Case 1:23-cv-01237-GBW Document 19 Filed 02/01/24 Page 1 of 20 PageID #: 1997
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`NOKIA TECHNOLOGIES OY,
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`Plaintiff,
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`IN THE UNITED STATES DISTRICT COURT
`DISTRICT OF DELAWARE
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`Civil Action No. 23-cv-1237-GBW
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`v.
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`HP, INC.,
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`Defendant.
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`PLAINTIFF NOKIA TECHNOLOGIES OY’S OPENING BRIEF IN SUPPORT OF ITS
`MOTION TO DISMISS DEFENDANT/COUNTERCLAIMANT HP, INC.’S
`COUNTERCLAIMS
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`Dated: February 1, 2024
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`
`
`Brian E. Farnan (Bar No. 4089)
`Michael J. Farnan (Bar No. 5165)
`FARNAN LLP
`919 N. Market St. 12th Floor
`Wilmington DE 19801
`Tel.: (302) 777-0300
`bfarnan@farnanlaw.com
`mfarnan@farnanlaw.com
`
`
`

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`Case 1:23-cv-01237-GBW Document 19 Filed 02/01/24 Page 2 of 20 PageID #: 1998
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`TABLE OF CONTENTS
`Introduction ..................................................................................................................... 1 
`Background ..................................................................................................................... 2 
`The Relevant Standard Setting Body .............................................................................. 2 
`The Claims and Allegations at Issue ............................................................................... 3 
`Legal Standard ................................................................................................................ 4 
`Argument ........................................................................................................................ 5 
`HP failed to plead viable contract-based counterclaims and, to the extent they are
`premised on seeking injunctive relief, they fail as a matter of law. (Counts I–II, V.) .... 5 
`HP’s declaratory request, premised on RAND, is insufficiently plead. (Count VI.) ...... 8 
`HP’s unenforceability counterclaim is factually deficient. (Count III.) ......................... 8 
`HP’s Section 2 claim fails to plausibly allege an antitrust violation. (Count IV.) .......... 8 
`HP has failed to allege anticompetitive conduct with particularity. ....................... 10 
`HP has failed to allege a relevant market. ............................................................... 13 
`Conclusion .................................................................................................................... 14 
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`1. 
`2. 
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`I. 
`II. 
`A. 
`B. 
`III. 
`IV. 
`A. 
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`B. 
`C. 
`D. 
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`IV.  
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`ii
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`Case 1:23-cv-01237-GBW Document 19 Filed 02/01/24 Page 3 of 20 PageID #: 1999
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`TABLE OF AUTHORITIES
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`CASES
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`Page(s)
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`10X Genomics, Inc. v. Vizgen,
`654 F. Supp. 3d 310 (D. Del. 2023) ...........................................................................................4
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`3G Licensing, S.A. v. HTC Corp.,
`No. 1:17-cv-00083 (D. Del. Oct. 2, 2020), D.I. 489 ..................................................................6
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`AG v. Interdigital, Inc.,
`No. 3:23-cv-00002 (S.D. Cal. Aug. 9, 2023), D.I. 50 ................................................................6
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`Apple Inc. v. Motorola, Inc.,
`757 F.3d 1286 (Fed. Cir. 2014), overruled on other grounds by Williamson v. Citrix
`Online, LLC, 792 F.3d 1339 (Fed. Cir. 2015)......................................................................7, 11
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`Apple Inc. v. Samsung Elecs. Co.,
`No. 11-CV-01846, 2011 WL 4948567 (N.D. Cal. Oct. 18, 2011) ....................................10, 12
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`Ashcroft v. Iqbal,
`556 U.S. 662 (2009) .............................................................................................................4, 11
`
`Bell Atl. Corp. v. Twombly,
`550 U.S. 544 (2007) ...................................................................................................................4
`
`Broadcom Corp. v. Qualcomm Inc.,
`501 F.3d 297 (3d Cir. 2007)...........................................................................................9, 10, 11
`
`Cont’l Auto. Sys., Inc. v. Avanci, LLC,
`485 F. Supp. 3d 712 (N.D. Tex. 2020), aff’d sub nom. Cont’l Auto. Sys., Inc. v.
`Avanci, L.L.C., No. 20-11032, 2022 WL 2205469 (5th Cir. June 21, 2022) .............................9
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`FTC v. Qualcomm Inc.,
`969 F.3d 974 (9th Cir. 2020) .....................................................................................................8
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`In re Lipitor Antitrust Litig.,
`868 F.3d 231 (3d Cir. 2017).......................................................................................................5
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`Koninklijke KPN N.V. v. Sierra Wireless, Inc.,
`No. 17-cv-90, 2020 WL 1891454 (D. Del. Apr. 16, 2020) .......................................................6
`
`Kuhn Constr. Co. v. Ocean & Coastal Consultants, Inc.,
`844 F. Supp. 2d 519 (D. Del. 2012) .........................................................................................13
`
`Patel v. Dhaduk,
`839 F. App’x 715 (3d Cir. 2020) ...............................................................................................4
`
`iii
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`Case 1:23-cv-01237-GBW Document 19 Filed 02/01/24 Page 4 of 20 PageID #: 2000
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`Queen City Pizza v. Domino’s Pizza,
`124 F.3d 430 (3d Cir. 1997).....................................................................................................13
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`Rambus Inc. v. FTC,
`522 F.3d 456 (D.C. Cir. 2008) .............................................................................................9, 12
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`Townshend v. Rockwell Int’l Corp.,
`No. C99-0400SBA, 2000 WL 433505 (N.D. Cal. Mar. 28, 2000) ..........................................11
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`TQ Delta, LLC v. Adtran, Inc.,
`No. 14-cv-954, 2021 WL 3633637 (D. Del. Aug. 17, 2021) .....................................................6
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`Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP,
`540 U.S. 398 (2004) .............................................................................................................4, 14
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`Wi-LAN Inc. v. LG Elecs., Inc.,
`382 F. Supp. 3d 1012 (S.D. Cal. 2019) ....................................................................................10
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`iv
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`Case 1:23-cv-01237-GBW Document 19 Filed 02/01/24 Page 5 of 20 PageID #: 2001
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`
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`I.
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`Introduction
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`HP, Inc.’s Answer and Counterclaims are irreconcilably conflicted. Nokia Technology Oy
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`asserts in this case claims from ten patents relating to the H.264 and H.265 video decoding
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`standards (the “Nokia Asserted Claims”). In its Answer HP denies, and in its Counterclaims HP
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`does not affirmatively allege, that any of the Nokia Asserted Claims are, in fact, essential to those
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`standards. (See D.I. 11 Answer ¶1, Counterclaims ¶1.) In the face of those denials, and as the
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`counterclaimant with the burden to both plead and prove its claims, HP has plead seven individual
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`counterclaims that are all premised on the claims of Nokia’s patents being essential to standardized
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`technology. HP advances its counterclaims under two general theories: (1) that Nokia purportedly
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`failed to identify the ten patents by specific patent number to the standard development
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`organization (“SDO”) when it made a contractual commitment to be prepared to license its
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`essential patent claims on reasonable and non-discriminatory (“RAND”) terms; and (2) that Nokia
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`purportedly never intended to license its essential patent claims on RAND terms when it made its
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`disclosure to the SDO. Either theory requires, as a threshold matter, that HP meet its burden to
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`plead the essentiality of the Nokia Asserted Claims. Because HP has failed to affirmatively plead
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`essentiality—and, to the contrary, HP has denied it—each of HP’s counterclaims is missing a
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`threshold element from the pleading.
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`What is more, HP attempts to morph what would be—even if properly plead—a breach of
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`contract case into a federal antitrust proceeding based on deficient allegations about alleged
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`disclosure and false RAND promises. But even under the narrow (and since called into question)
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`Third Circuit precedent that has recognized a theory, HP fails to identify either (a) any purported
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`alternative technologies that were excluded from the standard as a result of the challenged Nokia
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`RAND commitments, or (b) any relevant market in which anticompetitive conduct could be
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`evaluated. As a result, on top of failing to meet its burden to affirmatively plead (and ultimately
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`1
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`Case 1:23-cv-01237-GBW Document 19 Filed 02/01/24 Page 6 of 20 PageID #: 2002
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`prove) essentiality, HP’s antitrust counterclaims are inadequately plead for these additional
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`reasons. Therefore, each of HP’s counterclaims should be dismissed.
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`II.
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`Background
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`A. The Relevant Standard Setting Body
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`SDOs develop technical standards that enable competing products from different
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`manufacturers to connect, interoperate, and enjoy the benefits of the technologies described in the
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`standard. (Counterclaim ¶ 15.) SDOs are comprised of many different industry participants,
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`gathered into various working groups, who propose technical solutions for the standard; SDO
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`members consider the various proposals and, through a deliberative process aimed at achieving
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`consensus on the best solution for the technical problems, the SDO incorporates certain proposals
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`into a standard. (Id. ¶ 16.) As part of that process, the SDO will frequently ask participants to
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`contractually commit that, if a technical solution they propose for inclusion in the standard is
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`covered by claims of a patent, they will be prepared to grant a license to the patent claims needed
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`to implement those technical solutions (covered by standard-essential patents, or “SEPs”) on either
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`a royalty-free basis or on reasonable and non-discriminatory (“RAND”) terms. (Id. ¶¶ 19–21;
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`Counterclaim, Ex. A.) The requirement to provide a RAND commitment is typically contained in
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`the SDO’s intellectual property rights (“IPR”) policy. (Id. ¶¶ 18–20.)
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`The International Telecommunications Union is one such SDO with a specific
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`telecommunications sector (“ITU-T”) that developed the H.264 and H.265 standards related to
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`video decoding at issue here. (Id. ¶¶ 22, 27.) The ITU-T’s IPR policy, known as its “Common
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`Patent Policy,” states that “it is desirable that the fullest available information should be disclosed”
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`regarding the patented technology submitted for inclusion into ITU-T developed standards. (D.I.
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`11-1 (Counterclaim, Ex. A).) The policy then identifies three potential scenarios that arise when
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`patented technology has been proposed for incorporation into the standard: the patent holder is
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`2
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`Case 1:23-cv-01237-GBW Document 19 Filed 02/01/24 Page 7 of 20 PageID #: 2003
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`alternatively (i) willing to license its patented technology “required to implement the [standard]”
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`free of charge to implementers of the standard, (ii) “willing to negotiate licences with other parties
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`on a non-discriminatory basis on reasonable terms and conditions” for patented technology
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`“required to implement the [standard],” or (iii) “not willing” to license its technology on RAND
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`terms. (Id.)1 The ITU also publishes guidelines on implementing its Common Patent Policy. (D.I.
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`11-2 (Counterclaim, Ex. B).)
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`B. The Claims and Allegations at Issue
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`In its Complaint, Nokia alleges that HP makes, uses, or sells products that infringe upon
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`Nokia Asserted Claims related to the H.264 and H.265 standards. (Compl. ¶¶ 279–359.) Nokia
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`requested a declaration that it complied with its RAND commitment to negotiate toward a license
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`in good faith, as well as a declaration that HP failed to negotiate in good faith. (Id. ¶¶ 360–70.)
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`In response, HP has asserted seven counterclaims against Nokia. HP alleges that Nokia
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`failed to timely disclose to the ITU-T the specific patent numbers covering the Nokia Asserted
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`Claims as essential to either the H.264 or H.265 standards and, in doing so, Nokia (i) implicitly
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`waived its right to enforce the Nokia Asserted Claims (Count III) and (ii) violated Section 2 of the
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`Sherman Act (Count IV). (Id. ¶¶ 128–45.) HP has also lodged contract-based counterclaims,
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`arguing that Nokia has breached the ITU-T’s IPR policy by (i) demanding unreasonable royalty
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`rates that are not RAND (Count I), (ii) unilaterally abandoning negotiations with HP and seeking
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`injunctive relief against a willing licensee (Count II), and (iii) failing to negotiate in good faith
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`(Count V). (Id. ¶¶ 114–27, 146–48.) Based on these allegations, HP apparently seeks a declaration
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`from this Court that Nokia must license its essential patent claims to HP on RAND terms, and it
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`1 Although HP generally uses the term “FRAND” in its counterclaims, the actual term used in
`the SDO IPR policy at issue here is “RAND” and, therefore, Nokia uses that term herein.
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`3
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`Case 1:23-cv-01237-GBW Document 19 Filed 02/01/24 Page 8 of 20 PageID #: 2004
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`asks the Court to make “a determination of FRAND [sic] royalty terms for a license to Nokia’s
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`portfolio of SEPs that are essential to the Asserted Standards with those conditions being imposed
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`on the parties.” (Count VI). (Id. ¶¶ 149–54.) Lastly, HP has alleged a common-law fraud
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`counterclaim based on Nokia’s allegedly untimely disclosure of its patents covering essential
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`claims to the ITU-T and allegedly “false FRAND commitments” (Count VII). (Id. ¶¶ 155–63.)
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`III.
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`Legal Standard
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`Counterclaims are subject to the same pleading standards as complaints. Patel v. Dhaduk,
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`839 F. App’x 715, 720 n.6 (3d Cir. 2020). To survive a motion to dismiss under Rule 12(b)(6), the
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`counterclaims “must contain sufficient factual matter . . . to ‘state a claim to relief that is plausible
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`on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550
`
`U.S. 544, 570 (2007)). “When a claim sounds in fraud, however, the heightened pleading
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`requirements of Federal Rule of Civil Procedure Rule 9(b) apply.” 10X Genomics, Inc. v. Vizgen,
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`654 F. Supp. 3d 310, 318 (D. Del. 2023). When antitrust claims are asserted (as HP has here), “it
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`is only by taking care to require allegations” with sufficient heft that courts can “avoid the
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`potentially enormous expense of discovery in cases with no ‘reasonably founded hope’” of
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`success. Twombly, 550 U.S. at 558–60 (citation omitted). Courts must review antitrust allegations
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`carefully at the pleading stage because conclusory allegations about anticompetitive conduct could
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`threaten to “chill the very conduct the antitrust laws are designed to protect.” Verizon Commc’ns
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`Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 414 (2004).
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`While courts are typically confined to the four corners of the counterclaim when deciding
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`a motion to dismiss, courts may consider exhibits attached to the complaint, such as a contract that
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`is incorporated by reference, when deciding whether the counterclaim adequately states a claim.
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`In re Lipitor Antitrust Litig., 868 F.3d 231, 249 (3d Cir. 2017).
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`4
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`IV. Argument
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`A. HP failed to plead viable contract-based counterclaims and, to the extent they are
`premised on seeking injunctive relief, they fail as a matter of law. (Counts I–II, V.)
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`HP alleges that Nokia has breached its contractual commitment to the ITU-T in three ways:
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`(i) by demanding non-RAND royalty rates for a license to Nokia’s H.264 and H.265 SEPs (Count
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`I), (ii) by abandoning negotiations with HP and seeking injunctive relief in judicial fora (Count II),
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`and (iii) by failing to negotiate in good faith (Count V). (Counterclaim ¶¶ 114–27, 146–48.) But
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`HP has failed to meet its pleading burden for all three contract-based claims, and Count II
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`separately fails to state a claim as a matter of law.
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`First, all three contract-based counterclaims should be dismissed because HP did not meet
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`its burden to affirmatively plead that claims of Nokia’s patents are essential to the H.264 and H.265
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`standards. The ITU-T Guidelines state that a patent holder, by submitting a Declaration Form that
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`contains the RAND commitment, “declares its willingness to license its Patents . . . in case part(s)
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`or all of any proposals contained in its Contributions . . . are included in Recommendation(s) and
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`the included part(s) contain items for which Patents [defined as ‘those claims contained in and
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`identified by patents’] have been filed and whose licence would be required to practice or
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`implement Recommendation(s).” (Counterclaim, Ex. B at 6; accord id. at Annex 3.)2 Put
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`differently, Nokia’s RAND commitment to the ITU-T encumbers only patent claims that are
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`incorporated into the standard and are essential to implement the H.264 and H.265 standards.
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`HP did not meet its burden to plead that claims covered by Nokia’s patents are “are
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`included in ITU-T/ITU-R Recommendation(s) and the included part(s) contain items . . . whose
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`use would be required to implement ITU-T/ITU-R Recommendation(s).” (Counterclaim, Ex. B at
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`Annex 3; accord D.I. 11-3.) To the contrary, HP expressly “denies that Nokia has established that
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`2 Nokia’s June 7, 2001 RAND commitment contains nearly identical language. (D.I. 11-3.)
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`5
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`Case 1:23-cv-01237-GBW Document 19 Filed 02/01/24 Page 10 of 20 PageID #: 2006
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`any claims of the Asserted Patents are, in fact, essential for compliance with the H.264 and H.265
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`Standards.” (D.I. 11 at Answer ¶ 1 (emphasis added).) Because HP has denied that the Nokia
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`Asserted Claims are essential to the standards at issue, and has pleaded only that Nokia alleges its
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`patent claims are essential, HP has not met its burden to affirmatively plead that Nokia breached a
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`contractual obligation to license those patent claims on RAND terms. As courts have recognized,
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`the party seeking to invoke a RAND commitment—here, HP—bears the burden of “establish[ing]
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`whether each element of a claim is standard-essential for purposes of any FRAND obligation.” TQ
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`Delta, LLC v. Adtran, Inc., No. 14-cv-954, 2021 WL 3633637, at *3 (D. Del. Aug. 17, 2021); see
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`also Koninklijke KPN N.V. v. Sierra Wireless, Inc., No. 17-cv-90, 2020 WL 1891454, at *2 (D.
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`Del. Apr. 16, 2020) (“The threshold question underpinning [the breach of FRAND claim] is
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`whether the ’662 patent is standard-essential. . . . [ETSI] contracts . . . do not bind KPN if its ’662
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`patent is not essential. If there is no contract, then there is nothing for KPN to breach.” (footnote
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`omitted)).3 That burden begins at the pleading stage, where courts have held the party invoking a
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`RAND commitment must clearly plead the essentiality of the patents at issue in the case. See u-
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`blox AG v. Interdigital, Inc., No. 3:23-cv-00002 (S.D. Cal. Aug. 9, 2023), D.I. 50 at 12:22–16:8,
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`21:8–22:18 (noting at motion to dismiss hearing that plaintiff “can’t have it both ways” by alleging
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`the patents were not essential while also seeking a declaration that plaintiff was entitled to a
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`FRAND license that—if the court imposed royalty terms—could be later challenged on the basis
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`3 The party invoking RAND cannot point to a patent owner’s “beliefs,” declarations, or
`allegations about essentiality; rather, essentially must be established through objective proof. See,
`e.g., 3G Licensing, S.A. v. HTC Corp., No. 1:17-cv-00083 (D. Del. Oct. 2, 2020), D.I. 489 at 7
`(granting summary judgment on defendants’ FRAND defense because “essentiality depends on
`objective findings, i.e., whether practicing the relevant standard in fact infringes the asserted
`patents and whether non-infringing alternatives in fact exist”; “[p]ointing to Plaintiffs’ beliefs on
`these points . . . is insufficient to meet Defendants’ burden” (emphases added)). Because
`essentiality is a necessary element of HP’s contract claims, HP bears the burden of affirmatively
`pleading essentiality in each of its Counterclaims, which HP has failed to do. Supra Section IV.A.
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`6
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`Case 1:23-cv-01237-GBW Document 19 Filed 02/01/24 Page 11 of 20 PageID #: 2007
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`the patents are not actually essential). HP cannot have it both ways: either it affirmatively pleads
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`(and ultimately proves) that the claims of the Nokia patents on which it is basing its counterclaims
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`are essential to the standards at issue, a necessary predicate for each of its counterclaims which all
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`rely upon Nokia’s RAND commitment in some manner, or HP denies the claims of Nokia’s patents
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`are essential, in which case it fails to state a legally cognizable contract-based claim under each of
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`asserted Counts I, II, and V.4
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`Second, HP’s breach-of-contract theory in Count II—premised on Nokia requesting
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`injunctive relief—fails because HP cannot cite language in the ITU-T’s Common Patent Policy or
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`Guidelines that would be breached by a patent owner seeking injunctions against infringing
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`products. (Counterclaim ¶¶ 100–13, 121–27.) Indeed, the Common Patent Policy and Guidelines
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`do not prohibit SEP holders from seeking injunctive relief. (See generally D.I. 11-1 and 11-2.)
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`Without identifying contractual language that Nokia has purportedly breached, HP cannot state a
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`cognizable breach-of-contract claim. Further, general RAND principles undermine HP’s theory
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`because RAND commitments do not prohibit patent owners from seeking injunctions. See, e.g.,
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`Apple Inc. v. Motorola, Inc., 757 F.3d 1286, 1331 (Fed. Cir. 2014) (stating that it would be error
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`to apply “a per se rule that injunctions are unavailable for SEPs”), overruled on other grounds by
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`Williamson v. Citrix Online, LLC, 792 F.3d 1339 (Fed. Cir. 2015).5 Count II fails as a matter of
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`law and should be dismissed with prejudice.
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`4 For the reasons stated below, HP’s failure to affirmatively plead essentiality is fatal to all of
`its counterclaims.
`5 Other persuasive legal authority agrees that RAND commitments do not bar SEP holders
`from seeking injunctions against infringing producers and products. See, e.g., Policy Statement on
`Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments at 4–5
`(Dec. 19, 2019), https://www.justice.gov/atr/page/file/1228016/download
`(“All
`remedies
`available under national law, including injunctive relief and adequate damages, should be available
`for infringement of [SEPs] subject to a F/RAND commitment . . . .”).
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`7
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`Case 1:23-cv-01237-GBW Document 19 Filed 02/01/24 Page 12 of 20 PageID #: 2008
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`B. HP’s declaratory request, premised on RAND, is insufficiently plead. (Count VI.)
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`HP’s Count VI, which seeks a declaration of “HP’s right to a license and the FRAND [sic]
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`terms and conditions for such a license” (Counterclaim ¶ 153), is also derivative of HP’s contract-
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`based claims. In other words, HP’s claim to a “right to a license” is predicated on those patent
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`claims that are essential to a standardized technology. So HP’s request that the Court declare a
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`right to a license presupposes that RAND applies which, in turn, requires a threshold affirmative
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`pleading of essentiality. As demonstrated in connection with Counts I, II, and V, HP has not met
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`its burden to plead essentiality. For the same reasons, Count VI is inadequately plead as well.
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`C. HP’s unenforceability counterclaim is factually deficient. (Count III.)
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`In Count III, HP alleges the Nokia Asserted Claims are unenforceable on the sole basis that
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`Nokia allegedly waived its right to enforce them by violating a duty to identify the specific patent
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`numbers covering the Nokia Asserted Claims as essential to the H.264 or H.265 standards to the
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`ITU-T during the standard-setting process. (Counterclaim ¶¶ 133–34.) Once again, HP’s entire
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`theory is premised on the Nokia Asserted Claims being essential because the duty to declare only
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`attaches to patent claims that are “required to practice or implement Recommendation(s).”
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`(Counterclaim, Ex. B at 6; accord id. at Annex 3.) Because HP has failed to affirmatively plead
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`essentiality, HP’s unenforceability counterclaim should be dismissed.
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`D. HP’s Section 2 claim fails to plausibly allege an antitrust violation. (Count IV.)
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`In Count IV, HP relies on the same conduct underlying its deficient contract claims to
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`allege violations of Section 2 of the Sherman Act, which prohibits monopolization. (Counterclaim
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`¶¶ 139–45.) But courts, academics, and practitioners have repeatedly “expressed caution about
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`using the antitrust laws to remedy what are essentially contractual disputes between private parties
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`engaged in the pursuit of technological innovation” through RAND licensing. FTC v. Qualcomm
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`Inc., 969 F.3d 974, 997 (9th Cir. 2020). To be sure, the Third Circuit has previously held “a patent
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`8
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`Case 1:23-cv-01237-GBW Document 19 Filed 02/01/24 Page 13 of 20 PageID #: 2009
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`holder’s intentionally false promise to license essential proprietary technology on FRAND terms”
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`to an SDO, “coupled with an SDO’s reliance on that promise when including the technology in a
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`standard,” may be “actionable anticompetitive conduct” under Section 2 of the Sherman Act.
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`Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297, 314 (3d Cir. 2007). But that narrow holding—
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`rendered before the Supreme Court clarified pleading standards—has since been called into
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`question. See, e.g., Qualcomm Inc., 969 F.3d at 996–97 (noting “the Third Circuit’s ‘intentional
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`deception’ exception to the general rule that breaches of S[D]O commitments do not give rise to
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`antitrust liability” and rejecting its application); Rambus Inc. v. FTC, 522 F.3d 456, 466 (D.C. Cir.
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`2008) (concluding that the Third Circuit’s Broadcom holding conflicted with Supreme Court
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`precedent); Cont’l Auto. Sys., Inc. v. Avanci, LLC, 485 F. Supp. 3d 712, 735 (N.D. Tex. 2020)
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`(“The Court does not agree with those cases concluding that deception of an SSO constitutes the
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`type of anticompetitive conduct required to support a § 2 claim.”), aff’d sub nom. Cont’l Auto.
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`Sys., Inc. v. Avanci, L.L.C., No. 20-11032, 2022 WL 2205469 (5th Cir. June 21, 2022).6
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`6 The Third Circuit in Broadcom relied significantly on an FTC decision, see Broadcom, 501
`F.3d at 311–14, that was subsequently reversed by the D.C. Circuit, see Rambus Inc., 522 F.3d at
`466–69. Moreover, the court in Broadcom expressed an apparent concern about “patent hold-up.”
`501 F.3d at 310–12. The patent hold-up theory—to which HP also subscribes—hypothesizes that
`once patented technology is incorporated into a standard, SEP owners “demand higher royalties
`that reflect the invention’s inclusion in the standard rather than the value attributable to the
`patented technology itself” because users of the standard are “locked-in” to using those SEPs.
`(Counterclaim ¶ 17.) However, in the years since Broadcom, no empirical evidence has established
`that alleged patent hold-up is a real-world problem. See Makan Delrahim, Ass’t Att’y Gen., The
`“New Madison” Approach to Antitrust and Intellectual Property Law 9 (Mar. 16, 2018),
`https://www.justice.gov/opa/speech/file/1044316/download (noting that while “hold-up theories
`gained traction in the early 2000s, . . . they still remain an empirical enigma in the academic
`literature”); Alexander Galetovic & Stephen Haber, The Fallacies of Patent-Holdup Theory, 13 J.
`Comp. L. & Econ. 1, 9 (2017) (noting that “there is no positive evidence in support of [the patent-
`holdup theory’s] core predictions”); Richard A. Epstein & Kayvan B. Noroozi, Why Incentives for
`“Patent Holdout” Threaten to Dismantle FRAND, and Why It Matters, 32 Berkeley Tech. L.J.
`1381, 1388 (2017) (“[D]etailed empirical studies . . . have all come to the same conclusion:
`theoretical concerns regarding patent holdup . . . have not borne out in industries subject to
`innovation-driven standardization.”).
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`9
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`And, even in Broadcom, the Third Circuit’s holding narrowly allowed a Section 2 claim to
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`survive a motion to dismiss only if it alleged the SEP holder “obtained and maintained its market
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`power willfully” by falsely promising to “license its [standardized] technology on FRAND terms,
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`on which promise the relevant SDOs relied in choosing the [standardized] technology for
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`inclusion in the [] standard.” 501 F.3d at 315. In an attempt to extend Broadcom’s narrow holding
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`beyond its wrongly decided foundation, HP alleges that Nokia misled the ITU-T not only by
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`making an allegedly false RAND promise, but also by disclosing the specific patents covering the
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`Nokia Asserted Claims to the ITU-T only after the H.264/H.265 standards were frozen and
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`selections about technology had been made. (Counterclaim ¶¶ 142–43.) As set forth below, HP
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`fails to state a Section 2 claim even under Broadcom because it has failed to plead anticompetitive
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`conduct with specificity (including conduct relating to essential patent claims or any viable
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`technological alternatives to the Nokia Asserted Claims) and has failed to plead a relevant product
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`market to support a Section 2 claim.
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`1.
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`HP has failed to allege anticompetitive conduct with particularity.
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`Because HP’s Section 2 counterclaim sounds in theories of fraud (e.g., HP’s duplicative
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`count of common-law fraud), HP must satisfy Rule 9(b)’s heightened pleading requirements.
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`Indeed, the Broadcom court recognized that Rule 9(b)’s “heightened pleading requirements” apply
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`even to “[a]nalogous claims for inequitable conduct before the” United States Patent and
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`Trademark Office. 501 F.3d at 314 n.9.7 A fortiori, Rule 9(b) should apply to HP’s Section 2 claim
`
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`7 In the seventeen years since Broadcom was decided, courts have applied Rule 9(b)’s
`heightened pleading standards to Section 2 claims based on allegedly fraudulent statements to
`SDOs. See Wi-LAN Inc. v. LG Elecs., Inc., 382 F. Supp. 3d 1012, 1023 (S.D. Cal. 2019)
`(“Allegations of anticompetitive conduct based [on] a fraudulent FRAND declaration theory also
`must satisfy Rule 9(b)’s heightened pleading standard.”); accord Apple Inc. v. Samsung Elecs. Co.,
`No. 11-CV-01846, 2011 WL 4948567, at *4 & n.5 (N.D. Cal. Oct. 18, 2011). Setting Rule 9(b) to
`the side, the Third Circuit decided Broadcom before the Supreme Court’s groundbreaking decision
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`10
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`Case 1:23-cv-01237-GBW Document 19 Filed 02/01/24 Page 15 of 20 PageID #: 2011
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`which sounds in fraud. HP’s allegations do not satisfy the anticompetitive conduct element of a
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`Section 2 claim for at least two reasons.
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`First, HP’s Section 2 theory rests upon conduct in connection with essential patent claims.
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`As set forth above, however, HP has denied the essentiality of the Nokia Asserted Patents. (D.I.
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`11 (Answer) ¶ 1.) Consistent with those denials, HP failed to allege that Nokia (i) intentionally
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`failed to disclose essential patent claims or (ii) intentionally made a false promise to license
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`essential patent claims on RAND terms such that there was any anticompetitive effect. HP has
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`taken the position that a license to those patent claims would not even be necessary to practice the
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`H.264/H.265 standards. Because HP has not affirmatively alleged that Nokia’s Asserted Claims
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`are essential to the standards at issue, HP has not met its pleading burden to state a Section 2 claim
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`that requires plausible allegations of anticompetitive effects. See Apple Inc., 2011 WL
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`49485672011, at *4 n.6 (“If, as Apple alleges, some Samsung patents are not essential to the
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`standard, it will likely be difficult for Apple to establish that Samsung’s conduct has antitrust
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`implications. If the patents at issue are non-essential, then the ‘lock-in’ effect of the standard
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`setting does not exist.”); see also Broadcom, 501 F.3d at 308 (the anticompetitive conduct element
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`of a Section 2 claim requires “harming the competitive process,” not just a single competitor).
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`Second, HP’s counterclaim also lacks non-conclusory allegations plausibly showing that
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`the ITU-T relied on Nokia’s conduct in choosing Nokia’s technology over a specifically identified
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`competing alternative. See, e.g., Townshend v. Rockwell Int’l Corp., No. C99-0400SBA, 2000
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`WL 433505, at *11 (N.D. Cal. Mar. 28, 2000) (dismissing Sherman Act claim where the plaintiff
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`did not plead “that the ITU could have adopted a [] standard which did not encompass [the SEP
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`