Case 1:23-cv-01237-GBW Document 24 Filed 04/29/24 Page 1 of 10 PageID #: 2059
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
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`NOKIA TECHNOLOGIES OY,
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`HP, INC.,
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`Plaintiff,
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`V.
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`Defendant.
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`C.A. No. 23-1237-GBW
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`Brian E. Farnan, Farnan LLP, Wilmington, DE; Warren H. Lipschitz, Alexandra F. Easley, R.
`Mitch Verboncoeur, Josh Newcomer, Kevin Burgess, MCKOOL SMITH, P.C., Dallas, TX;
`Theodore Stevenson, III, John D. Haynes, Nicholas T. Tsui, Shawn Gannon, ALSTON & BIRD
`LLP, Dallas, TX
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`Counsel for Plaintiff
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`John V. Gorman, Amy M. Dudash, Brent A. Hawkins, David Levy, MORGAN, LEWIS &
`BOCKIUS LLP, Wilmington, DE; Kevin J. Post, ROPES & GRAY LLP, New York, NY
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`Counsel for Defendant
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`MEMORANDUM OPINION
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`April29, 2024
`Wilmington, Delaware
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`1
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`Case 1:23-cv-01237-GBW Document 24 Filed 04/29/24 Page 2 of 10 PageID #: 2060
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`GREGORYB. WILLIAMS
`U.S. DISTRICT JUDGE
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`Pending before the Court is Plaintiff Nokia Technology OY's ("Nokia") partial motion to
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`dismiss (a) Defendant HP, Inc.'s ("HP") request for declaratory relief and (b) HP's contract,
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`unenforceability, and antitrust counterclaims. D.I. 18. For the reasons set forth below, the Court
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`grants-in-part Nokia's motion to dismiss HP' s antitrust counterclaims and denies-in-part the
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`remainder of Nokia' s motion.
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`I.
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`BACKGROUND
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`Nokia filed this action against HP and alleges that HP infringes certain claims of ten patents
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`relating to the H.264 and H.265 video-decoding standards (the "Asserted Claims" of the "Asserted
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`Patents," and the "Asserted Standards"). See D.I. 1. In response, HP filed counterclaims against
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`Nokia, and alleges that (1) Nokia failed to identify the Asserted Patents to the relevant standard
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`development organization ("SDO") when it made a contractual commitment to be prepared to
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`license its essential patent claims on reasonable and non-discriminatory ("RAND" or "FRAND"1)
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`terms; and (2) Nokia never intended to license its essential patent claims on RAND terms when it
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`made its disclosure to the SDO. See D.I. 11. Nokia argues that each ofHP's counterclaims fail
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`because HP did not plead that the Asserted Claims are essential to the H.264 and H.265 standards.
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`D.I. 19. Nokia also argues that HP' s antitrust counterclaims fail because HP did not plead (a) that
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`a specific alternative technology was not included in the Asserted Standards as a result of Nokia' s
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`technology being incorporated into those standards, and (b) the existence of a relevant market. Id.
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`1 HP's counterclaims and Third Circuit precedent use the term FRAND (adding "fair"), while
`Nokia's Motion uses "RAND." The terms are interchangeable for the purposes of this opinion.
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`2
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`The H.264 and H.265 standards were developed by a SDO, namely the telecommunications
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`sector of the International Telecommunications Union (the "ITU-T"). Id. at 2-3. SDOs develop
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`technical standards that enable competing products from different manufacturers to use the
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`technolo_gies described in those standards. Id. As a part of that process, the SDO will frequently
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`ask participants to contractually commit that-if a technical solution they propose for inclusion in
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`a standard is covered by the claims of a patent owned by that participant-they will be prepared
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`to grant a license to the patent claims needed to implement those technical solutions on either a
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`royalty-free basis o: on FRAND terms. Id.
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`HP avers that Nokia has represented, to both this Court and the ITU-T, that the Asserted
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`Patents are necessary to practice the Asserted Standards. D.I. 20 at 8. The ITU-T' s Common
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`Patent Policy requires members of that organization to inform the organization when a member
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`proposes incorporation of technology into a standard that is covered by that member's intellectual
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`property rights. Id. at 7-8. However, according to HP, Nokia did not tell the ITU-T that the
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`technology it proposed for incorporation into the Asserted Standards was covered by the Asserted
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`Patents until after the ITU-Thad incorporated that technology into the Asserted Standards. Id.
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`II.
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`LEGAL STANDARD
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`To state a claim on which relief can be granted, a complaint must contain "a short and plain
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`statement of the claim showing that the pleader is entitled to relief . ... " Fed. R. Civ. P. 8(a)(2).
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`Such a claim must plausibly suggest "facts sufficient to 'draw the reasonable inference that the
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`defendant is liable for the misconduct alleged. "' Doe v. Princeton Univ. , 30 F.4th 335, 342 (3d
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`Cir. 2022) ( quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)) ( citing Bell At!. Corp. v. Twombly,
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`550 U.S. 544, 557 (2007)). "A claim is facially plausible 'when the plaintiff pleads factual content
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`3
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`Case 1:23-cv-01237-GBW Document 24 Filed 04/29/24 Page 4 of 10 PageID #: 2062
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`that allows the court to draw the reasonable inference that the defendant is liable for the misconduct
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`alleged."' Klotz v. Celentano Stadtmauer & Walentowicz LLP, 991 F.3d 458, 462 (3d Cir. 2021)
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`(quoting Iqbal, 556 U.S. at 678). But the Court will "'disregard legal conclusions and recitals of
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`the elements of a cause of action supported by mere conclusory statements. "' Princeton Univ., 30
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`F.4th at 342 (quoting Davis v. Wells Fargo, 824 F.3d 333, 341 (3d Cir. 2016)). Under Rule
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`12(b )( 6), the Court must accept as true all factual allegations in the Complaint and view those facts
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`in the light most favorable to the plaintiff. See Fed. Trade Comm 'n v. Abb Vie Inc, 976 F.3d 327,
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`351 (3d Cir. 2q20).
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`III. DISCUSSION
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`A.
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`HP Properly Pied Standard Essentiality.
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`Nokia argues that HP's contract-based counterclaims (Counts I, II, and V) should be
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`dismissed because HP did not affirmatively plead that the Asserted Claims are essential to the
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`H.264 and H.265 standards. D.I. 19 at 5. Nokia argues that HP had a choice: either plead that
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`Nokia's patents are essential to the standards, or deny that those patents are essential and concede
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`its contract-based counterclaims. Id. In response, HP contends that it sufficiently pled essentiality
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`by pointing to, in its counterclaims, Nokia's assertions in the Complaint that the Asserted Patents
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`are essential, along with Nokia's representations to HP that its patents were essential. D.I. 20 at
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`9-11; Counterclaims, D.I. 11 ,r,r 1, 28-35, 41 , 47, 53 , 55, 61 , 67, 69, 75, 81, 87, 93, 99. In the
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`District of Delaware this is sufficient: "Although at the case dispositive stage Defendant will need
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`to prove essentiality by way of objective findings (i.e., whether practicing the relevant standards
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`in fact leads to infringement of the patent) at the pleading stage it need only point to facts that
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`render it plausible that the patent is essential." Koninklijke KPN NV v. Coo/pad Technologies Inc.,
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`4
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`Case 1:23-cv-01237-GBW Document 24 Filed 04/29/24 Page 5 of 10 PageID #: 2063
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`C.A. No 21-43-LPS-CJB, D.I. 55 (D. Del. Jan 11 , 2022). A defendant may rely on a plaintiffs
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`statements in so doing. Id ("[T]he Court does not see why Plaintiff's alleged repeated statements
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`that it 'belie[ ved]' that the patent ' may be' essential, or that the patent 'is an essential patent' or
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`that the patent 'ha[s] been recognized as essential' cannot fit that bill."); see also Zenith
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`Electronics, LLC v. Sceptre, Inc. , No. LA CV14-05150 JAK (AJWx), 2015 WL 12765633, at *3-
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`4 (C.D. Cal. Feb. 5, 2015) (denying motion to dismiss breach of contract claim where defendant
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`alleged that the patents were "purportedly" or "allegedly" essential, establishing a defense
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`challengi~g the essentiality of the I?atents-in-suit while mai~taining its breach claim)._ Nokia' s
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`argument that HP must elect between pleading that the Asserted Patents are essential (under its
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`counterclaims) or that the Asserted Patents are non-essential (under its infringement defenses) is
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`flawed. HP "may state as many separate claims or defenses as it has, regardless of consistency."
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`Fed. R. Civ. P 8(d)(3). Thus, the Court finds that HP's counterclaims adequately plead facts that
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`render it plausible that the Asserted Patents are essential.2
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`B.
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`HP Properly Pied its Breach of Contract Claim.
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`Nokia argues that HP's breach of contract counterclaim (Count II), which is premised on
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`Nokia's request for injunctive relief, fails because HP does not cite language in the ITU-T
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`Common Patent Policy or Guidelines (the "Guidelines") that would be breached by a patent owner
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`seeking injunctions against infringing products. D.I. 19 at 7. However, HP has alleged that Nokia
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`(1) was obligated to offer a license to the Asserted Patents at FRAND rates (Counterclaims, D.I.
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`11 ,r,r 22-99), and (2) refused to do so. Instead, HP alleges, Nokia offered a rate far in excess of
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`2 Nokia's argument that HP failed to sufficiently plead its unenforceability and antitrust claims
`by not alleging that the Asserted Patents are standard-essential fails for the same reason. See D.I.
`22 at 8 (noting that unenforceability orders can extend to essentiality).
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`5
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`Case 1:23-cv-01237-GBW Document 24 Filed 04/29/24 Page 6 of 10 PageID #: 2064
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`FRAND rates (id. ,i,i 100-113) and unilaterally broke off negotiations in favor of seeking an
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`injunction to extort a higher license rate (id. ,i,i 110-111 , 124-25). While HP does not identify
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`language in the ITU-T Guidelines prohibiting injunctive relief, HP has adequately pled that Nokia
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`breached its FRAND obligations by refusing to grant a license on reasonable terms and conditions,
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`and that the injunction which Nokia seeks is part of that breach. See KPN, 21-43-LPS-CJB, D.I.
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`5 5 (pleading that "to the extent that the patent is essential, Plaintiff had to be prepared to grant a
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`license under FRAND terms, and that Plaintiff was not in fact prepared to do so" was enough to
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`"suffi_ciently identify a contrac~al provision that was bre~ched. ").
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`C.
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`HP Has Failed to Properly Plead A Claim Under Section 2 of the Sherman Act.
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`Nokia argues that HP has failed to state a claim for violation of Section 2 of the Sherman
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`Act (Count IV) because HP failed to plead (1 ) Nokia' s allegedly anticompetitive conduct with
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`specificity, and (2) the existence of a relevant product market. D .I. 19. To state a claim for
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`monopolization, a plaintiff must plead (1) the possession of monopoly power, (2) in a relevant
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`market, and (3) anticompetitive conduct on the part of the possessor. Broadcom Corp. v.
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`Qualcomm Inc. , 501 F.3d 297, 306-08 (3d Cir. 2007). For the reasons stated below, the Court
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`finds that HP adequately pled anticompetitive conduct, but failed to sufficiently plead a relevant
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`product market.
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`In support of its argument that HP did not sufficiently plead anticompetitive conduct, Nokia
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`first argues that HP's Section 2 antitrust claims sound in fraud but do not meet Rule 9(b)' s
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`heightened pleading standard. D.I. 19 at 10-12. The Court disagrees, and finds that HP has met
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`the heightened pleading standard of Rule 9(b) because HP pled that (1) Nokia participated in the
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`ITU-T's development of the Asserted Standards, (2) advocated for technical proposals for which
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`Nokia had intellectual property rights without informing the ITU-T that its proposals were covered
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`6
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`Case 1:23-cv-01237-GBW Document 24 Filed 04/29/24 Page 7 of 10 PageID #: 2065
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`by Nokia's patents, and (3) did not intend to honor its contractual obligation to license its standard(cid:173)
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`essential patents at a FRAND rate. See, e.g. , D.I. 11 11 21, 28-99, 141. Those allegations identify
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`"when the false FRAND declarations were made, by whom, and for which patents." See Microsoft
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`Mobile Inc. v. Interdigital, Inc., 2016 WL 1464545, at *4 (D. Del. Apr. 13, 201·6); Board ofTrs.
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`of Teamsters Local 863 Pension Fund v. Foodtown, Inc., 296 F.3d 164, 172 n. 10 (3d Cir. 2002)
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`(Rule 9(b) may be satisfied by pleading the "date, place or time" of the fraud.). Accordingly, those
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`allegations meet Rule 9(b)' s heightened pleading standard.
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`Nokia also argues _that HP failed to state a . claim under Section 2 of the Sherman Act
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`because HP did not identify a specific competing alternative technology that the ITU-T would
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`have included in the Asserted Standards ifNokia' s technology had not been incorporated into those
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`standards. D.I. 19 at 13-14. However, in the Third Circuit, a plaintiff does not need to identify a
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`specific competing alternative technology to state a claim for violation of Section 2 of the Sherman
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`Act. Broadcom, 501 F .3d at 314 (3d Cir. 2007). In Broadcom, the Third Circuit explained that "a
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`patent holder' s intentionally false promise to license essential proprietary technology on FRAND
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`terms ... coupled with a[ ] [standard-setting organization's] reliance on that promise when
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`including the technology in a standard, and . . . the patent holder' s subsequent breach of that
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`promise, is actionable anticompetitive conduct." Id. Accordingly, HP did not need to identify a
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`specific competing alternative technology at the pleading stage because Nokia's allegedly false
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`promise to the ITU-T was, itself, "actionable anticompetitive conduct." Id. Thus, the Court finds
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`that HP's allegations plausibly state a claim for violation of Section 2 of the Sherman Act.
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`The Court is not convinced by Nokia's arguments that it should depart from Broadcom and
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`adopt a more stringent pleading standard for claims under Section 2 of the Sherman Act when
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`those claims are based on the theory that a patent holder' s failure to disclose intellectual property
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`7
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`Case 1:23-cv-01237-GBW Document 24 Filed 04/29/24 Page 8 of 10 PageID #: 2066
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`rights in a declared essential patent created monopoly power for that patent holder. D.I. 22 at 9-
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`10. The authorities which Nokia cites for that view are outside of the Third Circuit and do not
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`follow Broadcom, which is binding on this Court. See, e.g., Apple Inc. v. Samsung Elecs. Co. ,
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`Ltd., 2011 WL 4948567, at *5 (N.D. Cal. Oct. 18, 2011); Lenovo (United States) Inc. v. Interdigital
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`Tech. Corp. , 2021 WL 1123101, at *7 n.3 (D. Del. Mar. 24, 2021). To succeed on its claim under
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`Section 2 of the Sherman Act, HP need only show that the ITU-T relied on a promise from Nokia
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`to license its patents on FRAND terms when the ITU-T chose to incorporate Nokia's technology
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`into the standard-fo~ example, by showing ~at the ITU-T, but for lll:corporation of Nokia's
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`technology, would have either (a) incorporated into the Asserted Standards an alternative
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`technology, or (b) omitted such functionality from the Asserted Standards. Broadcom, 501 F.3d
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`at 314 (3d Cir. 2007).
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`In other words, whether HP can show that the ITU-T would have
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`incorporated a different technology but for Nokia's conduct is relevant to whether HP can prove
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`reliance, but the Court finds that HP's failure to plead such facts is not fatal to its claim under
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`Section 2 of the Sherman Act.
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`Next, Nokia argues that HP failed to state a claim under Section 2 of the Sherman Act
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`because HP failed to plead a relevant market. D.I. 19 at 13-14. The Court agrees. For purposes
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`of a claim under Section 2 of the Sherman Act, the "relevant market" is typically defined by
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`reference to the rule of reasonable interchangeability and cross-elasticity of demand. Broadcom,
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`501 F.3d at 307. However, in the SDO context-where adoption of a standard results in the
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`exclusion of alternative technologies that were not included in that standard--courts have defined
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`the relevant market by reference to competing technologies, developed prior to adoption of the
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`standard, that perform the function of the technology that was included in the standard. Id. at 315.
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`("It is the incorporation of a patent into a standard ... that makes the scope of the relevant market
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`8
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`congruent with that of the patent"), see also Lenovo, 2021 WL 1123101 at *7; Microsoft Mobile ,
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`2016 WL 1464545 at *2; ChriMar Sys., Inc v. Cisco Sys., Inc, 72 F. Supp. 3d 1012 (N.D. Cal.
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`2014).
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`HP, in its complaint, defined the "Relevant Market" to include "products that implement
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`or support the functionality described in the Asserted Standards." D.I. 1, ,r 139. Nokia argues that
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`the Relevant Market ( as defined by HP) is not a "relevant market" because it is a market for
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`products while Nokia allegedly anticompetitively incorporated patented technology into the
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`Asserted Standar1s. D.I. 19 at 13-14. Acc~rdingly, Nokia argues, it_is unclear (1) what produ~ts
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`have been excluded from the Relevant Market because of the ITU-T's inclusion of Nokia's
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`technology in the Asserted Standards, and (2) whether Nokia is a participant in the Relevant
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`Market. Id. HP responds that the context of its allegations make clear that the Relevant Market is
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`a technology market. See, e.g., D.I. 1, ,r 140 ("the Relevant Markets contained competing
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`technologies that could perform the same or equivalent functions purportedly claimed in Nokia' s
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`SEPs for the Asserted Standards."); id. ,r 142 (" [B]y delaying its IPR declarations to the ITU-T,
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`Nokia was able to remove competitors and their technology from the Relevant Markets, while
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`ensuring its patented technology would remain, thus creating a monopoly in the Relevant
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`Markets.").
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`On balance, the Court finds that HP has failed to plead a relevant market. HP defined the
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`Relevant Market as a product market. D.I. 1 ,r 139. HP has not pled a relevant product market
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`because HP has not pled facts showing that all "products that implement or support the
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`functionality described in the Asserted Standards" are readily substitutable for one another, are
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`reasonably interchangeable, or share cross-elasticity of demand. Broadcom, 501 F.3d at 307
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`(citing Brown Shoe Co. v. United States, 370 U.S. 294, 325 (1962)). While some language in the
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`9
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`Case 1:23-cv-01237-GBW Document 24 Filed 04/29/24 Page 10 of 10 PageID #: 2068
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`counterclaims supports HP' s contention that it pled a relevant technology market, the
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`counterclaims do not "make clear" that the Relevant Market is such a market because the
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`complaint confusingly refers to the "Relevant Markets" but only offers a definition for the
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`"Relevant Market." Id. ,r,r 139-145. As a result, the Court is unable to meaningfully assess the
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`boundaries of the markets that HP alleged. For example, the Court cannot determine whether HP's
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`counterclaims allege the existence of ( 1) multiple relevant markets, where one relevant market is
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`for products and another relevant market is for technology, or (2) a single relevant market that
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`incorporates both products and technology. _ Accordingly, the Court _finds that HP has failed ~o
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`plead a relevant market because the Relevant Market that HP defined includes products that HP
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`has not shown are relevant, and HP did not plead an alternative relevant market that is limited to
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`technology that was competing with Nokia' s technology when Nokia' s technology was
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`incorporated into the Asserted Standards.
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`IV.
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`CONCLUSION
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`For the reasons stated above, the Court grants Nokia' s motion to dismiss only as to
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`Defendant' s claim under Section 2 of the Sherman Act. HP's claim under Section 2 of the
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`Sherman Act is dismissed without prejudice, and HP is granted leave to amend.
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