says it holds “at least many hundreds” of patents that are essential for cellphones to work within the LTE framework developed by the European Telecommunications Standards Institute.

Apple’s licensing deal with Ericsson expired in January, and the two are now battling over a fair, reasonable and nondiscriminatory (FRAND) royalty for Ericsson’s standard-essential patents. Ericsson’s director of U.S. patent licensing, Luke McLeroy, said in a declaration that Ericsson offered last year to let an arbitrator set the value of its global portfolio. And just two months ago Ericsson told Apple it was willing to let a district judge set a FRAND rate and “would unconditionally agree to grant a global license to Apple on the court-determined terms.”

Ericsson complains that Apple is using its commercial success to try to squeeze a lesser royalty than those paid by its competitors. It has brought its own suit in the Eastern District of Texas seeking a declaration that it complied with its FRAND obligations—a possible precursor to a suit for traditional patent royalties.

Apple says it’s willing to pay FRAND terms, but it thinks Ericsson is vastly overestimating the number of its patents that are essential to the LTE standard. Ericsson seeks “a judicial blessing of a FRAND rate for the entire patent portfolio that Ericsson believes Apple infringes, without Ericsson ever having to prove infringement,” Wilmer Cutler Pickering Hale and Dorr partner Mark Selwyn wrote in papers filed with Donato. In recent litigation with Intel Corp., all nine patents that Ericsson claimed were standard-essential were either dismissed, found not infringed at trial or on appeal, or invalidated by the Patent Trial and Appeal Board, Selwyn contends.

Consequently, Apple sued in the Northern District for a declaration of noninfringement.

Ericsson, represented by Munger, Tolles & Olson and McKool Smith, argued that Apple’s suit did not present a case or controversy because adjudicating the seven patents would do nothing to resolve the overall business dispute. They seemed hard-pressed for authority—the primary case they relied on was a prisoner habeas corpus class action against California officials.

Donato ruled Tuesday that the issue isn’t whether Apple’s suit will resolve “every single possible controversy, whether business or legal in nature, between the parties.” Rather, it’s whether there’s a substantial controversy of sufficient immediacy and reality, as described by the U.S. Supreme Court in MedImmune v. Genentech. “These requirements are amply met here,” Donato concluded.

Durie Tangri partner Clement Roberts, who is not involved in the case, said that when license negotiations over a large patent portfolio breaks down, it’s not uncommon for a company to sue over a small subset of patents. The outcome of that litigation can then be used “as a price discovery mechanism for the entire portfolio.”

IMAGE: U.S. District Judge James Donato, Northern District of California Diego M. Radzinschi / The National Law Journal

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