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Case 2:15-cv-10817-AC-RSW ECF No. 1 filed 03/05/15 PageID.1 Page 1 of 64
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`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF MICHIGAN
`SOUTHERN DIVISION
`
`CISCO SYSTEMS, INC.,
`
` Plaintiff,
`
`v.
`
`CHRIMAR SYSTEMS INC.,
` d/b/a CMS TECHNOLOGIES,
`
` Defendant.
`
`Case No.
`
`Honorable
`
`Magistrate Judge
`
`COMPLAINT AND JURY DEMAND
`
`Plaintiff Cisco Systems, Inc. ("Cisco") hereby demands a jury trial and
`
`alleges as follows for its complaint against Defendant ChriMar Systems Inc. d/b/a
`
`CMS Technologies ("ChriMar"):
`
`COMPLAINT
`
`PARTIES
`
`1.
`
`Cisco Systems, Inc. is a California corporation with its principal place
`
`of business on Tasman Drive in San Jose, California 95134.
`
`2.
`
`On information and belief, ChriMar Systems, Inc. d/b/a CMS
`
`Technologies is a Michigan corporation with its principal place of business at
`
`36528 Grand River Avenue, Suite A-1 in Farmington Hills, Michigan.
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`
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`JURISDICTION AND VENUE
`
`3.
`
`This action is predicated on the patent laws of the United States, Title
`
`35 of the United States Code, with a specific remedy sought based upon the laws
`
`authorizing actions for declaratory judgment in the courts of the United States, 28
`
`U.S.C. §§ 2201 and 2202. This court has jurisdiction over this action pursuant to
`
`28 U.S.C. §§ 1331, 1338(a), and 1367.
`
`4.
`
`An actual and justiciable controversy exists between ChriMar and
`
`Cisco as to the noninfringement, invalidity, and unenforceability of U.S. Patent
`
`Nos. 8,902,760 ("'760 Patent") and 8,942,107 ("'107 Patent") (attached as Exhibits
`
`A and B respectively). As further alleged below, ChriMar is and has been engaged
`
`in a campaign to license and enforce its patent portfolio against manufacturers and
`
`sellers of Power over Ethernet ("PoE") networking products, including Cisco. In
`
`connection with ChriMar's licensing campaign targeting PoE products, Cisco is
`
`currently involved in litigation against ChriMar with respect to U.S. Patent No.
`
`7,457,250 ("'250 Patent").1 This litigation involves PoE products implementing the
`
`IEEE 802.3af and IEEE 802.3at amendments to the IEEE 802.3 standard. Cisco
`
`has also brought a declaratory judgment action against ChriMar with respect to
`
`
`1 ChriMar Systems, Inc. v. Cisco Systems, Inc., No. 4:13-cv-1300-JSW (N.D.
`Cal.) ("the NDCA case").
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`
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`related U.S. Patent No. 8,155,012 ("'012 Patent") in this Court.2 The '760 Patent
`
`issued in December 2014, and ChriMar has included the '760 Patent in its public
`
`statements concerning its PoE licensing campaign. The '107 Patent issued at the
`
`end of January 2015. Cisco maintains that the '250, '012, '760, and '107 Patents are
`
`invalid, unenforceable, and are not infringed by Cisco's PoE products capable of
`
`implementing the IEEE 802.3af and IEEE 802.3at amendments to the IEEE 802.3
`
`standard.3
`
`5.
`
`This Court has personal jurisdiction over ChriMar at least because, on
`
`information and belief, ChriMar is a Michigan corporation having its principal
`
`place of business within the Eastern District of Michigan at 36528 Grand River
`
`Avenue, Suite A-1 in Farmington Hills, Michigan. ChriMar has made substantial
`
`business contacts in Michigan including product sales to Michigan entities, and
`
`ChriMar's campaign to enforce and license its patent portfolio, including the '760
`
`Patent and '107 Patent, has a substantial relationship to Michigan. ChriMar has
`
`availed itself of the laws of this district in connection with its current portfolio
`
`
`2 Cisco Systems, Inc. v. ChriMar Systems, Inc., No. 2:14-cv-10290 (E.D. Mich.).
`That action is currently stayed pending resolution of the N.D. Cal. litigation.
`
`3
`
`In the NDCA case, Cisco has counterclaimed for a declaratory judgment that
`the '250 Patent, parent to the '012, '760, and '107 Patents, is invalid,
`unenforceable, and not infringed by Cisco's PoE products, including products
`implementing the IEEE 802.3af and 802.3at amendments.
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`
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`licensing efforts targeting PoE products, including by litigating patent infringement
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`claims involving that portfolio in this district.
`
`6.
`
`Venue is proper in this Court under 28 U.S.C. § 1391(b)(1), (c) and
`
`§ 1400(b) at least because ChriMar is subject to personal jurisdiction in this
`
`District and is located within this District and because a substantial part of the
`
`events that give rise to the claims herein occurred in this district.
`
`INTRODUCTION
`
`7.
`
`During standardization of the "Power over Ethernet" technology by
`
`the Institute for Electrical and Electronics Engineers ("IEEE"), ChriMar
`
`deceptively and intentionally failed to disclose its belief that its then-pending and
`
`open patent application that led to both the '760 Patent and the '107 Patent covered
`
`certain functions being incorporated into the standards, and its licensing position
`
`about those patents or their applications. As alleged in further detail below,
`
`ChriMar participated in the standard-setting process of the IEEE and was fully
`
`aware of the rules and policies governing such participation, including with respect
`
`to the disclosure of intellectual property rights to the IEEE. In violation of those
`
`rules and policies, however, ChriMar selectively disclosed only one of its patents
`
`to the IEEE — a patent that was in a different patent family than the '760 and '107
`
`Patents — while deceptively hiding its belief about the applicability of the pending
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`
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`'760 and '107 Patent-related application to the standard from the IEEE and the
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`participants in the standards-setting process.
`
`8.
`
`ChriMar's plan at the time of this deception was to draft the claims to
`
`cover the standard and then hold producers and consumers of Power over Ethernet
`
`standardized technologies hostage to ChriMar's demands for supracompetitive
`
`royalty rates once industry participants and consumers became "locked-in" to the
`
`standards. Cisco denies any infringement, but under ChriMar's apparent
`
`infringement theories and enforcement campaigns, ChriMar's deceptive conduct at
`
`the IEEE — not any intrinsic value of the technology claimed by the '760 Patent or
`
`'107 Patent — gave it monopoly power in the relevant technology markets alleged
`
`herein.
`
`9.
`
`Due to ChriMar's intentional deception of the IEEE as part of its
`
`scheme, as further alleged herein, ChriMar has committed standards-related fraud,
`
`breached its contractual obligations to the IEEE, rendered the '760 and '107 Patents
`
`unenforceable due to its unclean hands, and violated Section 17200 of the
`
`California Business and Professions Code.
`
`A. CHRIMAR'S PATENTS
`
`BACKGROUND
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`10. ChriMar's patent portfolio includes the '107 Patent, the '760 Patent,
`
`the '250 Patent, the '012 Patent, U.S. Patent No. 6,650,622 (the "'622 Patent"), and
`
`U.S. Patent No. 5,406,260 (the "'260 Patent").
`
`11. The '107 Patent, entitled "Piece of Ethernet Terminal Equipment,"
`
`reports that it was filed on February 10, 2012 as Application No. 13/370,918, and
`
`issued on January 27, 2015. The '107 Patent reports that it is a continuation of
`
`Application No. 12/239,001, filed on September 26, 2008, now the '012 Patent,
`
`which is a continuation of Application No. 10/668,708, filed on September 23,
`
`2003, now the '250 Patent, which is a continuation of Application No. 09/370,430,
`
`filed on August 9, 1999, now the '622 Patent, which is a continuation-in-part of
`
`application No. PCT/US99/07846, filed on April 8, 1999. The inventors named on
`
`the '107 Patent are John F. Austermann, III and Marshall B. Cummings.
`
`12. As alleged herein, the '107 Patent was not duly and legally issued.
`
`13. On information and belief, ChriMar is the current assignee of the '107
`
`Patent.
`
`14. The '760 Patent, entitled "Network Systems and Optional Tethers,"
`
`reports that it was filed on September 14, 2012 as Application No. 13/615,755, and
`
`issued on December 2, 2014. The '760 Patent reports that it is a continuation of
`
`Application No. 13/370,918, filed on February 10, 2012, which is a continuation of
`
`Application No. 12/239,001, filed on September 26, 2008, now the '012 Patent,
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`which is a continuation of Application No. 10/668,708, filed on September 23,
`
`2003, now the '250 Patent, which is a continuation of Application No. 09/370,430,
`
`filed on August 9, 1999, now the '622 Patent, which is a continuation-in-part of
`
`application No. PCT/US99/07846, filed on April 8, 1999. The inventors named on
`
`the '760 Patent are John F. Austermann, III and Marshall B. Cummings.
`
`15. As alleged herein, the '760 Patent was not duly and legally issued.
`
`16. On information and belief, ChriMar is the current assignee of the '760
`
`Patent.
`
`17. The '012 Patent, entitled "System and Method for Adapting a Piece of
`
`Terminal Equipment," reports that it was filed on September 26, 2008 as
`
`Application No. 12/239,001, and issued on April 10, 2012. The '012 Patent reports
`
`that it is a continuation of Application No. 10/668,708, filed on September 23,
`
`2003, now the '250 Patent, which is a continuation of Application No. 09/370,430,
`
`filed on August 9, 1999, now the '622 Patent, which is a continuation-in-part of
`
`application No. PCT/US99/07846, filed on April 8, 1999. The inventors named on
`
`the '012 Patent are John F. Austermann, III and Marshall B. Cummings.
`
`18. On information and belief, ChriMar is the current assignee of the '012
`
`Patent.
`
`19. The '250 Patent, entitled "System for Communicating with Electronic
`
`Equipment," reports that it was filed on September 23, 2003, issued on November
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`25, 2008 and then had a reexamination certificate issued on March 1, 2011. The
`
`'250 Patent reports that it is a continuation of Application No. 09/370,430, filed on
`
`August 9, 1999, now the '622 Patent, which is a continuation-in-part of Application
`
`No. PCT/US99/ 07846, filed on April 8, 1999. The inventors named on the '250
`
`Patent are John F. Austermann, III, and Marshall B. Cummings.
`
`20. On information and belief, ChriMar is the current assignee of the '250
`
`Patent.
`
`21. The '760 and '107 Patents share nearly identical specifications with
`
`their family members, the '012 and '250 Patents.
`
`B. CHRIMAR'S LICENSING AND ENFORCEMENT EFFORTS
`TARGETING PRODUCTS WITH POWER OVER ETHERNET
`FUNCTIONALITY
`
`22. For many years, ChriMar has actively pursued a patent licensing and
`
`enforcement campaign targeting products with PoE functionality specified by
`
`certain standards promulgated by the IEEE and sellers of such products.
`
`23. ChriMar's licensing and enforcement campaign began at least as early
`
`as 2001, when ChriMar sued Cisco in this District for allegedly infringing the '260
`
`Patent, accusing, for example, Cisco's IP phones.4 ChriMar thereafter claimed that
`
`
`4 ChriMar Sys., Inc. v. Cisco Sys., Inc., No. 2:01-cv-71113 (E.D. Mich.) (filed
`Mar. 21, 2001, terminated Sept. 15, 2005).
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`the '260 Patent was "essential" to the IEEE PoE standards.5 After the court in that
`
`action entered an order granting Cisco's motion for summary judgment that claim 1
`
`of the '260 Patent was invalid, that litigation between Cisco and ChriMar was
`
`resolved by way of settlement, with Cisco taking a license to ChriMar's alleged
`
`technology. ChriMar also sued D-Link Systems ("D-Link"),6 Foundry Networks
`
`("Foundry"),7 and PowerDsine, Ltd. ("PowerDsine")8 based on their respective
`
`sales of products with PoE functionality, accusing those companies of infringing
`
`the '260 Patent based on sales of those products. D-Link and PowerDsine took
`
`licenses to the '260 Patent after rulings favorable to them were issued, and
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`ultimately an additional claim of the '260 Patent (claim 17) was invalidated by the
`
`court in the Foundry action, leading to dismissal of that action and summary
`
`affirmance by the Federal Circuit.
`
`24. Shortly after issuance of the '250 Patent, which ChriMar deliberately
`
`failed to disclose to the IEEE standards bodies that developed the PoE standards,
`
`
`5 See ChriMar Letter of Assurance, available at
`http://standards.ieee.org/about/sasb/patcom/loa-802_3af-chrimar-
`03Dec2001.pdf.
`
`6 See ChriMar Sys., Inc. v. D-Link Sys., Inc., No. 2:06-cv-13937 (E.D. Mich.)
`(filed Sept. 6, 2006, terminated Apr. 21, 2010).
`
`7 See ChriMar Sys., Inc. v. Foundry Networks, Inc., No. 2:06-cv-13936 (E.D.
`Mich.) (filed Sept. 6, 2006, terminated Aug. 1, 2012).
`
`8 ChriMar Sys., Inc. v. PowerDsine LTD., No. 2:01-cv-74081 (E.D. Mich.) (filed
`Oct. 26, 2001, terminated Mar. 31, 2010).
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`as alleged herein, ChriMar continued its licensing and enforcement campaign
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`against sellers of products with PoE functionality, including Cisco and a number of
`
`other companies. ChriMar sued Waters Network Systems, LLC for allegedly
`
`infringing the '250 Patent in 2008, and went on to sue multiple additional sellers of
`
`products with PoE functionality, including Danpex Corp., Garrettcom, Inc., and
`
`Edgewater Networks in 2009.9 Following conclusion of a reexamination
`
`proceeding involving the '250 Patent, ChriMar sued Cisco, and also Hewlett-
`
`Packard, Avaya, Inc., and Extreme Networks in district court,10 and initiated a
`
`Section 337 proceeding in the International Trade Commission.11 In both its
`
`district court case and in the Section 337 proceeding it initiated, ChriMar alleged
`
`that Cisco and the other district court defendants were infringing the '250 Patent by
`
`
`9 See ChriMar Sys., Inc. v. Waters Network Sys., LLC, No. 2:08-cv-00453 (E.D.
`Tex.) (filed Nov. 25, 2008, terminated June 19, 2009); ChriMar Sys., Inc. v.
`Danpex Corp., No. 2:09-cv-00044 (E.D. Tex.) (filed Feb. 6, 2009, terminated
`May 20, 2009); ChriMar Sys., Inc. v. Garrettcom, Inc., No. 2:09-cv-00085
`(E.D. Tex.) (filed Mar. 23, 2009), No. 3:09-cv-04516 (N.D. Cal.) (terminated
`Dec. 22, 2009); ChriMar Sys., Inc. v. KTI Network, Inc., No. 2:09-cv-00230
`(E.D. Tex.) (filed July 30, 2009, terminated Nov. 25, 2009).
`
`10 ChriMar Systems, Inc. v. Cisco Systems, Inc., No. 4:13-cv-1300-JSW (N.D.
`Cal.) ("the NDCA case").
`
`11 In the Matter of Certain Communication Equipment, Components Thereof, and
`Products Containing the same, including Power over Ethernet Telephones,
`Switches, Wireless Access Points, Routers and other Devices Used in LANs,
`and Cameras, Inv. No. 337-TA-817 (instituted Dec. 1, 2011, terminated Aug. 1,
`2012).
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`selling products with PoE functionality, including among other products, IP
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`telephones, wireless access points, and wireless network cameras.
`
`25. ChriMar expanded its licensing and enforcement campaign against
`
`products with PoE functionality to include the '012 Patent. ChriMar filed five
`
`actions in the United States District Court for the Eastern District of Texas alleging
`
`infringement of the '012 Patent by various manufacturers and re-sellers of PoE
`
`products. The complaints in these actions accuse specific models of IP phones
`
`and/or Wireless Access Points, each of which includes PoE functionality.
`
`26. ChriMar brought suit against Aastra Technologies Limited and Aastra
`
`USA Inc. in the Eastern District of Texas, Case No. 6:13-cv-879, on November 8,
`
`2013, alleging infringement of the '012 Patent, for among other things, making,
`
`using, offering for sale, selling, and/or importing IP telephones, which, on
`
`information and belief, include PoE functionality.
`
`27. ChriMar brought suit against Alcatel-Lucent, Inc., Alcatel-Lucent
`
`USA, Inc., and Alcatel-Lucent Holdings, Inc., in the Eastern District of Texas,
`
`Case No. 6:13-cv-880, on November 8, 2013, alleging infringement of the '012
`
`Patent, for among other things, making, using, offering for sale, selling, and/or
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`importing wireless access points, which, on information and belief, include PoE
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`functionality.
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`28. ChriMar brought suit against AMX, LLC, in the Eastern District of
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`Texas, Case No. 6:13-cv-881, on November 8, 2013, alleging infringement of the
`
`'012 Patent, for among other things, making, using, offering for sale, selling, and/or
`
`importing wireless access points, which, on information and belief, include PoE
`
`functionality.
`
`29. ChriMar brought suit against Grandstream Networks, Inc., in the
`
`Eastern District of Texas, Case No. 6:13-cv-882, on November 8, 2013, alleging
`
`infringement of the '012 Patent, for among other things, making, using, offering for
`
`sale, selling, and/or importing IP telephones and wireless network cameras, which,
`
`on information and belief, include PoE functionality.
`
`30. ChriMar brought suit against Samsung Electronics Co, Ltd., Samsung
`
`Electronics America, Inc. and Samsung Telecommunications in the Eastern
`
`District of Texas, Case No. 6:13-cv-883, on November 8, 2013, alleging
`
`infringement of the '012 Patent, for among other things, making, using, offering for
`
`sale, selling, and/or importing IP telephones, which, on information and belief,
`
`include PoE functionality.
`
`31. ChriMar's website, www.cmspatents.com, further confirms
`
`that
`
`ChriMar's licensing and enforcement campaign targets products with PoE
`
`functionality for allegedly infringing ChriMar's patents. ChriMar's website
`
`includes a number of public statements concerning ChriMar's licensing of the '760,
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`'012, and '250 Patents. References to the '760 Patent were added shortly after its
`
`issuance. Specifically, ChriMar publicly states on that website that its licensing
`
`campaign involves the '760, '012, and '250 Patents, and targets "PoE equipment."
`
`ChriMar states on that website that it "is engaged in active licensing with vendors
`
`of PoE equipment. Licenses for our patents are being offered to manufacturers
`
`and resellers of PoE equipment."12 As of December 15, 2014, this same pag e
`
`specifically identifies the '760 Patent, the '012 Patent, the '250 Patent, and the '622
`
`Patent as U.S. Patents awarded to ChriMar. The '107 Patent, which issued
`
`approximately a month ago, is part of this same patent family that ChriMar
`
`publicly states covers products supporting PoE functionality and which includes
`
`multiple patents that ChriMar is actively enforcing against manufacturers of such
`
`products, including Cisco. Additionally, ChriMar lists Avaya, Inc. and Extreme
`
`Networks, Inc. as licensees to the '012 Patent, the '250 Patent, and patents pending,
`
`under the heading "PoE Licensees and Products Include:".13 As alleged above,
`
`Avaya, Inc. and Extreme Networks, Inc. were previously named parties in the '250
`
`Patent
`
`litigation.
`
` Further, ChriMar's website
`
`describes ChriMar's
`
`"EthernetConnect Program," which ChriMar states "allows for certain vendors of
`
`
`12 EthernetConnect Program, http://www.cmspatents.com/index.html (emphases
`added).
`
`13 www.cmspatents.com/licensees.html.
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`PoE products to receive special terms under the Patent Licensing Program, the
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`EtherLock Reseller Program and/or the EtherLock OEM Program."14 Finally,
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`ChriMar's website www.cmstech.com
`
`includes
`
`the statement
`
`that "CMS
`
`Technologies is the innovator in putting a DC current signal to the 802.3i
`
`connection. In April of 1995 CMS received a US Patent for impressing a DC
`
`current signal onto associated current loops . . . . The IEEE 802.3af Standards
`
`Committee now refers to this important technique as Power over Ethernet."15
`
`ChriMar's actions and statements all make clear that ChriMar is targeting products
`
`with PoE functionality for allegedly infringing ChriMar's patents, including the
`
`'760 and '107 Patents, as well as the '012 and '250 Patents.
`
`C.
`
`STANDARDS IN GENERAL
`
`32. A technical standard is an established set of specifications or
`
`requirements that either provides or is intended to provide for interoperability
`
`among products manufactured by different entities. A standard is often published
`
`by a private Standards Setting Organization ("SSO"). Once a standard is
`
`established, competing manufacturers can offer their own products and services
`
`that are compliant with the standard.
`
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`14 EthernetConnect Program, http://www.cmspatents.com/index.html.
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`15 www.cmstech.com/power.htm.
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`33.
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`"Industry standards are widely acknowledged to be one of the engines
`
`driving the modern economy." See U.S. Dep't of Justice and U.S. Fed'l Trade
`
`Comm'n, Antitrust Enforcement and Intellectual Property Rights: Promoting
`
`Innovation and Competition (2007) at 33. Standards, such as those related to
`
`Power over Ethernet-enabled products, allow U.S. enterprises to create data and
`
`voice communications networks knowing that the different elements of the
`
`network will work together. Standards help drive innovation by making new
`
`products available and ensuring interoperability of components.
`
`34. Technical standards serve an
`
`important
`
`role
`
`in developing
`
`technologies and have the potential to encourage innovation and promote
`
`competition. As the technical specifications for most standards are published and
`
`broadly available, entities interested in designing, manufacturing and producing
`
`products that comply with a standard are more willing to invest heavily in the
`
`development of such products because they will operate effectively and be
`
`compatible with other products from third parties so long as their products are
`
`compliant with the published technical standard. Technical standards also reduce
`
`costs for both suppliers and purchasers at the manufacturing level, and the end-
`
`consumer level. See, e.g., U.S. Dep't of Justice and U.S. Fed'l Trade Comm'n,
`
`Antitrust Enforcement and Intellectual Property Rights: Promoting Innovation and
`
`Competition (2007) at 33 ("Standards can make products less costly for firms to
`
`{36669/1/DT932393.DOCX;1}
`
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`15
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`

`Case 2:15-cv-10817-AC-RSW ECF No. 1 filed 03/05/15 PageID.16 Page 16 of 64
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`
`
`produce and more valuable to consumers. . . . Standards make networks, such as
`
`the Internet and wireless telecommunications, more valuable by allowing products
`
`to interoperate.").
`
`35. While these benefits of technical standards are well recognized, it is
`
`also well understood that standard setting is subject to patent hold-up. A patent
`
`hold-up situation can occur where, after a standard is set and compliant products
`
`are being manufactured/sold, a patentee then claims rights to the technology
`
`covered by the standard. Typically, the royalty that a patentee may obtain from a
`
`patent license for its technology is limited in part by the availability of alternative
`
`technical approaches to perform that function. However, if an issued standard
`
`requires the use of that patented technology and the standard has been sufficiently
`
`widely-adopted, other technological approaches generally are no longer available
`
`substitutes and will no longer serve to limit the patentee's ability to demand
`
`royalties far in excess of what is warranted by the intrinsic value of the technology.
`
`This is compounded because companies who have designed, made, and sold
`
`standards-compliant products, such as Cisco, invest significant resources in
`
`developing innovative, new products that also comply with the technical standard.
`
`Even if there were an alternative standard, the costs and disruption associated with
`
`switching are prohibitively expensive once a standard has been widely adopted,
`
`due to the need to redesign any product compliant with the original standard
`
`{36669/1/DT932393.DOCX;1}
`
`
`16
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`
`
`
`allegedly covered by the patentee's patent rights. This results in "lock-in":
`
`companies have no choice but to manufacture and sell products that are in
`
`compliance with the standard. Indeed, the public comes to rely upon standards-
`
`compliant equipment, which can make it prohibitively difficult to subsequently
`
`switch to alternative, non-infringing substitutes once the standard has been issued.
`
`The high cost of switching applies to all elements of the standard regardless of how
`
`small the marginal contribution of the element would be (if not required by the
`
`standard) to the functionality of a standard-compliant product.
`
`36. Owners of patents covering technologies adopted in a standard subject
`
`to "lock-in" can use "patent hold-up" to charge supracompetitive royalties that are
`
`higher than any intrinsic value associated with the patented technology. See, e.g.,
`
`Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297, 310 (3d Cir. 2007) ("In this
`
`unique position of bargaining power [where industry participants are 'locked-in' to
`
`the standard], the patent holder may be able to extract supracompetitive royalties
`
`from the industry participants."); U.S. Dep't of Justice and U.S. Fed'l Trade
`
`Comm'n, Antitrust Enforcement and Intellectual Property Rights: Promoting
`
`Innovation and Competition (2007) at 35-40 ("Thus, ex post, the owner of a
`
`patented technology necessary to implement the standard may have the power to
`
`extract higher royalties or other licensing terms that reflect the absence of
`
`competitive alternatives.").
`
`{36669/1/DT932393.DOCX;1}
`
`
`17
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`IPR2018-01511
`Cisco v. Chrimar
`
`

`

`Case 2:15-cv-10817-AC-RSW ECF No. 1 filed 03/05/15 PageID.18 Page 18 of 64
`
`
`
`37. To address these concerns and to avoid the anticompetitive effects
`
`associated with patent hold-up, SSOs adopt policies that set forth requirements
`
`concerning, among other things: (a) the timely and prompt disclosure of
`
`intellectual property such as patents or patent applications that may claim any
`
`portion of the specifications of the standard in development (i.e., are believed to be
`
`infringed by implementing the standard (also sometimes referred to as "Essential
`
`Patent Rights")); and (b) a process of assurance by which members or participants
`
`in the SSO who hold purported Essential Patent Rights commit to licensing those
`
`rights on reasonable and non-discriminatory ("RAND") terms or at minimum
`
`indicate that they will not provide RAND licenses to any Essential Patent Rights.
`
`38. The timely disclosure of any arguably Essential Patent Rights and
`
`whether the holder of those rights will license those rights on RAND terms by
`
`individuals participating in the SSO is critical so that those participating in the
`
`development of the standard may evaluate any and all technical proposals with
`
`knowledge of the potential licensing costs that might be incurred by anyone
`
`developing standards-compliant products.
`
`39. Any deceptive non-disclosure of arguably Essential Patent Rights, as
`
`engaged in by ChriMar here, undermines the safeguards that SSOs put in place to
`
`guard against abuse and to prevent patent hold-up. Through such conduct, the
`
`{36669/1/DT932393.DOCX;1}
`
`
`18
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`Cisco 1048
`IPR2018-01511
`Cisco v. Chrimar
`
`

`

`Case 2:15-cv-10817-AC-RSW ECF No. 1 filed 03/05/15 PageID.19 Page 19 of 64
`
`
`
`intellectual property owner violates the industry practice and the very commitment
`
`that led to incorporation of that technology in the first place.
`
`THE HISTORY OF THE IEEE'S POWER OVER ETHERNET
`D.
`STANDARDS
`
`40. The IEEE Standards Association is an SSO for a broad range of
`
`disciplines, including electric power and energy, telecommunications, and
`
`consumer electronics. In or about March 1999, there was a call for interest in the
`
`IEEE 802.3 working group — which sets standards for physical layer and data link
`
`layer's media access control (MAC) of wired Ethernet — to begin developing what
`
`would become the IEEE 802.3af Data Terminal Equipment (DTE) Power via
`
`Media Dependent Interface (MDI) Enhancement to the IEEE 802.3 standard ("the
`
`IEEE 802.3af amendment"). A task force was formed to field technical proposals
`
`from the industry and to create a draft standard to present to the IEEE 802.3
`
`working group. As part of this process, the task force held a number of meetings
`
`and received input from multiple industry participants.
`
`41.
`
`In or about November 2004, there was a call for interest in the IEEE
`
`802.3 working group to begin what would become the IEEE 802.3at Data Terminal
`
`Equipment (DTE) Power via Media Dependent Interface (MDI) Enhancement to
`
`the IEEE 802.3 standard ("the IEEE 802.3at amendment"). Subsequently, a task
`
`force was formed to field technical proposals from the industry and to create a
`
`{36669/1/DT932393.DOCX;1}
`
`
`19
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`Cisco 1048
`IPR2018-01511
`Cisco v. Chrimar
`
`

`

`Case 2:15-cv-10817-AC-RSW ECF No. 1 filed 03/05/15 PageID.20 Page 20 of 64
`
`
`
`draft standard to present to the IEEE 802.3 working group. As part of this process,
`
`the task force held a number of meetings and received input from multiple industry
`
`participants.
`
`42. The IEEE 802.3af amendment allows for the supply of data and power
`
`over Ethernet cables to certain devices such as VoIP phones, switches, wireless
`
`access points ("WAPs"), routers, and security cameras. Generally, the IEEE
`
`802.3af amendment defines the electrical characteristics and behavior of both
`
`Power Sourcing Equipment ("PSE"), which provide up to 15.4 watts of power, and
`
`Powered Devices ("PD"), which draw power. The IEEE 802.3at amendment is
`
`meant to enhance the capabilities provided by the IEEE 802.3af amendment by
`
`allowing a PSE to provide power in excess of 30 watts to a PD. To remain
`
`"backwards compatible" with the previously ratified IEEE 802.3af amendment, the
`
`IEEE 802.3at amendment did not change many of the functions required by the
`
`802.3af amendment, including functions that ChriMar alleges infringe the '012 and
`
`'250 Patents, and on information and belief, also alleges are covered by the '760
`
`and '107 Patents. The general functionality of supplying data and power over
`
`Ethernet cables will be referred to herein as "Power over Ethernet."
`
`43. The success of the IEEE's standards-setting process depends on the
`
`disclosure by participants as to whether they possess any patents or applications
`
`which they

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